Toyota

Toyota Feels Exchange-Rate Pinch as Rivals Gain

By HIROKO TABUCHI

Published: September 2, 2010

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TOKYO — For all the turmoil over Toyota’s wave of recalls, the company, the world’s largest automaker, may face a bigger problem: the surging yen.

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Toshifumi Kitamura/Agence France-Presse — Getty Images

A factory in Toyota City, Japan. Toyota is behind its rivals in setting up plants overseas, which binds it to the strong yen.

With the yen at 15-year highs against the dollar, a 9-year peak versus the euro and still near recent heights against the won, Toyota is finding that its cars have become too expensive to compete in the increasingly cutthroat global auto market. That has created inroads around the world for its non-Japanese rivals, like Volkswagen of Germany, Hyundai of South Korea and the Detroit automakers, all of which are benefiting from relatively weaker currencies.

Hyundai is rapidly increasing its share in major markets, including the United States and China, using record profit to offer aggressive sales incentives that Toyota is struggling to match.

Volkswagen continues to dominate in Europe and across much of the Asia-Pacific region. Its chief executive, Martin Winterkorn, has said the automaker aims to be the world’s largest in sales by 2018, up from its current third place.

Analysts say the yen, which started soaring as a refuge currency in late 2008 in response to the global financial crisis, has highlighted a flaw in Toyota’s global production setup. The problem, they say, is that the company depends too heavily on factories and suppliers in its high-cost homeland. Although Toyota is taking steps to...