Yen’s Gain Leads to Losses: Jobs at U.S. Mazda, Profits in Japan : Trade: It’s tougher now for Japanese firms to hold down U.S. prices. Honda and Matsushita have seen overseas earnings erode.
The surging yen took its toll Tuesday on both sides of the Pacific.
In Tokyo, two giant companies--Honda Motor Co. and Matsushita Electric Industrial Co., parent of entertainment giant MCA--reported plunging quarterly earnings.
In Orange County, Irvine-based Mazda Motor of America, continuing a retrenchment of Japanese car makers’ U.S. operations, sacked its top-ranking U.S. executive and said itis eliminating a total of 175 jobs.
“It doesn’t take rocket science to figure this out,” Mazda spokesman Jay Amestoy said. “This is a global economy . . . (and) everyone is trying to reduce operating and fixed costs. It’s especially important for us to keep our pricing competitive. That means making the hard decisions about having to lay off people.”
The yen’s steady gains against the dollar have made it increasingly hard for Japanese exporters to hold the line on prices. A stronger yen means it costs more in dollars to buy Japanese products. It also reduces the value, in yen, of overseas profits brought back to Japan.
Honda is among the hardest hit. The car maker said its April-June earnings plunged 62% from the same period last year to $58.6 million.
Matsushita, known for its Panasonic and Technics brands, said its profits sagged 23% to $64.4 million.
Alarmed at the implicit risks in a runaway yen--notably its debilitating effect on Japan’s economy--global policy-makers acted last week to slow its rise. The dollar had dropped from about 125 yen in February to as low as 100.40 yen last week before intervention by the U.S. Federal Reserve Board. In currency trading Tuesday, the dollar bought 103.65 yen.
But the options facing economic decision makers are far from inspiring.
Theoretically, a strong yen should have reduced the huge bilateral trade surplus by making U.S. goods cheaper in Japan. But the surplus surged to record heights this spring. The continuing recession in Japan, it turns out, has made consumers there less likely to buy U.S.-made--or any other--products. It remains to be seen how far the two nations will go in adjusting the yen-dollar relationship.
Honda estimated that it lost about $48 million from April through June because of the yen’s climb. The company said it is considering a downward revision of its earnings forecast for the entire fiscal year.
Matsushita said its overseas sales increased in local currency terms from a year earlier, but declined when translated back into yen because of the Japanese currency’s rise.
That was also the case for its Universal City-based MCA unit, which “actually achieved growth in U.S. dollar value” but recorded a 2% sales drop in yen terms, according to Matsushita. At the end of the period, MCA’s performance got a boost from Universal’s “Jurassic Park,” which has taken in more than $500 million worldwide since its release in June.
Workers at Mazda’s U.S. headquarters in Irvine--where 140 of the car maker’s 175 job cuts will occur--felt the pain of the currency crunch most palpably.
The reductions are in addition to 200 positions slashed in March after Mazda scrapped plans for a luxury car division and pushed some corporate functions into its regional offices.
Among those losing their jobs is Clark Vitulli, the firm’s top-ranking American executive, who had been demoted in the earlier round of belt-tightening.
In April, Torrance-based Nissan Motor Corp. laid off 115 corporate employees in a similar corporate restructuring.
Reflecting the worldwide effects of Japan’s struggle, Nissan officials said Tuesday that they are putting under review expansion plans at a manufacturing plant in the United Kingdom.
The Associated Press contributed to this report.
The Yen Factor
The rising yen is taking a toll on Japanese firms that do a lot of export business. Honda and Matsushita blamed their latest-quarter earnings declines on the steady increase in the yen’s value.
Honda net Profits (in millions): April-June, 1993: $56.6 April-June, 1992: $132.0
Matsushita net Profits (in millions): April-June, 1993: $64.4 April-June, 1992: $84.0
The Yen Factor; Los Angeles Times
