Nissan to Shift Output to Dollar Economies - CNBC

Nissan is planning to shift the balance of its production and support functions towards dollar-linked economies, including the U.S. and China, to protect itself against currency volatility, the Japanese carmaker’s chief executive has said.

Carlos Ghosn, CEO of Nissan [NSANY 19.45 0.12 (+0.62%) ] and its French partner Renault, told the Financial Times that they wanted to correct a “big imbalance” in costs and revenues caused by producing cars in Japan to sell in the U.S. and dollar-linked economies in Asia.

“What we [want] to do is shift more of our cost from a yen base to a dollar base,” he said. That would not mean closing down facilities in Japan, he added, but that the company could not expand there.

His remarks may fuel concerns among other countries, and Japan in particular, about the effects of loose U.S. monetary policy and China’s currency link to the dollar.

The dollar has lost 10 percent of its value against the yen [JPY=X 83.48 0.01 (+0.01%) ] this year.

Mr Ghosn said exchange rate volatility of any kind was damaging to business, because it militated against long-term strategy. “The only way you can protect yourself is by making sure your currency footprint is balanced. If there is any imbalance, it should be small.”

He contrasted the position at Renault, which is relatively well-balanced in terms of the match between its cost base and its sales, with Nissan, which has “an unbalanced footprint, and the big imbalance is the yen to the dollar”.

That means Nissan needs to have more of its factories and administrative costs outside Japan, in the U.S. or dollar-linked economies. Nissan’s expansion in the U.S. is being led by its new Leaf electric car, which will initially be exported from Japan, but from 2012 manufactured, with its batteries, in Tennessee.

Mr Ghosn also spoke enthusiastically about the prospects for the Renault-Nissan alliance in Russia, where it has been invited by Vladimir Putin, prime minister, to raise its stake in Avtovaz, the manufacturer of the Lada, to up to 50 percent.

Renault currently owns 25 percent plus one share.

Asked if he would accept Mr Putin’s invitation, he replied: “We’re going to look at the timing, the conditions, but very likely, yes.

“We are going to put in a lot of technology, develop a lot of capacity, do a lot of things together between Avtovaz Lada, Renault and Nissan.”