As Yen Falls, Japanese Automakers Cut Supplier Costs, Auto News, ET Auto

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With inflation plaguing the world, Toyota Motor Corp, Nissan Motor Corp and others are shouldering more of the burden of soaring commodity prices or extending other aid to hard-hit parts makers, executives say .

TOKYO — For decades, powerful Japanese automakers had a playbook for dealing with deflation: pressuring suppliers for lower prices on everything from seatbelts to wiring harnesses and promising volume.

Today, with inflation plaguing the world, Toyota Motor Corp, Nissan Motor Corp and others are shouldering more of the burden of soaring commodity prices or offering other relief to hard-hit parts makers. , according to the leaders.

The metrics show how automakers are trying to shore up already strained supply chains ravaged by COVID-19 pandemic lockdowns and a global shortage of semiconductors, even at the cost of lower profit margins for themselves. . The patchy support being negotiated in Japan‘s auto industry also highlights the potential disruption from a dramatic weakening of the yen, now at a two-decade low.

Japanese automakers, historically the beneficiaries of a weaker currency through overseas sales, are now focusing on managing the threat to suppliers. For many parts makers, the weak yen is compounding the pain of higher input costs for materials.

“Inflation is happening and we absolutely have to deal with it,” Nissan chief executive Ashwani Gupta told reporters recently. “We discuss with our suppliers because in the end their sustainability is our sustainability.”

Tokai Rika Co Ltd, a maker of steering wheels and other parts partly owned by Toyota, is one of the suppliers that received aid.

Initially, it expected rising material costs to cut operating profit by 9.1 billion yen ($68 million) in the just-ended fiscal year. Instead, its customers, mostly Toyota, have absorbed nearly 15% of the higher costs and will take on more this year, a spokesperson said.

Tokai Rika estimates that its customers – again, primarily Toyota – will bear nearly two-thirds of the expected 7.9 billion yen hit by rising prices for metals, resin and other materials this year.

It continues to discuss higher semiconductor costs and logistics with customers, the spokesperson said.

“ATTENTION CLOSER”

Toyota pays “greater attention” to the concerns and issues of business partners, Tokai spokesman Rika added. The world’s biggest automaker by sales owns almost a third of the parts maker and accounts for around three-quarters of its sales.

The automaker was taking steps to reduce the burden on its suppliers, Toyota spokesman Shiori Hashimoto said, declining to comment specifically on Tokai Rika.

Semiconductor shortages and the pandemic have forced Toyota to repeatedly cut production plans, increasing the cost burden on parts makers. It has 400 main suppliers and some 60,000 suppliers in total.

Toyota has warned that “unprecedented” increases in commodity prices could cost it $11 billion this year and slash its annual profits by a fifth.

NISSAN TECHNOLOGY

Nissan is already bearing much of the cost of rising raw materials and precious metals, chief operating officer Gupta told reporters recently.

It now pays suppliers before the deadline and sends production forecasts further in advance, which is a help for parts manufacturers, according to an official from one of its suppliers who declined to be identified in order to to be able to talk about a business partner.

Unipres Corp, which specializes in stamping technology, avoided price cuts this year after winning backing from Nissan, Unipres Chairman Nobuya Uranishi said in a recent investor briefing that was not not open to the general public, according to notes of his comments taken by a participant and reviewed. by Reuters.

Unipres declined to comment.

This approach marks a significant change for Nissan. Under ousted former President Carlos Ghosn, he was known to annually press suppliers for cheaper parts in return for high-volume orders.

Nissan chief executive Makoto Uchida told Reuters in an interview last month that the investment needed to switch to all-electric vehicles required a longer-term approach from suppliers – not just a focus on “a massive volume growth.

For Unipres, that has meant working with Nissan at an early stage on parts and technology development, rather than winning on price alone, Chairman Uranishi told Unipres’ investor briefing, according to the notes.

Such collaboration does not guarantee contracts for parts, but gives the supplier critical feedback at an early stage in the development process, he said.

TRANSFER OF COSTS

Honda Motor Co supplier Musashi Seimitsu Industry Co, a supplier of transmission gears and suspension parts, is negotiating with automakers to reflect the impact of rising shipping and material costs, the company said. company at Reuters.

Another Honda supplier, fuel tank and sunroof maker Yachiyo Industry Co, has seen little impact as it buys raw materials directly from Honda and builds higher costs into the price of parts sold to its company. mother, he said.

Honda declined to comment.

The automaker was working with suppliers to cut costs in the face of a second straight year of price hikes, chief financial officer Kohei Takeuchi said in a recent earnings call. Still, he expected a lower annual profit, he said.

Meanwhile, Mitsubishi Motors Corp is meeting with its small and medium-sized suppliers and will move quickly to help them if they are threatened by cost increases, a senior executive said, declining to be identified so he can speak openly. company policy.

The automaker will also step in if smaller suppliers have funding problems, the executive said.

“We are communicating more closely than ever with our suppliers to check if there are any issues,” Mitsubishi Motors spokesman Hiromu Hatanaka said.

($1 = 134.4200 yen)

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