The Yomiuri Shimbun reported that Japanese domestic automakers, which are being squeezed by the extreme rise in the yen's value, are seeking to cut production costs by buying more parts from overseas.
As per report, some economists fear Japanese parts makers will be forced to relocate plants overseas or go out of business if the trend continues. Economists say this could lead to the complete hollowing-out of the Japanese automobile industry.
Toyota Motor Corporation in August 2011 invited officials from about 40 South Korean parts makers to its head office in Toyota, Aichi Prefecture, to display their companies' technologies. Toyota held the event to determine the technological capabilities of South Korean makers. In mid December 2011, Toyota held a similar event in Seoul. Toyota is already using parts from South Korea in some domestic assembly lines.
A Toyota executive said that "South Korean makers' technological capabilities and product quality are high. And their parts are also 20% to 30% cheaper than parts made by Japanese makers."
Nissan Motor Kyushu Co in Kandamachi, Fukuoka Prefecture, plans to use only parts made overseas or in Kyushu in the future.
Fuji Heavy Industries Limited plans to raise its percentage of parts procured from overseas from its current level of about 13% to 30% by fiscal 2015.
Mitsubishi Motors Corporation also plans to raise the percentage of foreign made parts from 18% in fiscal 2010 to 25% in fiscal 2013.
Domestic automakers have increased procurement of foreign made parts in the hope the cheaper parts will allow them to protect jobs and technological capabilities at home by keeping domestic car production going.
The effects of moves overseas by domestic automakers have spread to parts makers.
Mr Akihiko Shido VC of Japan Auto Parts Industries Association said that "Not only major parts makers but also midsize and small firms are accelerating their moves overseas."
Toyota EVP Mr Satoshi Ozawa said that he was shocked to learn, in the wake of flood damage in Thailand, that some electronic parts widely used to manufacture cars are not produced in Japan. Mr Ozawa said he was shocked to see that Japan's auto parts industry is rapidly hollowing out.
An official of the Economy, Trade and Industry Ministry said that "If the yen remains at its current high level, the whole of the automobile industry, including parts and materials makers, may relocate overseas, resulting in a 'hollowing out by the roots.'"
An estimate by the ministry shows that if the hollowing out of the automobile industry continues at the current pace, 600,000 jobs, more than 10% of all jobs in the nation, may be lost in the middle of the 2010s and later.
(Sourced from www.yomiuri.co.jp)
