"A Pileup in Europe for Japan's Carmakers"

Business Week, December 18, 2000.

Synopsis:

The opening case in chapter 9 illustrates the impacts of currency fluctuations on the foreign exchange transactions, focusing on the case of Japan Airlines (JAL).

This article explains how the exchange rate affected the operations of Japanese carmakers in Europe. With the removal of the quota restrictions on imported Japanese cars, several Japanese carmakers including Toyota, Honda, Mitsubishi, and Nissan were ambitious about their operations in the vast European auto market. However, the reality was rather disastrous; the Japanese carmakers' combined operation losses in Europe reached $470 million. One of the main reasons was the exchange rate. The stronger pound and yen compared to the euro resulted in the significant cost increase of the Japanese cars mostly made in Britain and Japan. This article also introduces the Japanese carmakers' strategies to reduce their exposure to currency swings.

Full-text Article: http://www.businessweek.com/2000/00_51/b3712192.htm

Case connection:

"Foreign Exchange Losses at JAL" in Chapter 9 (pp.276-277).