Toyota and Sony Grapple With Japan Production Issues

As the yen continues to hold on to its strength, iconic Japanese brands like Toyota and Sony are having to make increasingly difficult decisions about retaining domestic production in Japan. At this point, it looks like the world's biggest automaker and its most enduring consumer-electronics brand are coming to somewhat different conclusions.

Toyota President Akio Toyoda has surprised many close observers over the last few days by conceding that his company may have to end up skewing future production much more toward other countries and away from Japan because of the persistent imbalance of the yen against the weaker dollar and other currencies.

In fact, he told the Wall Street Journal that Toyota may actually end up exporting Corolla subcompact sedans that it is beginning to build at its just-opened plant in Mississippi, in addition to supplying the North American market from there.

"It is very possible to consider exporting [from Mississippi] to countries" that share free trade with the United States, such as South Korea in the wake of the new trade pact, Toyoda said. The company only exports relatively small volumes of existing nameplates out of U.S. plants, such as its Sequoia SUV out of its factory near Princeton, Ind., and its Tundra pickup out of the San Antonio assembly plant.

No one expects Toyota to abandon Japan. Japanese origins are a key to the identity of the company and the brand. That would be like "putting our head in a noose," Atsushi Niimi, Toyota's EVP for manufacturing, told the newspaper. But site decisions are more pressing for Toyota than for its Japan-based rivals these days because Honda and Nissan already have located much more of their overall production in other countries.

At the same time, Sony is trying to keep its lucrative image-sensor production based in Japan even though it faces yen-related financial pressures as well. For one thing, the margins on those products are higher than in the intensely competitive global small-car business, and Sony says it's especially important to keep output of the sensors close to key technology and suppliers that are rooted in Japan.

For patriotic Japanese brands, such questions are likely to become more difficult to answer before they become easier.

At top: Toyota CEO Akio Toyoda and Mississippi Governor Haley Barbour celebrate the first Mississippi-built Corolla, on Nov. 17, 2011.