Yen Woes - Surging Asian currency worries auto-parts dealers
Published:Sunday | June 26, 2011 | 12:00 AM
Brian Bonitto, Special Assignment Editor
THE TOWERING waves from the tsunami and magnitude 9.0 earthquake which devastated Japan's northeast coast have subsided. However, local auto-parts dealers are reeling from the threats of an ever-strengthening Japanese yen.
"Right now, we are spending more money to get less goods out of Japan," said Derrick Johnson, proprietor of Superior Parts Limited.
Johnson, who has branches in Kingston, Manchester, St Ann and St James, said he thought, with the March 11 earthquake and tsunami which claimed more than 18,000 lives and about US$35 billion in damage, the currency would have weakened.
"At one time, US$1 was valued about ¥100. So, the currency is really strengthening," said the auto-parts trader, who specialises in Honda and Acura parts.
On Friday, US$1 traded for ¥80.645.
Johnson said shipments of parts from Japan are not back to normal levels, but his company has revised its strategy to avert any possible shortage.
"We have set up multiple network systems with suppliers in different cities in Japan to mitigate against the shortage, even though we still experience some delays in shipment," Johnson added.
Posing a challenge
Bert Tomlinson, managing director of Bert's Auto Parts, said the strengthened East Asian currency is posing a challenge to the cost of spare parts.
"The strengthening of the yen is the biggest headache we have to date," Tomlinson told Automotives. "The yen's upward movement has caused the cost of supplies to increase."
The managing director said, as a result of the current strength of the yen, local customers can expect a slight uptick in prices.
"There will be a slight price increase, but not a massive one," said Tomlinson, who is also an avid golfer.
With outlets on Molynes Road, Hagley Park Road and Camp Road, Tomlinson said there may be some slight hiccup in the supply chain, but nothing to worry about.
"For me, some delays may be up to a month. But, I'm getting supplies nonetheless," he said.
Like his counterpart Johnson, Tomlinson said, with his network of suppliers scattered throughout Japan, there should not be any problems in supplying the local market.
"There hasn't been any major disruption in my supplies, as a lot of the factories I deal with are far removed from where the disaster took place," he said. "So there is no need to panic."
Financial trading
Dr Damien King, lecturer in economics at the University of West Indies, explained that the rejuvenation of the yen is more attributed to financial trading than the ability of the underlying economy to withstand shocks.
"So, it will cost us more money to buy goods from Japan," he said.
In addition, the economist said, there was a flip side to the strengthening of the Asian currency.
"Jamaican goods are cheaper and more attractive to the Japanese. So, maybe we will benefit from this new boost to the yen, resulting in more orders from Japan for our coffee and more visitors to the island," said King.
Hezron Cameron, managing director of the Montego Bay-based Cee's Automotive Parts and Accessories Limited, said he has been receiving his shipment from Japan as usual. However, he said he has been noticing that the prices of parts continue to rise.
"The cost of used car parts has increased," said Cameron. "Suppliers have advised me to hold off on payment due to the strengthening of the dollar. So this means that the longer we take to pay, is the more the Japanese suppliers will earn from the Jamaican used car-parts market based on the increasing conversion rate."
The managing director went on to say that special orders are now taking up to four days longer than in the past.
"But we'll always have parts to supply our customers."