Japanese car manufacturers, including Toyota Motor Corporation (NYSE:TM) (TYO:7203), Nissan Motor Co., Ltd (PINK:NSANY), and Honda Motor Co Ltd (NYSE:HMC), might suffer a bigger crisis than the tsunami that occurred in Japan last year.
Toyota Motor Corporation (NYSE:TM) (TYO:7203), Nissan Motor Co., Ltd (PINK:NSANY), and Honda’s business operations, particularly in China are at risk, due to the increasing anti Japanese sentiment among Chinese people in connection with dispute over a group of islands claimed by Japan and China.
Anti-Japanese protests sparked, due to media reports that the Japanese government reached a purchase agreement with the private owners of the disputed Sensaku (Diaoyu) islands, located in the East China Sea.
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The rallies against Japan escalated, when Tokyo Governor Shintaro Ishihara confirmed that the Metropolitan Government of Tokyo had been collecting funds to buy the islands. Some protesters became violent, breaking into Japanese cars and burning vehicle showrooms.
Demonstrators attacked the dealerships of Toyota, Nissan, and Honda, located in the eastern port city of Qingdao. The companies also stopped their car productions in plants in China, while their managements are evaluating the situation.
Cui Dongshu, deputy secretary general of China’s Passenger Car Association, said that Japanese car brands would possibly lose their lead in the country, to Western car brands for the first time since 2005. He said, “The repercussions for Japanese carmakers are very serious and will last for a long time. There are plenty of choices. Why bother with Japanese brands, if there are concerns of safety due to anti-Japan sentiment?”
Chinese consumers are expected to stay away from buying Japanese cars, and would instead patronize vehicles manufactured by American automakers, such as General Motors Company (NYSE:GM). This year, GM sold 1.84 million cars in China, compared with Nissan’s 485,000 vehicles sold in the country. GM’s joint venture with Volkswagen sold 1.49 million total vehicles in China this year.
The diplomatic crisis between the two countries has caused great damaged to the Japanese automakers. In addition, analysts believe a broad range of Japanese products from rice to tractors would also suffer negative impacts from the situation
In another report, General Motors Company (NYSE:GM launched its “thrilled or just return it” program in Germany, as the company tries to improve the image of Opel, its European unit. The company is offering German consumers an opportunity to return the keys of their brand new vehicles within 30 days, or 1,864 miles (3,000 kilometers) without questions and fees. If a consumer returned the car within 30 days without damage, but exceeded the limited mileage, the company would charge 0.67 percent per 621.37 miles (1,000 kilometers).
In a statement, Opel Interim Chief, Thomas Sendran, said, “We want to win new fans of the brand with this deal. Whoever drives our cars for the first time will quickly be convinced of the quality and innovations of our cars.”
Meanwhile, a report from Reuters cited that Daimler warned of a possible profit decline of its Mercedes-Benz Cars division, due to the economic slowdown in China and Europe. CEO Dieter Zetsche said the company is gearing up for a challenging environment. The company projects a similar EBIT of 9 billion euro this year.
Previously, Ford Motor Company (NYSE:F) has been chosen by the Canadian Auto Workers (CAW) to lead the negotiation to reach an acceptable contract, which will serve as a guide for General Motors Company (NYSE:GM) and Chrysler, to create an agreement with the Canadian workers union. The three U.S. automakers were negotiating to adjust the wages and benefits of the Canadian autoworkers to be similar to their counterparts in the United States. Their objective is to seal a deal before the expiration of the CAW contract.
Ford and CAW reached a tentative agreement on Monday, as the workers union continues its discussion with GM and Chrysler. Based on the agreement, 800 laid off Ford employees will be re-hired. Ford will partially create 600 new jobs in its Canadian operations, no base wage increases during the entire duration of the new contract will take place, until September 2016, although every employee will receive a $2,000 lump sum payment for cost of living increases.