Automakers Nissan and Honda import from Japan 23 to 28 percent of the vehicles they sell in the United States. But Toyota sold 999,527 imports in the United States last year — or 45.1 percent of its total sales. A stronger yen trims profits from every dollar sale.
In 2007, when this year's cars were being developed, a dollar bought an average ¥118 so planners could figure each $1,000 in profit was worth ¥118,000 to Toyota. At today's rate, $1,000 is only ¥96,000.
Over time, that will pressure Toyota to raise U.S. sticker prices, particularly for vehicles built in Japan, such as the Prius and most Lexus models.
Toyota's reliance on exports and exposure to currency risk has soared. Last year, Toyota exported about 61.5 percent of all the vehicles it built in Japan. In 1996, it exported just 35.9 percent, says Chris Richter, an analyst with CLSA Asia-Pacific Markets. "It added to the pain," he says.
Moreover, Toyota expanded production at home. Toyota's capacity in Japan grew from 3.73 million units in 2001 to 4.32 million last year, says Ta-tsuo Yoshida, an auto analyst at UBS Investment Research. Industrywide sales in Japan have fallen for years so all of the extra capacity was exported.
Toyota expanded even faster abroad. Global capacity jumped to 9.3 million from 6.4 million in that same period, Yoshida says. Now Toyota faces a 3 million unit gap between what it plans to sell this year and what it can build.
"They weren't ready for the downside," Yoshida says. "They were expecting a 10-meter tsunami, and what they got was a 30-meter one."
A push for ever-quicker vehicle development hurt quality. Recalls are up. Rivals, including Hyundai Motor Co., have caught or passed Toyota in J.D. Power and Associates' Initial Quality Study in the United States.
"What Toyota really needs to be careful of is that the quality gap between it and other competitors is narrowing," says Dave Sargent, vice president of automotive research at J.D. Power. "A lot of people were attracted to Toyota because of the quality."