What goes up, must come down. And in this situation, Japan's yen has gone up when compared to our dollar -- about eight percent since August. And with the yen's rise in value, the profitability of low margin cars like the Honda Fit goes down. Built in Japan, with the yen up, the strong-selling Fit isn't making Honda any money. That's bad.
What if, like 80 percent of all other Hondas sold in the US, the Fit was manufactured right here? Well, that would certainly bring costs down and move Fit-related profits right back up. This switch could happen sooner than later, as Honda sales are down 25 percent over the first nine months of 2009, while Fit sales are only down 12%.
Honda president Takanobu Ito said the change from Japanese to American production a "highly likely possibility." Ito noted that Honda likes the current manufacturing ratio of 80 percent US/20 percent Japan, but says that more hghi tech models (such as hybrids, maybe even sports cars) should come from Japan while the more basic, Fit-like stuff gets built here. Makes economic sense, no?