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Last Updated: Tuesday, 2 March, 2004, 20:03 GMT
Weak yen 'unfair,' says GM boss
Rick Wagoner: Competitive situation in the US is tough
General Motors (GM) chief executive Rick Wagoner has said Japan's efforts to weaken the yen have given it an "unfair" trade advantage.

Mr Wagoner told the BBC that repeated intervention by the Bank of Japan had left the yen "artificially" low against the dollar and euro.

He said the weak yen had put added pressure on US and European carmakers, struggling against tepid demand.

GM's European operations have been hit hard, with sales down 10% in January.

"The amount of intervention in the currency markets by the Japanese central bank is at record levels, " Mr Wagoner told the BBC's World Business Report.

Yen effect

"That is keeping their currency artificially weak against the dollar and the euro, and really reducing the competitive position of the manufacturers' base in Europe and the US.

"We think it's actually an unfair trade practice."

Mr Wagoner's comments come as Japanese carmakers are making deep inroads into the US market, with Toyota overtaking third-ranked Chrysler in terms of market share last year.

European carmakers, already losing ground in the US because of the dollar's steep slide against the euro, are also under pressure from their Japanese competitors.

In the US, the car industry has responded by offering cheap financing deals, a tactic which has kept the showrooms busy at the expense of vastly reduced profit margins.

GM's own car operations have turned in weaker profits for each of the last two quarters, although its overall earnings rose thanks to a strong performance from its GMAC personal finance arm.

Cheap deals

Mr Wagoner acknowledged that the sales incentives had dented profits, but said they would be withdrawn only if the economy recovered convincingly.

"Certainly the competitive situation in the US is tough. I think the heavy level of incentives and other merchandising costs have affected profitability for all of us," he said.

"We're hoping as the economy picks up we'll see an easing of those incentives, but frankly we'll have to see how that plays out. "

However, Mr Wagoner said cheap financing deals had "helped hold up or grow market share during a tough period".

Mr Wagoner said he expected a range of new models, including the updated Vauxhall Astra, to help turn around GM's European operations this year.

He added that GM would continue to push into the booming Chinese car market, where the company recorded a 50% jump in sales last year.

"It's not without risk, but I think the balance of risk versus reward has been very much in favour or reward, so we remain very aggressive in our profile for China."

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