Germany's leading auto makers Friday said they are comfortably
hedged against major currencies as the euro's continued gains
against the dollar and Japanese yen threaten to squeeze the
export-oriented auto sector's profit margins and blunt its
competitiveness.
Volkswagen AG (VOW.XE), Europe's leading auto maker by sales,
and BMW AG (BMW.XE), the world's leading maker of premium cars,
said their active hedging policies provide insurance against
currency volatility. The euro Friday touched $1.3640, its highest
level in 14 months, before falling slightly. It rose just above a
May 2010 high of Y125.00.
The German car makers among other exporters are vulnerable to
the euro's strength because much of their production capacity is in
the euro zone while most of their growth is coming from foreign
markets as demand for new cars in the European Union has entered
its sixth year of declines. Volkswagen owns 25 car, truck, and
engine factories in the euro zone. BMW owns five car factories.
"We are very solidly hedged against the dollar, yen and pound,"
a Volkswagen spokesman said, declining to comment further.
A BMW spokesman said the group hedges "systematically against
currency fluctuations and we don't speculate."
"From a long-term point of view this strategy has paid off. We
are not overly concerned about possible currency fluctuations in
2013. We have already hedged more than 50% [of our revenues]
against major currencies," the spokesman said.
German auto makers are also investing heavily in new production
capacity in foreign markets to reduce their dependence on exports
from Germany and the rest of the euro zone.
With plants up and running in the U.S. and China, the world's
two largest auto markets, and a new factory planned in Brazil, BMW
is now considering expanding its manufacturing operations in
Russia. The moves are steadily reducing BMW's reliance on Germany,
which today accounts for around 60% of the auto maker's output of
around 1.7 million cars a year, down from around 70% a decade
ago.
Volkswagen said last November it would invest 50 billion euros
($67.83 billion) in its global operations over the next three
years. Volkswagen said it would raise investments to about EUR16.7
billion a year under the latest plan, up EUR4.2 billion from about
EUR12.5 billion annually under previous plans.
Daimler AG (DAI.XE), the owner of the Mercedes-Benz brand, made
plans last year to invest EUR2 billion in its venture with Chinese
partner Beijing Automotive Industry Corp. and a further $2.4
billion to expand its Alabama plant.
In 2012 German car makers produced round about 8 million cars
outside of Germany, up 9% on the year, and 5.4 million cars in
Germany, down 4%, according to the German auto maker's association
VDA. VDA expects the number of cars being produced outside Germany
will increase in a single digit percentage range this year. The
number of cars being produced in Germany will be stable according
to the VDA.
(Matthew Curtin in Paris contributed to this article)
Write to Nico.Schmidt atnico.schmidt@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires