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^I'm fully aware of what's going on in Japan and in the auto industry. Some people just like to blame things on the exchange rate. Decision to build a factory overseas is the same as 'outsourcing' here in US. It works until it doesn't, and then you're stuck. I didn't say exchange rate isn't important at all, but it's waaaay a secondary factor (because short-term you can hedge your business from fluctuations and in the longer run other prices adjust, bringing _real_ exchange rate back in line). Exchange rate might've been a tipping factor in the linked article, but the weight of the issue alone is likely small. Transportation costs in a world of high oil prices are likely to factor a lot more into the decision. And anyone who bases long-term strategic decisions on a directional forecast of the exchange rate is stupid. Exchange rates are almost unpredictable, and the best forecast for X years into the future is where the exchange rate is today.
Exchange rate movement quickly hurt exporters when they are:
a) small and can't justify establishing financial hedges (not true for auto-manufacturers)
b) price things in export markets according to domestic price X exchange rate. Nobody in auto business does this. Most cars are "priced to market".
c) banks walk-out on pre-arranged rates. This happens, but not too often.
Over the longer run, if exchange rates persist (and hedges at old rates expire), they will bite, but the firms should have plenty of time to prepare, alter cost structure and otherwise mitigate the issue.
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