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The cost base for most of the auto sold within the Continental European market was the Japanese Yen. As the Yen rose against the Euro, costs increased significantly when measured in Euro terms. If Toyota wished to preserve its price competitiveness in the European market, it had to absorb most of the exchange rate changes, suffering reduced or negative margins on both completed cars and key subcomponents shipped to its European manufacturing centers. Deciding to manufacture the Yaris in Japan had only exacerbated the problem.

Toyota management was not sitting passively by. In 2001, they had stared up some assembly operations in Valenciennes, France. Although Valenciennes still constituted a relatively small percentage of total European sales as of January 2002, Toyota planned to continue to expand its capacity and capabilities to source about 25% of European sales by 2004. Assembly of the Yaris was scheduled to be moved to Valenciennes in 2002. The continuing problem, however, was that it was an assembly facility, meaning that much of the expensive value added content of the autos being assembled was still based in either Japan or the United Kingdom.