Nissan to shift manufacturing locally
Strategic Sourceror on Tuesday, January 10, 2012
Still reeling from the effects of the 9.0-magnitude earthquake and tsunami that rocked its domestic manufacturing facilities, Nissan said it plans to significantly increase car production in the U.S.
Japan-based Nissan struggled to emerge from the effects of the natural disasters, which struck in March 2010. Nissan chief executive Carlos Ghosn asserted the company now believes making cars in Japan is putting it at a competitive disadvantage.
The automaker – like competitors Toyota and Honda – has had to overhaul supply chain management and work with procurement consultants. Automakers throughout the world had to rework their spend management and purchasing services, as the natural disasters had a huge impact on the global car making supply chain.
The Wall Street Journal reports that Ghosn said Nissan plans to localize car manufacturing to approximately 90 percent of its sales in North America. Prompting the shift in manufacturing is the strength of the Japanese currency, the yen, which has accumulated against the U.S. dollar over the past few years.
"It's uncompetitive even now at 77 yen" to the dollar, according to Ghosn. The Nissan chief executive asserted the automaker is striving to implement business cost reduction programs in an effort to improve profitability, but that it has become exceptionally difficult because of the strength of the yen.
Nissan currently produces about 70 percent of its sales in North America locally, according to Ghosn. The company would need two to three years to ratchet up production in the U.S. before it could achieve the 90 percent goal, he said.
The yen has risen not only against the greenback, but also against a host of other currencies, which has spurred Nissan executives to rethink how the company divides its manufacturing among its global markets. By producing cars locally, the company could successfully implement manufacturing cost reduction programs.
Nevertheless, restructuring Nissan's expansive supply chain will require a deft reworking of its procurement and logistics divisions, among other segments, experts said. Ghosn said Nissan does not plan to shutter the doors of its production plants in Japan but, rather, would rework manufacturing. He noted, moreover, that the company is endeavoring to increase market share in the U.S. and in China.
Nissan currently owns an 8.2 percent market share in the U.S., and a 7.2 percent one in China, which is the world's biggest car market. The company is hoping to surpass 10 percent in both countries, according to Ghosn.