Carlos Ghosn, president of Nissan Motor Co, has performed one of the corporate world’s most breathtaking transformations by taking the Japanese automaker from the brink of ruin to profitability in just two years.
Essentially, Mr Ghosn defied Japanese business and cultural taboos and revived the company’s design innovation, quality standards and product. He set out to invest less in non-core activities and more in core businesses while slashing debt.
As part of the process, Nissan took a huge gamble in 2000 and built its first US manufacturing plant in Canton, Mississippi, at a cost of $1.43bn. But the announcement came with $295m in incentives from the state to seal the deal. It included monies to help hire and train workers and fund infrastructure improvements, such as water and sewer improvements and highway access. Nissan’s goal for the plant was to increase US production immediately following a reduction in Japan. The gamble was a huge success for the 3.5 million square foot plant: Nissan made automotive history by introducing five new models in its first eight months.
The same year, Nissan revealed plans to expand its engine and transaxle plant in Decherd, Tennessee, and to expand its plant in Smyrna, Tennessee. The investment called for $1bn and up to 2000 new employees over four years.
In May 2001, the company announced its best financial results in its history. The following year, it revealed plans to invest $500m to expand the Canton plant by one million square feet to add production of the Nissan Altima in spring 2004.
Since then, Smyrna has received a further investment of $250m for production of the all-new Nissan Pathfinder in 2004, adding 800 employees to the Smyrna and Decherd workforces. And in July 2004, plans were announced to invest $47m to construct a forging facility at the Decherd power train assembly plant to manufacture one million crankshafts when at full production in 2006.
“Engines for the Nissan are made in the US,” says James C Morton Jr, senior vice-president of administration and finance for Nissan North America (NNA) from his office in Gardena, California.
The latest big news came in June when Nissan executives announced that the Nissan Altima gasoline-electric hybrid car would be manufactured in Smyrna, starting in 2006. About $10.4m for additional equipment and minor modifications will be invested at the plant to accommodate the hybrid. No square footage will be added. Some employees will undergo training to build the vehicle.
“We continue to make investments in facilities for car manufacturing in the south-east largely because the southern states are very pro-business and support us with job training,” says Mr Morton.
There has been a huge influx of automobile manufacturers into the south-eastern US, largely because of its incentives and job training opportunities. “States are even now pre-qualifying sites,” says Mr Morton. “The Tennessee Valley Authority is identifying sites for automotive manufacturers.
He continues: “We see so much potential in the south-east. We have been manufacturing in Smyrna for 20-plus years and continue to expand.”
The area’s good weather also helps. “We experience few lost work days,” he adds.
From Mr Morton’s perspective, the area will continue its hot trend of attracting auto manufacturers. “I’ve talked to representatives in Oklahoma who are interested in attracting suppliers,” he says. “Arkansas is even rumoured to be attracting a manufacturer’s new plant.”
The expansions are important to the company because, as Mr Morton reveals, 80% of the Nissans sold in the US are produced in North America. “Our objective is to produce in markets where we have close to 80% in sales. We’ve been ramping up our North American operations to meet demand,” he says.
Already the company has the capacity to product 950,000 units a year in the US. “We hold nearly 6% of the US market,” Mr Morton says.
In March, NNA joined the exclusive ‘million’ club by reporting one million total fiscal year sales, making it one of only six companies in automotive history to have chalked up this total in the US within a 12-month period. This achievement, along with record-breaking sales for the past three consecutive years, also fulfilled NNA’s fiscal year commitment to sell one million units.
Not all cars produced in the US are for the home market, though. “We export close to 100,000 units a year, largely to Mexico and Canada,” Mr Morton says. “This summer we will begin exporting our Quest minivans to China and even larger quantities of shipments to the Middle East. South America has also opened as a new market for us.” The Altima has been a popular car with buyers in the Middle East, where Nissan automobiles are so popular that the company has located its largest showroom there.
To date, the Altima is the company’s highest volume vehicle. “But our new Infiniti is getting rave reviews,” Mr Morton says. “Everything is made in Canton except the Altima and new products.”
For now the company believes it has ample capacity to meet needs into 2009. “The total industry volume in the US is 16.9m. This has been steady. The last projections pegged the figure at 16.7m,” he says.
To prepare for the future, NNA is expanding its design capabilities at its design studio in Farmington Hills, Michigan. Traditionally, Nissan’s design studio’s main focus has been production design and feasibility. The studio, located in the grounds of Nissan Technical Center North America, recently oversaw the birth of its first concept car, the AZEAL sports coupe, at the 2005 North American International Auto Show in Detroit.
The studio expansion will result in an open plan space of 50,912 square feet, which includes a 15,000 square-foot, steel-mesh enclosed viewing courtyard or ‘egg’ made for viewing designs in optimal light. The facility compliments the company’s sister studio, Nissan Design America, which is located in La Jolla, near San Diego.
Southern California has long been an excellent location for the design and testing of automobiles, given the region’s affinity to the car culture, love affair with stylish up-and-coming trends, and the never-ending highways that hug the California coast and vanish into the Sierra Nevada mountains. Many car companies operate design centres in the region.
Nissan’s San Diego operations were originally created to be a secluded, hillside retreat to foster unorganised and unorthodox ways of thinking. Like other Nissan investments, it has paid off. There market-specific cars such as the Z-car, full-size truck, new sports utility van, Altima, minivan, Murano cross-over vehicle, and more than two dozen new or radically changed models have emerged from dream to reality.
Nissan has chosen its locations in North America wisely and carefully. But, like much of its competition, it operates its North American headquarters in southern California, a location popular with Asian car manufacturers. Toyota and Honda are located in nearby Gardena, and in Irvine are Hyundai and Kia Motors America, as well as the North American headquarters of Lincoln Mercury.
Nissan executives find southern California especially advantageous because the Los Angeles area is easily accessible from Japan. “Los Angeles International Airport serves as a big hub for airlines travelling to Japan and Korea,” explains Mr Morton. “In California, our operations are basically on this campus. We have close to 1200 employees.”
Besides Nissan’s North American headquarters, Gardena serves as the company’s command centre for marketing and sales, legal and human resources functions. Just down the road is its finance company, which also houses its engineers and call centre operations.
From its southern California hub across the country to its south-eastern manufacturing base, Nissan North America is doing its part to complete the remarkable turnaround of a once-struggling global automaker.