Shifting Japan-Based Production
Nissan's Hassan (right) and Gov. Bredesen discuss the automaker's $250-million Tennessee expansion.
Nissan Adding 1,500 Tennessee Jobs to Up Efficiency, Cut Costs
by JACK LYNE, Site Selection
Executive Editor of Interactive Publishing
NASHVILLE, Tenn. Nissan's (www.nissan.com) fierce yen for expansion - plus its need to soothe the fiscal sting of the Japanese yen - equals1,500 new jobs at the automaker's two plants in Decherd and Smyrna, Tenn.
Nissan, in the midst of its biggest North American expansion in two decades, is adding that gob of jobs by relocating 50,000 units of its Japan-based Pathfinder SUV production. The US$250-million Pathfinder project will be Nissan's fifth major expansion in Tennessee since it made front-page headlines in 1980, announcing that it would site its first North American plant in Smyrna.
Nissan's Smyrna plant (pictured above during final body inspection) has been named North America's most productive auto-making facility for nine straight years by the influential Harbour Report.
"What started 23 years ago continues to grow," said Nissan Senior Vice President Emil Hassan, Nissan North America's senior vice president of manufacturing, purchasing, quality and logistics.
The production shift also signals further growth in the major cost efficiencies attained since Nissan's strikingly successful "Revival Program" started in 1999.
Basing North American-sold Pathfinder production in Middle Tennessee tempers the effects of the yen's weakness against the U.S. dollar. The yen's puny performance has major bottom-line implications. Nissan officials announced in May that every drop of one yen against the dollar would cut some $84,000 from the company's 2003-04 fiscal year operating profits. (As of a few days ago, one U.S. dollar equaled 119.6 yen.)
'Integrated Suppliers' Shouldering Much Work
Nissan's new Pathfinder setup will also produce significant labor savings. The automaker will add only a modest 800 new jobs in shifting the SUV production.
The automaker's "integrated supplier" strategy will stimulate the 700 other new jobs. And that strategy ensures that the supplier-jobs figure is very unlike the soft, doubt-inviting numbers often bandied about in project announcements.
The Pathfinder (above) is being redesigned to share the same platform used in the Frontier pickups and Xterra SUVs that are already made in Smyrna.
Those 700 jobs are firm, since they'll be inside Nissan's two plants. The automaker is leaning on those in-plant suppliers to perform substantial production-related work.
Integrated suppliers, for example, will assemble Pathfinder modules and sequence parts, Hassan said at the Nashville project announcement. That setup will significantly reduce Nissan's handling and transportation costs, he explained.
The Smyrna assembly plant will house 550 of the new supplier positions, Hassan said. Another 150 will be added at the Decherd plant 71 miles (114 kilometers) southeast, which makes the engines installed in Smyrna. He didn't identify any Pathfinder suppliers, explaining that some negotiations are still in progress.
The Smyrna plant will add even more manufacturing efficiencies in the fall of 2004, when common vehicle platforms are introduced. The Pathfinder is being redesigned to share the same platform used in the Frontier pickup and Xterra SUV - both already produced in Smyrna.
North America's Most Efficient
Those changes will come inside a Smyrna operation already fairly dripping with efficiencies.
Auto Plant Will Become Most Productive
The influential Harbour Report (www.harbourinc.com) named Nissan's Tennessee plant North America's most productive auto manufacturing facility for the ninth straight year. The facility averaged 15.74 labor hours in 2002 making Nissan's midsize Altima sedan, the Harbour Group reported. That's the best rating recorded since the Michigan-based consulting firm began its annual auto-industry productivity report in 1990.
The Smyrna plant's performance is part of Nissan's larger efficiency infusion. Four year ago, Nissan was losing $2,162 per vehicle in North America, according to the Harbour Report. Now, the automaker makes a $2,069 profit on each.
The Pathfinder addition will make the continent's most efficient auto plant also its most productive. By fall 2004, the Smyrna plant will make 550,000 vehicles a year, the most of any North American auto facility.
Moving in Pathfinder production will add 600 Nissan jobs at the Smyrna plant and 200 at the Decherd plant. That will bring the two operations' total employment to 8,300. And the new supplier jobs will bring the total on-site supplier contingent to 2,800 workers.
Unlike Canton, Suppliers in Existing Space
The project will also add 170,000 sq. ft. (15,300 sq. m.) of new space in Smyrna, adding a stamping line and enlarging the logistics center.
The 700 new supplier employees, however, will work primarily in the two plants' existing space, Hassan said. That's at odds with contemporary Nissan designs like the $1.4-billion, 5,300-job Canton, Miss., facility that opened in late May. Integrated suppliers were part of the Mississippi plant's initial design thinking. Consequently, Canton parts suppliers make modules in their own dedicated space, with conveyer belts moving products to the assembly line.
Retrofitting the 22-year-old Smyrna plant, though, would've been prohibitively expensive, Hassan said. But using existing space will work well, he insisted. Smyrna, in fact, was the precursor for the Canton approach, Hassan explained.
CalsonicKansei North America already works inside the Smyrna plant. The supplier makes Altima front-end modules and instrument panels at assigned work stations.
"Smyrna really set the stage for us to do this sort of sequenced modular delivery," Hassan said. "Then we did it to an even greater degree in Canton. Now, Smyrna will go the next step in implementing those ideas."
Bredesen: 'Preaching the Gospel'
The Nissan project is also a major next step for the administration of Gov. Phil Bredesen (D), who made job creation a major campaign plank.
"When a company like Nissan, which is desired everywhere, decides to put a substantial expansion at its plant here, it is a great reaffirmation of the work force and the business climate in Tennessee, and I'm real proud of it," Bredesen said at the project announcement.
"During my first months as governor, I have just been trying to preach the gospel rather than looking for new tax sources every year," he added. "We've got to get the economy growing. Ultimately, that is the solution to our budget issues."
The Nissan project was the administration's fifth major expansion announcement since Bredesen took office in mid-January. Together, those projects will create 3,400 jobs.
Hassan also lauded Nissan's support from Tennessee, where the state Dept. of Economic & Community Development (www.state.tn.us/ecd) won Site Selection's newly established Competitiveness Award. (For more, see "Site Selection Competitiveness Award Debuts" from our May issue.)
"This project is a result of our partnership with the state of Tennessee," said Hassan. "The state officials who have worked with us have been very supportive of our efforts to grow our business and add jobs."
Carlos in charge: CEO Carlos Ghosn (pictured), who's spearheaded Nissan's renaissance, insists that the company's "sound, long-term fundamentals" will make its huge North American expansion wave pay off.
That support will include hiring the automaker's new workers through Tennessee's Job Service Program. The state will also offset part of Nissan's worker training costs and will bankroll road improvements to handle added traffic flow.
State officials didn't estimate those incentives' value. In addition Nissan will receive a one-time, $2,000 state tax credit for each new job that it creates.
Though Profits Up 52 Percent,
With the Pathfinder's Tennessee migration, almost all North American-sold Nissan vehicles will be made in the continent. Only the Murano crossover vehicle 350Z sports car will continue to be produced in Japan.
Mega-Expansion a Calculated Risk
Moving production closer to the point of sale - along with dramatically upping plant efficiencies and slicing total suppliers - have been big parts of Nissan's Lazarus-like makeover. As a result, the company's operating profits soared by 51 percent in its last business year, which ended March 31st of this year.
Even so, highly aggressive expansions like the Tennessee project entail considerable risk right now. North American vehicle demand is cooling.
Nissan has felt that pain. Its U.S. sales in 2003's first four months were down 5.4 percent, trailing the overall market. And the automaker has announced that it expects this year's operating-profit growth to slow to a more modest 11 percent.
Still, Nissan CEO Carlos Ghosn, who's spearheaded the remarkable renaissance, remains unfazed. Bold expansions like the one in Tennessee will pay off, he insisted at a Tokyo press conference last week announcing the new Presage minivan.
"Nissan's fundamentals are sound, so long-term, there is no doubt in my mind that the shares will move up, say, over the next three or six months," Ghosn said.
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