Nissan to move cars production from Japan to Mexico

2008 NISSAN Tiida

Nissan Motor Co., facing its first loss in nine years, will shift production of some small cars sold overseas to Mexico as the surging yen erodes profits on vehicles exported from Japan.


"At ¥90 to the dollar we are losing money, so we have stopped production" of some models at home, Chief Financial Officer Alain Dassas said in an interview Wednesday in Tokyo. The company will begin shipping compacts to the Middle East from Mexico, he added.

Nissan, Japan's third-largest carmaker, plans to shift production of 130,000 vehicles to other countries over the next two fiscal years after the yen surged 23 percent in 2008.

The stronger yen and tumbling auto sales in the U.S. and Japan have forced Nissan, Toyota Motor Corp. and Honda Motor Co. to slash production and cut staff.

"We look at the yen every day," Dassas said. "If the yen stays at 90 to the dollar, then we have to think about something else" beyond the production shift.

Honda has said it may move research and development overseas and increase manufacturing abroad if the exchange rate stays below 90 to the dollar.

An exchange rate of between ¥100 and ¥110 to the dollar would allow Nissan to maintain more production in Japan, Dassas said.

Nissan produces models including the Tiida compact and Sentra sedan in Mexico.

Nissan's domestic production may drop as much as 20 percent to less than 1 million vehicles next fiscal year, the Nikkan Kogyo newspaper reported Friday, without citing sources.

The company's latest forecast estimates domestic production will drop 16 percent to 1.06 million vehicles in the fiscal year ending in March. The automaker is still planning for next year and cannot confirm whether output will fall, spokesman Mitsuru Yonekawa said.

The automaker may press ahead with construction of a factory in Chennai, India, even if 50-50 joint partner Renault SA quits the project, Dassas said. Nissan would reduce the plant's capacity if forced to go solo, he added. Renault Chief Financial Officer Thierry Moulonguet said last week the French carmaker may abandon the venture.

Nissan expects an operating loss of ¥180 billion ($1.91 billion) for the fiscal year ending in March. The company based its earnings forecast on exchange rates of 99.7 to the dollar and 141.9 to the euro. The strong yen will cut full-year operating profit by ¥60.9 billion.

[Source : Bloomberg]