GARDENA, CA – For Nissan Motor Co. Ltd., the comeback trail in the U.S. is clearly marked, and the game plan is working.

July 2004 was the best sales month in company history, with combined Nissan and Infiniti deliveries of 93,297 units. From January to October, combined sales were up a healthy 22.6% over like-2003, according to Ward’s data.

Nissan marketers expect their U.S. sales to hit a new record high this year of 1 million, compared with the previous peak of 830,767 reached in 1985, while forecasting total industry sales in the U.S. this year of 16.9 million, about the same as 2003.

"It certainly seems like the U.S. auto market is saturated. Real demand may be around where actual sales are,” says Jed Connelly, senior vice president-sales and marketing, Nissan North America Inc. “Incentives spike up and pull sales ahead, but there's payback the next month. At some levels it looks like the market is optimized."

Yet, Nissan North America executives are understandably optimistic and have no plans to follow the lead from General Motors Corp. and Ford Motor Co. to reduce output.

Nissan’s Jed Connelly says U.S. sales should hit a record high of 1 million units this year.

"We have no need to cut production,” Connelly says. “We have good capacity in both of our U.S. plants and have been judicious in our planning cycle. Earlier this year, we were even running a bit of overtime. And we've been able to shift production around."

How much of Nissan’s recent sales turnaround is due to incentives is impossible to measure.

But Connelly considers incentives excessive and unavoidable, especially as the company gains marketing momentum with new models, such as the Titan pickup and Armada SUV. He says Nissan relies on conquest sales from competitors because there is no base of loyal owners yet on which to build.

"From a percentage standpoint, we're showing restraint," says Connelly.

Nissan's sales incentives for the past two years have been running about 55% of the industry average. He declines to supply dollar figures.

"To make sure our dealers can compete, we're spending more than we planned to and more than we would like to, in response to what's going on in the industry,” Connelly says. “It's not part of our strategy – it's a reaction."

He concedes incentives are effective, saying, "We wouldn't do them if they didn't work." Connelly emphasizes the variable nature of what many in the industry consider a necessary evil.

"We try to apply incentives surgically. For several months after launch, the Titan had none,” he says. “Today, we offer $2,000, and that's probably less than half the industry average. There aren't any incentives on the Z, now in its third sales year."

With the U.S. vehicle market currently stagnating at or near the saturation point, first-time buyers have become more important than ever for auto producers.

"We're interested in attracting Echo Boomers (children of Baby Boomers, born since 1982), who over the next 10 years are going to be buying their first cars,” says Connelly. “We'd like these young people to have their first new-car experience with a Nissan, which would give us a good chance to retain them as customers."

He says Nissan's current lineup already attracts young buyers, especially the Sentra compact and Xterra SUV. "The average Altima buyer is 43,” Connelly says. “Right now, among auto manufacturers, we're at the younger end of the spectrum across the board."

The auto maker has kept pressure on competitors with five new vehicle launches in 2002 and another five in 2003, which included the Quest minivan, Armada and Titan.

Nissan is launching five more new vehicles this model year, including the Pathfinder SUV and Frontier pickup. Coming up next year: a 35th Anniversary Z in January and a new Xterra in February. The new Infiniti M45 debuts in March as an ’06 model.

With the new Canton, MS, plant in full production, along with Smyrna, TN, and two plants in Mexico, Nissan has ample production capacity in North America of 1.28 million units to meet demand.

The company expects its Build-To-Order program to shrink the leadtime between order and delivery – currently four to six weeks – to three weeks.

Although Nissan assembly plants receive dealer orders 60 days in advance, a dealer can access an order as late as a week before a vehicle is produced and change the specifications to suit a particular customer. Add on 12 to 13 days’ transportation time to the dealership.

Connelly says the emergence of cross/utility vehicles, such as the Nissan Murano, is the most significant trend in the North American market.

Luxury models such as the Infiniti FX45, Lexus RX 330, Porsche Cayenne and Volkswagen Touareg are generating new excitement and selling briskly at the expense of SUVs.

He foresees potential trends developing at the entry level, triggered by Toyota Motor Corp.'s successful Scion models, but feels none have matured yet.

And Connelly stresses the need to build domestically or import what the Echo Boomers are going to want in three to five years.

Consequently, Nissan plans to import a small car from Japan to join the battle in the “youth segment,” possibly the boxy Cube to compete against the quirky Scion xB and Honda Element, but he insists no specific vehicle has been picked yet.

The hefty North American truck market poses a unique set of challenges and a far different product mix.

Connelly points out compact-truck sales have declined in recent years because of downward pricing pressure from fullsize trucks.

“People have been opting for fullsize trucks at the expense of the compacts," he says. Connelly considers Nissan's new-generation Frontier, derived from a modified Titan platform with a new 265-hp 4L V-6, a midsize truck. “I think that's where the Toyota Tacoma is heading, as well.”

As the mature, fullsize truck market continues to thrive in North America, Nissan – as well as Toyota – is charging full-bore into the segment.

"It's hard to imagine that market, over 2 million units, will grow a lot more, but I don't think it will diminish, either,” Connelly says. “It's too big to ignore. What it may do is evolve. The new models have truck utility with car-like ambiance."

Connelly marvels at the shift from simple pickups years ago to fancy king cabs and crew cabs fitted with leather upholstery, DVD players and automatic transmissions.

"Domestic makers build good trucks and are fiercely defending their turf,” he says. “Toyota is building a new truck plant in Texas, and our goal is to establish ourselves. We're being cross-shopped by all the right people, and as the ‘new kid on the block,' the Titan is a credible, fullsize pickup truck."

Titans went on sale in December 2003. But even factoring in time to ramp up and fill the dealer pipeline, cumulative sales of 60,481 units as of Sept. 30 have been disappointing.

Yet, Nissan marketers are confident they have a competitive truck and expect to meet their sales target of 100,000 units for the full fiscal year ending March 31, 2005.

The growing pains that plagued the new, $1.4 billion Canton plant may have bruised sales of Titan and the other four models launched in the first 13 months of operation.

A variety of factors – new plant, new products, new suppliers, new workforce – are blamed for the initial failure to meet Nissan's quality standards. The situation became so serious that 200 engineers arrived from Japan this past summer to find a quick fix. Most have returned home.

“They made a lot of changes at the production and supplier level, and we should see the benefits in the recent model launches," Connelly says.

Turnaround specialist Carlos Ghosn, who took charge of Nissan in June 2000, set remarkably high goals for the troubled auto maker.

So far, all have been met or surpassed, with Nissan North America the source of about 37% of worldwide sales and most of the company's operating profits. North America is so important to the company that Ghosn decided last March to personally oversee the operations here.

Few, if any, have reason to believe Ghosn's success formula and reliance on North America will change when his new growth plan, Nissan Value Up, succeeds the current Nissan 180 in April 2005.