Nissan Motor Co. Ltd. CEO Carlos Ghosn has an uncanny knack for making bold pronouncements and then making them happen. His company, three years ago in terrible financial shape, has just emerged victorious from its zealous turnaround scheme, the Nissan Revival Plan, a full year ahead of schedule.
Now, Ghosn has turned his attention to Phase Two, dubbed the Nissan 180 — “1” for 1 million additional units of global sales, “8” for 8% operating margins and “0” for zero debt, ambitious goals for the next three years.
Nissan is expecting much of the increased volume to come from the U.S., where its sales are projected to rise 7.3% despite the softening market. To accommodate the extra volume, helped by 28 product launches in the next three years, the auto maker now is honing in on increasing its U.S. manufacturing capacity.
Nissan is adding about 350,000 units of U.S. capacity in the next two years, through an expansion within its Smyrna, TN, facilities — without any added bricks and mortar — as well as the launch of a new facility in Canton, MS. Nissan's much-lauded penchant for efficiency is at the heart of the plans; Ghosn claims that if the new plant in Canton isn't the most efficient in the country, it will be second only to Smyrna, which has long held the title.
Nissan North America Inc.'s added capacity at Smyrna makes room for the Maxima midsize sedan. Trial production runs of the new Maxima, which bows for the '04 model year, begin this month.
Smyrna, which will build the next-generation Maxima alongside the Altima sedan (the two midsize sedans will share a platform and engine), Xterra SUV and Frontier pickup, plans to hire up to 1,000 new workers to accommodate Maxima production, which officially moves to the facility from Japan in January 2003. The shift will hike production capacity by as much as 100,000 units annually.
The increase in employment brings the plant's rolls to near 7,000. Hiring already has begun, although the bulk of additional employees — about 700 — will be brought on after July's shutdown.
The cost of training these new workers and new suppliers, plus tooling investment, will surpass $100 million, officials say. Training may prove to be particularly expensive, as current high-seniority workers will be given first crack at newly created positions, causing a shuffle through the ranks. The 1,000 added jobs may generate some 5,000 employee moves, one senior official says.
Capacity, currently at 410,000, is expected to exceed 500,000 units, most likely settling between 510,000 to 515,000 units by spring 2003 when Maxima production is fully ramped up. With the increase, the Smyrna plant will rival Toyota Motor Corp.'s 500,000-unit Georgetown, KY, facility as the country's biggest automotive plant.
Nissan will create capacity for 80,000 Maximas, says Emil Hassan, senior vice president-North American manufacturing, purchasing, quality and logistics, adding that the plant will be flexible enough to vary the production mix between the two sedans in order to meet demand. The auto maker has targeted first-year Maxima sales at 70,000 units.
The ability to make room for the Maxima at capacity-constrained Smyrna is a testament to the plant itself — consistently ranked one of the most efficient in the U.S. by the Harbour Report.
“We're undertaking a major production-volume increase without expanding one square foot,” says Hassan, of the 5.2 million-sq.-ft. (483,000-sq.-m) facility.
The auto maker plans to squeeze out the added units through increased up-time to be created by heightened levels of automation at the already highly automated plant. Nissan proved its abilities in this arena in the Xterra body shop, where a $2 million investment in automation has allowed it to increase production by 30,600 units annually, cutting costs by $840,000.
Subtle changes are improving efficiency in the Altima paint plant, which it will soon share with Maxima. The auto maker, for example, recently developed a small, mechanized arm to open car doors during the painting process, replacing a slower robot. The mechanism enabled line speed to increase by 22% to 70 jobs an hour from 57.
The paint booth, which Hassan claims is the most automated and most efficient in the world, boasts 97% to 98% first runs with no need for fixes. The industry average is closer to 85%, Nissan says.
Ron Harbour, president of the Troy, MI-based manufacturing consultancy Harbour and Associates, says the increase in capacity through efficiency measures is a good accomplishment, but not something that any of the major Japanese makers couldn't pull off. When Honda Motor Co. Ltd. launched its East Liberty, OH, plant, it announced a capacity of 150,000 units annually. “Within two years, they're up to 235,000 units,” Harbour says.
“In Japan, the country is so small they have to, by nature, be very space efficient,” Harbour says. “In a sense, (in the U.S.) we've been spoiled by land and money.” Big Three plants claiming the same square footage of Smyrna only produce at half of Nissan's rate, he says.
More remarkable than the plant's efficiency of space, he says, is its efficiency in labor, where despite the output, workers don't seem to strain under physical demands. “It's more like a choreographed ballet,” Harbour says.
And just as the timing of Nissan's sales increase flies in the face of industry convention, so does its scheme to grow capacity at a time when the Big Three's manufacturing strategy falls more into the category of damage control.
As General Motors Corp., Ford Motor Co. and the Chrysler Group prepare to shutter plants and continue to find other ways to reduce capacity, the only plant other than Nissan that's currently taking on an expansion is Mercedes-Benz's Vance, AL, facilities.
Changes at Smyrna are just the tip of the iceberg for Nissan North America, which is finishing construction on a 250,000-unit capacity plant in Canton, MS, that will build a minivan and fullsize SUV and pickup beginning next year (see story below).
Hiring also continues at Nissan's Dechard, TN, engine and transaxle plant as it prepares for several upcoming engine launches. The plant currently builds the 4-cyl. engine for the Altima and soon will begin producing two versions of the V-6 — one for the Altima and a modified version for the Maxima, both presently built in Japan. Dechard a year later will begin production of Nissan's first V-8, designed to power the forthcoming fullsize trucks.
Canton Plant Eyes Speedy Rollout, <b>Possible Expansion</b>
SMYRNA, TN — Construction is not yet complete at Nissan North America Inc.'s forthcoming plant in Canton, MS, but already company officials are honing in on the principle of constant improvement — targeting speedy vehicle rollouts, unprecedented efficiency and even the possibility of expansion.
Production starts in summer 2003 at the $930 million plant, which will build the next-generation Quest, a fullsize pickup truck and two fullsize SUVs. The Quest will bow first, and other products will follow with only two to three months between each launch, Nissan officials say.
Capacity at the 2.5 million sq.-ft. (232,258 sq.-m) facility currently is set at 250,000 units, but officials say there will be room to grow on the 1,400-acre (567-ha) site. Nissan's massive, 5.2 million-sq.-ft. (483,000-sq.-m) plant in Smyrna, TN, began with a capacity of 250,000 units, growing to its current size through a 1990 expansion. It sits on only 884 acres (358 ha), less than two-thirds the size of the Canton site. “So there's plenty of room,” says Maurice Brunelle, Nissan North America vice president, product quality and supply chain management.
And the new facility is designed to be the auto maker's most efficient, with the potential to outperform the Smyrna plant, which for seven of the last eight years has topped the Harbour Report's efficiency rankings.
“Canton has the advantage over Smyrna,” says Emil Hassan, Nissan North America senior vice president, North American manufacturing, purchasing, quality and logistics. “There are some things we can do easier from a greenfield site.”
The auto maker at Canton already has forged tight relationships with suppliers, which in many cases will be located on or near the plant site. This, Nissan says, will result in sequential delivery of parts, eliminating the need for inventories.
Sequential delivery, also employed at General Motors Corp.'s new Lansing Grand River facility, is emerging as one of the most significant new manufacturing trends, says Ron Harbour, president of Troy, MI-based manufacturing consultants Harbour and Associates. He adds that Nissan has proven itself talented when it comes to optimizing logistics. “Smyrna's been working on that hard and made huge advances,” he says.
Modular assembly also will be taken to new heights, employing up to five modules per vehicle, whereas the Smyrna-built Altima only uses two — instrument panel and cockpit. Nissan plans to begin production at Canton with more than 80% local content.
A closer relationship with suppliers was impossible when Nissan started manufacturing in Smyrna in 1983 as the first major foreign maker to begin assembly in the U.S. The reinvestment required today to bring suppliers closer to Smyrna would not be worth it, Hassan says.
Nissan also will adopt and improve upon some key manufacturing systems currently in place at Smyrna, including its Intelligent Body Assembly System, which employs 104 robots, accurate to within one-tenth of a millimeter.
Construction at Canton is on schedule and nearly completed, Nissan says. Some 230 employees have been hired, and that number will increase to 3,000 by the start of production.
— Katherine Zachary
