Nissan Closing in on '94 Peak

GARDENA, CA — No doubt about it, Nissan North America Inc. is on the comeback trail.

Rebuilding a corporate and brand image, expanding sales and boosting market share, all at the same time, never is an easy job. But it's especially hard now in the U.S., with consumers intimidated by war fears and a sluggish economy.

Even so, President Norio Matsumura says Nissan's made a good start. He is confident that, after operating more than four decades in North America, Nissan is on track and prepared for nothing less than a successful comeback.

The “vicious cycle” of the past, described by Matsumura as “wrong products and lower residual values,” has ended. The turnaround, fueled by what he calls “people, product and President (Carlos Ghosn),” began in 1999 and is gaining momentum.

Matsumura, the company's man in charge of North American and European operations, has been the non-resident president of Nissan North America for two years.

He commutes to Gardena from Tokyo once a month, is in frequent contact by trans-Pacific telephone in between visits and says, “I don't have to be here fulltime. Information sharing is now better than ever before. Some problems are decided on the spot when I am in Gardena. Others I take back to the Nissan executive committee in Tokyo.”

U.S. sales this year are expected to reach 760,000 vehicles, up 8% from last year and closing in on the 1994 peak of 774,405.

Next year, Nissan expects to move a record 850,000 cars and trucks out of showrooms in the U.S., which customarily provides around 75% of total North American sales, with the balance from Mexico (roughly 20%) and Canada (about 5%).

No one at Nissan is satisfied yet. Sights have been raised above the peak 5.2% market share reached in the U.S. in 1995. Matsumura foresees a 6% share for Nissan no later than 2005, and that's only an interim target.

North America is vital to Nissan's recovery, providing 40% of the auto maker's global sales in fiscal 2001, ending last March 31, up from 25.8% in 1998.

In each of the last three fiscal years, sales in North America have exceeded those in Japan and nearly doubled those in Europe. What's more, North American operations have been the main force behind Nissan's fiscal revival.

Matsumura declines to reveal numbers, but industry analysts in Tokyo say North America supplied about 75% of Nissan's total corporate profits in fiscal 2000 and record earnings in fiscal 2001.

President Matsumura, who doubles as executive vice president of the parent company, gives major credit to “the clear direction and strategy provided by Carlos Ghosn. Everyone now knows where we are and where we are going.”

But the comeback trail has been rough. He deplores the “deformation” of the U.S. market by high sales incentives. Independent analysts calculate such spending by Nissan at $1,655 per vehicle, 80% of the industry average but down from $1,900 per vehicle in 1999, which was 3% more than what competitors were shelling out.

In an exclusive interview with Ward's, Matsumura concedes “any decrease (in sales incentives) depends on how quickly we can re-establish our brands.” He will not guess how much longer auto makers will need these costly additives to stimulate sales.

The J.D. Power 2002 Initial Quality Survey, ranking Nissan 9th in quality — below General Motors Corp., DaimlerChrysler Group and Ford Motor Co. — was a blow to company pride.

A thorough investigation now is under way to identify and solve problems and eliminate the perception that Toyota Motor Corp. and Honda Motor Co. Ltd. offer higher quality and better value. “We are fighting complacency, and products in the pipeline are improving,” Matsumura says.

He sees sharpening competition from South Korea's Hyundai Motor Co. Ltd. and Kia Motors Corp. as a new threat, with Detroit's Big Three expected to be the big losers.

“Some people are core ‘Buy America’ customers, but in general Americans are very open,” says Matsumura, who acknowledges Nissan's need for a stronger image in the U.S.

He has high hopes for the new Nissan 350Z sports car, “our image leader,” launched in August as well as Nissan's first fullsize pickup truck. It's due to roll out of the new Canton, MS, plant in the second half of 2003.

Other important image builders include the Altima, named “North American Car of the Year in 2001” by a jury of automotive journalists, and a bevy of new model launches — five this year and six more in 2003-2004.

“The model cycle is now shorter and shorter, making competition much fiercer,” says Matsumura.

He expects the sales growth leaders in North America to be SUVs, such as the Nissan Pathfinder and Infiniti QX4; cross/utility vehicles, such as the new Nissan Murano and the Infiniti FX45 due in January; and what he calls “near luxury models,” such as the Infiniti G35.

Nissan is placing renewed emphasis on the luxury segment with an extended Infiniti lineup designed to increase dealer showroom traffic and broaden attention spans.

The Q45 flagship will be perked up next year with enhancements, including a new final drive ratio for better acceleration. The just-released M45 sedan, now in showrooms, fits in between the flagship and G35.

North American production currently is centered at Smyrna, TN, where annual capacity recently was hiked to 500,000 units, and two Mexican plants with combined capacity of 400,000 units annually.

Next May, production will begin at the new Canton plant, where initial capacity of 250,000 units will rise to 400,000 a year later. By 2004, Nissan will have invested more than $6 billion in North America, and total capacity will be 1.3 million units, which Matsumura says should be sufficient — at least until 2005.

The import share of Nissan sales in North America currently is 30%, but “next year the Smryna plant will make Maximas, and imports will drop below 20%,” he says, and eventually may stabilize around 15%.

“We have a global outlook. There's no need to produce everything here. In the long run, there will be more global sourcing, and we may sell cars here made in the U.K., Spain or Thailand, as well as Japan.”

Surprisingly, Matsumura does not share the enthusiasm of some auto executives about the future of hybrids powered by electric motors and gasoline engines. “The problem at this stage is cost,” he says. “It's too high to be popular with the public.”

He also says fuel cells, as practical power-plants, remain 10 to 20 years away. He is more impressed by the environmentally kinder ULEV (ultra light emission) engines, which will be installed in 80% of all Nissan cars sold next year in Japan.

And although Nissan is angling vigorously for a larger presence in China, Matsumura makes it clear the U.S. will remain the main focus of overseas attention and an irreplaceable contributor to the company's fortunes.