Supplier Switch Saves Nissan $1,800 on Micra

By changing most of its supply base for the new Micra just launched in Sunderland, U.K., Nissan Motor Mfg. Ltd. has cut the cost of manufacturing the car from $7,661 for the old version to $5,808.

There were two factors: getting away from supplies purchased in British pounds, and going to higher volumes thanks to switching to a shared platform with Renault SA.

The strength of the British pound compared to the euro makes vehicles with high British content expensive when sold on the Continent. For the old Micra, 80% of sales took place on the Continent, but only 19% of the parts were sourced in euros. For the new Micra, 72% of the parts are sourced in euros, providing a natural hedge against currency fluctuations.

“We can't produce in a currency which doesn't represent sales,” says Nissan CEO Carlos Ghosn, who was in Sunderland to watch the first Micra leave the assembly line. “We don't want to be profitable because we're lucky with the exchange rate.”

Ghosn says the pound is not nearly as strong now as it was two years ago when Nissan was negotiating a $62 million (£40 million) incentive package from Northeast England that was meant to compensate indirectly for the currency problem.

Many of the new suppliers are in France because of the commonality with Renault. A logistics company picks up parts at the supplier factories and brings them to a warehouse near the plant. Only a few parts come from Japan, such as engine blocks and crankshafts for the gasoline engine.

Northeast England had no auto industry when Nissan invested there in 1984. Today, there are 24 local suppliers, and most of them retained business on the new Micra.