- Change to supply-push over demand-pull for Nissan has assisted post-quake volume recovery
- China is Nissan's largest market; India adds new CV with Ashok Leyland
- Nissan prefers fast-charge EV infrastructure model over battery swap
- Renault-Nissan Alliance 'working very well' - merger not required
- Infiniti to take on BMW with Daimler diesels
Despite the understandable difficulties of this year, Nissan's Andy Palmer is upbeat about Nissan's prospects and the benefits flowing from close alliance with Renault. But there's no need for full merger, he tells Dave Leggett.
Andy Palmer is based at Nissan's HQ in Japan and sits on the ten-man executive committee that affords a broad perspective on the company's business. He offers a summary of the company's global highlights.
“Obviously the fiscal 2010 year (to March 31 2011) ended on a rather bad note with the earthquake, but our volumes increased from around 3.5m units to a shade under 4.2m. That was partly driven by TIV [Total Industry Volume, or total market], but we have had great success with certain models.”
Operating profit was also up by 72%, net revenue by 16% and ten new cars were launched.
For Palmer personally, a highlight has been the New York taxi deal – a deal that took four years to do. “That was a particular delight.”
Supplier disruption and the problem with chips
This year has brought with it the need for crisis management. Palmer, a Brit, is based at Nissan's world headquarters at Nishi-ku, Yokohama. On March 11 he was in a regional planning meeting when the devastatingly large earthquake stuck in Japan's north-east. The building shook and it was big enough for everyone to take shelter under desks and tables. Palmer recounts the day, clearly a traumatic one as Nissan's HQ staff struggled to get home and to confirm – with communications widely down - that family members were safe.
In the midst of the immediate crisis and disruption, Palmer describes a sense of community and stoicism in Japan, of everyone pulling together in the face of great adversity. It was also something evident at the company level. “There were lots of examples of mini-heroics,” he says. “For example, we have a data centre where all of our computers are backed up. When the grid failed, the electricity switched over to the on-site diesel engine powered generators. Once they start operating, you have to get the fuel there, but there was a lot of disruption. We ended up running people with diesel between the technical centre, where the test cars are, and the data centre in order to ensure that we didn't lose any data.”
Nissan – in common with others - has had to grapple with considerable supply chain disruption this year, but the problems have gradually come under control, though with some areas of concern likely to persist. These include IC chips for engine controllers and navigation systems, and the supply problems there could last until October. “Everyone has the same problem,” he says.
Nissan has also flexed its supply chain so that it has gone from demand pull to supply push. That has meant prioritising vehicle production if parts are available, rather than waiting for a build-to-order style order. “We went to a position where if we had the bits, we made the car and put it into the supply chain and then tried to find the customer. So we might say 'we can't give you the one with black seats, but we can give you one with tan seats', and that's perhaps allowed us to recover volume more quickly than others.”
Growing in emerging markets
The demands of his role clearly entail a lot of time in the air. For example, he visits China regularly and is a also a director at the local JV with Dongfeng.
“We are growing significantly in China, where we grew volume by 250,000 cars last year to over a million sales, making China our biggest market worldwide. We have just increased our production capacity there to 1.2m units.”
Infiniti is growing very strongly in China, he says.
And Nissan is also well positioned in Russia due to the heavy involvement of the Alliance with AvtoVAZ. Renault currently owns 25% of AvtoVAZ and the Russian government has offered the opportunity to take that up to 50%.
“We're in the process of due diligence on that and Nissan and Renault combined will probably move up to 50%. The objective will be to produce Nissan and Renault cars at the Togliatti facility.”
At Nissan's own facility at St Petersburg, “we are running at full capacity”.
India is another bright spot.
“In India we have the facility at Chennai that is doing the Micra and we're just about to get the first commercial vehicle off the line in a joint venture with Ashok Leyland. It is called the Dost [meaning friend or mate in Hindi].”
Qashqai boost in Europe
In Europe, the Qashqai has been a big success with 250,000 a year produced at the factory in Sunderland, UK. The crossover vehicle followed Nissan's analysis of poor sales of the C-segment Almera and D-segment Primera. The Qashqai represented a bold repositioning for Nissan in Europe.
“We made the decision to reposition the company in Europe and because we had an SUV/4x4 heritage we could get a kind of alignment through Patrol, Terrano, Murano and eventually Qashqai and Juke. So we tried to push everything a little off-centre and build on that 4x4 heritage and brand image. And the execution was to get Qashqai off the C-segment platform for cost efficiencies, get good diesel engines and get the right package for the European consumer.”
Nissan goes fast-charge for Leaf
The Leaf electric car is obviously another major product initiative for the Nissan brand. Palmer doesn't see limited range as an issue because most people in the segment will be using the car for relatively short distances and simply charging batteries overnight at home. Nissan estimates that 34% of B-segment car drivers never travel more than 150km in their cars.
“If you are charging up and down the motorways, don't buy a Leaf,” Palmer says. “We only ever said we'd target 10% of the population. But there's the motorist who wants to do the occasional trip and we could perhaps say that we'll give a customer a conventional car for that trip...”
In Japan, quick-chargers are being rolled out extensively, including installing them at Nissan (and other) dealers. There are already 200 quick-charge points which means you are never more than 40kms away from one. There's a critical mass issue with such investment, but Palmer reckons there's a sizeable commercial opportunity ahead for struggling to survive petrol stations.
“They don't make their money from selling petrol or diesel, but from the coffee and other goods they sell. There's an opportunity to have a captive audience for 15 or 20 minutes to sell them a caffe latte and a bun while they give their battery a quick charge. You are starting to see that sort of approach."
What about volumes on the Leaf and reported 'missed targets' in the US? Palmer offers a candid explanation.
“We said we'd sell what we make and that we would make 10,000 cars in fiscal 2010. We made 10,400 cars. Our schedule was out by about a month early on due to battery supply issues and we then had to make a decision on where to send them. Some were destined for Japan, some to Europe and some for the US. We made a commitment to supply 4,500 cars to the Japanese government in fiscal 2010 and we simply could not supply to the US in the time scale planned. If we had tried to do that, we would have both failed to get the cars in to the US by April 1 and also missed our Japan supply commitment.”
Project Better Place and battery swap stations are an important plank of Renault's EV strategy. Nissan's strategic approach is different to Renault's.
Palmer is cautious about battery swap stations and has significant reservations over the costs and benefits involved. “There's a big capital investment required to create the swap station – around a million dollars - and it takes you three minutes to change your battery for a fully charged one. Great. Fast-charging station will take you fifteen minutes and we'll be able to sell anybody a fast charger for about $3,000. So that's the kind of equation to consider – are you prepared to take the premium of the difference between $3000 and $1m for the sake of 12 minutes?”
He says that in small countries like Israel and Denmark it makes much more sense, but the economics has to be carefully considered. Renault will be a first-mover, too and he applauds the innovation despite reservations. “If it works for Renault and is a winner, we can obviously adopt the same system. We'll be happy because it's our battery. We're trying to back as many horses as we can but we're committed to the fast-charging system.”
There is also the issue of non-standardisation of battery packs between manufacturers. “Most people who buy an electric car won't be driving it long distance. They will be almost certainly charging overnight, almost certainly for the same route every day and hopefully many companies will have charging stations. The fast-charger is however there for longer journeys.”
Two become one?
The nuances of the different positions taken by Renault and Nissan in this area raise some questions concerning the degree to which the two alliance partners' operations should be integrated. Palmer highlights the benefits from back office synergies – for example in the manufacture of the batteries by Nissan for supply to both brands - that allow the two makers to try out different approaches.
The two partners are already sharing parts, platforms, engines and Palmer maintains that it is hard to see what further industrial benefits would flow from a full merger. “The companies behave as one in terms of discussing investments,” he says. Carlos Ghosn, as head of both companies, clearly acts as an important bridge and there are many cross-company structures designed to facilitate cooperation and collaboration for mutual gain. “The Alliance allows us to be different and yet work very closely together. I am very proud to be a Nissan employee and I don't have any resistance to leveraging what I can out of Renault and, of course, it's the same for Renault.”
Palmer maintains that the relationship between Renault and Nissan is working very well and questions whether a full-blown merger of the the two – suggested by some investment bank analysts - is necessary. Besides the savings already made on parts procurement, there are shared ownerships of production facilities around the world.
“In Russia, for example, there is basically a Renault-led Alliance discussion taking place,” he says.
“Every big decision is somewhere shared and I would argue that we are getting more from the collaboration than we would get from a financial merger. Look, there can be pressures in the financial markets for other things...but from my perspective, making the products, it is working really well. Nissan is very distinctive, but there are good savings that can be made – and a good example is purchasing. It is all done through a common body (RNPO) and that doesn't impact on the customer at all.”
Infiniti brand to get Mercedes diesel boost
Palmer is realistic about the challenges facing Nissan's luxury Infiniti brand, especially in Europe. The German premium brands are well embedded, as Lexus and others know only too well. Palmer outlines the vision and some elements of strategy.
“I want to position Infiniti as the de facto alternative to the Germans, especially BMW. Infiniti cars are great performing cars, handle nicely and they are very engaging. Dynamically, they are maybe close to BMW – which are great by the way, but perhaps a little cold in their execution. I would like Infiniti to be warmer and a little bit more soulful.”
Palmer believes that in places like China and Russia, where the playing field is more level, Infiniti can grow quickly. “In those emerging markets – like China – we understand them very well. We are catching Lexus very quickly in China.”
In Europe, access to diesel engines via a deal done with Daimler for the supply of three diesel engines for Infiniti models will provide a big boost, Palmer believes. “It's a dream ticket for Infiniti, because these are the best luxury engines you can buy. It gives us a way of going after BMW.”
He also says that more investment will take place to raise awareness of the Infiniti brand – F1 sponsorship with Red Bull is a part of that. A step-up to marketing activity is being planned.
Further out, he sees an electric Infiniti model – a 'sedan' he says. It will share underpinnings with Leaf, but will be very different.
Apr 2004 Graduated from Cranfield University
Doctorate (PhD) in Management
Jul 1990 Graduated from Warwick University
Masters Degree (MSC) in Product Engineering
Apr 2011 Executive Vice President
Global Product Planning, Global Program Management, Global Market Intelligence, Global IS, Global Infiniti Business Unit, Global Marketing Communications, Global Corporate Planning (Incl. OEM Business)
Oct 2010 Senior Vice President
Corporate Planning, Product Planning. Program Management, Market Intelligence, Global IS, Global LCV, Infiniti & Zero Emissions Business Units, Global Battery Business, Global Marketing Communications, OEM Business Unit, Global Vehicle Information Technology Business Unit
Apr 2010 Senior Vice President
Corporate Planning, Product Planning. Program Management, Market Intelligence, Global IS, Global LCV, Infiniti & Zero Emissions Business Units, Global Battery Business, OEM Business Unit, Global Vehicle Information Technology Business Unit
Feb 2009 Senior Vice President
Product Planning. Program Management, Market Intelligence, Global IS, Global LCV, Infiniti & Zero Emissions Business Units
Apr 2006 Corporate Vice President
LCV Business Unit
Apr 2005 Vice President
LCV Business Unit
Apr 2004 Divisional General Manager
LCV Business Unit
Sep 2002 Joined Nissan Motor Co., Ltd.
Program Director of Program Director Office
Mar 2001 Deputy Managing Director & Vice President
Vehicle Engineering Division
1999 Director of Vehicle Engineering Division
1996 Director of Vehicle Design/Test
1995 Nissan Technical Centre Europe Ltd.
General Manager of Vehicle Design
1991 Manual Transmission Chief Engineer, Rover Group
1983 Project Engineer, Automotive Product Ltd.