Nissan recently raised the competitive ante in North America with the opening of a new plant at Canton, Mississippi. Its truck products will strike at the heart of Big Three market territory and takes Nissan’s global growth strategy a step further. Chris Wright was there and spoke with Carlos Ghosn about the plant and how it fits in with Nissan’s strategy.
The United States’ love affair with the pick-up truck continues unabated. It is a market of 2.2 million vehicles a year, dominated by the Big Three North American automakers. But it’s a market Carlos Ghosn, president and chief executive officer of Nissan, covets. It is one reason why the company has invested $1.4 billion in its new plant in Canton, Mississippi to build the full-size Titan King Cab and Crew Cab pick-up.
It’s a plant that will also build four other all-new models over the next two years pushing capacity to 400,000 units a year – and that’s the other reason for the investment. That figure makes Canton a significant contributor to Ghosn’s Nissan Revival strategy to increase sales by 1 million vehicles a year by 2005, and to enter new market segments. Ford, GM and DaimlerChrysler’s dominance of the US pick-up market will be a tough nut to crack, but Ghosn is undaunted.
“I don’t consider that the market belongs to anyone,” he said. “You have to earn market share through quality and image. We want to be present in all segments, not by being the cheapest product – we have done that before and failed. “We decided right at the start of the Revival Programme that the only way forward was to build the right products. We can compete in new segments by being different and having products that meets the expectations of the market.”
His targets are fairly modest. That 2.2 million-market segment is huge by any standards – to put it into perspective the figure is 50 percent of the entire Japanese vehicle market. He added: “It is a huge opportunity for us, a high profit, high margin segment with a lot of unmet needs. If we sold 100,000 pick-ups that would be all new business for us and would represent 5 percent of the segment which is about what our market share is generally.”
Ghosn was speaking at the launch of the
all-new 2004 Nissan Quest minivan, the first
of the five new vehicles to come out of
the new Canton plant. It will be launched
in the United States in July and will be
followed by the Titan pick up and the full-size
Pathfinder Armada SUV, built on the same
platform as the Titan, at the end of this
year. The two other vehicles to be built
at Canton will be the Nissan Altima and
Inifiniti full-size SUV Mississippi.
President Carlos Ghosn meets the Canton
workers at the Job One ceremony
The Quest will be built at a rate of 92,000
vehicles a year, all but 2,000 sold in the
United States and Canada, the rest in China.
Nissan Europe is viewing the Quest enviously
although Ghosn personally believes it is
too large for the European market. Nissan
Europe does like the look of it, however,
and some of the technologies contained within
it. Insiders say that the possibility of
selling the new Quest in Europe in small
numbers are being looked at but the business
case – and profitability – has to be strong
enough. Certainly many of the technologies
on the Quest will find their way into European
Europe, Ghosn admitted, was still a tough market for Nissan because it is not as profitable as North America. “The incentive to grow there is not so great and we have had to spend time re-establishing our competitiveness. We do not want to be perceived any more as a low cost brand, but one of high quality with great products and we are getting there.
We are growing in Europe this year with the launch of the new Micra which has already improved its market share and with new diesel engines for the Almera and Primera.” The economic climate in Europe is also now favourable for Nissan, which is expecting one of its best ever years in the region. With the Euro soaring against the yen and the dollar and the British pound losing ground to the Euro but strong against the US dollar, Ghosn believes Nissan’s results in the region will be “better than we deserve.”
“Part of our success will be because we have been lucky and not just because we have been competent. Having said that the economic climate has worked against us in the past.”
The Titan pick-up is not likely to make the move across the Atlantic, however – it really is too big. In the United States pickups are bought for personal use rather than as a utilitarian farm or construction vehicle. US models now come with radios, air conditioning power steering, electric windows. In Europe manufacturers have concentrated on compact pick-ups, often car-derived. Their popularity is growing, particularly in Spain and Portugal where Nissan and Mitsubishi do well with Toyota, Mazda and Isuzu taking a smaller share of sales.
The Japanese automakers are predicting growth in the number of pick-ups sold in Europe to 120,000 by 2006. Most of them import vehicles from Asia although Nissan is considering building its next generation model in Spain from 2005. Other European manufacturers are monitoring the situation with DaimlerChrysler already considering importing a pick-up from the United States. The tax situation regarding such vehicles in the UK is one factor in the growth of their popularity there. Any VAT registered company – be it a one-man operation or one with a staff of thousands – can reclaim the VAT on the purchase price.
Similarly employees that drive a pick up currently will pay significantly less income tax compared to a similarly priced passenger car.
Back in Mississippi Ghosn has set some tough targets for the new Canton plant, hoping it will quickly establish itself alongside Nissan’s factory in Smyrna, Tennessee, already North America’s number one plant for efficiency. He added: “I don’t want our plants to be number one and two, I want them to be tied equally at number one.”
At start up around 2,000 people have been hired at Canton with a further one thousand expected to be taken on as production ramps up. That employment figure will be multiplied by a factor of six or seven with associated suppliers and businesses setting up around the area to support the plant – a measure of how important Nissan is to Mississippi State.