Record Production Levels Depend on Strong Supplier BaseMon, 09/01/2014 - 17:21
Q: What are the pillars of Nissan’s business strategy in Mexico?
A: Nissan has a very clear and aggressive growth strategy. Our ‘Power 88’ strategy sets out this growth vision, which is to hold 8% of the global market share by 2016. Mexico is becoming increasingly important for Nissan’s global operations. Last year, the Mexico team achieved the best sales and manufacturing performance levels of Nissan operations. As a result, Nissan Mexicana received the Global Nissan President Award 2013 for best performance within the Nissan Corporation. Mexico has become a benchmark for manufacturing worldwide. This is reflected in our new Aguascalientes plant, which is the best performing plant in our global operations. Last year alone, we produced almost 684,000 units between our Morelos and Aguascalientes plants while our domestic sales grew around 13%.
Q: Is the perception of the ‘Made in Mexico’ production stamp improving to match other major global production hubs?
A: The country has demonstrated it has good quality and productivity at a competitive price. Mexico’s 12 FTAs with 45 countries have put it into a position of strength, as all the countries concerned account for almost 65% of the world’s GDP. These are all countries that will buy vehicles from Mexico. Nissan now exports to 100 countries from Mexico, which is clear evidence of the country’s reputation as a quality production hub.
Q: With recent OEM investments, Mexican suppliers can select who they want to work with. Why would a supplier want to work with Nissan and vice versa?
A: Nissan is a very good company to have as a customer as we have always been fair with our suppliers. We are the leading automotive company in Mexico, in terms of sales and production. We are also a very strong company that can ensure sustainable growth. We look for suppliers that have a global footprint and can facilitate contracts effectively at competitive pricing levels. We have no doubt in the capability of local industry players. Key suppliers in Mexico have experience exporting to the main global markets such as the US, Japan, and Europe. They have proven themselves to be capable and can compete with the industry in any part of the world. The companies that operate internationally already have all of the resources in order to supply any OEM. Technologically, all OEMs have different approaches so we do have a supplier development group which helps companies to understand the Nissan mindset and way of doing business. Nissan challenges its suppliers to understand our way and to apply it. We are increasing production in Mexico but we may not greatly expand our supply base. We seek to keep the same amount of suppliers but increasing the volume given to each supplier. We also share future technologies with our suppliers in Mexico through an exchange process.
Q: Producing 1 million vehicles in Mexico by 2016 will require major investments from both Nissan and its suppliers. How much risk is involved for both sides?
A: This is a shared risk for both OEMs and suppliers. Nissan has a projected goal and we have made supporting investments to ensure we reach our targets. If we fail, then Nissan will lose out financially. Likewise, suppliers make investments for the future knowing that there are risks involved. Growth and risk are always interlinked. We continuously take steps to minimize risk and close communication with our suppliers is one of them. The preparation needed to achieve this level of production does not just involve more buildings or machines, it also involves more people. Our HR department is planning extensively for this by approaching universities directly to ensure we have sufficient man power for the future. To protect our personnel, we have agreements in place with our suppliers. If we can see the benefits of one of our employees moving to a supplier, we will support the move knowing that having talented people on both sides helps the entire industry.
Q: How is Nissan optimizing its logistics to meet its production goals?
A: Logistics was a key part of developing our growth strategy, as producing 1 million vehicles by 2016 is complex. We conducted a study that showed the actual capacity of logistic companies is very limited in terms of equipment. They do not have sufficient resources, such as the number of trucks needed to transport the cars. We are not a logistics company, but we need to be involved in order to ensure that our vehicles reach their target market.
Q: What potential do you see for green vehicles and production strategies in Mexico?
A: The Nissan Leaf is a very successful electric car that arrived in Mexico in the second quarter of 2014. In terms of a clean manufacturing process, our Aguascalientes plant now gets 45% of its energy from wind power and 5% from biogas, which equates to a 50% reduction in fossil fuel based electricity use in one year. We also aim to reduce emissions by using suppliers based close to our plants. Also in Aguascalientes, we are developing a supplier park with the help of Vesta, which will hold about nine critical suppliers. JATCO, our transmission supplier is already there, having made a US$220 million investment and a capacity of 400,000 transmissions. Posco, a steel blanking supplier, is there as well and we are looking to bring in other essential part suppliers.