Bloomberg News - Nissan Motor Co. Chief Executive Officer Carlos Ghosn said the automaker plans to invest 3 billion yen ($37 million) to reinforce the foundation of its most heavily damaged domestic factory after Japan's record earthquake in March disrupted output.
Nissan, Japan's second-largest automaker, plans to do the same at other factories including those in Tochigi and Yokohama, north and west of Tokyo respectively, to equip them against future earthquakes, Ghosn said in an interview today at the Iwaki plant in Fukushima prefecture. The facility builds engines for Infiniti-brand cars and other luxury models.
"We will do it as a priority here and then we will extend this to other plants, mostly those near the high probability earthquake area," Ghosn said. "By taking some precautions and making some investments, you're going to limit the damage."
Nissan plans to reinforce foundations at its factories after Prime Minister Naoto Kan earlier this month requested Chubu Electric Power Co. shut a nuclear plant in Shizuoka prefecture, west of Tokyo, until the plant's tsunami defenses are improved. Kan cited a government study that showed an 87 percent likelihood of an 8-magnitude quake striking the area within 30 years.
Ghosn said Nissan is still evaluating the extent of reinforcements needed and declined to specify investments for the other plants.
Parts, Power
Nissan, Toyota Motor Corp. (7203) and Honda Motor Co. halted output after the March 11 disaster damaged factories and knocked out power plants, causing shortage of parts and electricity. Nissan today said repairs at the Iwaki plant were completed two weeks earlier than expected.
"Iwaki is a symbol of our swift recovery," Ghosn told 600 factory workers, before presenting a Special President's Award to plant manager Nobuhiro Ozawa.
Shares of Nissan gained 0.8 percent to 809 yen at the 3 p.m. close in Tokyo. The stock has dropped 0.9 percent since March 10, the day before the earthquake.
After the earthquake, the plant suffered damages including total loss of electricity, water and fuel, Ghosn said. Half a dozen air ducts fell from the ceiling, cracks in the floor had to be filled with concrete and steel plates were placed under equipment to compensate for slanted floors that sank into the ground. The plant's location was originally a rice paddy, said Hikaru Kawasumi, head of the factory's management division.
First Shift
Since the plant's first shift on March 11 reached its daily output target early, no workers were at the production line when the earthquake struck, Kawasumi said.
The factory, which resumed partial production on April 18, is operating at about 50 percent of capacity because of shortage of parts, Ghosn said. Fewer than 20 suppliers are still in a critical situation, down from 40 in March, allowing Nissan to forecast that global production will return to normal by October, he said last week.
To prevent future production disruptions, Nissan will ask second- and third-tier suppliers to implement "alternate sourcing" of components, which they currently lack, Ghosn said. That may mean suppliers, particularly semiconductor makers, will be able to produce the same component in multiple factories around the country.
Tougher Quarter
Nissan last week said it boosted fourth-quarter profit even as Toyota reported a 77 percent drop in earnings after the 9- magnitude temblor in March. Ghosn has said the current quarter will be tougher for the carmaker and its Japanese rivals as they recover from the plunge in sales and factory disruptions that followed the disaster.
Nissan lost production of 55,000 units in Japan in March, compared with the company's original plan. The carmaker will initially face a "significant" market-share loss globally because of the earthquake and plans to catch up in the second half of the fiscal year.
Nissan plans to prioritize China and the U.S., the world's two biggest auto markets, to stem market-share losses and still plans to increase full-year sales.
In April, Nissan's production volume in Japan was at about 40 percent of last year's level, and output this month is at about 50 percent, the company has said. Production has also been halted periodically from April at factories in Mexico, the U.S. and the U.K. In China, plants are halting weekend and overtime shifts.
