The Wall Street Journal (Yokohama) - Nissan Motor Co. may shift production of more models from Japan to factories overseas and could see domestic output fall below one million vehicles a year if the yen continues to strengthen against the dollar, a senior company executive said Friday.
"We would like to keep to one million units [in Japan], but if the yen becomes even stronger it may be quite difficult to maintain" that level, Toshiyuki Shiga, chief operating officer of Nissan, said during an interview.
Nissan has previously pledged to manufacture at least one million vehicles a year in Japan to maintain its domestic production base. But that decision has proven increasingly hard to justify as the value of the yen has increased to record levels against the U.S. dollar in recent months.
Mr. Shiga said that for every one yen in appreciation of the Japanese currency, Nissan loses about ¥20 billion, or approximately $259 million, in annual operating profit.
The Japanese currency hit a postwar high of ¥75.94 to the dollar on Aug. 19, up from about ¥81 to the dollar this time last year.
To cope with the yen's climb against the dollar, Nissan has been among the most aggressive Japanese auto makers in relocating production to factories outside of Japan and using more foreign-made parts in cars assembled in Japan.
Last year, Nissan, Japan's No. 2 auto maker by sales volume, began importing 100% of the March compacts it sells in its home market from Thailand.
This year, the company said it plans to shift output of its small Rogue crossover and Infiniti JX sport-utility vehicles to the U.S. over the next two years.
"However, maybe we need to do more," Mr. Shiga said. "We cannot maintain low-cost car production in Japan."
Mr. Shiga also said Nissan has increased the use of components made elsewhere in Asia as a way to reduce yen-based costs.
"We are importing from China, Korea and ASEAN countries to offset the strong yen by using dollar-based parts," he said, using an acronym to refer to the Association of Southeast Asian Nations.
Nissan is closely monitoring sales in Europe and the U.S. amid the continuing financial turmoil and worries about economic weakness, but Mr. Shiga said that so far his company has yet to see a significant decline in demand in either market.
"At the moment, it's too early to review our outlook" for full-year earnings, Mr. Shiga said, adding that sales volumes were running ahead of projections during the first half of the year.
"Our outlook for sales volumes is for 4.6 million [vehicles] this year, and the pace of the first six months is better than our forecast," he said.
Nissan has forecast a profit of ¥270 billion on sales of ¥9.4 trillion for the fiscal year through next March.
Mr. Shiga, who also serves as chairman of the Japan Automobile Manufacturers Association, said that recent flooding in Thailand that has interfered with production at many Japanese car makers' factories in the Southeast Asian nation would remain a problem for at least another week.
But he added that he doesn't expect the disruption in Thailand to last for longer than one month, or to be as severe for Japanese auto makers as the production stoppage that resulted from the massive March earthquake and tsunami in northern Japan.
Separately, Nissan said Friday that it will report fiscal second-quarter earnings on Nov. 2.
