Nissan North America Inc. has begun dialing back production at its giant assembly plant in Smyrna, Tenn., to pare the U.S. auto industry's biggest days' supply of unsold vehicles.
'It's obvious our sales and production are not aligned,' said Gary Frigo, Nissan Division director of operations. 'We want our sales to seek a more natural level.'
A company spokesman said Nissan will cut six production days out of its first-quarter schedule, which began April 1. The plant, one of the biggest in North America, routinely builds about 1,700 Frontier pickups, Sentras, Altimas and 200SXs a day.
A six-day reduction will cut at least 10,000 vehicles out of the Nissan system by the end of June.
The plant stopped production for two days last week in addition to the normal Easter Monday halt.
Nissan Division inventories on April 1 totalled more than 225,000 units, or 127 days supply, for a franchise that barely sold 125,000 units in the first quarter of 1998.
No major automaker is carrying inventory of more than 81 days.
Nissan's first-quarter sales were down 34.8 percent from a year earlier despite having the highest incentive rates of any major marque, according to two firms that track incentives data, AutoFacts' Incentives Monitor and CNW Marketing Research.
According to Bandon, Ore.-based CNW, Nissan spent $1,763 per car in March vs. an industry average of $1,728. Of the six biggest American and Japanese makers, Nissan is the top spender, even though General Motors has embarked on a substantial incentives push, said CNW President Art Spinella.
On the plus side, Nissan's franchise car, Altima, seems to finally have hit its stride. Altima sales have increased every month since January, and it is the only Nissan car selling better this year than last. But it has partly come at the expense of Sentra, which is off 68 percent through March.
Although the new Frontier pickup has posted month-over-month sales increases since January over the previous pickup, total sales are still off 48 percent from the 1997 first quarter.
One reason Nissan sales are off so sharply, Frigo says, is because of the comparison to artificially inflated sales a year earlier, when the company mounted its annual end of the fiscal year push. March volume was bought with high incentive spending, but it also pulled back a lot of sales from April and May, he said.
This year, Nissan didn't play the game, Frigo said.
'We made the smart decision to look at the market and do it right, and not go overboard at the end of our fiscal year,' he said.
Nissan's biggest problem is shared with the rest of the industry: a sagging small-car market. The Smyrna plant builds about 135,000 Sentras and 200SX coupes annually, and has the capacity to produce about 200,000 Altimas a year.
Yet Nissan sold only 17,108 Sentra/200SXs in the first three months, and 38,040 Altimas - way below capacity. What's more, Sentra production will move to Aguascalientes, Mexico, next year, and only part of the capacity left behind in Smyrna will be absorbed by the new Frontier-based sport-utility.
Frigo says he wants inventories down to 100 days' supply within the next three months, and down to industry average by late summer. In fact, even though Nissan is already 67,015 units behind last year, Frigo thinks the franchise can finish the year flat.
'The bad news is that sales are off,' Frigo said. 'The good news is that we're in good shape to start the new fiscal year.'
Frigo said the high incentives level has everyone concerned. So instead of selling the deal, Nissan is going to sell the product.
Nissan is embarking on a massive sales-training binge, accompanied by an improved compensation plan. Sales personnel will be taught product features and benefits, and be told to lay off the hard-sell incentive talk.
Because off-lease vehicles have become such a major industry force, salespeople also will be told how to better explain the benefits of buying a new car rather than a certified used car, Frigo said.
That will be accompanied by continued emphasis on retail advertising, although product features will dominate over deal-speak. Brand advertising will be a minor player.
Nissan also will try to shore up residuals by slashing fleet sales from 12 percent of total sales to less than 7 percent.
SHRINKING CAR MARKET
Lincoln Merrihew, director of product advance for J.D. Power and Associates, said Nissan's new approach 'may be the first sign' of one of the larger companies adopting a new strategy for a declining market.
'We're seeing a shrinking car market, with more brands in the wings,' he said. 'Sooner of later, there are going to be some major effects on the marketplace.'