As Nissan prepares to launch its first American-made sport-utility, the automaker is playing its strong suit: cost.
Nissan's U.S. auto factory in Smyrna, Tenn., has long been ranked one of the industry's most efficient. As that plant prepares to turn out the new Xterra, Nissan executives vow that production cost and retail price will figure prominently in the venture.
On Monday, Jan. 4, company officials unveiled the Xterra, a spinoff of Nissan's Frontier pickup. The mission is to turn a profit selling a Jeep Cherokee-sized vehicle - with stadium-style rear seating - in the price range of a smaller Toyota RAV4.
The Xterra uses the Frontier's chassis, powertrain and body from the B-pillar forward. The commonality cut the Xterra's development cost in half, says Jerry Benefield, CEO of Nissan Motor Manufacturing Corp. U.S.A.
'It's like developing a new vehicle for half the cost,' Benefield said. He declined to specify the cost.
'We were able to capture all sorts of savings on this project. Because we'll build it on the same line as our pickup, we saved on tooling costs,' he said. 'And since it shares a lot of parts with the truck, our piece price will be lower than it would normally be for a product of this volume.'
He said parts costs on the Frontier also will go down, since truck suppliers now will get a bigger production run.
Nissan expects to build about 65,000 Xterras a year. Production starts in March, and the Xterra will be on dealer lots by May.
Cutting production costs is a new imperative at the already-lean Smyrna operation. Last year, as the Japanese parent company stumbled through another grim financial year, the U.S. subsidiary vowed to cut $1,800 per vehicle out of its cost structure.
Benefield had committed to $800 of that in a three-year business plan. But the parent company then asked for all its plants to cut $1,000 out of their cost structures, and Benefield tacked that amount on top of his existing plan without flinching.
He said Smyrna is on schedule to meet the target.
'A lot of it has to come from suppliers,' he said. 'Eighty percent of the cost of a vehicle is in the parts. We'll find some of our savings there. But we'll also keep looking at the 20 percent that we have direct control of in-house.'
To produce the Xterra less expensively, Smyrna will begin building bodies directly on an assembly line. Stamped body parts will be brought directly from the factory presses to the line, where small groups of employees will weld them into shape. That will do away with the storage of the stampings, the racks that usually hold the pieces, the overhead conveyers that normally move bodies across the plant and much of the tooling that is typically scattered around the body shop.
And because Smyrna is starting Xterra production as it hands off Sentra car production to Nissan Mexicana, the U.S. plant will have more workers focusing on trucks. Plant managers say shifting people back and forth between Frontier and Xterra production will be easier and will generate less training expense than shifting people between car and truck lines.
The Xterra will be a symbol for Nissan's cost-reduction drive. The Japanese automaker is looking for more sales and higher profits per sale. Nissan refuses to reveal the Xterra's sticker price, but the company has said it wants the vehicle's price to compete with that of the smaller Toyota RAV4, which retails in the $16,000 to $18,000 range. Even in that range, the Xterra appears to have profit built in.
Nissan officials said the company originally envisioned a lower sticker price than it will place on the Xterra. In initial marketing clinics, consumers indicated that at the unnamed lower sticker price, Nissan would sell about 120,000 Xterras a year. Because Smyrna is not prepared to build that many, Nissan instead chose to put a slightly higher price on it.
'We'd like to have more production,' Benefield said. 'But making a profit is important for us, too.'