Three transplant auto companies moved last week to build more trucks in North America despite signals that the booming truck market may be starting to cool.
Nissan Motor Co. Ltd. on Thursday, Nov. 9, said it will spend $930 million on a new assembly plant near Jackson, Miss., to produce full-sized trucks, sport-utilities and minivans. Production is scheduled to begin in 2003. It will be Nissan's second U.S. auto plant and its fourth in North America.
At the same time, Mitsubishi Motor Manufacturing of America Inc. and Mercedes-Benz U.S. International Inc. broke ground on U.S. projects to add manufacturing capacity. Both the Mitsubishi and Mercedes-Benz projects were announced earlier.
Last week's trio of brick-and-mortar activities came against the backdrop of a 1.5 percent dip in new-vehicle sales for October. Of particular note, the October reports included a decline of 12,000 units in U.S. light-truck sales from a year ago.
The roaring North American market has been beckoning expansion since the early 1990s. But in the past year or two, analysts have been warning of a slowdown. The warnings are having little effect, although automakers say they have incorporated such concerns into their planning.
Nissan, for instance, planned its Mississippi plant knowing the market likely would turn downward during the next five years, President Carlos Ghosn said.
'And we have taken some extreme scenarios to see how well this project would fare if, instead of a soft landing, you have a little bit more accelerated softening,' Ghosn said. 'And it's looking good.'
Still, some industry observers wonder, why now?
'There is no consensus forecast on the market yet, but this doesn't look like the best time to be expanding,' said Jim Mateyka, vice president of A.T. Kearney Inc., an automotive consulting firm in Southfield, Mich. 'The reality is that the timing is not always logical for these spurts of industry expansion.'
For Nissan, the full-sized truck and sport-utility scheduled to be built in Mississippi are new entries in market categories that have provided robust growth and significant profits to competitors. And Ghosn, as part of his bid to turn Nissan around, doesn't plan to miss out on that business.
'We think there will still be growth in this market,' he said. 'This is one of the most popular segments of the market.'
The $930 million Nissan is spending on the new plant will be augmented with $295 million in incentives from Mississippi. In contrast, Mercedes-Benz originally spent $300 million on the M-class assembly plant in Vance, Ala., aided by $253 million from the state.
But now Mercedes is spending an additional $600 million to expand the plant to boost output above 80,000 units per year and have room for derivative vehicles off the M-class platform.
HOPE FOR MITSUBISHI
In Mitsubishi's case, the brand has been making a comeback for the past two years as it struggled with global financial troubles.
Richard Gilligan, executive vice president of the Illinois company, said Mitsubishi has been planning for months to launch the project there. In the first 10 months of this year, Mitsubishi sales were up 28 percent over 1999.
'Because of the dramatic improvements we have made in the quality of our vehicles and the efficiencies of our manufacturing process, we are better positioned now than ever before to undertake the exciting introduction of an SUV in the North American market,' Gilligan said.
Nor has a slumping U.S. market been an obstacle to foreign auto industry investment in the past. In the early 1980s, during one of the worst recessions in modern times, both Honda and Nissan built their first auto plants in the United States.