SMYRNA, Tenn. - Nissan plans to organize its new Mississippi truck factory on a modular-assembly model, using a handful of outside suppliers to deliver assembled vehicle sections.
Nissan believes the approach will help it succeed in the U.S. big-truck segment, with a trio of new vehicles to be launched after the plant opens in 2003.
The project will be the first new Nissan factory since Carlos Ghosn in 1999 arrived from Renault SA to rescue its Japanese affiliate. The Mississippi plan reflects Ghosn's efforts to make Nissan Motor Co. Ltd. more efficient. For the past decade, Nissan has been cash-strapped and reluctant to take chances.
Studies suggest automakers can reduce production costs by as much as 20 percent by outsourcing the sub-assembly of parts into modules. The concept also is aimed at helping Nissan deliver a vehicle just 15 days after a customer orders it.
`Right across the street'
According to Nissan's internal study, the $930 million project on the drawing boards for Canton, Miss., would rely on nearby parts assembly centers to deliver complete axles, front ends, cockpits, exhaust systems and wheel systems, among other modules.
That could be good and bad for U.S. suppliers. The good: Any module contract landed by a U.S. company would represent a mother lode of business. The bad: There would be fewer Tier 1 module contracts to go around.
The plan would require several module suppliers to produce their components 'right on our site or right across the street from us,' said Emil Hassan, senior vice president of manufacturing, purchasing, quality and logistics for Nissan North America Inc.
The auto industry has been shy about bringing modular assembly to the United States. But each of the Big 3 has experimented with the concept in Brazil or Mexico.
While the Big 3 have expressed interest in more modular-assembly plants, they face an obstacle in the UAW. The U.S. union views the concept of assembly outsourcing as a threat to jobs. Nissan's U.S. production plants and many of its suppliers are non-union.
In a traditional auto plant - even at Nissan's 20-year-old plant in Smyrna, Tenn. - most of the assembly is done on the vehicle as it moves through the factory. Instrument panels, air conditioning ducts and electronic equipment are installed piecemeal on a moving assembly line.
In the modular approach, the cabin cockpit is installed as a single item, with instrument clusters, airbags, audio equipment and wiring already assembled.
Nissan plans to build 250,000 vehicles a year at Canton, 15 miles north of Jackson, Miss. The output will include minivans, full-sized pickups and sport-utilities.
When Nissan began building its first U.S. plant in 1981, that project was equally ambitious by U.S. industry standards - and also challenged UAW assumptions.
The Smyrna plant used just-in-time delivery, non-unionized workers, flexible work rules that allowed supervisors to reassign employees as needed and empowered line workers to work in teams to monitor quality and make production decisions.
Like other Japanese auto plants, Nissan strived for vertical integration. The factory did its metal stamping, plastic trim production, made its gasoline tanks and axles, and assembled many of its engines.
But Japanese automakers in North America have never had to worry about efficiency, says Laurie Felax, vice president for Harbour and Associates Inc., a manufacturing consulting firm in Troy, Mich. 'The issue for them has always been controlling quality. You haven't seen the Japanese move to modules in any big way because they say, `Why should somebody else do this? We're already doing it the best it can be done.' '
Harbour and Associates' annual industry survey, 'The Harbour Report,' has repeatedly cited Nissan's Smyrna operation as the most productive auto plant in North America.
Hassan declined to name the suppliers who stand to win the module contracts for the Mississippi project, should it proceed. With production still two years away, the concept still is under study and the sourcing decisions have not been reached, he said.
But at the same time, Nissan has made no secret of wanting to break out of the traditional Japanese sourcing constraints that have bound it for a generation.
Under Nissan President Ghosn's encouragement, the company has been forming supplier relations with larger and more global parts makers than its traditional Japanese suppliers. Nissan also has indicated it will do more business with European suppliers.
Whoever wins the contracts will face a tough customer. Nissan is two years into its three-year drive to bring down supplier costs by 30 percent. Hassan said Nissan's expansion in Mississippi will be 'a reward for all those suppliers who really worked with us on cutting costs.'