TOKYO (Bloomberg) -- Nissan Motor Co. CEO Carlos Ghosn said the automaker plans to invest 3 billion yen ($37 million) to reinforce the foundation of its engine factory in Iwaki, Fukushima prefecture, after Japan's record earthquake in March disrupted output.
Nissan has already started work on the foundation, Ghosn said during an interview today in Iwaki. The company plans to do the same at other factories including in Tochigi and Yokohama, north and west of Tokyo respectively, he said. Carmakers such as Nissan, Toyota Motor Corp. and Honda Motor Co. halted output after the March 11 disaster damaged factories and knocked out power plants, causing shortages of parts and electricity.
All three carmakers have said production recovery is faster than earlier expected.
"Carmakers returning to normal operations is positive as we can see the bottom of production and business performance," said Satoru Takada, a Tokyo-based analyst at TIW Inc. in Tokyo. Nissan said on May 13 it has repaired damage at the Iwaki plant, where partial production resumed on April 18 after it was shut due to the March 11 earthquake.
The factory, which recovered two weeks earlier than expected, is operating at 50 percent production level as it still lacks parts, Ghosn said today.
87 percent likelihood
Nissan is reinforcing foundations at its factories after Prime Minister Naoto Kan earlier this month requested Chubu Electric Power Co. to shut a nuclear plant in Shizuoka prefecture, west of Tokyo.
The government requested the shutdown until the plant's tsunami defenses are improved, citing a government study that showed an 87 percent likelihood of an 8-magnitude quake striking the area within 30 years.
Ghosn said last week fewer than 20 suppliers are still in a critical situation, down from 40 in March. "Much less than half" of the suppliers have yet to recover, allowing Nissan to forecast that global production will return to normal by October, Ghosn said.
To prevent future disruptions to production, Nissan, Japan's second-largest automaker, will ask second- and third- tier suppliers to implement "alternate sourcing" of components, which they currently lack, Ghosn said. That may mean suppliers, particularly semiconductor makers, will be able to produce the same component in multiple factories around the country, he said.
Nissan last week said it boosted fourth-quarter profit even as Toyota reported a 77 percent drop in earnings after the 9-magnitude temblor in March. Ghosn has said the current quarter will be tougher for the carmaker and its Japanese rivals as they recover from the plunge in sales and factory disruptions that followed the disaster.
Nissan lost production of 55,000 units in Japan in March, compared with the company's original plan. The carmaker will initially face a "significant" market-share loss globally because of the earthquake and plans to catch up in the second half of the fiscal year. Nissan plans to prioritize China and the U.S., the world's two biggest auto markets, to stem market-share losses and still plans to increase full-year sales.
In April, Nissan's production volume in Japan was at about 40 percent of last year's level, and output this month is at about 50 percent, the company has said. Production has also been halted periodically from April at factories in Mexico, the U.S. and the U.K.
In China, plants are halting weekend and overtime shifts. In a letter to U.S. dealers on May 12, Nissan said it has more inventory than Toyota and Honda and its plants haven't been as severely disrupted by the earthquake. Nissan, sixth in the U.S. by sales volume, began May with a 64-day supply of cars and light trucks, compared with 48 days for Toyota and 36 days for Honda, according to the letter.
Like Toyota and Honda, Nissan declined to provide an earnings forecast for the fiscal year started April 1, citing the impact of the earthquake on production. Nissan plans to announce a midterm plan before its annual shareholders' meeting in June.