Infiniti shifts output from Japan to fight yen

TOKYO -- Nissan Motor Co., which decided to make its Infiniti JX crossover in the United States to fight the strong and profit-eating yen, will keep moving Infiniti production out of Japan, the brand's global chief says.

For example, a compact car based on the Etherea Concept shown at the Geneva auto show won't be built in Japan.

The strategy calls for building Infinitis in Europe and China for the first time and using more imported parts in Japan-made models. Future vehicles being developed for production in Japan will have non-yen content as high as 65 percent, up from around 15 percent today.

Andy Palmer, executive vice president in charge of Infiniti, said the shift is necessary to combat the yen's surge to record highs against the dollar.

"Clearly, we're working on one strategy," Palmer told Automotive News. "As cars come up for renewal, generally they're being relocated in a function of where the majority of sales are."

The transfer begins with the JX crossover. Production begins in February at Nissan's Smyrna, Tenn., plant, and the car goes on sale in the spring. It will be the first Infiniti made overseas since the QX56 SUV was moved back to Japan from Canton, Miss., early last year.

The Etherea-based compact hatchback, due in North America as early as 2013, also won't be made in Japan, Palmer said.

He declined to say where the hatchback -- envisioned as a rival to the Audi A3 and BMW 1 series -- will be made. But he hinted strongly at Europe. "The major market for a car like that is obviously the European market," he said. "It's basically the key of European expansion."

Nissan is pushing Infiniti into new territory as the Japanese carmaker strives to grab 8 percent of the world market in the next six years under a new midterm business plan. CEO Carlos Ghosn said he wants Infiniti to win 10 percent of the global luxury market in that time.

Infiniti aims to increase global sales to 500,000 units by 2017, from about 150,000 today. Infiniti also will expand into 71 global markets, up from 36 now.

"As we grow Infiniti, any incremental capacity required will have to avoid yen exposure," Colin Dodge, Nissan Americas' chairman, said in a separate interview. "We have to make sure there is no yen cost in Infiniti that's unnecessary."

Dodge called the JX a test that, if successful, would open the door to further Infiniti production in North American and other overseas markets.

He said manufacturing in the United States, one of Infiniti's most important markets, has the added advantages of offering shorter lead time from factory to dealer floor. It also allows for faster tweaking of the car in response to customer feedback.

"The other advantage is it's dollar-based," Dodge said. "You don't have to read the exchange rate every day to see what the price is."

But Infiniti can't abandon Japan completely because its brand image is tightly interwoven with its Japanese roots, Palmer said. Currently all Infiniti products are made at the company's Tochigi plant north of Tokyo.

"Part of the myth of Infiniti is Japanese craftsmanship. You need to have something resonating around that," Palmer said.

For a new Infiniti model scheduled to be produced in Japan within two years, Nissan is targeting non-yen content of 65 percent, Palmer said. He declined to identify the model, but said sourcing will weigh heavily toward dollar- and euro- denominated regions.

Currently, the average Tochigi-built Infiniti has non-yen content of only 15 percent, he said.

There are benefits to buying parts from outside Japan, Palmer noted. "You can manufacture an engine in Europe, bring it to Japan, install it in a car and send it back," Palmer said. Nissan gets the "benefit of buying with a strong yen" while offsetting the car's European content against Europe's import duty, he said.

Dodge said Smyrna is capable of matching Tochigi in delivering Infiniti-level quality. But he said ensuring equal quality from overseas supply chains is a tougher challenge.

Said Dodge: "Somebody in this industry has got to demonstrate that you can make luxury outside of Germany and Japan successfully over time."