Nissan will move Rogue output to U.S. plant

Nissan Motor Co. will shift production of one of its highest-volume vehicles, the Rogue crossover, from Japan to an American factory in a bid to cut its exposure to the high Japanese yen.

Following the move, Nissan will build more than 100,000 Rogues a year at its Smyrna, Tenn., assembly plant in 2013, when the vehicle is scheduled for a redesign.

Carlos Tavares, chairman of Nissan Americas, revealed the plan Sunday night in comments before a Society of Automotive Analysts conference in Detroit.

In North America, Nissan intends to cut its reliance on imported vehicles by half, to 15 percent in 2015 from 30 percent in 2010, Tavares said. Nissan also plans to reduce the amount of vehicle content it sources out of Japan.

“We still have significant exposure to the yen,” Tavares said.

Nissan imports: 15% of sales by 2015

Last year, more than 30 percent of all the vehicles sold by Nissan and Infiniti dealers in the United States came from Japan. Imports accounted for a third of Toyota Motor Sales U.S.A. Inc.'s combined Toyota, Lexus and Scion brand sales last year.

Nissan also has a $1.8 billion project under way to build the electric Leaf sedan and its battery module at its Smyrna plant. Until that expansion is completed in late 2012, Nissan's U.S. dealers will be reliant on Leafs imported from Japan.

The Rogue also could be exported from Tennessee to other markets in North and South America, Tavares said.

"We are reducing the numbers of cars we import from Japan," he said. "We are growing rapidly in North America and we have too much yen exposure."

The dollar has actually been creeping back up in value against the yen since last summer, easing the pressure on Japanese automakers. But as recently as this weekend, the dollar fell again slightly.

“The strong yen is a serious challenge for all Japanese manufacturers--but it is one that Nissan has been most aggressive in tackling for many months,” Tavares said.

Reduced revenues

When the yen rises against the dollar, that reduces the amount of yen revenue that Japanese automakers take in from cars and trucks sold for dollars. Japanese automakers then must decide whether to raise prices in dollars, in order to protect their profit margins, or accept lower profits.

By building vehicles in North America, Japanese automakers offset the negative impact of a rising yen, but switching labor and parts costs from yen to dollars.

In recent years, Japanese automakers were basing their profit calculations on an exchange rate of 110 yen to the dollar. The yen is currently in the 83-to-the-dollar range, near a 15-year high and a troubling change of production costs in a market where automakers have little opportunity to increase sticker prices.

Japanese automakers have been attempting to localize production in North American plants for three decades. Nissan's Smyrna plant opened in 1983.

The Koreans, too, have been increasing U.S. capacity.

Overall, U.S. sales of North American-built vehicles jumped 2.5 share points last year to 76.4 percent (from 73.9). Detroit 3 share improvement helped, but additional U.S. production from Asian automakers played a significant role as well.

Still, Nissan and other Japanese automakers remain heavily reliant on vehicles, engines and parts that are manufactured in Japan.

Victims of their success

Japanese automakers' efforts to localize have been thwarted, in part, by their own success. For every product they move into production in North America, a new hot-seller built in Japan seems to materialize.

The imported Rogue only appeared in the U.S. market in October 2007. But it already is the Nissan brand's third best-selling model behind the Altima and Versa, with 2010 sales of 99,515.

At the same time, some attempts to move production to North America simply haven't helped. Nissan began building its Quest minivan in Canton, Miss., in 2003. But the model was a market failure. Now Nissan is preparing to re-introduce a completely redesigned Quest minivan at U.S. dealerships--but the improved model will be imported from Japan.

Infiniti similarly launched its full-sized QX56 SUV in Mississippi in recent years. But last year, production of the SUV was moved back to Japan. The import, now redesigned, has become a hot seller for Infiniti dealers. Sales jumped 85 percent in 2010 over 2009 to 11,024.

Stalled plan

Nor is it always feasible to move vehicles from Japan to North America. In 2008, Toyota said it would put its fast-growing Prius hybrid import into a new plant in Tupelo, Miss. But that plan stalled in the teeth of the global economic crisis. Toyota now says North American production of the Prius may be several years away.

Meanwhile, at this week's Detroit auto show, Toyota plans to reveal a family of Prius-based vehicles, likely meaning even more Japanese imports for the automaker.

By Lindsay Chappell- Automotive News