Nissan Motor Co, Japan's second-largest carmaker, plans to cut production costs by 12 percent as surging commodity prices threaten to curb earnings.
The company will start making different models on the same production line in Taiwan, Thailand, South Africa and Indonesia, said executive vice president Tadao Takahashi in an interview on Friday. The carmaker also plans to use 80 percent of global factory capacity by the year ending March 2008, from 75 percent last fiscal year, to achieve the cost cuts over three years.
"It's extremely important to continue cutting costs," Takahashi said.
The Tokyo-based maker of Altima sedans already has 18 so-called flexible production lines in Japan, the US, Mexico, Europe and China.
Nissan chief executive officer Carlos Ghosn, poised to report a sixth year of record profit for the year ended March 31, needs to hone efficiency to compensate for higher prices for raw materials. He has cut ¥1 trillion (US$8.5 billion) in costs since taking the helm at the company in June 2000. The new technology has allowed Nissan to retool its assembly lines to make a new model in one and half months, compared with more than three months in 1999.
"Every company that's successful has to come up with ideas to reduce costs," said Koji Endo, Credit Suisse's Tokyo-based analyst who said Nissan shares will "outperform" the market.
"Nissan will probably achieve the cost cut target," the analyst said.
Nissan also plans to increase the number of suppliers that make parts at its production sites, measure factories more rigorously against each other and offer more models.
Nissan plans to sell 28 new or redesigned vehicle models in the three fiscal years ending March 2008. Nissan, 44.3 percent owned by Renault SA, expects to sell 4.2 million vehicles globally in the year ending March 2009. That's up 16 percent from an estimate of 3.62 million units, which the company plans to sell this business year.
The automaker, boosting capital investment by 13 percent to a record ¥540 billion this fiscal year, also expects return on investment capital to exceed 20 percent, Takahashi said.
Nissan shares fell 0.4 percent to ¥1,374 in Tokyo at the close of trading.
"It's important to keep the factory running steadily and to do so, we need to be able to offer models suited to customers' preferences and local needs," said Takahashi.
Nissan's factories in Japan have a utilization rate of about 85 percent, which is among the highest, Takahashi said.
Prices of cold-rolled steel sheets in Tokyo rose 13 percent to ¥87,000 as of the end of fiscal first half in September, according to data from Japan Metal Daily's Web site.
Nippon Steel Corp said it charged an average of ¥75,600 per ton for steel in the third-quarter.
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