Nissan to build $2 billion factory in Mexico to avoid Yen image

Nissan Motor Co, on Wednesday said it would invest up to $2 billion for an all-new manufacturing complex in Aguascalientes, Mexico, to support the company’s Americas growth strategy.

Up to 3,000 direct jobs will be created initially at the new facility, with approximately 9,000 positions to be generated within the supply chain and wider community. With these additional jobs, Nissan’s total headcount in Mexico will expand to nearly 13,500 workers.

The factory, aimed to produce vehicles for the Americas, will initially be able to make 175,000 small cars a year before it gradually expands capacity, the company said.

Along with the production facilities, Nissan said it will also construct an on-site test track to allow for off-line quality assurance testing of all new-model production.

Mexico is a key engine for Nissan’s growth in the Americas,” said Carlos Ghosn, chairman and chief executive officer of Nissan.

“Together with our new plant in Brazil, this new manufacturing facility in Aguascalientes is an important pillar in our strategy to ensure that Nissan has the capacity it needs to increase sales volume and market share across the Americas.”

When Nissan’s new plant opens next year, the company estimates it will be able to produce as many as 1 million vehicles in Mexico, the most capacity of any carmaker there.

Strong yen
Over the past 6 months, the Yen’s strength has increased by 9%. This has made not only Nissan’s, but all Japanese auto makers exports less effective and profitable.

Carlos Ghosn, Nissan’s Chief Executive Officer said that making an investment in Japan would prove fruitless due to the Yen’s strength.

“It’s difficult to make an investment in a country with no return,”

The executive said Wednesday that it will be tough to maintain its targeted level of production in Japan under the yen’s current strength.

Nissan aims to keep its pledge to make at least 1 million vehicles a year in Japan as Japan’s production skills and technologies are a source of the company’s strength, Toshiyuki Shiga said at a press conference at the Foreign Correspondents’ Club of Japan.

But beside the strong Yen, Japan is facing intense competition from South Korea, Taiwan and Singapore, where labor and production costs are cheaper.

The tsunami temporarily disrupted the production of automobile makers and other manufacturers. Weakness in the U.S. economy and Europe’s debt problems and recent flooding in Thailand, where many Japanese automakers have assembly lines, also contributed to export declines.