The Midas touch

Posted on 16 Sep 2009 by The Manufacturer

The UK volume car industry has had a punishing 12 months, and arguably only the intervention of the car scrappage incentive scheme saved it from a deep crisis. But Nissan Manufacturing UK has had, in the circumstances, a very good year. Trevor Mann, senior vice president manufacturing, Nissan Europe tells TM about their reasons to be cheerful.

Q The Manufacturer: Production of the Micra and Note models are up and Nissan has had several good news stories lately. To what do you mainly attribute Nissan’s position?

Trevor Mann: We’re seeing the benefit of a couple of things, mainly the car scrappage schemes operating in Europe. Germany was first in November – Nissan reacted, and that increased volumes particularly on the Micra and Note. Italy and the UK followed with their schemes in the middle of May I think. How important? If you measure success by keeping employment levels in the car industry, in manufacturing and the dealer networks, if you see success as taking old vehicles off the road and replacing them with new ones – yes the scheme has been a great success.* Everyone knows these are artificial stimulus packages. We must consider that these are temporary schemes, so we need to watch closely what is expected to happen when they terminate.

Q Nissan Sunderland is building a new lithiumion car battery plant. Did the decision that you would get investment from Nissan and the other stakeholders surprise you?

There are no surprises when you are awarded new business – you have to earn it. Here in Sunderland we’ve had success for much longer than the last six weeks you mentioned, and what this plant has attracted in terms of new business in recent years has been very significant. We’ve had six model launches over about the last five years. We’re launching the new model based on the hybrid engine next year and we’ve got the investment to make the batteries for the new generation of vehicles. The significance is that, despite the climate, we can still attract that business because of the overall competitiveness here. Our competitiveness is based on our overall cost performance, but also our technical expertise in terms of having the ability to deliver these new projects.

Q Did Nissan Sunderland compete against other Nissan plants for the battery business?

A number of options were studied, we had to go through a viability process and we were successful.

The full share of the initial investment is £200m, it’s the single biggest infrastructure investment this plant has made in 20 years – you might normally spend an amount like £200m on a brand new model, on supplies, tooling and things like that – this is infrastructural, it’s a new factory, new equipment, new processes, it’s a very significant investment. The UK Government has said that it will put together an appropriate package to support this. We are still discussing the detail but they’ve given their commitment to it.

Q There are other notable successes. In July you won a contract to assemble a new petrol engine, which could create up to 200 jobs, and you were also presented with an award by the Lord Lieutenant of Tyne and Wear?

It was the Queen’s Award for Enterprise, which used to be the Queen’s Award for Export I believe. Companies awarded this have to demonstrate they have consistent and sustainable growth in export revenue terms for a three year period. About 80% of our output is exported to about 50 markets, mainly Europe including Russia and last year included Japan, and to countries like Mexico and Chile.

Q The car industry in the UK has suffered heavily, yet Nissan has fared comparatively well. Can you explain what Nissan UK has got right that other companies have not?

Basically we’re continuing with fundamental parts of our long term strategy that we believe are important.

We’ve put significant investment in new models, our new Murano Bronze and further expansion of our light commercial vehicles. We review the market to make sure we’re pursuing the right strategy – as a company we put a stake in the ground a couple of years ago that we wanted to be global leaders in zero emissions mobility, therefore we believe in continuing with our electric vehicle strategy.

Q When will the first fully electric Nissan cars roll off the production lines in Sunderland?

That’s not decided yet. The first generation electric vehicles will come off the lines in Japan in 2010. It’s likely the first electric [Nissan] vehicles to be built in Europe will be produced in 2012, but it has not been decided when. There’s a good chance for Sunderland but we just have to try hard and wait and see. As always in a competitive marketplace we have to compete against others who would also want to have that factory and build those electric vehicles.

Q The automotive supply chain in the northeast was clearly affected by your scaled down production at the start of the year. How have increased sales of the Micra and Note and the news of the battery plant affected them – for many this year will have been touch-and-go?

It’s not just our very local suppliers in the north-east, there are a lot of distressed suppliers throughout Europe because the overall industry volume is down.

In particular vehicle segments it is heavily down —the large, less fuel efficient vehicles are struggling. We have been fortunate in having kept a reasonable level of [production] volume. We reacted at the beginning of the year to the market fall which we fixed rather quickly, we managed to explain to our suppliers that we were right-sized and that we still had a viable business. The suppliers around us are doing ok, they’re keeping their heads above water.

We’ve developed a very close relationship with our suppliers over this period. They can’t survive without us but likewise we’d struggle to survive without them in the shorter term. So we need to work together and we were in very close communication with them at the start of the year to explain what we were doing, when we were doing it and how we were positioning ourselves and obviously they took pretty much the same decisions as we did. We made decisions to ensure that we had viable operations here in the North East to manage in a much smaller marketplace.

Q You attribute your resilience mainly to intelligent forecasting of output and the market collapse?

From the last quarter of 2008, we watched the market very closely and we implemented short-time working from October last year. We weren’t sleeping. The market turned off very quickly, but again the effect was different market-by-market, and as a net exporter we had to try and get our arms around each of the individual markets. Our inventory in finished vehicles was back in complete control by February, and we are being very prudent in terms of forecasts .

Q Where do you see European car production levels in 12 months time? What types of car do you expect to see more of?

The overall market is down about 25 per cent. We expect it will be much smaller and cleaner vehicles that will do well. Overall the industry is dynamic and it will react to that, both in terms of its manufacturing output and technology and the choice of vehicles it will produce. That’s not a Nissan thing – there are lots of other good manufacturers reacting to make sure their businesses will survive.