Nissan mulls buying parts in low-cost regions

By Yuzo Yamaguchi, Automotive News

TOKYO -- To chop purchasing costs, Nissan's assembly plants in North America and Japan may buy more components from suppliers in low-cost regions such as China, Southeast Asia and South America.

Nissan Motor Co. Ltd. wants to cut global purchasing costs by 15 percent during the three-year span that began last April.

In an interview with Automotive News, a senior Nissan executive said the automaker will line up suppliers in low-cost regions as one of several strategies to cut costs.

Hiroto Saikawa, Nissan's executive vice president in charge of purchasing, says a 15 percent reduction would match the cuts achieved by the company in the three years ended in April 2005. "That's very challenging to us and our suppliers," Saikawa says.

To help suppliers reduce prices, Nissan wants to give them more business. If the automaker can carry out its plan to boost vehicle sales 24 percent, to 4.2 million units, during the next three years, suppliers can enjoy economies of scale as they produce more parts.

Saikawa says Nissan will let vendors supply a variety of model lines, and the automaker will foster long-term relationships with suppliers.

But he acknowledges that Nissan's cost-cutting target will be difficult to achieve. Suppliers are struggling with the high price of raw materials such as oil and steel.

This is Nissan's third cost-cutting plan launched during the reign of Carlos Ghosn. Over the past five years, Nissan launched two campaigns: one to cut purchasing costs by 15 percent from 2002-05 and another to trim costs 20 percent from 200 to 2002.

As part of its earlier campaigns, Nissan dismantled most of its keiretsu network of suppliers - but not entirely; the company retains close ties to a handful of vendors.

In January, Nissan raised a stake in Calsonic Kansei Corp. to 41.9 percent, from 27.6 percent. That move raised speculation that Nissan might shift to the Japanese supplier from Visteon Corp. when it buys modules for its U.S.-built vehicles.

Calsonic Kansei doesn't build cockpits for Nissan's U.S.-built trucks. Visteon has that business.

It appears that Calsonic could compete for the module business if Visteon falters. But Saikawa says, "There would be no change in competition" between the Japanese and U.S. suppliers.

From Automotive News