Mumbai: Japan’s third largest auto maker by sales Nissan Motor Co. Ltd, which is facing losses globally, is reviewing its capital expenditure and manufacturing plans, according to two local parts suppliers to the firm.
“The company has asked us to scale down the supplies by at least 30%,” said a vendor for Nissan’s project in Chennai, where it shares a manufacturing facility with French car maker Renault SA. “They are re-evaluating all the projects in India to halve the costs. They have even put a cap on the number of people they want to hire for the project.”
Tough ride: Carlos Ghosn, chief executive officer of Nissan Motor Co. Adam Berry / Bloomberg
Another supplier confirmed the 30% scale-down at the Chennai plant. Both the vendors did not want to be identified citing confidentiality agreements with Nissan.
“We are optimizing investments and will probably do a slower ramp up at our Chennai facility. If the ramp up is slower, supplies will have to be scaled down,” Simon Sproule, Nissan’s vice-president for global corporate communications, said over phone from Japan on Tuesday.
Manufacturing at the Chennai facility was estimated to reached peak volume in one- and-a-half years from the start of production, but will need three years now, the vendor added.
Sproule did not confirm if Nissan has asked the vendors to prune supplies, but maintained that plans for the Chennai facility going on stream in early 2010 and the company’s new model launches in India were on track.
Nissan is also reviewing the programmes at its three joint ventures with Ashok Leyland Ltd, India’s second largest maker of trucks by sales, for making engines, light commercial vehicles and technology development.
“Both companies are facing the same challenges. We are, hence, working on how best to structure the next step,” said Sproule.
On Nissan’s plans with Bajaj Auto Ltd to make an ultra-low-cost car, Ananya Handa, spokeswoman for Nissan India, said in an email: “The ULC (ultra-low-cost) project continues to be studied between the three partners (Bajaj, Renault and Nissan). We will disclose more information when we have finalized the product and manufacturing scope for this vehicle. For now, we are not forecasting an introduction date, but still intend to be active in this segment in the future.”
Nissan India had announced a 50:50 joint venture with Renault last February to use a common facility for making cars for Indian and overseas markets. They had pledged a combined investment of Rs4,500 crore into the facility.
Sproule said Nissan would “make adjustments” to the investment, but did not give more details. Last month, Renault announced it was putting its vehicle launch programme from its Chennai facility on hold, citing unfavourable market conditions.
Nissan still plans to launch its maiden compact car, Micra, in India from the Chennai facility by the second half of 2010, Handa said.
Faced with slowing demand and recessionary pressures, the Japanese auto maker said on 9 February that it plans to cut 20,000 jobs globally between March 2009 and March 2010 and expects to make £2 billion (around Rs14,440 crore) losses in the current fiscal year.
Currently, Nissan imports and sells the Teana and X-Trail models in India.