Central Mexico Key for Nissan’s Growth in Americas

Commentary by John Paul McDaris

Nissan recently inaugurated its $2 billion plant in Aguascalientes, and the Japanese manufacturer will build 1 million cars in Mexico by 2016, according to a recent report from Reuters. Most of the cars produced in the new plant will be destined for North and South America.

The facility will be key for Nissan’s platform strategy, which is the industry’s prevailing development model for different regions of the world. The plant can produce 4 different cars on 4 different platforms, Nissan CEO Carlos Ghosn said at the opening.

He continued, in an interview at the plant: “We like Mexico because it allows us to be competitive. It’s not only about cost, it’s also about quality and it’s about responsiveness – capacity to respond to variation of the market very quickly.”

He sums up the new Mexican paradigm quite nicely – here it’s no longer about just cost savings and lowering operational overhead to the bare minimum. It’s the fact that the big automakers need to be in Mexico because it really is the ideal place to produce for both the North and South American market. And though the Mexican domestic market certainly isn’t the main draw, Nissan plans to sell 300,000 to 1 million of the units it makes domestically.

Aguascalientes is a small-ish city of a bit over 1 million people. So it will be interesting to see the extent to which Nissan will have challenges finding enough skilled workers regionally. Further, Aguascalientes is not as big a draw as larger, more attractive and cosmopolitan cities like Querétaro or Puebla. Nissan, as well as the suppliers servicing them in the area, will have to make extra effort to find and retain skilled labor. We’ve seen training programs successfully used for that purpose, as a carrot to reward promising employees.

On the other hand, smaller tier suppliers whose manufacturing is based on more labor-intensive processes probably won’t find themselves able to afford Aguascalientes. Lower-cost alternatives like Zacatecas, where Entrada’s facility is located, are apt to be more attractive to companies of that type.

Source: Reuters

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