Japan’s Carmakers Expand Home Factories

Japan’s dwindling car market is a major concern for the country’s automakers. Having touched a 20-year low in 2006, this year sales fell every month until October. But when it comes to Japanese auto production, the picture is quite different. Despite Japan’s high costs and sluggish domestic market, 2007 is set to mark a fifth consecutive increase in vehicle production. Spurred by rising demand overseas, Japan Inc.’s high-quality, flexible plants will produce a total of 10.7 million vehicles this year, projects automotive consulting firm CSM Worldwide. That compares with a total of 10.5 million cars and trucks in the U.S., which fell behind Japan as the world’s biggest vehicle maker last year.
Just as important, there are few signs of a slowdown. By 2010, CSM reckons vehicle production in Japan will reach 11.35 million, compared with 10.17 million in the U.S. %26quot;Japanese automakers are aggressively expanding their production facilities in Japan, despite the shrinking market at home,%26quot; says Hirofumi Yokoi, an analyst at CSM in Tokyo. Rising demand for fuel-sippers and in fast-growing new markets are more than offsetting sluggish sales at home and in the U.S. Exports to the Middle East, for example, will account for 10% of Japanese car exports this year%26mdash;a 30% rise over 2006.
All the big players are chipping in. In October, the Nikkei, a Japanese business daily, reported that Central Motor, which assembles cars for Toyota Motor (TM), has plans to add a new $450 million, 100,000-unit plant in Miyagi, north of Tokyo, in 2010. The new factory will be Toyota’s first new assembly plant in Japan since 1993. Toyota spent the last decade rapidly expanding capacity around the world. A year earlier, Toyota Motor Kyushu will open a new parts plant in Kitakyushu in western Japan, where it’s also expected to add a new research and development center.
Kyushu: Gateway to ChinaNissan (NSANY), which not so long back was slashing production in Japan, has just revamped its 530,000-annual-capacity Kyushu plant and plans, through its Nissan Shatai subsidiary (maker of a host of models for Nissan, including the Infiniti FX35 and FX45 sport-utility vehicles), to add 120,000 more vehicles at the site. Speaking at a ceremony to mark the beginning of work on the new production facility in September, Nissan Shatai President Shigeru Takagi said that Kyushu’s proximity to China was an important factor in the decision.
And Honda (HMC) started work on its first new plant in 30 years in Saitama, just north of Tokyo, in September. The $630 million, 980,000-square-meter factory, which is scheduled to begin operating in 2010, will have an annual output capacity of 200,000 cars and employ about 2,000 workers.
Even Suzuki (SZKMF), better known of late for its rapid expansion plans in India, is building a new $1.7 billion, 260,000-unit plant in Shizuoka prefecture that will eventually export production versions of its Kizashi concept cars (BusinessWeek.com, 10/10/07), shown at the Frankfurt and Tokyo motor shows, to Europe and the U.S. %26quot;We’re working hard to increase our production capacity,%26quot; says Osamu Suzuki, the company’s chairman.
Extremely Flexible PlantsJust as startling, though, is that millions more are being spent upgrading existing plants, which are already among the most efficient in the world. Toyota’s newly refurbished Takaoka plant, for instance, will combine the latest developments of the Toyota Production System, such as sensors that monitor quality during each manufacturing process or stamping presses that use servo-motors rather than hydraulics, combined with high-speed delivery robots. Nissan’s Kyushu plant, after its refurbishment, is one of the company’s top four plants, and capable of producing seven different models on a single production line.

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