Driving it home

Nissan's move should sound alarm for Canadian auto industry

New York — The Globe and Mail

Carlos Ghosn, right, CEO of the Nissan-Renault Alliance, introduces the Infiniti LE concept at the New York International Auto Show. (Mark Lennihan/AP)

An announcement by Nissan CEO Carlos Ghosn at the New York auto show should sound a cautionary warning for Canadians wondering about the future of car manufacturing in our country.

Last December, at the Tokyo motor show, Ghosn announced that the high Japanese yen is forcing Nissan Motor to move Infiniti production out of Japan.

Story continues below ad

“You won't have to wait a long time before we make a decision about the new base for sourcing of Infiniti,” Ghosn told a group of reporters at the New York Auto Show. “If you follow our logic, we should make the cars where we sell them.”

Already the Infiniti JX is being built at Nissan’s plant in Tennessee. Now Nissan may move some, if not all, Infiniti production to perhaps North America or China or elsewhere. The details are unclear. We know this: Nissan has announced plans to build a new $2-billion (U.S.) factory in Aguascalientes, Mexico. While Nissan has not said what models will be built there, Infinitis are now on the radar screen.

The problem, as Ghosn discussed at the show here, is that back around the time of the big financial crisis, the yen traded at about 110 to the greenback. This week it hit 82.36. Last December, Ghosn warned those listening in Tokyo that his company would consider moving production out of Japan if the yen remained at an uncompetitive exchange rate. He’s been true to his word.

The strong yen, he said here in New York, is a barrier to Infiniti reaching its sales goals. Currently, all Infiniti models save the JX are built in Japan – yet Infiniti vehicles are not sold in Japan

“So this is an interesting case,” he said, “where you have most of the sourcing in Japan, none of the sales in Japan. And today, having the sourcing in Japan with the yen is obviously not the right system. So we're going to be moving Infiniti out of Japan in order to give it a little bit more competitiveness.”

Take note that Nissan is not building a new plant in Canada. While it’s true that Toyota recently announced an expansion of its plant in Woodstock, Ont., as a general rule Canada is not the destination of choice for cost-conscious car makers who eye our strong dollar and high wages in the assembly sector and then look elsewhere to invest – in Mexico, the southern U.S. states, China and other places.

Ghosn’s announcement should send shivers down the spines of anyone watching the hollowing out of Canada’s manufacturing sector.