Nissan's track record of success drives other Japanese firms to the hills of Tennessee -- now the fourth largest auto-producing state in the U.S.

T

he state that built the bomb to end World War II now finds another explosion on its hands -- a rising Japanese "yen" to build automobiles and their parts in the hills of Tennessee.
      Japan doing business in the state that launched the Manhattan Project? Yes -- and doing it quite well.
      To understand the relationship forged between the Land of the Rising Sun and the Volunteer State, one need look no further than the town of Smyrna, about 20 miles south of the state capital city of Nashville. Smyrna is the birthplace of Nissan North America, the most efficient automaker in the United States.

      Twenty years ago Nissan -- then known as Datsun -- opened its first American factory in Smyrna in Rutherford County. Today, that plant outperforms every other automotive assembly operation in the country. For the seventh year in a row, Nissan has been named the most efficient manufacturing nameplate in North America by the Harbour Report.
      Emil Hassan, Nissan North America senior vice president of manufacturing, purchasing, quality and logistics, says the honor is a testament to the work force the company has found in Tennessee and the strong relationship the automaker has with the state.
      "Over the years, Nissan has put an enormous amount of brainpower and investment into designing its vehicles, processes and systems," Hassan says. "Our employees, including the people that work on the line, are working smarter and more efficiently to achieve the best results possible. The Harbour study is an indication that we're doing many things well."
      The 5.2 million-sq.-ft. (483,000-sq.-m.) Nissan plant in Smyrna employs 5,400 people who make an average of US$23 an hour and manufacture three vehicles: the Altima midsize sedan, Xterra sport-utility vehicle and Frontier pickup. The plant produces 370,000 vehicles a year.
      According to the Harbour Report, the Nissan factory in Smyrna needed just 17.37 assembly hours per vehicle -- a 7.1 percent improvement over last year's report. The Altima was rated No. 1 in assembly hours per vehicle in the midsize car category, while the Xterra claimed the top spot in assembly hours per vehicle among midsize SUV's. In the small pickup segment, the Frontier also ranked No. 1.
      Ron Harbour, president of Harbour and Associates in Troy, Mich., says it's frequently the case that the most productive plants produce the highest-quality vehicles. "If you truly have a good process that builds quality in place, it's going to automatically be better productivity and lower cost," he says. "That's what we're seeing in the best plants, and that's certainly true at Nissan."
      Not coincidentally, Tokyo-based Nissan Motor Co. announced in May that the company reported an all-time record net profit after tax of 331.1 billion yen (US$2.7 billion) for fiscal year 2000. The results followed a decade of cost cutting, factory modernization and engineering redesign -- dubbed the "Nissan Revival Plan" by Carlos Ghosn, president of Nissan.
      The poster child for Nissan's revival is the Tennessee plant. "Our cost-cutting target was 10 percent and we exceeded that," says Hassan. "We took on tremendous cost-cutting not just with our suppliers but also in-house. The result is that Smyrna has been our most productive plant for seven consecutive years, and we never had to lay off a single person. During one particular slowdown, Nissan shifted to a four-day work week, but we still paid our workers for a half day on the day they stayed home. And we are still reducing our overtime. We believe that every nook and cranny in the company has the potential to cut costs."
      Hassan notes that, without the cooperation of state and local officials in Tennessee, none of this would be possible. When Nissan announced last year that it would expand its engine and transaxle assembly operation in Decherd, Tenn., by $500 million and 1,000 jobs, the state of Tennessee and the Franklin County Industrial Development Board played key roles in securing the deal.
      It would be a mistake, however, to attribute Tennessee's success in the automotive sector solely to government-backed incentives. While incentives play a role, they represent only a portion of the state's investment, according to Alex Fischer, commissioner of the Tennessee Dept. of Economic and Community Development.
      "We spend more than $30 million on worker training each year," says Fischer. "We tell corporate prospects every day that we won't be beat on this issue. Our best resource is our people. Our second biggest assets are our communities. We are building capacity through our people."
      Visits by Tennessee Gov. Don Sundquist to Japan don't hurt either. The governor makes a pilgrimage to Japan every year to meet with business and government leaders. "The understanding of Japanese businesses by our business and government leaders in Tennessee has grown because of these annual trips," says Fischer. "It is part of a long-term strategy. We even have an office in Japan with two people."
      The result of this carefully cultivated relationship extends beyond Nissan and its $330 million-a-year payroll in Tennessee to include 130 Japanese companies now operating in the Volunteer State, and that number is growing. On June 15, OTICS Corp., a Japanese manufacturer of automotive engine parts, selected Morristown, Tenn., as the site for its first U.S. facility. The company will build in phase one a 98,000-sq.-ft. (9,114-sq.-m.) manufacturing plant in the East Tennessee Progress Center Industrial Park at a cost of more than $30 million.
      Masataka Takasu, senior managing director of OTICS, says the cooperation of state and local officials was pivotal in closing the deal. "From the first time we visited Morristown, we have been treated very well by both the local and state officials," he says. "We believe the site we have selected in the Morristown community will allow us to operate in a good working environment and meet our expectations in serving our customers in an efficient, profitable manner."
      When the facility opens in 2003, it will create 50 jobs and will expand to more than 120 by 2006. OTICS will supply parts to Toyota engine plants in Kentucky and West Virginia, as well as a new plant being built for the Toyota Tundra pickup's V-8 engine in Huntsville, Ala.