Detroit Seeks Retro Upgrade

Last June, Nissan achieved Blockbuster Deal of the Week status with its announced $38.8-million R&D expansion at Nissan Technical Center North America in Farmington Hills, Mich.

In the Big Three's home territory, the hard work of permitting is almost a happy respite from hard times. Their share of the U.S. market has fallen to 61.5 percent from 72.1 percent in 1992, according to Ward's AutoInfoBank. A Reuters article pointed out that the Big Three's share of orders to major supplier BorgWarner had fallen between the exact same percentages ... but in a mere four years. Nonetheless, they and their supplier constituents continue to refine their products and processes with facility makeovers and shake-ups.
        In October, the Chrysler division of DaimlerChrysler said it would invest $35 million in its pickup truck plant in Warren, Mich., a move that will add 1,000 jobs to the payroll and 60,000 annual units to the plant's annual output. The company lost around $2 billion in 2001.
        Visteon Corp., the world's second-largest automotive supplier, announced in May that it would spend some $300 million on a new headquarters in Van Buren Township, Mich. To be built on 265 acres (107 hectares) with around 1 million sq. ft. (92,900 sq. m.) of office space, the project will realize both significant incentives (estimated in the broad range of $35 million to $67 million, with $18 million in infrastructure improvements) and a big reduction in lease payments at the current 15 facilities scattered throughout the area. The company is simultaneously building a European headquarters in Kerpen-Sindorf, Germany, as well as a new $23-million electronics plant in Nuevo Leon, Mexico, the company's 15th facility in the country.
        General Motors announced at nearly the same time an investment of $300 million in its Orion, Mich., plant, part of a reorganization that will see the eventual closing of one of its Lansing factories and a new facility rise up in nearby Delta Township, expected to begin production in 2006. (For more on the GM transformation in Lansing, see "The Michigan Model".) The re-molding has also included the continuing demolition of the company's legendary Buick plant in Flint. The city is marketing the 250-acre (101-hectare) parcel in the middle of a Michigan Renaissance Zone, which exempts a potential buyer from single business taxes or property taxes until 2011. Already, GM supplier UPF has put a 100,000-sq.-ft. (9,290-sq.-m.) frame manufacturing facility on the site, convenient to GM's truck plant nearby. Given the right legislative conditions, that truck plant may be in line to supply the Turkish military with 40,000 trucks over the next three years, a $4.25-billion contract.
        The company's pattern of rejuvenation through renovation extends beyond Michigan's borders. In August, GM pledged to invest $560 million in its Lordstown, Oh., plant, saving thousands of jobs. (For details of the deal, see "In the Pivot," on p. 766 of the November 2002 issue of Site Selection.) What characterizes this and other projects, besides the secured piece of land, is speed.
        "One of the things we're seeing in the industry, as a result of greater customer demand, is that manufacturers are re-engineering and refreshing products faster and faster," says Dan Flores, GM spokesman. "The life cycles of vehicles are becoming much shorter, and that is driving a significant change in the way we renovate our facilities. With the compression we've seen in the vehicle development process, now you have new vehicles coming out in 24 months or 18 months, and that puts a greater stress on the whole facility renovation process. With Lordstown, we'll be up and running with the next generation small car two years from now. That type of speed would be challenging in itself."
        Add to that the demand to keep up current production at the same time they're preparing for the next generation, and you have a mammoth task.
        "There is just greater demand on our facilities," says Flores. "We can't afford to have a hiccup on the current production, and we can't afford to have a hiccup as they're preparing for the new product as well. We can't blink, because there are other competitors who compete in this market segment who are going to refresh their products as well. It's a continual race with no finish line. There's never going to be a point in time when our quality's good enough, our productivity's good enough, our facilities run efficiently enough – there's always got to be continuous improvement."
        That goes for relationships with both suppliers and building contractors, both of whom GM endeavors to involve ever earlier in new development plans. It's called "long leap" sourcing, says Flores, and its principles have ramifications for facility development.
        "If we're going to keep on bringing these products to market faster, which in turn is driving us to make facility renovations faster, we have to get people engaged earlier on in the process to allow that to happen," he says. The practice is also being implemented by Toledo-based Dana Corp. with its own suppliers. The company recently broke ground for a new Automotive Systems Group Technology Center outside Toledo, which will employ 500.
        Elsewhere in Ohio, the revamping and growth continues, with Honda investing $20 million in an expansion at its plant in Anna. But the company may be reshaping its U.S. supplier base, as it announced later in the year plans to implement its Asia-based logistics system across its entire worldwide portfolio of plants, a way to realize efficiencies of scale through shipment of less expensive Asian-made parts to its many plants.
        Ford is in the midst of a plan to simultaneously close five plants and introduce new car models by 2005, part of CEO William Clay Ford Jr.'s effort to achieve $10 billion in cost cuts after losing more than $5.4 billion in 2001. Ford Chairman and CEO Bill Ford Jr. blames, among other factors, the weakness of the Japanese yen, which he says gives both Japanese automakers and their Asian counterparts a competitive advantage. Operating results from Toyota bear this out: out of an increase of $1.84 billion in operating income for the six months ended September 30, 2002, $739.8 million (or 40 percent) of that was ascribed by the company to favorable changes in foreign exchange rates.
        U.S. West Coast port difficulties aside, other Asian automakers have made significant inroads in profitability even as their zero-percent financing rolls on. Nissan reported a 24-percent rise in net income for the fiscal first half ended in September, driven largely by the introduction of new models in the U.S. But oddly enough, some of the growth fueled by that competitive edge is coming back to Detroit.
        In June, Nissan Motor Co. announced that it would invest $38.8 million in the expansion of its research and engineering campus in Farmington Hills. That's the same town that saw Motorola open its 125,000-sq.-ft. (11,613-sq.-m.) automotive technical center a mere two weeks before. Now it's the turn of Nissan Technical Center North America. The project will encompass a 78,000-sq.-ft. (7,246-sq.-m.) engineering building, a 12,700-sq.-ft. (1,180-sq.m.) design studio and a 10,000-sq.-ft. (929-sq.m.) test center. Employment at the center, which already occupied a 374,000-sq.-ft. (34,745-sq.m.) building, will increase from the current 550 to more than 810 by 2004.
        "Nissan is in the midst of a significant business revival, based primarily on new products," says Fred Standish, Nissan spokesman. "There is a host of new products coming worldwide, so we need capabilities and capacity and facilities to support the development of these new products."
        The Michigan Economic Development Council approved a single business tax credit for Nissan to expand in Farmington Hills worth an estimated $15.7 million over the next 17 years. The assistance helped NTCNA choose Michigan over Nissan's worldwide technical headquarters in Atsugi, Japan.
        Standish makes it clear that Nissan Technical Center North America has a "tremendous amount of interplay" with all company divisions worldwide, whether it's concerning styling or engineering efficiencies. As for where they decided to execute the expansion, Standish said the answer was plain from the day the technical center was first established.
        "When we first decided to expand R&D in the U.S., we looked around," he says. "We have a manufacturing center in Tennessee, styling and design in La Jolla [Calif.], and we decided to locate a tech center in Southeastern Michigan because that's here the engineers are. It's as simple as that."