Nissan Optimistic About US Will Boost Production

TOKYO, June 20 Reuters reported that Nissan Motor Co Ltd is to boost production capacity at its Mississippi plant by 60 percent, a move that underlines its confidence in its new vehicles for the U.S. market, an industry source said on Thursday.

Chairman Yoshikazu Hanawa told the company's annual shareholders' meeting earlier that Japan's third-largest automaker was reviewing its production capacity in North America.

An industry source told Reuters that planned capacity at its Canton plant in Mississippi would be lifted from 250,000 units to 400,000 units.

The Canton plant is due to start operations next May with current plans for it to build a minivan, sports utility vehicles and a pick-up truck.

Nissan, 44.4 percent owned by Renault SA has so far announced an investment of $930 million in the plant.

Eager to be first in line should the automaker decide to increase capacity, the Mississippi legislature is scheduled to hold a special session on Friday to discuss an economic package to support any expansion.

"After that has finished, we will be making an announcement," Hanawa told the shareholders' meeting.

Nissan spokesman Gerry Spahn said the automaker had decided to review its North American plans due to the success of its Altima sedan for which demand outstripped supply.

He added that the company would be viewing any support from the state of Mississippi positively but declined further comment.

A GREAT DEAL?

Christopher Redl, analyst at UBS Warburg, said that expected tax breaks from the state of Mississippi could limit Nissan's addditional investment to just $400 million.

Media reports have put Mississippi's new economic package at $50 million to $75 million.

"It's pretty economical, a great deal," he said. "By my calculations it will be 17 percent cheaper per unit than their original plans."

Earlier in the day before news of the scale of the expansion came out, some analysts said they were reserving judgment on any further expansion.

They said Nissan's plans to boost U.S. vehicle sales by 300,000 over three years was already covered by its new Canton plant and an expansion at its Smyrna, Tennessee, plant.

They added it might not be prudent to boost capacity for vehicles that were not even on the market yet and noted that the U.S. auto market had shown relative weakness of late.

Separately, Hanawa also said that Nissan, having successfully restructured, planned to pay an interim dividend for the first time since 1997/98, forecasting a four-yen payout.

The dividend amount is in line with the total eight yen paid in the last business year ended March 31 although Nissan did not forecast a full-year dividend.

The interim dividend announcement went some way towards appeasing those irate shareholders, who, belying the traditional image of the quiet, rubber-stamping Japanese stockholder, got up to complain their dividends were too small.

Nissan, having posted record profits in the past year and raised bonus payments for directors by 50 percent, could have done better than the one-yen increase to eight yen, they said.

Hanawa countered that bonus payments for directors fluctuated and that in bad times executives would get nothing. The company aimed to give shareholders stable returns over the medium to long term, he said.

"In the past, the company has overdone it in dividend payments and we have had to inconvenience shareholders when times turned bad," he said.

"Also if you look at our share price, it has doubled, which some investors are more concerned about," he added.

Nissan's stock closed down 0.24 percent at 843 yen, compared to a 1.31 percent rise in the Nikkei 225 average.

Although off recent highs of more than 1,000 yen, the stock has more than doubled since Nissan first formed an alliance with Renault in 1999.

Hanawa was standing in for chief executive Carlos Ghosn, who has returned to Brazil to attend his father's funeral.