Nissan: Cuts in Japan Production Reduced

TOKYO, Feb 26, 2009; Chang-Ran Kim and Sachi Izumi in TOKYO, Poornima Gupta in Detroit writing for Reuters reported that Nissan Motor Co said on Thursday it was on track to reverse some of its production cuts in Japan in March as inventory levels come under control, although it said vehicle sales remained weak and unpredictable.

Japan's third-biggest automaker had said earlier this month that its domestic factories would work on half the number of days on average in February and March to reduce bloated inventory as car sales tumble around the world.

It said at the time it was aiming to bring global inventories to 480,000 vehicles by the end of March, down by a third from a peak of 720,000 in November.

Nissan had planned deeper cuts in February, when its three domestic factories were closed for 9.5 to 13 days. In March, non-production days would be reduced to six to seven days at two factories and to zero at a third, a spokeswoman said.

Shares in Nissan, owned 44 percent by Renault, rose as much as 5.3 percent earlier on a front-page report in the Nikkei business daily that the automaker was expected to produce 60,000 to 70,000 vehicles next month, nearly 30,000 more than in February. The shares ended the morning up 3.3 percent in mixed trade for shares of Japanese automakers.

Nissan said the report was in line with its announced plans.

"Inventory in Japan has come down to fairly normal levels as we had planned," spokeswoman Haruko Wada said.

"This is by no means due to stronger sales, but we expect to be able to run at production levels that reflect the sales trend from April," she said.

PACT REACHED IN SPAIN

Most automakers, including Japan's Toyota Motor Corp and Honda Motor Co, are squeezing production in the January-March quarter in response to double-digit declines in vehicle sales in North America and other key markets that have driven up stocks of unsold cars.

On Wednesday, Japan's top three carmakers reported their worst monthly drop in global production in at least a decade, with Nissan's global production plunging 54 percent in January.

Production levels are expected to be restored somewhat from the business year starting on April 1, although nowhere near where they were a year earlier as sales show no sign of recovering.

"The fact that production is declining at a faster rate than retail sales should mean that inventories are coming down, but the further slowdown in retail sales is not encouraging," KBC Securities auto analyst Andrew Phillips wrote in a report.

Toyota, the world's biggest automaker, is planning to raise output in Japan slightly in May, partly due to the launch of the new Prius. [ID:nT143423]

Yamaha Motor Co said on Thursday it plans to cut motorcycle output in Japan by 24 percent this year.

Nissan, like Toyota, is expecting its first annual loss in years in the business year ending March 31, and has announced a number of steps to slim down its operations to return to profit.

Nissan said on Wednesday that the union at its Barcelona plant in Spain had agreed to reduce headcount by about a third to 2,800 as part of a business plan leading up to 2012.

The agreement includes plans to work on two shifts for annual output of 128,000 vehicles, or 80 percent of capacity, with the addition of one new product next year. Nissan will provide assistance to prepare workers who take voluntary buyouts to find other employment until 2011.

Workers at the plant had previously demonstrated against Nissan's plans, initially announced in October, to cut 1,680 jobs.

Editing for Reuters by Michael Watson