Facing declining demand in the North American market, as well as other headwinds, Nissan confirmed it will cut production at two Mexican assembly plants and lay off about 1,000 workers “over the next several months.”
Layoffs have already begun at the Nissan plant in Aguascalientes that produces models such as the Sentra sedan for the Mexican domestic market, as well as for the U.S. and other export markets, Nissan spokesman Brian Brockman told TheDetroitBureau.com.
“We’ve seen a decline in sales in Mexico, which is one of the driving forces, as is an overall decline in North American sales,” said Brockman.
The Mexican market had been growing steadily during the last decade, partly reflecting the growth of its domestic auto industry, as well as the expansion of its overall economy. Over that period, the country grew from an industry backwater to become one of the world’s top five auto manufacturing nations. Much of that production has been geared for export, particularly to the U.S., though Nissan is the largest supplier to the domestic Mexican market, holding about a 24% share of new vehicle sales.
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The local Mexican market has been dipping this year, however, Nissan attributing the planned cuts to “challenging market conditions.” Complicating matters has been a rise in raw materials costs, according to Nissan.
Spokesman Brockman said it will take “several months” to complete the planned cutbacks, though some layoffs are already beginning this week at the Aguascalientes factory. More will follow at the older Nissan plant in Cuevrnavaca.
While the Mexican market is quite different from that of its northern neighbor, it has also seen a shift away from traditional sedans, coupes and hatchbacks to SUVs, CUVs and other light trucks.
In the U.S., demand for Nissan’s passenger car models has been on a sharp slide. Sales of the Versa sedan tumbled 30.7% during the first 11 months of this year. The bigger Sentra sedan was off 3% for the same period, though sales slid 27.6% in November. Both models are produced in Mexico.
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“We’ve maintained production in line with demand in the market to make sure inventories remain at a healthy level,” Brockman explained.
While the two Mexican assembly plants are being hurt by declining North American sales, compounded by the slump in passenger car models, they have gotten a boost by the surge in light truck demand. The new Kicks model produced in Mexico has generated strong demand in both markets since its launch earlier in the year, as has the Frontier pickup. But even on the truck side, the Mexican-made NV200 van saw an 8.2% slump in U.S. sales for the first 11 months of the year.
This past summer, Nissan cut production at the big Smyrna plant in Tennessee, but there are “no actions” planned to trim production there in the months ahead, said Brockman.
(To see the latest on former Nissan chairman Carlos Ghosn, Click Here.)
Slowing sales and shifting market demand has resulted in cutbacks by several other automakers, including General Motors which, last month, announced plans to close three factories producing slow-selling sedans. Along with cuts to its white-collar workforce GM plans to eliminate about 15,000 jobs.