Next year you will celebrate the fortieth anniversary of the establishment of Nissan Mexicana which a few years ago was named the commercialization base for Central and Latin America. What are the factors that influenced that decision?
My answer would not be so strategic. The main reason is the closeness, another reason would be the similarity of the Latin culture. From the logistic point you can locate the base in Tennessee. Maybe the logistic cost is not so different if you compare exports from Japan to Central and South America, but the way of making business and the way of thinking between Americans and Latin Americans differs a bit with Mexican and South Americans. Also, they speak the same language, Spanish. Even the vocabulary is different from country to country but the way of thinking is very similar, especially if you have to communicate very closely, there is no language barrier. And the simple reason is, that we had no manufacturing base, except Chile and Peru. In the case of Chile, Nissan retired in 1974. In the case of Peru, we had a program but our factory was severely attacked and we were forced to withdraw from manufacturing operations in Peru. That is why Mexico is the only manufacturing site in Latin America.
Nissan was the first Japanese carmaker to establish operations in the United States, under the name of Datsun many decades ago. Today, you have a very important position here in Mexico. Japanese are a highly educated people and have strong interests in culture. How difficult is it for you to adapt to the Mexican and Latin American business mentality as compared with that in the United States?
I cannot comment about the Latin American countries because I'm not so familiar with other Latin American countries. If you allow me, I'll comment about Mexico. There are always difficulties. When you establish your own new factory, even in Japan, there is a difficulty. If you put your new factory in Paris, it's difficult. A new culture always implies difficulties. But when you see difficulties from a positive point of view, sooner or later, you resolve them. That's our very simple approach.
In the case of Mexico, many criticized us, especially because federal regulations are always changing, from one day to the next. But at least in the case of the automotive industry, the consistency from the beginning until the year 2003, for more than forty years, "c'est magnifique", incredibly marvelous. This means that every federal president established an automotive decree, lasting the administration's six years. The people outside Mexico watching the difference between the former decree and the new decree would react saying, "Oh, you changed it so much!" But I believe it's wrong. If you consider from zero to three open markets, which will start in the year 2004, the consistency is incredibly firm. I'll take the liberty of explaining why. For example, when the first automotive decree was established in the year 1962, this country decided that it should establish the automotive industry as a strategic industry, such as petroleum and energy. They decided to create an industry in Mexico instead of importing 100 percent of the cars. The first stage was the prohibition of imports and import substitution. In the next stage they promoted the car-parts industry. In the next stage they promoted components exports. In the next stage they promoted exports of cars. And in the following stage they promoted, with limitations, imports of cars. And finally, as from the year 2004, they are going to open it fully. That is an industry policy that lasted a bit more than 40 years.
The truth is that at the end of this long transition period Nissan Mexicana has positioned itself in the Mexican market and by the year 2004 you will be one of the leading brands and you will be prepared to compete and export worldwide. What do you expect from the Free Trade Agreement that has recently been signed with the EU. ?
Nobody knows, but about what you mentioned, once the doors are opened, we will be one of many. If we lack the international competitiveness level, then we could be eliminated. Even if we can survive in Mexico. But in other countries, we could be eliminated. That's why the situation is the same. If you cannot swim, then you will always have to worry about the deepness of the water. But if you can swim, even in the middle of the Pacific Ocean, then you can keep swimming.
According to some Japanese industrials we have interviewed, Japanese companies are not yet fully aware of the importance of this Free Trade Agreement. They can triangle their export activities instead of going directly to Europe and paying 15 or 17 percent tariffs. What are your foresights?
We cannot say that all Japanese companies are not aware. Some, which operate in Mexico, are quite aware. For almost all the Japanese people, not only the automotive industry, Mexico is still very far, that is a fact.
Do you think that feeling is reciprocal?
For example, automotive or home appliance industries, such as Sony or Panasonic, etc., have operations and transactions with the U.S. and almost all of them are concerned about the NAFTA. The industries or companies aware of the NAFTA are also aware of the bilateral agreement between Mexico and the EU. They are thinking how to benefit from the recently established agreement.
Being a regional base of marketing, a fast and efficient distribution network must be crucial for Nissan Mexicana, both locally and internationally. Could you explain how distribution is organized?
In the case of Mexico, we have 166 authorized dealers. But some dealers have branches, therefore, we have 188 outlets in total. This year, if the economy remains stable, this country's total demand may reach 0.8 million. In that market, we are aiming to reach more than a 20 percent market share, that is 170 thousand. That means more than one thousand units per year per dealer. That is remarkable. There aren't many countries with this dealership percentage.
1998 was an extraordinary year for Nissan Mexicana. It had a 48.7 percent growth in sales, with 20 percent of the market penetration, Nissan Mexicana holds today a second place in total sales in the Mexican market, after Volkswagen. Are you satisfied with those results or do you plan to challenge Volkswagen's leading position and if so, what would be your strategy?
Our strategy is very simple. Every company located in free competition is seeking to be better or higher. Of course we will continue to try being more operable, not only in volume, (you can sell with a 50% discount). What we are seeking, together with the dealership network is to maintain quality sales, expanding our business. That's why we are satisfied with the current dealers' performance. Diplomatically speaking, I'm satisfied, but not operationally. If you are satisfied, you are finished. We always have much to do, so do the dealers. When you are fully satisfied, your retirement is around the corner, and I'm speaking about all of us: Volkswagen, General Motors, etc. | You may share the same concern of the president of Volkswagen de Mexico, regarding illegal imports of cars from the United States, but the fact is that cars in Mexico are more expensive than in the United States. How could you explain that situation, is it because of the tax system applied here in Mexico?
In the case of illegal importation, authorities should control it. If the authorities want to allow imports of used cars, it's O.K., but once regulation is established either the authorities or we, ourselves, should respect that regulation. Illegal imports should not be tolerated in any country. According to the rules, it's prohibited.
If used car imports are legalized, I have nothing to say, because it would abide to the regulation. We have to respect regulations. That is our basic policy.
The price level of new or used cars in Mexico is different from the United States level. Last year alone, the U.S. sold 16 million units. In the case of Mexico, it was less than 0.7 million. There is a different economy scale. There is also a difference between the taxation systems. This system depends on the country. You can complain about it in your country, you are a citizen and you are paying taxes to your government. But in our case, we can suggest, recommend, but we don't insist. I believe we should not insist because every country has its own situation. Once, Mr. Fujimori said that even in democracy, there are different types, depending on each country's situation. I don't fully disagree. If you want to be at a more international level, then even the taxation system will reach global levels. It is co-related with the number of taxpayers. Once the taxpayer number rises, the taxation percentage decreases, as well as the country's needs. If you are in a developing phase, then you need more investment for infrastructure and if you have a dramatic devaluation history, then you have to recover your confidence as a country. Many factors have to be considered. If tax levels are zero percent, prices automatically decrease, then many people have access to purchase, but you have to be very careful with your government, if you are president of the country. It should be very balanced, not give incentives to specific industries but to all the sectors.
One thing I can foresee is that, if the economy is going well, then, according to other countries' experience, the taxes will decrease. If the tax percentage lowers, then the total will go down.
How will Nissan and Renault benefit from Renault's return to Mexico?
In the case of Mexico, as the end of this year we will start producing the Scenic in our Cuernavaca, Morelos, factory. In the year 2002 we will begin producing Clio in Aguascalientes. We can maximize a very specific synergy using our installed capacities, that is our benefit. In the case of Renault, they can use our facilities without the need of building a new factory.
I would say there are many more invisible synergies that you cannot quantify. We will be able to learn their way of thinking and they will learn ours, absorbing whichever is the best. For example, if we think Renault's marketing strategy or system is better than ours, we can introduce it or copy it. The uncountable synergy is very important to me. Nissan cannot learn alone, it needs a new insight. That's why many companies merge. From the beginning of mankind, it has always been this way. Civilization has a co-relation with copying.
Going back to the tangible synergy, in a country where loans are far from being accessible for the general public, how relevant will be for Nissan to enjoy Renault International Credit's experience?
We, Nissan Mexicana, as the main manufacturer, do not have our own financing company, our competitors do. That's why we are anticipating their arrival and the dealer network is also expecting them anxiously.
How do you see Nissan Mexicana in five years, bearing in mind that the joint project with Renault includes an investment of 400 million U.S. dollars over the next seven years?
The joint project will invest that amount. During this project we are aiming to produce the models I mentioned previously. The investment is to start running this project. After seven years, I don't know. The situation of the country will change. As from the year 2004, Mexico will permit the import of cars. Even changing the situation, we want to at least maintain our current situation, if not improve it. The sale volume is not the only factor, nor the market share nor the transaction but also the quality of our business in Mexico, with the dealer network and our future customers' relations.
In the case of our headquarters, they are nor satisfied with a more specific description.
Beating Volkswagen can be a very specific objective but our position in the automotive sector doesn't concern me. Of every five cars you see in the street, one car is a Nissan. At least I want to improve. Hopefully, of every four units in the street, one will be a Nissan. But it's not easy because in the 60s, 70s until the early 80s, the number of manufacturers in Mexico was five or six. Currently, how many are there? And as from the year 2004, how many brands will there be? Even in that situation, to keep the current status is a tough job. I cannot guarantee it, but it is a challenge. |
Nissan Mexicana