Nissan Rogue

Made in America: Now a bargain for Nissan

October 31, 2013: 11:10 AM ET

Partly due to the strength of the yen, Nissan realized that it could improve its bottom line by shifting production of the Rogue to the U.S.

By Doron Levin

131031104432-nissan-smyrna-tennessee-620xa

FORTUNE -- To those who argue that the U.S. has relinquished its manufacturing base and turned into a service-oriented economy, Nissan Motor's Smyrna, Tenn. plant serves as a potent rebuttal.

The second-generation Nissan Rogue, a stylish compact utility vehicle (CUV), went into production at Smyrna on Oct. 15 and will arrive at U.S. dealerships in mid-November. The previous-generation Rogue was built in Japan and exported to the U.S. Partly due to the strength of the yen compared to the dollar, Nissan realized that it could improve Rogue's contribution to the bottom line by shifting production to its U.S. plant in Smyrna.

From a recession-related trough of 191,469 vehicles produced in Smyrna in 2009, Nissan projects vehicle production of more than 490,000 vehicles this year and more than 600,000 next year. The increase in production helps Nissan toward its goal of achieving 85% local production of its vehicles sold in the U.S.

MORE: Meet the biggest banjo maker in the U.S.

Nissan, which is based in Yokohama, Japan, has benefited from turning its U.S. manufacturing plants into an export platform. In August, Nissan began shipping right-hand-drive Pathfinders to Australia and New Zealand, bringing the number of export markets served by the Smyrna plant to 61. With exports from Nissan's Canton, Miss. plant, the automaker says it will be able to serve 120 global markets by the end of 2014.

"Shipping right-hand drive vehicles halfway around the world from Tennessee at one time may have seemed exotic to us, but now it's an increasingly common event on our path to becoming a net exporter," says Bill Krueger, a Nissan senior vice president of manufacturing.

Over the past five years, the CUV market in the U.S., led by the Honda CR-V (HMC) and Toyota RAV-4 (TM), has grown by 60%, with sales of about 1.8 million vehicles annually. Nissan projects that the segment will grow by 6.5%, or more than 100,000 vehicles, this year. Since 2007, when Rogue was introduced, it has grown to annual sales of about 145,000 from about 78,000.

The new Rogue will have a strong selling point, fuel economy leadership in the category at 33 miles per gallon in the city and on the highway.

The new Rogue is also the first vehicle using shared architecture with French automaker Renault SA, which has owned 44% of Nissan since rescuing the Japanese automaker from a brush with bankruptcy in 1999. The two automakers have been moving closer during the past decade, sharing parts and major components, such as engines.

"It seems like a long time coming," says Carla Bailo, senior vice president of Nissan research and development. "But it's not really," in light of other forms of cooperation and the lead time required to develop a common architecture that would work for both automakers.

MORE: The toy business: It's now a girl's world

A version of Rogue will be sold as the Nissan Qashqai in Europe and the Nissan X-Trail in Latin America. Renault will use the architecture to create new models for its Espace, Scenic, and Laguna vehicles next year.

With the Nissan-Renault CMF (common module family) architecture, the alliance hopes to begin achieving the scale of efficiency that Volkswagen, leader in Europe and China, has been claiming with its common architecture.

But first, the automakers will need to see if U.S. consumers are willing to consider the new Rogue as an alternative to the competitive RAV-4 and CR-V models. That question will likely be answered in the next few months.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.