Nissan Motor threatens to cut U.S. jobs over fuel standard

Japanese automaker faces millions in penalties

February 07, 2004|By BLOOMBERG NEWS

WASHINGTON - Nissan Motor Co., which has about 15,000 American employees, said yesterday that it may have to cut production in the United States unless the federal government exempts the automaker from a fuel-economy rule.

Without an exemption, Nissan may have to pay millions of dollars in penalties because some Mexican-made Sentras won't meet U.S. fuel-economy standards.

At issue is the inclusion of the Sentras in Nissan's non-import fleet starting with 2005 models, the automaker said.

Washington has considered vehicles U.S.-made if 75 percent of their cost was due to value added in the U.S. and Canada. Now the Sentras will be added under a law passed in 1994 to implement the North American Free Trade Agreement, covering the United States, Canada and Mexico.

Nissan as a result may be forced to shift production of Sentras and Tennessee-built Altimas and Maximas outside North America, the carmaker said in a petition filed at the National Highway Traffic Safety Administration in Washington.

"Such reductions in domestic production of the Altima or Maxima could likely lead to reduction in employment at Nissan's Tennessee plants," the automaker said in the filing.

John Schilling, a Nissan spokesman, declined to say how many jobs in Tennessee and Mexico could be affected by a production shift.

Nissan, which is completing one of the auto industry's fastest expansion plans in North America, is boosting plant capacity 54 percent on the continent between 2002 and end of this year.

Nissan last year opened a factory in Mississippi making Quest minivans, Titan pickup trucks, Armada and Infiniti QX56 sport utility vehicles.

A reduction in Nissan's U.S. work force "can be a serious problem," said Yoshihiro Okumura, general manager of Chiba-gin Asset Management Co. in Tokyo. "It may lead Nissan to adjust its U.S. strategy." Nissan aims to increase U.S. sales by 25 percent to 1 million by 2005.

Vehicle makers must pay a penalty if a fleet of automobiles fails to meet the corporate average fuel economy level, or CAFE, according to a 1975 U.S. law.

European manufacturers regularly pay CAFE fines ranging from less than $1 million to more than $20 million a year, the highway agency said. Asian and U.S.-based automakers have never paid a civil penalty, the agency said.

The CAFE requirement is 27.5 miles per gallon for a fleet of cars and 20.7 mpg for light trucks, including sport-utility vehicles, pickups and minivans. The truck standard will rise to 21 mpg for 2005 models.

Part of the CAFE rule requires automakers to meet the standard twice - separately for its U.S.-made vehicles and for imports. The U.S. created the "two-fleet" rule to discourage automakers from importing fuel-efficient vehicles and cutting U.S. jobs to meet the standard.

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