Focus: Japanese carmakers' weapon of choice in Trump trade war - Flexible factories

By Nick Carey

SMYRNA, Tenn. (Reuters) - At points along the assembly line at Nissan Motor Co Ltd's largest U.S. factory, workers wheel trolleys past shelves selecting parts wherever they see a green or blue light.

Nissan calls the system "pick to the light," and it helps workers get the right part for whichever of six different vehicles built at the plant, according to Ryan Fulkerson, director of new model engineering during a walk along the line.

"No matter which model comes down the line, the right parts are waiting for it," said Fulkerson.

Designing assembly lines to build more than one type of vehicle dates back decades. But the ability to shift production from one type of vehicle to another is now proving vital for an automotive industry coping with multiple challenges.

Consumers around the world are shifting rapidly away from traditional sedans in favor of sport utility vehicles. The recent rise in U.S. gasoline prices is a reminder that a more serious oil price shock could make smaller vehicles popular again. Trade tensions and tariffs threaten companies that ship significant numbers of vehicles from one country to another.

Weakening China sales, market stagnation in America and fears of a full-blown trade war have only added to uncertainty, spooking auto investors.

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Nissan and rival Japanese automakers Honda Motor Co Ltd and Toyota Motor Corp have been the best at flexible manufacturing, auto experts and industry executives said. Historically, Japanese automakers focused on interchangeable processes and platforms out of necessity -because one model for the Japanese market could not sustain an entire factory.

U.S. and European automakers have worked to catch up. For example, Ford Motor Co's Kentucky truck plant makes some of its best-selling pickup trucks and large SUVs on the same platform, and is expected to hit full capacity this year.

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But General Motors Co illustrates some of thepitfalls of relying on single models. While The No. 1 automaker's U.S. plants producing popular pickup trucks are running around the clock to meet demand, others that make a single car model are running well below capacity.

At the GM plant in Lordstown, Ohio, workers make only the Cruze compact sedan, which has suffered a 26.5 percent sales decline this year through September. The plant is running a little over 30 percent capacity, on one shift.

"We continuously look at our global operations to find waysto drive greater efficiency and capacity utilization," GM saidin a statement.

Workers at Lordstown are campaigning for GM to build anothervehicle at the plant to make it viable. The UAW has consolidatedtwo locals at the facility to simplify the negotiating process.It also has agreed to allow outsourcing of some non-productionjobs and worked to significantly improve quality.

Dave Green, UAW Local 1112 president, said his members areon edge.

"We're doing all we can to be competitive," Green said. "Weknow that if we can't compete, we're out of business."

"PEOPLE ARE MORE FLEXIBLE"

Using one assembly line to build a variety of different bodystyles requires careful coordination that starts with theengineers who design the vehicles, and extends to theconstruction of the tools used to weld and assemble them.

Honda's assembly factory in Greensburg, Indiana startedoperation in 2008 building Civic sedans, and later a small sedanfor the Acura brand. Last year, as sedan sales weakened anddemand for SUVs soared, Honda decided to add production of itscompact CR-V utility vehicle at Greensburg.

Honda had designed the CR-V and Civic so they could be puttogether on the same line, but engineers and workers at theGreensburg plant had to make changes.

Before the CR-V was introduced, Civic trunks and hoods werewelded together by one group of machines, or cell, in the bodyshop. The metal pieces for the hood and trunk lid were placed inan industrial-strength Lazy Susan and the same robots weldedthem both.

However, the tailgate of the CR-V is a bigger piece thatrequires 37 more welds. The same system would not work for boththe Civic and CR-V. An entirely new welding line to handle theCR-V work would be too expensive, and the plant had no space,said Honda engineer Zach McCurdy during a tour of the plant.

Instead, McCurdy and other engineers separated the hoodwelding line from the Civic trunk and CR-V tailgate weldingsystem, reusing many of the robots. The plant bought 10 morewelding robots – fewer than originally proposed. During aplanned production week-long shutdown, workers reconfigured thearea of the welding shop.

Honda has not pushed automation to the limit at Greensburg,managers at the plant said. Workers load parts by hand intofixtures that hold them in place so robots can weld themtogether. Such repetitive work could be automated, said the Greensburg plant's new model manager, Tom Hilfinger. But it does not pay off.

“People are more flexible,” he said.

RUNNING AT A HIGH RATE

The Nissan plant in Smyrna has two lines that can eachproduce 60 vehicles an hour. The plant's 8,000-plus workers makesix different vehicles on two production lines here - three SUVsand three cars, including Nissan's best-selling, higher-marginRogue SUV crossover. Last year Smyrna made 623,000 vehicles,more than 97 percent of its capacity, and it is running over 90percent now.

Auto plants need to operate at 80 percent of capacity orabove to remain profitable.

To keep Smyrna running at a high rate, Nissan last yearexported 100,000 vehicles to 70 countries. The automaker stillimports most of the Rogues it sells in the United States, toavoid idle production lines at plants in Japan and South Korea.

U.S. President Donald Trump has threatened to impose autotariffs of up to 25 percent. That would be a direct hit tocompanies such as Nissan, which imported two thirds of the310,000 Rogues it has sold in America during the first ninemonths of this year.

Denis Le Vot, who heads Nissan North America, declined todiscuss the possibility of Trump's tariffs on imported vehicles.

But when asked if Nissan could make those imported Rogues inthe United States if faced with a massive supply chaindisruption, Le Vot said: "Sure, we can."

(Reporting By Nick Carey; editing by Joe White and Edward Tobin)