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Mexico becoming Nissan's export hub for Americas: CEO

Nissan Chief Executive Carlos Ghosn smiles during an interview with Reuters at the company's new plant in Aguascalientes, Mexico, November 1
Nissan Chief Executive Carlos Ghosn smiles during an interview with Reuters at the company's new plant in Aguascalientes, Mexico, November 1

By Elinor Comlay

AGUASCALIENTES, Mexico (Reuters) - Nissan Motor Co Ltd <7201.T> will build 1 million cars in Mexico by 2016, cementing the country's position as the export hub for the Japanese automaker in the Americas, Chief Executive Carlos Ghosn told Reuters as he inaugurated a $2 billion plant.

Most of the cars from the new plant in Aguascalientes in central Mexico will be sent by rail to destinations throughout North and South America.

A staff of 3,000 in the light, airy plant filled with rows of shiny yellow robots will produce one car every 38 seconds, in partnership with Nissan's other Aguascalientes plant.

"We like Mexico because it allows us to be competitive," Ghosn said in an interview at the plant on Tuesday. "It's not only about cost, it's also about quality and it's about responsiveness - capacity to respond to variation of the market very quickly.

"Mexico is becoming the export hub for the Americas - not only North America but also South America."

The new factory, which was built in a record 19 months, is critical to helping Nissan meet growing demand for compact cars such as the Nissan Sentra throughout the Americas. Nissan will build 175,000 Sentras at the new plant, which can be expanded.

"It's capable of doing four different cars on four different platforms," Ghosn said of the plant, which will assemble cars with engines built at Nissan's first Aguascalientes plant 5 miles down the road.

Last year, Nissan built around 5 million cars and trucks, with 683,520 vehicles made in Mexico. Nissan currently builds 1 million cars and trucks at its factories in the United States.

The new plant is Nissan's third in Mexico. Nissan, 43.4 percent-owned by Renault SA , of which Ghosn is also CEO, is Mexico's largest producer and commands about one-quarter of all car sales in the country.

Nissan plans to locally sell about 300,000 of the 1 million cars it will ultimately make in Mexico.

Low wages, a strong supply base and a global web of free-trade agreements have spurred automakers to build new plants in Mexico. This shift may threaten jobs in the United States and Canada, where even non-union factories are influenced by contracts forged with unions including the United Auto Workers.

The UAW was not immediately available for comment.

Nissan is also making some "marginal investments" to its plant in Cuernavaca, south of Mexico City, to improve existing production there, Ghosn said.

Germany's Daimler AG and Nissan are expected to build small Infiniti and Mercedes-Benz luxury cars at the new factory in the future, but Ghosn said no decision has been made on plans to expand capacity.

Daimler is discussing "different strategies" for building the next-generation compacts in Mexico with partner Renault-Nissan, a top Daimler executive said late last month.

BUMPS IN THE ROAD

The Brazilian-born CEO, 59, has set aggressive expansion targets for the automaker including goals for sales of electric cars, which he said are still a key focus for the company in spite of a recent revision to sales forecasts.

"We still have electric cars as a key focus, we think this technology is going to be a big part of the development of the industry in the mid- to long-term."

Nissan, the world's sixth-biggest automaker, has been ramping up spending as part of its expansion plan. This financial year, which ends in March, the company is investing in eight new plants as well as expanding one existing plant.

Ghosn committed the company to boosting both global market share and its operating margin to 8 percent by end-March 2017.

But recent recalls and a sales slowdown in markets such as China and Russia have cast a shadow over that plan.

Nissan earlier this month slashed its net profit outlook for the year ending March 2014 by nearly 20 percent to 355 billion yen ($3.62 billion).

"If you have a lot of headwinds ... well, you're just going to have to be realistic and revise your ambition down, but this being said, we will continue to grow from 2014 onwards," Ghosn said.

He said free cash flow was positive, and he did not see a cash crunch.

Ghosn, whose twin CEO contracts are up for renewal at Renault in 2014 and at Nissan the following year, said he is confident that Russia and Brazil will recover in 2014 and that sales in China are back on track after two difficult years.

Nissan is not the only carmaker spending big in Mexico. By 2020, Mexico will have the capacity to build one in every four vehicles in North America, up from one in six in 2012, according to Michigan-based research firm IHS Automotive.

BMW AG , Toyota Motor Corp <7203.T> and Daimler AG's Mercedes-Benz are expected to announce at least $2 billion worth of deals in the next year or two, according to suppliers and other industry sources. That is on top of nearly $6 billion in announced plants by Nissan, Honda Motor Co <7267.T>, Mazda Motor Corp <7261.T> and Volkswagen AG .

(Additional reporting by Paul Lienert in Detroit; Editing by Simon Gardner, Matthew Lewis and Ryan Woo)

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