Nissan eyes new factory subsidiary to cut costs

TOKYO, Oct 5 (Reuters) - Nissan Motor Co 7201.T said it may turn one of its Japanese factories into a new subsidiary, a move that would allow it to broach wage negotiations with labour unions and seek lower prices from suppliers in a bid to trim costs.

The 2.4 million square meter facility on the southern island of Kyushu, which builds 430,000 cars a year including its Teana, Lafesta and X-Trail models, may be established as a new company in the second half of next year. Nissan will approach unions to discuss the proposal, it said in a statement.

This would be the first time the car maker has separated part of its vehicle assembly into a separate company.

Company spokesman Toshitake Inoshita said Nissan wants a low cost production base in Japan, close to competitive suppliers in and out of Japan, with labour expenses also open to discussion.

“Making small cars in Japan is a challenge,” he said. He didn’t confirm whether Nissan plans to ask its auto unions for pay cuts, saying that wage levels would stay unchanged for “a certain time.”

A strengthening yen has made car production in Japan expensive for Nissan and its competitors. Lowering costs at home would help companies avoid the cost of relocating to lower wage markets.

In March, Nissan did just that, shifting output of its small March car to Thailand, the first time it has shifted production of one of its popular domestic model outside Japan. (Reporting by Tim Kelly; Editing by Anshuman Daga)