Nissan planning to close 64-year-old factory

Nissan Motor’s Oppama factory, opened in 1961, was once a crown jewel in Japan’s postwar rise to a manufacturing powerhouse.

Today, it represents the dangers of being caught flatfooted in a rapidly changing industry.

The factory, about 30 miles south of Tokyo, is set to shut by March 2028 — part of Nissan’s wide-ranging restructuring after a slump in sales sparked its worst financial crisis since Renault rescued the carmaker from near bankruptcy a quarter century ago.

Once synonymous with cutting-edge technology, Japan’s legacy brands are struggling to adapt to changing consumer tastes, ceding market share first to the likes of Tesla and more recently to a wave of Chinese upstarts led by BYD.

Whatever happens to Oppama — and the thousands of local residents that depend on it — will serve as a warning for Japanese manufacturers as intensifying competition sparks a painful period of consolidation that could pave the way for much-needed rejuvenation.

It’s also a new era for the Japanese economy, as a wave of bankruptcies among small and medium-size firms across industries challenges the idea of shushin koyo — a job for life.

Like any factory town, Nissan’s ties run deep. It directly employs almost 10% of Oppama’s 29,700 residents.

Field trips to the plant are a rite of passage for local school children and the company revived its baseball team this year after a 16-year hiatus, though they lost in the semifinals to ultimate tournament winner Toshiba. 

A victory would have provided a welcome distraction, said Yuji Fujita, the third-generation owner of a fresh produce store located in the shopping avenue that runs between Oppama’s train station and the factory.

He drew parallels with the shutdown of Nissan’s Zama plant in 1995, the first factory closure in Japan by any carmaker in the postwar period.

“This is the worst-case scenario,” said Fujita, whose family has owned around two dozen Nissan cars over the years.

“It’s impossible to know what will happen to us now.”

This sentiment is echoed around town. It’s not clear yet how many of the 2,400 people employed at Oppama will be transferred to a Nissan factory in Kyushu, about 600 miles to the southwest, or when they will start their new roles.

“The priority now is to figure out what options will be offered to existing employees,” said Keiichi Asakura, general secretary of the Nissan Motor Worker’s Union. 

A spokesperson for Nissan didn’t immediately respond to a request for comment.

There’s also uncertainty about what happens to the site that spans 1.7 million square meters – about half the size of Central Park.

Speculation has swirled among residents that it could be turned into a vacation resort or a theme park, or even used by the private defense industry.

Nikkei reported in early July, before the announcement that Oppama will close, that Nissan is in talks with Taiwan’s Hon Hai Precision Industry — better known as Foxconn — over the site. 

Nissan Chief Executive Officer Ivan Espinosa has said he isn’t considering contract manufacturing. And plans are complicated by the need to rewrite the town’s civil laws to reflect a change in utilization.

Katsuaki Kamiji, the mayor of Yokosuka, the city where Oppama is located, said he spoke to Espinosa late last month to advocate for a future that provides ongoing employment for residents.

“We urged him to take into account, as much as possible, the creation of jobs, the region’s revitalization and the growth of Yokosuka when weighing how the property will be utilized,” he said in an emailed statement.

Fading Fortunes

While the announcement that Oppama will close was a surprise for some, residents have known for some time that Nissan’s fortunes were fading, said Nakao Habutsu, superintendent of the Oppama Administration Center.

In 2007, when it celebrated having produced 15 million vehicles, Oppama still made seven different models.

In 2010, the town was given a boost by the Leaf — the world’s first mass-market all-electric car.

But Leaf production started to shift to the US and the UK in 2013. Now, Oppama makes just two models: the Note subcompact hatchback and the Aura, both for the domestic market.

Tesla’s offerings usurped the Leaf as best-selling EVs. But it’s the Chinese that have emerged as an industry superpower, offering sleek and high-tech models at a variety of price points.

Nissan’s limited all-electric lineup is spearheaded by the Sakura, the Ariya and the Leaf, which is getting a makeover in the hope of lifting sales.

Production Cuts

The lack of blockbusters is core to Nissan’s troubles, though Espinosa has said that once Oppama is shut, there are no plans for further consolidation in Japan. 

All told, Nissan wants to reduce annual output to 2.5 million units from 3.5 million by consolidating production from 17 factories to 10, and will cut 20,000 jobs.

The carmaker is likely to see ¥160 billion ($1.1 billion) in impairments and restructuring charges this financial year, Chief Financial Officer Jeremie Papin said during an event hosted by Sanford C Bernstein. 

Espinosa has insisted Nissan doesn’t need a savior to get back on track. Talks to combine with Honda Motor Co. fell apart earlier this year, and the company’s downturn has drawn interest from Foxconn and KKR & Co. 

So far, it’s the sprawling network of small, specialty-parts suppliers that have borne the brunt of the auto sector’s challenges.

There were 32 bankruptcies during the fiscal year that ended in March, the most in a decade, according to Teikoku Databank. 

There’s likely more consolidation to come as companies that specialize in EVs, autonomous driving and high-efficiency engines thrive, while others look to attain that expertise through mergers and acquisitions, according to Satoru Shinozuka, an analyst at Teikoku Databank. 

“If they don’t have the technology or the capital, it’ll be difficult,” said Shinozuka. It’s “survival of the fittest,” he said.