Nissan may cut output again on steel shortages

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The ongoing steel crisis at Nissan Motors may force the company to reduce production by a further 15,000 vehicles in March on top of the 25,000 that have been lost from the closure of most of its Japanese plants for five days, Carlos Ghosn, president, said on Thursday.

Despite securing additional steel supplies from Pohang Iron Steel (Posco), South Korea?s largest steel mill, and the possibility of additional supply from Arcelor, the French steelmaker, output could still be hit.

?March is a risk,? Mr Ghosn warned.

March is the month that demand for new vehicles in Japan usually hits the peak and Mr Ghosn predicted that other Japanese carmakers might also have to halt or slow production as a result of steel shortages. ?We will not be the only ones,? he said.

A spokesman for Toyota Motor said the company was not expecting any problems in March but was taking action to reduce the amount of steel its uses in its cars. The world?s second largest carmaker has also held talks with China?s Baosteel to provide it with extra steel.

A spokesman for Honda Motor said none of its factories had slowed down their production lines and added that ?at this point there has been no effect? as a result of steel supply problems.

Nissan has been forced to close three of its four plants in Japan for five days after running out of steel. The loss of a total of up to 40,000 units by March is equivalent to around 3 per cent of forecast annual domestic production of 1.43m units and will cost the company around Y16bn ($156m) in profit.

Mr Ghosn admitted the company made mistakes in its steel procurement but added it had saved around Y1,000bn in costs since 2000 and that this compared favourably with the Y16bn that could be lost from the reduction in production.

Nevertheless, the image of factories grinding to a halt at a time when demand for its cars is surging is a rare blemish on Mr Ghosn?s image as the man that saved Nissan from collapse in 2000.

Nissan, in common with Toyota, gets most of its steel from Nippon Steel and JFE, two domestic steel groups, both of which have been unable to offer any additional supply.

Steel suppliers in Japan and elsewhere in Asia are struggling to meet demand despite running at full capacity to satisfy Japan?s booming exporters as well as surging demand in China and South Korea, forcing up prices in Japan by 23 per cent in the year to October.

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