Q1. Given the impact of the Japanese earthquake and the continued strength of the yen, what is the background to today's upbeat forecast?
A1. We were, before the earthquake hit, preparing a very strong year in 2011 because of all the investments we have been doing for the last years in terms of products, in terms of technology, and even in terms of geographical expansion -- new plants, new markets, new platforms.
When the earthquake hit on March 11, we had to revise our plans, so I had to announce that maybe in 2011 we could be selling more cars in 2011 than in 2010, but I was not sure because we did not have a clear picture about the amount of damage yet in our plants and at the level of suppliers.
With the announcement today we feel much more comfortable because practically our plants are fully reestablished. We are at normal production, and if not at, then very near it. Obviously, it is restricted as there are some engines that still are limited or some version or specification that we cannot make. But, we have been able to reestablish the situation very quickly, and because of the strength of the product line up and the strength of the technology we are bringing, we are able to overcome the headwinds that 80 yen to the dollar represents for any company exporting from Japan. So, 2011 could have been a major year for progress and development of Nissan -- we had to downgrade it a little bit because of from one side the earthquake, from the other side the very strong yen, but it's still going to be year of growth -- I would say significant growth of 10 percent more in volume for the year.
Q2. Looking at the recovery from the earthquake and the crisis in Japan, Nissan seems to have moved ahead much better than expected and arguably faster than some peers. What explains this quick recovery?
A2. So far, it's true on the performance of May and what we know of June, we have a better forecast than our peers, but a forecast is a forecast and we will have to see the reality. If we are moving faster than the competition or our peers, I would obviously attribute it to the fact that we have reacted very quickly. On March 11 when the earthquake hit we had a Crisis Committee in place within minutes after it happened. We have a long experience of cross-functional work and crisis management for other reasons than the earthquake, so we put it to work at that moment. Also, I think the work ethic of Nissan employees has been great. People have been absolutely relentless in their efforts -- extremely focused on the priority to bring back production as soon as possible to normal, and do it in a way where Japan was working with the United States, China and Europe in order to minimize the impact for the company, so nobody played his own turf. People played for the company, which also explains the speed at which we came back.
On top of this, we had great collaboration with our suppliers, so very quickly we exchanged information and support to our suppliers was extended. All of this, I think, explains the fact we have been extremely responsive and hopefully we will be able to continue to always beat our forecast.
Q3. Finally, in terms of lessons learned from the crisis, what are the things that will have a long-term impact on the way you operate the company?
A3. We discovered through the crisis that we still have an abnormal level of dependency on a very limited number of suppliers with a very limited number of plants. For example, it was difficult to see because these were not our first-ranked suppliers. These were suppliers ranked two or three, which means these were suppliers of our suppliers. We discovered in some cases that some suppliers were in a practically unique position because they were the only one supplying the part, and that they were supplying the part only from one plant. So, if something was happening at the plant, we were stuck as a company. We learned it during this crisis, and we're going to organize ourselves for this to never happen again. Which means we are never going to allow again one supplier to be in a position of a monopoly, and if we accept him to be in a position of monopoly, then he has to have at least two different sourcings. By the way, it's not only in Japan -- the sourcing can be in Thailand and all of sudden you have a flood in Thailand and the plant is stopped, then we're stuck. This is lesson No.1.
Lesson No.2 is the importance of localization. We need to continue to push for cars being sold in China to be made and sourced in China, cars being sold in Mexico being built and sourced in Mexico. Every time we have dependency on other countries, we have very complicated supply chains. On top of what this represents in terms of financial burden because we have a long pipeline of products, it just makes your supply chain extremely vulnerable to any surprise happening. So, this was a good opportunity to reinforce the fact inside Nissan of the necessity of localizing as much of our production in the main markets we are competing in.
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