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Nissan Motor Co.'s Infiniti brand vehicles bound for China, are given a final check after passing through the assembly line at the company's Tochigi plant in Tochigi Prefecture, Japan, on Thursday, Nov. 12, 2009.

Robert Gilhooly/Bloomberg

Magna International Inc. has won a breakthrough agreement with Nissan Motor Co. Ltd. that gives the parts company its first contract to assemble a vehicle for a Japan-based auto maker.

Magna will assemble a model for Nissan's luxury Infiniti line beginning in 2014, the companies said Thursday, a move that broadens the customer base of its MagnaSteyr unit, which also builds vehicles for BMW AG, Mercedes-Benz and Aston Martin.

The move comes as Nissan shifts assembly outside its home country of Japan as a way of reducing the impact the high value of the yen is having on its profitability.

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Nissan chief executive officer Carlos Ghosn told The Globe and Mail in November that regions outside its home country were telling the head office in Yokohama to stop shipping them cars from Japan because they were being priced out of the market.

The vehicles Magna assembles for other auto makers are put together at an assembly plant in Graz, Austria, which could also be where the Infiniti model will be built.

The car will be built in Europe, possibly in Graz. Sources said it's likely a compact car with expected sales of about 40,000 annually.

There have been reports in the European media that Magna is scouting for sites in Poland and Hungary to build a second assembly plant.

One more assembly contract would likely be enough to require the construction of a second assembly facility in Europe, industry sources said.

"We are very excited about this new award with an important new assembly customer," Magna CEO Don Walker said on a conference call with investors and analysts Thursday.

The contract is believed to be the first instance of a Japan-based auto maker outsourcing assembly to a third party.

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"This is certainly the easiest part of manufacturing to get right, particularly since the Japanese auto makers are known for designing the vehicle for ease of assembly," said Jeffrey Liker, a University of Michigan professor who follows the Japanese auto makers closely and has written books about Toyota Motor Corp.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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