Aging products. Slumping sales. Financial losses. A cloudy future.
The business news is grim at Nissan, and there’s no quick fix ahead. What happened?
Blame much of the company’s woes on a lack of attention to its product lineup, which hasn’t kept pace with its rivals.
Nissan began paying too much to flog sales of elderly models and not enough on developing more appealing vehicles.
The company lost concentration last year following the ouster of its one-time savior, Chairman Carlos Ghosn, on charges of financial wrongdoing. The drama that resulted also has rattled Nissan’s 21-year-old alliance with Renault, upon which it relies on the cost-cutting benefits of shared product development and parts purchasing.
Another distraction—Fiat Chrysler Automobile’s ill-timed overture to merge with Renault—didn’t help. The deal quickly collapsed, but the damage to the Renault-Nissan alliance was done. Nissan’s suspicions about its French partner deepened.
Now it’s payback time.
Over the past nine months, global demand for those Nissan cars and trucks fell 11%—more than twice the decline in the market overall—to 3.70 million vehicles. The company’s revenue plunged an alarming 13% to $68 billion.
The profit picture was bleak. Operating profit nosedived 83% to a skimpy 54 billion yen ($491 million) over Nissan’s first three fiscal quarters ending Dec. 31. Net income shrank to 39 billion yen ($355 million) from more than eight times that much a year earlier.
The slide accelerated in October-December. Operating profits dwindled to a microscopic 23 billion yen ($209 million). Nissan posted its first net loss, 26 billion yen ($236 million), in nearly a decade.
Nissan claims “steady progress” in reversing its precipitous slide. The efforts entail lower spending on sales incentives, cuts in fleet sales, phasing out slow-selling models, trimming production capacity and withdrawing its Datsun budget brand from Indonesia.
Much of the company’s repair work is in the U.S. This is where efforts are all about stabilizing prices while shrinking dealer inventories and bringing down low-profit sales to fleets to a “more appropriate” level.
The overall goal is to contribute at least 480 billion yen ($4.4 billion) to the bottom line by 2023. Starting a year from now, the company will begin debuting a badly needed array of new or updated models to help on the revenue side.
Here and Now
Those are laudable goals, but Nissan is in dire straits right now. The company is again lowering its outlook for the current fiscal year, which expired at the end of March.
Compared with an already-grim forecast in November, Nissan now expects 4% less revenue, 43% lower operating profits and 41% less net income. The last figure is expected to come to 65 billion yen ($591 million).
CEO Makoto Uchida concedes Nissan must immediately step up previous plans to eliminate 600,000 units of capacity and shed 12,500 jobs worldwide. Reports say the company is looking at shedding an additional 4,300 salaried positions and closing two assembly plants.
It’s the fifth generation of a vehicle that has been increasing in sales year after year since its introduction in 1997.
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