Saturday, November 2, 2013
DJ: Nissan Cuts Profit Forecast
YOKOHAMA, Japan--Nissan Motor Co. (7201) cut its profit outlook on costly recalls and disappointing performance in some markets, leading chief executive Carlos Ghosn to unveil a reshuffle of top management aimed at getting the company's growth back on track.
Japan's No. 2 car maker by volume said it was moving its chief operating officer, Toshiyuki Shiga, to a vice-chairman post, and splitting his responsibilities between three senior executives. The move was unveiled after Nissan cut its net-profit forecast for the year ending March 2014 by 15% to 355 billion yen, on poor sales in markets like Russia and Brazil, as well after a recall of more than 900,000 vehicles to fix defective accelerator sensors during the first half of the year.
The problems hit at a time when Nissan was plowing money into plant construction and renovation, and so didn't have much ability to cushion the blow.
"Many of these [management] changes were planned as part of the natural evolution of the company," said Mr. Ghosn, at a briefing after the company announced its earnings. "However, our slow performance in the first half of the year required immediate action to be taken."
Mr. Ghosn said that more changes are in store at the beginning of the next fiscal year in April as the company prepared to deal with aging top management.
Mr. Ghosn canceled a planned appearance in South Korea, to explain Nissan's challenges and changes it was making, at the press conference and a meeting with analysts in Japan.
The management changes reflect a growing sense within Nissan that the company isn't as far along toward the goals it laid out in its mid-term plan as it should be. The company has said it wants to have a global market share of 8% by the end of March 2017; Nissan's share was only 5.9% during the six months ended September. Key to the achievement of that goal is growth in the huge Chinese market, where Nissan is aiming for a market share of 10% in sales by March 2017. It had only 6.1% in the July-September quarter, after sales were hit by anti-Japan protests last year.
In some areas, Nissan's results are "far removed from its goals," said Satoshi Nagashima, an automotive strategy consultant and partner at Roland Berger Ltd. in Tokyo.
In his earnings press conference, Mr. Ghosn also admitted that the company's resources had been stretched by the construction of new facilities as part of its mid-term plan. The company is currently expanding or building new facilities at nine sites, in countries such as China and Brazil. Seven of the projects are slated for completion by the end of March.
"We have spent a lot of time at the beginning of the mid-term plan by launching new products, launching new technologies, launching new plants," said Mr. Ghosn. "If the headwinds become too high because of this overextension by growth, we will have problems."
After Nissan's management revamp, manufacturing as well as supply-chain management and the Chinese market will be handled by the company's No. 2 executive, Hiroto Saikawa. Executive vice president Andy Palmer will lead global sales, as well as Nissan's zero-emission vehicle strategy and the global battery unit. Executive vice president Trevor Mann will head the budget brand, Datsun, as well as light commercial vehicles.
Nissan said its operating profit fell 19%, while its net profit for the second quarter ended September rose 2% to Y107.8 billion ($1.99 billion) -- helped by a boost from the weak yen, which increases the value of overseas earnings in yen terms.
Sales rose 16% to Y2.523 trillion in the quarter from Y2.168 trillion in the same quarter last year, while operating profit fell to Y113.8 billion from Y139.9 billion.
Nissan said it expects sales will be strong for the full year in the important North American market as well as in Japan. Nissan also raised its sales forecast for China, where the company was hard hit by anti-Japan sentiment following territorial disputes last year between Tokyo and Beijing.
Europe was again Nissan's only loss-making region among major markets in the second quarter amid the effects of the debt crisis in the region. In emerging markets such as Mexico and the Middle East, Mr. Ghosn said the company was doing well. One-off factors hit Nissan in Brazil and Russia, however.
Certain policies in Brazil make it hard for foreign-made cars to compete and Nissan will not have an operating factory there until the beginning of 2014, he said. In Russia, the ramping up for a new, low-cost car model took more time than anticipated.
Nissan reports earnings under Japanese accounting standards.