Tuesday, May 28, 2019

Nissan's Net Income Drops 57.3 Percent Due to "Reckless Pursuit of Sales Volume"


Nissan’s global operating profit and net income dropped 44.6 percent and 57.3 percent, respectively in fiscal year 2018 indicating that there are tough times ahead for the automaker. Naturally, Nissan CEO Hiroto Saikawa blamed it on who else, but Carlos Ghosn.

Saikawa said that Ghosn “recklessly pursued volume” by increasing sales through incentives and fleet sales while neglected investment in new products for key markets such as the United States by diverting funds into plants and a new Datsun brand for emerging markets.

“Most of the problems that I presented today are the negative legacy coming from the old leadership,” Saikawa said. “We would like to make recover happen as soon as possible.”

Ghosn, who saved Nissan from the brink of bankruptcy in 1999 and combined it with Renault and Mitsubishi into the world’s largest automotive group, sees it differently.

In a recorded video message, Ghosn blasted Nissan for an “absolutely mediocre” performance. He cited a string of profit warnings, declining share price, lack of leadership, and “many scandals.”

“For somebody like me, it’s sickening,” Ghosn said, decrying Nissan’s current state.

It is worth noting though that Nissan was already in a downward trajectory during Ghosn’s last year as CEO, when he shared leadership with Saikawa. Operating fell 6.4 percent in the fiscal year ended March 31, 2017, and Ghosn missed both headline targets of his Power 88 mid-term business plan.

Operating profit margin came in at 6.9 percent, instead of 8 percent. And global market share actually declined to 6.1 percent that year, instead of expanding to the targeted 8 percent.

Nissan’s sales in 2018 fell by 4.4 percent to 5.516 million units. Despite the unfavorable business climate, sales in Japan (including mini-vehicles) rose by 2.1 percent to 596,000 units. This increase was driven by strong demand for the Note and the Serena MPV.

In China, where the company’s results are calculated on a calendar-year basis, strong performances by the new Kicks, X-Trail, and Sylphy led to a 2.9 percent increase in Nissan’s unit sales increased to 1.564 million units, equivalent to a market share of 5.9 percent.

In the U.S., Nissan’s unit sales fell by 9.3 percent to 1.444 million units, equivalent to a market share of 8.4 percent while in Europe (excluding Russia), it fell by 17.8 percent to 536,000 units. In other markets, including Asia and Oceania, Latin America, the Middle East and Africa, Nissan’s sales fell by 0.4 percent to 815,000 units.

Moving forward, Saikawa says Nissan is looking to move away from its “discount image” and is prepared to sacrifice volume to improve margins. Since the end of 2018, the company is already dialing back on excess vehicle inventory and dealer sales-incentive programs.

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