Nissan Shifts Into Recovery Mode
Thursday, March 29, 2007SUSIE GHARIB: Nissan Motor is expected to unveil a new growth initiative next month. The auto maker, which is 44 percent owned by Renault, stumbled in the all-important U.S. market last year and some have questioned whether it can get back on track. But as Lucy Craft reports from Tokyo, a number of analysts say the potholes Nissan hit last year could prove fleeting.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here's a story you've probably heard before: Japanese car maker prepares to zoom past an American competitor, in the global rankings. Toyota vs. GM? Well, there's a fresh rivalry a-bloomin'. Down another rung on the international rankings, Tokyo and Detroit are facing off yet again, only this time, it's Nissan and its French partner Renault, who are poised to run Ford off the road. The French-Japanese alliance could become the world's leading car maker after Toyota and GM by 2010. It would mark an epic turnaround for Nissan, which was teetering on oblivion less than a decade ago. Still, it's no done deal yet. Charismatic CEO Carlos Ghosn seemed incapable of missteps, until early this year. Nissan Vice President Carlos Tavares explains the company's first earnings miss on Ghosn's watch.
CARLOS TAVARES, EXECUTIVE VICE PRES., NISSAN: What happened is that the headwinds were stronger than expected. It is as simple as that.
CRAFT: Ghosn and his team were blindsided by overly rosy forecasting about everything from the price of steel plate, to their ability to move pickup trucks off the lot, says Merrill Lynch senior analyst Koichi Sugimoto.
TRANSLATION OF: KOICHI SUGIMOTO, SR. ANALYST, MERRILL LYNCH JAPAN SECURITIES: Raw material costs were higher than expected, and they had costly quality problems. Their new models didn't sell as well as hoped.
CRAFT: Merrill Lynch owns more than 1 percent of Nissan Motors common stock and has an investment banking relationship with the company. Critics say the firm now faces a Faustian choice: either offer heavy incentives, and sully the brand, or risk flat volume. For its part, Nissan's Tavares says the firm will stayed focused on profits, not making it into the big three by units sold. Its fat operating profits, at about 7 percent, are close to those of Toyota.
TAVARES: We committed, that we would be among the most profitable car makers in the world which we still are, hopefully. Therefore, we are on track for that particular one. So that's our mindset, we are not going to rush for volumes by itself.
CRAFT: Observers like car analyst Hirofumi Yokoi, with CSM Asia, say Nissan is only now emerging from a prolonged restructuring that should position it to bounce back from this year's earnings shock.
TRANSLATION OF: HIROFUMI YOKOI, MANAGER, JAPAN & KOREA VEHICLE FORECASTS, CSM ASIA: Overall, I am optimistic about Nissan. Of course, they still need to solve some management issues. And they still haven't achieved economies of scale on platform-sharing with Renault, that would cut costs and boost profit. If they manage to do that, they will exceed even our forecast.
CRAFT: Nissan and supporters like analyst Sugimoto say the company can compensate for disappointment in mature markets by moving aggressively into Asia, fast-growing countries such as Brazil and India.
SUGIMOTO: Up to now, Nissan has targeted only Europe and North America. But they've finally gotten to the point where they can start paying attention to emerging markets and they'll reap the benefits from now on.
CRAFTT: Many analysts are confident Nissan-Renault will end up taking away the number three spot from Ford sometime over the next few years. They say it's not a question of how fast Nissan gets its own house in order, but how quickly Ford spins into reverse. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.
