Nissan's Operating Income Plunges; Critics Speak Out...against Ghosn!

[johnny smallblock]

I posted the entire article because after the first day, only members can view it.

Source: www.NYTimes.com
By MARTIN FACKLER
Published: July 26, 2006
http://www.nytimes.com/2006/07/26/bu...ss&oref=slogin

TOKYO, July 25 — Nissan Motor on Tuesday reported a slight quarterly profit, but said operating income dropped steeply amid a slump in vehicle sales that the company called a temporary setback. Analysts said the performance raised questions about the management of its chief executive, Carlos Ghosn.

Nissan, Japan’s second-largest carmaker, said its operating profit, which reflects the strength of its underlying auto business, fell 25.7 percent, to 153.3 billion yen ($1.3 billion), in the three months ended June 30 from the previous quarter. It said the decline mainly reflected a one-time provision related to warranties on Altimas in the United States.

The company said that net profit rose 4.2 percent, to 110.2 billion yen, but that the gain came from a one-time drop in pension costs and accounting changes.

The company and analysts said a lack of new vehicle models drove down overall car sales volume 6 percent, to 826,000 units. In the United States, Nissan’s largest single market, vehicle sales fell 10.6 percent. Sales fell 17 percent in its home market, Japan, the company said.

While widely expected by analysts, the declines come at a time of intense scrutiny of Nissan and Mr. Ghosn, just as he might be called on to help fix General Motors. A group of G.M. investors led by Kirk Kerkorian say they hope that Mr. Ghosn, who is also chief executive of Renault, might turn around G.M. the same way he rescued Nissan from bankruptcy half a decade ago.

“Ghosn can make mistakes, too,” said Koji Endo, an auto analyst in Tokyo for Credit Suisse First Boston. “He pulled off a huge turnaround, but now he’s struggling to take Nissan to the next stage.”

Nissan said sales would bounce back later in the year, as eight new models hit worldwide showrooms, including new versions of its Altima and Sentra sedans. But analysts faulted the company for not spacing out new models more evenly, and for failing to keep up with Honda and Toyota in fuel-saving technologies, like hybrid vehicles.

The company is also struggling to overcome quality problems. While other carmakers, like Toyota, have also experienced rising recalls in recent years, analysts said Nissan’s problems were rooted in a drive to ramp up production too quickly at new factories like one in Canton, Ala.

Nissan said it took a charge of 23 billion yen ($197 million) in the quarter to cover the costs of a voluntary recall of Altimas built in American factories from January to May. The action was taken after reports that the vehicles’ engines burn oil too quickly and could catch fire.

On Monday, the company announced another recall, this one involving 135,000 minivans in Japan.

There’s “no end in sight to the quality problems,” Takaki Nakanishi, an auto analyst in Tokyo for J. P. Morgan Securities wrote in a report. He wrote that if Nissan did not fix the source of these problems soon, it could suffer damage to its reputation that “can not only hurt near-term earnings but also do lasting damage to brand value.”

Nissan said that as new models are rolled out later this year, it expects a pickup in sales that will more than make up for declines in the quarter. The company said it was sticking with its original forecast of posting a net profit of 523 billion yen ($4.5 billion) in the current fiscal year ending March 31, 2007.

“We will have a year with two halves,” said Simon Sproule, a Nissan corporate vice president in charge of global communications. “In the second half, we will come on very strong.”

The company also said it benefited in the first quarter from a stronger dollar, which raises the value in yen of overseas profits. Because of the currency move, Nissan’s total sales in the first quarter actually rose 3.1 percent, to 2.2 trillion yen, despite the declines in numbers of vehicles sold, the company said.

Another bright spot for the company was China, where the number of vehicles sold rose 42.6 percent in the quarter, to 92,400.

Still, analysts said the wide range of difficulties facing the company could be a warning that Mr. Ghosn is not paying close enough attention to Nissan and has instead spread himself too thin between the Tokyo-based company and Renault in Paris. Some analysts have raised questions about whether he could add a third company, especially one as large and complex as G.M.

They said the troubles reflected a lack of longer-term vision by Mr. Ghosn, who has had mixed results in maintaining growth at the revitalized company. But analysts also note that Mr. Ghosn saved Nissan by squeezing fat and restoring employee morale, exactly the sorts of skills that he would need to accomplish a quick turnaround at G.M.

“Ghosn has a strong short-term focus on cutting costs,” Mr. Endo said. “His strategy is closer to the Big Three” than the traditional Japanese focus on longer-term investments.

Mr. Endo said Mr. Ghosn had also erred by following Detroit in another way: by giving Nissan a product lineup that relied too heavily on gas-guzzling pickup trucks and sport utility vehicles. Mr. Endo said this had hurt Nissan as soaring gas prices drive consumers to smaller, more efficient vehicles like those offered by Honda and Toyota.

Nissan’s recent difficulties stand in contrast to Honda and Toyota, which are expected to post strong profits and strong sales gains when they report earnings in coming weeks.

These concerns have been reflected in Nissan’s stock, which has dropped 19.2 percent over the last three months. On Tuesday, Nissan’s stock ended up 28 yen, at 1,180 yen. The earnings announcement came after the close of trading.

[69Firebird400]

Amazing how fast the media can decide that you're not its "darling" anymore, isn't it, Carlos?? Sounded like a good article, was well balanced and I did not really sense any bias either way.

I know that Nissan keeps touting how its newly launched Sentra and Altima are going to turn them around this year, but although those models might increase sales if the launches are properly executed, wouldn't the launches themselves cost a lot of money initially, eating into Nissan's profit margins?

Also, the article got the state where the infamous Canton plant is located. It's Mississippi, not Alabama.

[Ming]

Analysts said the performance raised questions about the management of its chief executive, Carlos Ghosn.

Wow, never thought I'd read that. Carlos Ghosn is like a god in Japan, with scores of books written about his talent. What's next, Toyota issuing recalls for multiple products globally in the millions within a few months, being investigated by the Police in Japan for covering up product issues, and then Toyota fans shouting proudly and defensively that they are actually on par with GM when it comes to recalls, and that their quality is about the same as GMs?

Oops, that already happened.

[mbukukanyau]

Originally Posted by johnny smallblock

I posted the entire article because after the first day, only members can view it.

http://www.nytimes.com/2006/07/26/bu...ss&oref=slogin

group of G.M. investors led by Kirk Kerkorian say they hope that Mr. Ghosn, who is also chief executive of Renault, might turn around G.M. the same way he rescued Nissan from bankruptcy half a decade ago.
.

Group? York and Kovokian are not a group, they are two people

[johnny smallblock]

Originally Posted by mbukukanyau

Group? York and Kovokian are not a group, they are two people

Good point. Of course if the article portrayed it as just the 2 of them, people would start talking about a Kirkorian takeover.

[cfch3399]

Can't wait for GM and RN to conclude in 2.5 months or so that an alliance would be a great idea and to move ahead with a multi-billion dollar project to make it happen.

[Ming]

Originally Posted by cfch3399

Can't wait for GM and RN to conclude in 2.5 months or so that an alliance would be a great idea and to move ahead with a multi-billion dollar project to make it happen.

Certainly one good thing about it would be that with a visibly weaker Nissan in the market, and Ghosn under attack, it would be far less likely that he would ever claim the Emperor's seat or that we'd be seeing "Ask Dr. G" commercials with Ghosn controlling the merged companies.

A stronger GM and weaker Nissan bodes well for us GM fans, and allays my fears regarding this outcome: There's no G.M. In "Alliance"

[hotrod747]

The new Sentra is more of an after- thought, the new Maxima and Altima, and Infiniti G35 and FX Series are more of the same as they were before. As good as they are, they may not be as good as Nissan needs them to be. The general buying public will hardly see the difference between the new ones and the old ones.

[Ty_99]

So Kerkorian's golden boy Ghosn is all the suddenly not so golden. Can't wait to hear that GM has carefully looked at the options of a merger but at this time decides to decline the offer.

[Greg Burr]

Through experience I am wary of personalities built up by the media. Their abilities and personalities are overhyped, and even if they did have 1/2 of their purported ability their hubris leads to an ugly downfall, eventually. Give me a low-key guy with a vision and modesty like Wagonner any day.

As I said before this merger is a way for Ghosn to distract from the problems at home, and cash in while his image is at its peak.

[LAMRONH]

Welcome to the Big Leagues.

[LAMRONH]

Originally Posted by Ming

Certainly one good thing about it would be that with a visibly weaker Nissan in the market, and Ghosn under attack, it would be far less likely that he would ever claim the Emperor's seat or that we'd be seeing "Ask Dr. G" commercials with Ghosn controlling the merged companies.

A stronger GM and weaker Nissan bodes well for us GM fans, and allays my fears regarding this outcome: There's no G.M. In "Alliance"

Congratulations on your promotion to a Chicommie 3.4 motor. Moovin on up.
More likely to see an ad with not-Dr. Zhacqk dung Chiraqk, waving the new french flag: pure white.

[69Firebird400]

Originally Posted by LAMRONH

Congratulations on your promotion to a Chicommie 3.4 motor. Moovin on up.
More likely to see an ad with not-Dr. Zhacqk dung Chiraqk, waving the new french flag: pure white.

Oh my gosh, I hadn't noticed his new engine type. That is SO funny. Definitely moving up in the world, Ming!

[1G6]

Originally Posted by Ming

Wow, never thought I'd read that. Carlos Ghosn is like a god in Japan, with scores of books written about his talent. What's next, Toyota issuing recalls for multiple products globally in the millions within a few months, being investigated by the Police in Japan for covering up product issues, and then Toyota fans shouting proudly and defensively that they are actually on par with GM when it comes to recalls, and that their quality is about the same as GMs?

Oops, that already happened.

lolololol

[BGH]

Not that big of a surprise Nissan's strategy seemed painfully short termed. Products where sold based on visual pizaz and value, now that the pizaz has worn off they find themselves in a difficult situation. Quality has taken a hit, and the Altima is probably one of the worst cars in the segment, and what they did to the maxima should be a crime. That car had a loyal following based on its merits something that can't be said for many of other Nissan products.