Nissan Executive Says the Hybrids Market Remains an Unprofitable Proposition

WASHINGTON DC December 7, 2006; Ken Thomas writing for the AP reported that a top Nissan Motor Co. executive in North America said Thursday that the hybrid market still remains an unprofitable proposition in the auto industry despite the interest in alternative vehicles.

"Hybrids today are not a very viable economic proposition. It's still a loss-making proposition and we'll see," said Dominique Thormann, Nissan North America's senior vice president for administration and finance.

Nissan recently showcased its first hybrid-powered vehicle, an Altima sedan, at the Los Angeles Auto Show. The hybrid, powered by a 2.5-liter four-cylinder gasoline engine and an electric motor, goes into production Monday and will be sold in California and several Northeast states beginning in January.

Thormann, during a luncheon with reporters, said "for these technologies to work, there has to be a customer benefit. Somewhere there's got to be a reason why people will go towards that technology."

"People don't want to pay more for a hybrid. They get a tax credit for it but they don't want to pay the price for the cost of the hybrid," he said. The hybrid Altima was introduced to comply with California's partial zero emissions vehicle standards, he said.

Hybrids currently comprise more than 1 percent of the auto market. Federal legislation approved last year provides up to $3,600 in tax credits to U.S. consumers who buy hybrids, but automakers are subject to a production limit of 60,000 vehicles eligible for the entire credit.

Thormann said Nissan has had a smooth transition in moving its North American headquarters from California to Nashville, Tenn., and expects to move into a new facility outside the city in 2008.

The automaker has not made any plans to expand in North America, Thormann said, but the company will begin laying the foundation of a business plan for 2008-2010. Thormann noted that "we're at the point where we don't have a lot of spare capacity to support growth of Nissan in the United States."

In early October, General Motors Corp. halted three months of discussions over a possible alliance with Nissan and Renault SA. Thormann said there has been no further discussions of a possible alliance and "the GM ship has sailed." But he said "it confirmed what we thought, which is that expanding the alliance to a third party makes sense."

Thormann said the Nissan-Renault alliance, established in 1999, has been extremely successful, leading to Nissan's market capitalization, or the total value of its shares, growing fivefold and Renault's market cap tripling.

He predicted that the industry could face additional consolidation because of the intense competition in the marketplace.

"Fifty percent of cars sold in America are sold by companies that lose money selling cars, and that's not sustainable," Thormann said.

Nissan Motor Co.: http://www.nissanusa.com