Higher Yen, U.S. Used Car Price Falls Erode Nissan's Profits in April-June

Tokyo, Aug 1, 2008; Nissan Motor Co. said Friday it suffered falls in its group sales and profits in April-June, reflecting used car price falls in the United States and the yen's strength against the dollar.

In the first quarter of fiscal 2008, Nissan's group net profit sank 42.8 pct from a year before to 52,798 million yen, and operating profit dropped 46.1 pct to 79,946 million yen. Sales were down 4.1 pct at 2,347,251 million yen.

Currency rate fluctuations, mainly the dollar's fall against the yen from a year earlier, cut operating profit by 54.7 billion yen. The dollar stood at 104.6 yen on average in the reporting period, down from 120.8 yen in April-June 2007.

Another negative factor was the booking of 42 billion yen to cover expected declines in the residual value of leased vehicles in the United States and Canada amid the used car price falls.

Nissan managed to offset continued rises in raw materials prices with its cost-cutting efforts.

The company's global vehicle sales increased 6.9 pct to 936,000 units, led by brisk demand in emerging economies. Sales jumped 59.4 pct in the Middle East and 26.3 pct in China.

But sales in the United States slumped 1.5 pct due mainly to slack demand for trucks.

Sales fell 2.2 pct in Japan and 0.2 pct in Europe.

In response to poor truck sales in the United States, Nissan has reduced pickup production at its plant in Canton, Mississippi, and increased passenger car output there.

The company will also offer early retirement programs at its vehicle assembly plant in Smyrna and at its power train assembly plant in Decherd, both in Tennessee.

Nissan kept intact its earnings projections for the whole of fiscal 2008. The automaker forecasts a net profit of 340 billion yen, down 29.5 pct from the previous year, an operating profit of 550 billion yen, down 30.5 pct, and sales of 10,350 billion yen, down 4.4 pct.

At a press conference, Corporate Vice President Joji Tagawa noted that the adverse effects of soaring materials costs on the company's earnings may be bigger than the estimated 170 billion yen for fiscal 2008.

Tagawa said that the weak U.S. sales are unlikely to recover substantially in 2008 and 2009.