Ghosn Says Nissan Sales Slump a Shorty

TOKYO November 25, 2005; Chang-Ran Kim writing for Reuters reported that Nissan Chief Executive Carlos Ghosn sought to allay fears of a protracted fall in the auto maker's sales, characterizing last month's sudden, sharp slide as a short-lived reaction to the completion in September of a highly publicized sales drive.

Under its last business plan, Japan's second-biggest auto maker had promised to sell 3.6 million vehicles globally in the 12 months through September 30.

With the final tally at 3.671 million, Nissan delivered on all three commitments under the "Nissan 180" plan: 1 million additional sales versus fiscal 2001, an operating margin of at least 8 percent and zero automotive debt.

But in an evident payback from straining to reach the final and most difficult volume commitment, sales in October sank by double digits in all three major markets -- the United States, Japan and Europe -- and industry analysts are wondering how long the impact will last.

Ghosn, the celebrity chief executive of Nissan and its French alliance partner Renault SA (Paris:RENA.PA - News), sought to put their minds at ease saying last month's performance was an aberration, and predicted a return to normality by December.

"(Sales in) October went down as a correction," he told an audience at the Foreign Correspondents' Club of Japan in Tokyo.

"I think the effect will be very short-term. You may see some effect in November, and then it will disappear."

CHAMPION OF PROFITS

Ghosn has been praised for championing profit objectives over size even as U.S. rivals General Motors Corp. and Ford Motor Co. piled on discounts and other incentives despite losing money on every car or truck they sold.

But some analysts have criticized Nissan's dogged sales commitment as running counter to its promise of placing profits first.

"When Carlos Ghosn uses the word 'commitment', that means they're going to do it come hell or high water. And that's precisely what they did," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets.

"Ultimately, pushing a lot of cars through the pipeline to satisfy a sales goal is not a worthwhile goal."

Company data released on Friday showed Nissan's retail sales in the United States dropping 16.5 percent in October from a year earlier to 72,279 units -- the first fall in more than a year. Sales tanked by 34.4 percent in Europe to 29,044 units and by 13.2 percent in Japan to 50,996.

That has led analysts to believe that demand in the run-up to the September 30 deadline was inflated by sweetened sales deals, eating into margins.

Although rising commodity prices and intensifying price wars everywhere pressured the entire industry, Nissan's operating profit margin slipped further than its rivals' last quarter, to 8.7 percent from 9.6 percent in the April-June period.

By comparison, Honda Motor Co.'s margin fell by half a percentage point to 7 percent in the second quarter, while Toyota Motor Corp.'s stayed flat at 8.1 percent.

Ghosn conceded that Nissan's sales staff around the world likely went the extra mile to meet the 3.6-million-unit target. But he defended the company's practice of setting a sales volume objective, saying it was vital for ensuring earnings growth.

"There is no way that anyone can accept that the company is very profitable but is stable. There is no such thing. If you are stable, you're going to lose your profitability little by little."

As long as the volume objective was twinned with a profit margin target, he said, there was no danger of "buying" size at the expense of profits.

Nissan's new business plan that kicked off in April also includes a sales volume goal, to sell 4.2 million vehicles in the year ending March 31, 2009, while maintaining the "top level" of operating profit margin among global auto makers for each of the three years of the plan.

Ghosn, who added the role of heading Renault in April, is due to unveil a three-year plan for the French car maker in February.