I am not trying to pester anyone with this, its just good to know exactly where things are. I am certain that this is just a bump in the road for Nissan. Hell, most folks could care less, but read it anyway. Thanks.
Nissan's Net Profit Falls, Raising
Worries in Japan's Auto Industry
Tough U.S. Market, Rise
In Oil Prices May Be Taking
Toll on Japan Auto Makers
By JATHON SAPSFORD
Staff Reporter of THE WALL STREET JOURNAL
November 1, 2004; Page A3
TOKYO -- Nissan Motor Co. said its fiscal second-quarter net profit fell 3.5%, underscoring concerns that Japan's famously efficient car makers are beginning to feel the effects of rising oil prices and a vicious price war in the all-important U.S. market.
Nissan, Japan's second-largest automobile company by sales volume, wasn't the first to report a profit decline for the period ended Sept. 30. Honda Motor Co., the third-largest Japanese car maker, said two days before Nissan's Friday disclosure that its net profit fell 7.5% in the fiscal second quarter. Toyota Motor Corp., Japan's biggest auto maker, is scheduled to release earnings in Tokyo today.
Both Nissan and Honda blamed much of the profit decline on the strength of the yen against other currencies, which erodes earnings when repatriated to Japan. They said the outlook remains optimistic for the two remaining quarters in the year to March 31. Few independent analysts argue with that assessment.
Meanwhile, their fortunes have fared better than their U.S. competitors. Both General Motors Corp. and Ford Motor Co. have struggled to straighten up their core North American auto operations amid high inventories. Last week, as GM and Ford made plans to cut overtime and temporarily lay off workers to avoid production cuts, some big car dealers said they no longer would crowd their lots with the auto makers' excess cars.
Yet the U.S. poses important short-term challenges for the Japanese car industry. American consumers have grown accustomed to discounts, which Japan's car companies now must offer to compete.
That is worrisome because the U.S. market is so important. Koji Endo, an analyst with Credit Suisse First Boston, says for Japan's car industry, "as much as 60% of profit" comes from the U.S.
The U.S. has been an integral part of Nissan's recent success. Nissan's profit rose 4.5% in the fiscal first quarter ended June 30, as it enjoyed strong growth in the U.S. despite the competitive market.
Nissan's chief executive, Carlos Ghosn, agrees that the operating environment is difficult in the U.S. and other markets, with little sign of easing in the months ahead. Rising commodity prices are pushing up production costs. Interest rates in crucial markets from the U.S. to China are rising, trimming demand. Oil prices also are hitting highs, resulting in higher gasoline prices.
"The business climate in the second half is likely to remain severe as the risks are expected to continue," Mr. Ghosn said. Still, Nissan is standing by its full-year forecasts because of the car maker's "strong business fundamentals," he said. This year, following the disappointing early sales of some key models, Mr. Ghosn took direct charge of Nissan's crucial North American operations.
Japan's auto makers remain among the most profitable in the world. Nissan reports under Japanese accounting standards, which require companies to disclose performance for the half year to Sept. 30. By that measure, Nissan's half-year net profit totaled ¥238.81 billion, up less than 1%, on sales that rose 13% to ¥4.008 trillion ($37.89 billion).
Company officials said net profit for the quarter from July through September, which the company isn't required to disclose, fell 3.5% to ¥115.6 billion from a year earlier. Operating profit for the period totaled ¥217.1 billion, also down 3.5%. Further details about the second-quarter performance were unavailable.
Profit margins would have been wider had it not been for the strong yen and ramped-up investment in research and development during the past few months.
Nissan doesn't deny that a price war in the U.S. is a major concern. Nissan's American sales are rising, with 254,000 vehicles sold in the second quarter, compared with the 235,000 it sold in the first quarter ended in June. Yet profit growth isn't matching that increase.
One reason: discounts that Nissan offers in the form of incentives increased on average 21% during the six months to September to $1,853 a unit sold, according to CNW Marketing Research, a Bandon, Ore., automobile market-research firm.
That still is less than incentives by Japanese rival Toyota, which jumped 32% in the same period to $3,148 for each vehicle sold. The big three U.S. auto makers, GM, Ford and DaimlerChrysler AG's Chrysler unit, have long been offering incentives well above $4,000 a unit sold, according to CNW.
"I am not trying to buy volume here," Mr. Ghosn said. But "we need to make sure our pricing is relevant to the market. If you don't sell, you make no profit."
Nissan, 44% owned by Renault SA of France, still expects a 4.3% rise in full-year profit to a record ¥860 billion. The company still estimates it will sell 3.38 million vehicles world-wide.