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Nissan Earnings Revises Full-Year View, Mid-Term Plan Unchanged

Nov. 1 – Yokohama – Nissan Chief Executive Officer Carlos Ghosn announced Friday half-year financial results that showed a 14.7% rise in net revenues and 6.5% increase in net income, but revised its full-year forecast lower due to sluggish market conditions in Europe, higher-than-expected recall costs, and volatile demand in several key emerging markets.

Ghosn spoke with the Nissan Global Media Center’s Coco Masters on the results and the steps planned in response.

Global Media Center: Earnings were announced today and came in below company and market expectations. What happened over the period and what is your message to shareholders in response?

Carlos Ghosn, CEO:

In a very factual way, what happened is that we had very costly recalls during this first-half that hit our earnings. Second, our performance in selected emerging markets has been way below our expectations. I’m mentioning countries such as Indonesia, Australia, Thailand and Brazil.

It doesn’t mean that all the emerging markets are like this, because we have very good performance in China; we have performed well in Mexico. So, we have a mixed bag. But we have been hit very hard. I forgot to mention Russia, particularly. And I would say that the volatility of the currency, also, in these particular emerging markets, where most of these currencies went down, also had a big impact on us.

We know exactly what happened. The problem is that it’s happening at a moment in which we are stretched. I counted nine plants in construction or in expansion at the same time during this first half. We knew that, but we knew that we were stretched. So, a little bit of bad news, we could overcome; too much bad news – impossible.

Now, the message to shareholders is that, obviously, we recognize this is a bump so we reforecast for the year. But we have maintained the dividend, as our free-cash flow continued to be positive. We ended up in the first half with more than 800 billion yen in cash. So we’re very confident about what comes first, the capacity of the company to respond to this, but also particularly our mid-term plan and our mid-term goals.

Global Media Center: You’ve just mentioned a number of factors that have contributed to these results. What concrete steps will Nissan take to address this?


You have some causes that are very specific. And on every specific cause we have an answer.

For example, we have had a bad performance in Brazil, and you know that the bad performance in Brazil is due to the fact that we import most of the cars today from Mexico. The solution is coming because the production is going to start at the beginning of calendar year 2014. So, what we can do is, as much as possible, anticipate the production in Brazil, because when we will have local production the impact of the taxes that Brazil has imposed on Mexican products and the impact of the weakness of the real will fade away little by little. This is one specific.

Another specific is that in Russia one of the reasons we underperformed is because we were counting on the launch of the new Almera. The Almera, as you know, is being produced in Togliatti by AvtoVAZ late. Because they were late, we didn’t get the car; because we didn’t get the car, we lost the market, which we were counting on. But AvtoVAZ, right now, has quality that is at the level of expectation and they are ramping up production.

So, on every specific issue, we have an answer. But overall, I think this is a message also about the fact that we need more focus on execution. We need more focus on implementation. And I have decided to change the organization, to adapt the organization, in this period of time, which is less about strategy, less about new plants and products and technology, because we have done a lot in the last year, and more on focusing on execution.

Global Media Center: To what extent can you elaborate on personnel and organizational changes?


This is an opportunity to anticipate some changes in the future. For example, for the rejuvenation of the management team, we went from three regions to six. This is mainly to allow some of our leaders to concentrate on a territory, which is probably more adequate for good execution. This will take place between now and the first of January. We have split North America in two – North America and South America. We’re splitting Europe AMIE in two; Europe and Russia from one side and AMIE from the other side. We are combining Japan with the Southeast of Asia. We are isolating China as a region. And each one of them will have a leader.

On top of this, I have asked the future CPO (Chief Performance Officer) to mainly concentrate on the duty of the CPO, and he will not have on top of this a region to manage.

So, we’re doing some specific changes in the organization to make sure that the focus on execution and the focus on implementation will be helped by the organization.

Global Media Center: Looking at the larger picture, do the results in any way impact the Nissan Power 88 Mid-term Plan or other company goals?


I don’t think so. Power 88 is within our reach. It is within the potential of the company. It is essentially to make Power 88 and particularly the 8% market share that we are increasing capacity and building new plants.

And people say, ‘You know what, you are building new plants and maybe these are creating over-capacity’. No, not at all because the new plant in Brazil cannot be substituted. The day you have a plant producing in Brazil, you sell cars in Brazil, whereas today you have some difficulty to sell cars in Brazil because we don’t have a plant in Brazil. It’s not over-capacity.

A new plant in Mexico – we need it. We need it particularly to support our offensive in the United States. A new plant in China – if we don’t have a new plant in China, we can’t follow the Chinese market. We cannot substitute it with a plant in Japan.

These new capacities are absolutely important. And what I want to say is that 2014, in a certain way, is going to be moving from nine plants being built and expanded to two. So all of a sudden, we’re going to start to have most of this investment behind us and that will also help our concentration on execution.

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