Nissan Reports Profits Down 70 Percent, And it Could Get Worse

Profits at Nissan Motor Company tumbled roughly 70 percent last quarter, bringing the carmakers full-year forecast to its lowest in 11 years.  Strong yen and falling sales indicate that the second-largest automaker in Japan will likely continue to face the same struggles it has since letting go of Carlos Ghosn. 

For one, the company now expects to sell only 5.2 million cars for the fiscal year (ending March 2020). While that might seem like a lot of vehicles, it is still 5.4 percent less than what the company had originally anticipated.  What’s more, Nissan’s most recent weak showing also slashed their interim dividend by upwards of 65 percent, following their worst second-quarter action in 15 years.  As we near the year end, it appears the new executive team will have quite the work ahead. 

Again, it seems the Ghosn’s ousting may have been the catalyst to a bigger executive overhaul.  Since his release, Nissan CEO Hiroto Saikawa stepped down upon admitting his involvement—along with other top executives—in an overpaying stock-related payment plan; which is, essentially, fraud.  Makoto Uchida was named as the new CEO last month; and then Ma was appointed as the new head of finance soon after. This was then followed by yet more tenured executives stepping down. 

But even with all the issues Nissan is dealing with at the executive level, the auto industry as a whole continues to struggle.  The global economy is growing at a much slower pace than many industries anticipated and the trade war with China is certainly not making things any easier.  Include the new emission standards that are forcing carmakers to change how they build vehicles and it becomes quite clear the obstacles ahead. 

In terms of turnaround, following the executive shake-up, it appears their plan is currently off track.  According to incoming chief financial officer Stephen Ma, Nissan now expects post operating profits to reach 150 billion yen. That is the equivalent to about $1.4 billion USD, this year; it is down from the original estimate of 230 billion yen, or $2.1 billion USD. 

Indeed, these numbers come after Nissan reported operating profit for the previous quarter—which ended in September—of 30 billion yen.  Equivalent to $275 million USD, that is the 70 percent drop, year-over-year, that have analysts quite concerned.  After all, some analysts had initially expected Nissan would post an operating profit of 47.5 billion yen ($435 million USD).