5/14/2019 | 1 MINUTE READ

Nissan Predicts Further Erosion as Profits Plunge

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Nissan Motor Co.’s profits plunged in the fiscal year ended March 31, and the company predicts another sharp decline this year.

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Nissan Motor Co.’s profits plunged in the fiscal year ended March 31, and the company predicts another sharp decline this year.

Nissan blames its last year’s woes primarily on warranty costs and pricey sales incentives in the U.S. The company says its immediate goal is to establish steady medium-term profitability. But it warns “substantial improvements in performance will not be immediate.”

CEO Hiroto Saikawa predicts the company will “hit rock bottom” in 2018-2019 before recovering over the following three years. He blames the growth-first policies of predecessor Carlos Ghosn for saddling the company with excess production capacity.

Operating profit shrank 45% to 575 billion yen ($5.2 billion) and will drop another 60% to 230 billion yen this year, according to the company. Net profit, which plummeted 57% to 319 billion yen ($2.9 billion) last year, is expected to shrink 47% to 170 billion yen this year.

Nissan says revenue for the 2018-2019 fiscal year declined 3% to 11.6 trillion yen ($106 billion). The company anticipates another 3% decline, to 11.3 trillion yen, this year.

Nissan’s operating margin narrowed to 2.7% from 4.8% in the previous fiscal period and is likely to decline to 2% this year.

Global vehicle sales in the last fiscal year retreated 4% to 5.52 million cars and trucks. Nissan says a 9% drop to 1.44 million units in the U.S. offset gains in China (+3% to 1.56 million vehicles) and Japan (+2% to 596,000 units). Volume this year is expected to advance by only 20,000 units.