Daily Management Review

70% Drop In Quarterly Profits Reported By Nissan, Slashes Full Year Forecast


70% Drop In Quarterly Profits Reported By Nissan, Slashes Full Year Forecast
Profits at the Japanese auto major Nissan Motor Co Ltd fell by 70 per cent for the July-September quarter as reported by the company on Tuesday while also announcing a lowering of its forecast for the entire year’s profits which came out to be the lowest in 11 years. Ever since the arrest and subsequent ouster of its embattled former CEO and Chairman Carlod Ghosn over money laundering changes, the company has been struggling with drop in sale and revenues. The company’s relations with its partner – the French automaker Renault, had also soured after the ouster of Ghosn. 
The Japanese automaker’s financial performance is already the worst in two years and the latest huge drop in quarterly profits reflects the scope and scale of efforts that the new head of the company and the new executive team, due to take over on December 1, have at hand to turn the tides in favor of the company.
Tensions with top shareholder Renault SA, uncertainty over its future leadership and dropping profits have troubled Nissan ever since the arrest and ouster of Ghosn about a year ago. The shares of Renault fell by 2 per cent – its lowest since April 2013, after the very disappointing quarterly performance from Nissan
During the latest quarter, Nissan, the second largest auto maker of Japan by sale, reported an operating profit of 30 billion yen or $274.98 million compared to the 101.2 billion yen reported by the company in the same period a year ago.
“Operating profit for the first half is off our target” for full-year profit, Stephen Ma, a corporate vice president and the incoming chief financial officer, told reporters. “We are revisiting all our assumptions, and as you can see that is why we revised down our forecast for sales volume for the full year,” he added.
The poor July-September quarter performance also forced Nissan to announce a 35 per cent cut in its profit forecast for the entire year at 150 billion yen which is the worst for the company in the last 11 years. Earlier the company had forecast sale of 5.5 million vehicles while now it says it would be able to sell only about 5.2 million vehicles in the retail market.
A revamp of its top ranks with was recently announced by the company within the past few weeks in which the older executives were replaced with younger executives. For example, the company appointed 53-year-old Makoto Uchida, as its next chief executive, who was earlier the head of the company’s business in China. Analysts see this as an attempt by the company to bring an end to the legacy of Ghosn at the company. 
One of the major problems for Nissan is its image of a cheap brand which was created because of the company engaging in offering heavy discounting and fleet sales, especially particularly in the United States. Further the resale value of the vehicles of the company had also reduced because of the image which also dented the sale.