Daily Management Review

Nissan Issues Profit Warning For 2019, Its Lowest In Six Years


Nissan Issues Profit Warning For 2019, Its Lowest In Six Years
The Japanese auto giant Nissan issued a profit warning on Wednesday after its shares dropped by 4 per cent overnight at the Tokyo stock exchange as the company continued to adjust to a business performance minus its once celebrated chairman Carlos Ghosn.
According to the warning issued by the Japanese manufacturer, it forecast a 2019 yearly drop of 45 per cent in its net profit to about 319bn yen which was a sharp decline from its earlier profit forecast of 410bn yen. The last forecast announced in February was already its lowest yearly profit forecast in six years.
The drop in profit forecast was attributed by the company to a drop in sales in its largest market, the United States, and added that there was negative impact on the company following the arrest of Ghosn in Japan in November last year over charges of financial misconduct. Following the arrest, Ghosn was removed as the chairman of the company and currently Nissan is in the midst of a management overhaul.
The aggressive sales targets for Nissan set under Ghosn’s leadership were met for years through heavy discounting in the US and the company is now looking to reduce such high sale targets. The new chief executive of the company Hiroto Saikawa has not decided to shift focus away from achieving strong sale s in the US and instead focus on growing the business in China as its major target market in an effort to leave his mark on the company.
Additional charge of aggravated breach of trust was brought against Ghosn in Japan, earlier this week, following his re-arrest earlier in the month. His lawyers immediately met the charge with a bail request which came on the day his latest period of detention was set to expire.
“We are confident that we have the evidence to successfully prosecute all four cases,” an official from the prosecutor’s office said.
All the charges brought against him have been denied by Ghosn. He has claimed that he had been subjected to a boardroom conspiracy by Nissan at and had accused former colleagues of “backstabbing”. He claimed that his efforts to bring French car maker Renault – a major shareholder in Nissan, and the Japanese company closer in their three company alliance with Mitsubishi as the third partner, was the reason fo the conspiracy. 
The arrest of Ghosn was also pointed out by Nissan to be a cause of the forecasted drop in profits because the incident had dented its brand image.
A 66 billion yen provision for expenses towards extension of the warranty on its continuously variable transmission system which are a part of the engine in its about 3 million Sentra and Altima sedans and Versa subcompact models between 2012 and 2017 for the U.S. market is expected to be booked by the company at its full-year results on May 14.
“Everyday, there are many reports of the case,” Nissan CFO Hiroshi Karube said on Wednesday, referring to the scandal. “Non-Nissan users are hesitant to buy our cars.”