Nissan Finds The Source Of Its Problems

As it turns out, offering huge discounts and increasing fleet sales to maximize total sales numbers is a tricky thing to do correctly. Automakers who've gone down that road tend to have a hard time coming back from it, and finding the road back is a predicament Nissan's US wing is currently in. The Japanese automaker's CEO, Hiroto Saikawa, previously said that Nissan's attempt to claw its way to a larger share of the US market had come at such a great expense that it had led the company to "hit rock bottom."

A report by Bloomberg may shed some light onto how Nissan plans to get its US operations out of a sales slump because apparently, it has become "a big burden" to the company, claims its CEO. "We need to revive the U.S. operation," said Saikawa. "We have excessive capacity and unprofitable operations, which are becoming a big burden."

Saikawa had previously blamed the company's problems on bad leadership by Nissan's old CEO, Carlos Ghosn, though other Bloomberg columnists think Saikawa bears equal responsibility. In either case, the problem stems from Nissan's sole focus on gaining market share rather than maintaining profitability. It begins with Nissan's Power 88 plan from 2011, which was a goal to increase its global share to 8% by 2017. That target led Nissan to set an unofficial goal of reaching a 10% share within what was previously its most profitable market, the US.

To do so, it offered incentives and ratcheted up sales to fleet customers, but that caused Nissan's profitability in the US to plummet to around 1-2%. Now that Nissan has dialed back on the incentives, sales are down 8.4% through April this year. A hurdle Nissan needs to clear is the fact that without incentives, it has had a hard time selling vehicles, especially so since many of its models have been left to age while the competition has only gotten fresher.