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Nissan Finds The Source Of Its Problems

Industry News / 15 Comments

Apparently, Nissan USA has become a “huge burden” for the automaker.

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.

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The most noteworthy examples of that are the Frontier and Rogue, the former of which hasn't seen a serious update since 2005 and the latter of which is five years old but sells in a segment so competitive that it's already considered dated. To avoid aging itself into redundancy, Nissan has promised to redesign models that represent 70% of sales volume by 2020, with the hopes of bringing annual retail (meaning non-fleet) sales in the US back to 1.4 million cars.

Our weeklong test of the new Altima, one of the new models that resulted from the automaker's refresh plan, revealed that Nissan seems to be going in the right direction - prioritizing great cars rather than compromise offerings designed to sell with the help of a fat incentive. If it can keep this mojo in upcoming models like the Versa, and hopefully a soon-to-be-announced new Frontier and Rogue, then maybe Nissan can crawl out of the hole it dug itself into.