Nissan Is In Serious Trouble

Industry News

And apparently it's all Carlos Ghosn's fault.

Nissan’s current CEO Hiroto Saikawa, who replaced Carlos Ghosn when the previous CEO was caught embezzling money from Nissan, best summarized the Japanese automaker’s current position at a news conference, where he told reporters, "Today we have hit rock bottom.” As Reuters tells it, Saikawa was referring to the fact that Japan’s second largest automaker just forecast a 28% drop in its annual operating profit, enough that it now expects to post only 230 billion yen ($2 billion) in operating profit by March 2020 rather than 457.7 billion yen ($4.18 billion), which was the average number previously predicted by more than 20 seasoned analysts.

According to Saikawa, much of Nissan’s financial trouble stems from bad decisions made by Ghosn when he was at the automaker's helm.

"Most of the problems we are facing are the negative legacy of our old leader,” said Saikawa during the news conference. That accusation references the fact that Nissan used to set highly aggressive sales targets under Ghosn’s rule. So high, in fact, that it had to heavily incentivize sales of vehicles like the Rogue and Altima just to meet those goals. Despite the US being Nissan’s biggest market, those discounts cut heavily into profits, making the sting from the automaker’s recent sales dip in America hurt even more than it would have with thicker profit margins cushioning the blow.

That downturn in sales was not small, working out to 9.3%, to 1.44 million units, by the end of Nissan’s fiscal year on March 31st. The fall prompted Nissan to revise its 2022 revenue target to 14.5 trillion yen ($132 billion), down from the previous target of from 16.5 trillion yen ($150 billion), representing a 2% fall in operating margins, from 8% to 6%.

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Without a doubt, that dip is raising concern with Nissan’s partner Renault, which has a 43% stake in the company. After Ghosn’s dramatic departure from Nissan, Renault was considering forming a joint holding company to give both companies a more equal standing. A move like that would give the much smaller French company a very big say in what an auto giant like Nissan can or can not do. To no one’s surprise, that idea isn’t something Saikawa is happy with. "I have been negative to the idea of a full merger,” he said. "Now is not the right time to discuss a merger. We have to focus on our recovery.” Hopefully that recovery will come for Nissan because if it doesn't, those merger talks may be inevitable.

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