Behind the spin: Nissan

THE DILEMMA.

by
Last Updated: 06 Nov 2012

Last month, Japan's third-biggest carmaker missed its profits target for the second year running. And Nissan, which is 44% owned by Renault, said the coming year would be difficult, with an expected 30% fall in profits, because of 'absolutely scary' increases in raw materials, a lacklustre US market, and a strong yen. Could it be that the company's Brazilian-born CEO, who is also head of Renault, is overstretched? 'The ongoing speculation will be how much Carlos Ghosn can do and whether he has bitten off more than he can chew,' said Michael Tyndall, car industry analyst at Nomura in London.

THE SPIN

Admitted Ghosn: 'Every single element of our environment is negative except one, which is the growth of emerging markets.' While raw material prices rise and the demand for gas-guzzlers wanes in the West, the only way car manufacturers can lift themselves out of the gloom is by meeting the demand for cheap cars in developing economies like India and China. Nissan has promised to launch an 'ultra low-cost' car in partnership with Indian motorcycle maker Bajaj Auto, in 2011. They aim to produce a vehicle that will cost just £1,250 and compete head-on with Tata's Nano. Nissan will also strive to boost its green credentials in the West by producing a pure battery/electric car to be launched in the US in 2010 and mass-marketed globally two years later. Apparently, it will be 'a sexy electric car that will be fun to drive'. Stop sniggering ...

THE STRAIGHT TALK

Hiroyuki Yokoi, an analyst in Tokyo, told the FT: 'It's not good for Ghosn to be at the helm of both companies. It's challenging for him to handle everything from partnerships to new bets in product development.' Can the infallible one keep all the plates spinning? Times are tough, and other carmakers have been forced to accept lower than expected sales and profits. Now that obvious ways to cut costs and make efficiencies have been made, it will be all the harder for Nissan and its rivals to improve earnings.

THE VERDICT

Nissan is not the only car manufacturer to suffer; in fact, it's one of the industry's most profitable companies, having made an operating margin of 7.3% last year - better than European marques like Fiat, Peugeot and Volkswagen. Ghosn has been a well-respected leader who sets ambitious targets and makes sure they're achieved - until recently. Nissan must apply all its ingenuity to meet changing consumer demands. 'Shift convention' is the corporate maxim. Can the firm live up to it?

Find this article useful?

Get more great articles like this in your inbox every lunchtime