TOKYO – The profit of Nissan Motor fell below that of the French partner Renault for the first time in a decade last fiscal year, a development that threatens to weaken the position of the Japanese automaker in their alliance.
Nissan's operating profit rose 45% to 318.2 billion yen ($ 2.91 billion) for the year ended March, earnings released Tuesday – less than 3.61 billion euros ( $ 4.06 billion) reported by Renault for 2018. It also recorded the smallest operating margin of the three members of the alliance, at 2.7% for 6.3% of Renault and 4.4% of Mitsubishi Motors.
With few new models in the works, the trend reversal prospects remain uncertain. Nissan has indicated that it will lower its annual dividend for the first time in 10 years, to 40 yen per share from 57 yen in fiscal 2018.
The low visibility and the dividend cut will probably change the dynamics of the alliance, in which Nissan's exceptional contribution to earnings has allowed to repel the pressure of Renault, its largest shareholder with a share of 43.4 %. With Renault renewing its appeals for the two car manufacturers to unite, Nissan, which seeks to maintain its independence, is in a more precarious position.
Nissan's problems in the last fiscal year stem mainly from the United States, a huge market that represents 30% of global car sales. Faced with competition from rivals such as Toyota Motor and General Motors, Nissan offered strong discounts to move more units, but these incentives proved expensive. The automaker has accumulated over $ 4,000 in promotional costs per vehicle sold, 10% more than the US average.
Discounts became the norm under former president Carlos Ghosn, focusing mainly on volume. This reduced margins and reduced brand image, creating a vicious circle of deterioration. Nissan's operating profit margin in North America fell 1.9 percentage points to 1.2% last fiscal year.
For the 2019 fiscal year, Nissan expects the group's net profit to be down 47% to 170 billion yen. This would represent its worst performance since fiscal 2009, following the global financial crisis.
In recent weeks, Renault has increased pressure on Nissan for a long sought after merger. Nissan president and CEO Hiroto Saikawa told reporters that it is not open to the idea, saying it would have a "big negative impact" on the Japanese company.
Renault president Jean-Dominique Senard wants to integrate the two car manufacturers, but such a move "could damage Nissan's ability to generate value," Saikawa said, while acknowledging that "it was a discussion on the structure of capital "of the alliance.
Saikawa has stated that Nissan will reduce the operating margin target in its medium-term plan from 2022 to 6% from 8%. The annual turnover target will be reduced by 2 trillion yen to 14.5 trillion yen, as the automotive manufacturer shifts the gears from increasing sales to improved profitability.
The head of Nissan also said that global production capacity will be trimmed by 10%. Under Ghosn and its first approach to volume, capacity has swelled to 6 million vehicles, well over the 5.51 million sold last fiscal year. Nissan will cut this to 5.4 million.
Despite the downsizing, Saikawa continues to defend itself from the merger with Renault. "There are many Nissan directors who also oppose integration," he said.
But the status of the French automaker as the largest shareholder of Nissan can make it difficult to maintain this. If Nissan's gains were to remain too slow for too long, Renault could raise the pressure on managing its Japanese partner and try to go ahead with a merger regardless.
. (TagsToTranslate) Nissan