Nissan’s U.S. profit push bogs down as sales slow

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YOKOHAMA, Japan – Nissan Motor Co. admits that it has waited too long to start US retail reform.

Just as the car manufacturer is trying to break through its addiction to incentives and vehicle sales, the slowdown in the US is making it more difficult because rivals put more money on the market. As a result, Nissan's effort to improve US profits takes more time and money than planned.

"We could not assume how difficult it would be in these circumstances," said CFO Hiroshi Karube this month and announced a 21% decline in Nissan's global operating profit for the quarter of July-September.

Karube: "If we had done this two or three years ago, we would have done it faster."

Karube blamed the heavy battle on the total volume of the sector for flat lines, or TIV, in total American sales in the United States, only 0.5 percent compared to October, after a decline of 1.8 percent in 2017 .

"From the economic side in the US, many things are uncertain," Karube said. "TIV peaks, improving the quality of sales was more difficult in terms of time and costs.

"If we had done this two or three years ago, we would have done it faster."

No magic wand

Nissan hopes to curb its long-standing practices of generous incentives and robust fleet sales. North American operating profit increased 13 percent in the second quarter of the business, ending on 30 September. But Karube said the Japanese car manufacturer had aimed higher.

Nissan made some progress in reducing incentives and inventories in the last quarter. But the improvements were not enough to offset the impact of the lower wholesale volume, unfavorable exchange rates and rising raw material costs.

There is only so much that Nissan can do against a grueling general question, Karube said.

"We do not have a wand," he said.

CEO Hiroto Saikawa wants to keep Nissan away from profit-bearing fleet sales and incentives in the US in an attempt to increase brand value and margins.

Saikawa has said that Nissan is willing to sacrifice some volume to increase the margins. Last spring, the car manufacturer began to withdraw fleet deliveries, destroy an inflated inventory and reduce the pressure on dealers' sales programs, even if the US market for light vehicles is declining.

An influx of new or re-designed models has helped Nissan to use incentives themselves.

The fresh offering that now touches the US includes the Kicks subcompact crossover and Altima midsize sedan, and Infiniti's QX50 compact crossover. But the long-awaited redesign Altima ends up in a busy segment that has dropped demand by 16 percent this year.

Incentive spending at the Nissan and Infiniti brands fell 3.5 percent to an average of $ 4,018 per vehicle throughout the year to October, according to figures from Autodata Corp.

Stop the trend

This was at the expense of the trend in the sector, which had 3.1 percent more expenditure per vehicle. But Nissan's spending was still above the industry average of $ 3,734 per vehicle.

On the other hand, American incentives for Japanese rivals Toyota, Honda, Mazda, Subaru and even Mitsubishi were all below average for the first 10 months of the year.

Karube said the campaign to engage American incentives is under way.

"We are not there yet," he said. "We have to do more."

Nissan North America has closed American stocks. Vehicle inventories declined to a 53-day delivery on 1 October, from a 67-day delay on 1 September and a 86-day level on 1 September 2017, according to the Automotive News Data Center. On 1 October, Nissan had 259,500 vehicles in stock in the United States, against 335,600 vehicles on 1 October 2017.

Karube said that Nissan will keep the course, even if this means a long game.

"Nissan is trying to rectify things that we have not done well in the past," Karube said. "We will continue to work steadily to improve brand value, make the products better, make the distribution network stronger, that's what we do."