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Nissan cites progress in getting rid of showroom freebies

Carmaker insists it U.S. layoffs over ‘for now’


Major Mississippi employer Nissan Motor Co. has decided its best bet for a U.S. recovery after a pair of awful quarters is not to sell more cars but to make more money from each car sold.

Forget “market share” for now, said Nissan global controller and CFO-designate Stephen Ma, in a mid-November press conference.  Instead, he said, think “quality” sales, a term the automobile executive defines as transactions with limited showroom sweeteners.

The new emphasis comes after profits for the first half of fiscal 2019 fell to half of previous year levels. In the first quarter alone, companywide operating profits plunged 98.5 percent to $14.80 million and fell 70 percent in the second quarter that ended Sept. 30 to $278 million.

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Nissan’s new chief executive, Makoto Uchida, conceded the headwinds a day after taking his post on Dec. 1, repeatedly acknowledging the company was in an “extremely harsh situation,” the Associated Press reported.

Uchida oversaw Nissan’s China market before taking the company’s top post.

Nissan saw the start of the profit slump begin last fiscal year. It cited devaluation of emerging market currencies and rising commodity prices. Sales incentives were blamed for the U.S. drop-off and new environmental regulations for the same in Europe.

The drops internationally coincided with sales and brand damage that followed the November 2018 arrest of former chairman Carlos Ghosn. Japanese authorities indicted Ghosn on several financial misconduct charges, including the funneling of $5 million of Nissan’s money to a car dealership he controlled.

The steep downturn in operating profits comes as Nissan is in the midst of worldwide labor force reductions targeted at 12,500 workers by 2022. So far, Nissan has cut 6,000 jobs, including about 1,400 in North America, of which 350 were jobs at the company’s 16-year-old plant in Canton, just north of Jackson.

Nissan settled on the 12,500 jobs reduction before profits began falling drastically in the spring. A spokeswoman for the company’s North America region says the cuts are over for now but adjustments will be made as needed.

By spring 2022, Nissan wants to have cut 10 percent of its production capacity.

Meanwhile, signs on the sales “quality” front look promising, Ma said in his post-second quarter press briefing. He said getting more profit from each sale is the first pillar of a recovery plan that frowns on generous sales incentives.

Inducements like equipment upgrades, rebates and factory discounts must become far fewer, Nissan says, as the $171 billion company initiates new cost controls and manufacturing efficiencies.

Ma said Nissan executives are encouraged by an improvement in net-revenue per unit that began in July and showed signs of picking up steam as the second quarter closed. Not coincidentally, incentives per unit began decreasing in August, Nissan says.


The carmaker is further encouraged by a drop of 9 percent, or 22,000 vehicles, in dealer inventories since the April 1 start of Nissan’s fiscal year.

Nissan calls limiting of  buyer enticements   “normalizing” sales and gauges the quality of the sale on how close to normal it comes.

The two other pillars to the recovery plan: Control costs and gain more efficiencies from manufacturing plants. “For the first pillar you can see we are right on track,” said Ma, citing the improved net revenue and increase in sales that came with limited incentives.

“We are seeing recovery in the United States of quality sales,” he said.

Fiscal 2019 U.S. sales projections, lowered in most of Nissan’s other global markets, are up 1.8 percent for the remainder of the year.

Today, though, the company is “not chasing market share,” Ma noted.

“We’re really primarily focused on sustaining long-term growth,” he said.

Ma said Nissan is especially confident it can do that with the new models of the compact Sentra and subcompact Versa. Neither is made in Canton, however.

The new versions of the Sentra and Versa as well as the electricity powered Leaf and autonomous cars and other vehicles well-stocked with artificial intelligence features. These are among efforts at reversing what Ma called “an aged car portfolio.”

Plants that make small cars are among targets for job cuts, said Hiroto Saikawa, who had a brief stint as CEO after Ghosn but departed the post over reports of having received questionable – but not illegal – compensation.

Neither the Canton nor Smyrna, Tenn., assembly plants makes the company’s small cars. They both instead produce the midsize compact Altima.

A new Altima model introduced last fall is expected to hold sufficient sales appeal to help the company reduce retail incentives going forward.

But Nissan is also focused on plants that are working below capacity, Saikawa said in July. He left as CEO in September.

The 4.7 million square foot Canton plant has capacity to build 450,000 annually. But it has operated far below that capacity since its opening in 2003.

It built its 4 millionth vehicle in 2018, for an average yearly production of 266,666. Last fiscal year the Canton plant produced 259,706 vehicles in a lineup consisting of the Altima, Titan trucks, Frontier light trucks, the NV Cargo and NV Passenger commercial vehicles and the midsize Murano SUV.

The Murano struggles, especially in comparison to the Rogue SUV Nissan makes at its Smyrna plant. The Rogue sits below only Toyota’s RAV4 in U.S. SUV sales, ending 2018 with 412,110 units sold. The Murano sold 83,547 units in 2018, reported the sales data and research site GoodCarsBadCars.net.

About 15,700 people work at Nissan U.S. assembly plants in Tennessee and Mississippi. Canton accounts for approximately 6,000 workers and remainder at Smyrna, where the company also produces batteries for its electric cars, and Decherd, Tenn.

Nissan is not the first global carmaker to endure fiscal pain the last couple years.  General Motors, the largest auto manufacturer in the U.S., said last year it plans to lay off nearly 15,000 workers in North America. In May, Ford said it would slash 10 percent of its labor force by August, laying off 7,000 workers worldwide.

Nissan is done with its North America job cuts — for now, according to Nissan spokeswoman Lloryn Love-Carter. “We will continue to monitor and react to market demand, but have no plans for further workforce reductions at this time,” she said in a late November email.


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