Despite U.S. drag, Nissan posts record profit

TOKYO - Showing the benefits of managing its global business for profit, not market share, Nissan Motor Co. last week posted its third consecutive half-year of record profits.

"Just two years after having a near-death experience, Nissan is not very far from the highest level of profitability among the global volume players in the industry," said Nissan CEO Carlos Ghosn.

Ghosn said Nissan expects consolidated, or group, net income for the fiscal first half that ended Sept. 30 to be up 33.7 percent from a year earlier to the equivalent of $1.92 billion. The figures are preliminary, but Ghosn said the final numbers to be released Nov. 19 would not hold "any significant surprises."

First-half revenue was almost flat at $25 billion, compared with $25.2 billion a year earlier, as global unit sales slipped 3.8 percent to 1.28 million, he said.

The stellar earnings came despite disappointing results in the cutthroat U.S. market. Operating profit there fell 42 percent in the period to $392 million as unit sales dropped 14 percent to 349,000.

For the full fiscal year ending March 31, Nissan predicts U.S. unit sales will fall 8.6 percent, the same as the overall market, to 680,000.

"This is the only market where our profitability is going down," Ghosn said. With volumes falling and incentives rising, "it's very difficult to maintain profitability" in the American market, he said.

Ghosn insisted, though, that Nissan is "not going to do foolish things" to remain competitive in the U.S. market. Despite 0 percent financing incentives by most automakers in the U.S. market, he said, Nissan has only "two plans on 0 percent, limited to two cars for October, period."

Because of the uncertain economic climate, Nissan left unchanged its forecast for the full fiscal year - net income of $2.75 billion, down 0.3 percent, on revenue of $52.5 billion, up 3.4 percent.

"In normal circumstances, we would have made an upward revision," Ghosn said.

Ghosn gave the figures two years to the day after he unveiled his plan for turning around the ailing carmaker. Nissan put the plan in place April 1, 2000.

Nissan is on track to meet the last of the plan's three central goals - cutting debt in half to $5.8 billion at current exchange rates - by "very early" in the fiscal year starting April 2002, well ahead of the March 2003 deadline, Ghosn said.

Ghosn set a new goal of cutting debt to $6.25 billion by March 31, 2002, $833 million below the original goal for that date.

The other two goals were to return to the black in the year ending March 2000 and to achieve an operating-profit margin of at least 4.5 percent for the year ending March 2003. Nissan's $1.56 billion in first-half operating profit rose 39 percent from a year-earlier and represented an operating margin of 6.2 percent.

Nissan's cumulative purchasing cost reductions are on track to reach 18 percent this year, against a three-year goal of 20 percent.

Mazda revises up

Mazda Motor Corp., meanwhile, revised its forecast for first-half consolidated net profit to 1 billion, or $8.3 million at current exchange rates, a sharp swing from the $79.2 million loss that Mazda had forecast in May.

Mazda President Mark Fields said the improvement reflects better-than-forecast results in terms of sales and mix, currency gains, purchasing cost cuts and cuts in fixed costs. Cuts in fixed costs include early retirements.

You can reach James B. Treece at jtreece@crain.com

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