Nissan's revamp of Japan sales network drags on
At the same time, General Motors is restructuring its U.S. retail network. Closing the Oldsmobile brand was a major step, but GM still has far to go.
Nissan's experience shows how slow and difficult the process is. It also indicates that the Nissan-Renault alliance wouldn't bring particular expertise in fixing a bloated dealer network if it tied up with GM.
A decade ago, Nissan had four sales networks in Japan: Motor, Nissan, Prince and Satio. Each network had its own history. The Prince network, for example, traced its roots to Nissan's takeover of Prince Motors Ltd. in 1966.
What the networks didn't have: distinct brand identities or volume. The different nameplates they sold often were the same cars, given slightly different sheet metal and rebadged.
The four networks split, unevenly, Nissan's 1998 Japan sales of 903,573 cars and trucks, down 13.4 percent from a year earlier. That volume was not enough. Most dealerships were unprofitable.
Many also suffered from overstaffing. As Nissan's financial woes worsened, the automaker shipped excess employees to its factory-owned stores. It hoped that extra sales staff would boost sales.
But the staffers had minimum sales training. Some were middle managers unsuited to retailing.
Factory store losses
The factory-owned stores dragged Nissan down. The company owned a majority stake - in many cases 100 percent - in roughly half its dealers. Their losses pushed Nissan's consolidated net loss to ¥14.01 billion, or about $121.8 million at today's exchange rate, in the fiscal year that ended March 31, 1998.
The parent automaker's core operations were profitable. But adding the subsidiaries, mainly its dealer companies, pushed it into the red.
In January 1999, shortly before Renault showed up, Nissan merged its four networks into two. Motor and Nissan became Nissan Blue Stage. Prince and Satio became Nissan Red Stage.
Blue Stage sold mainly luxury cars including the Cima, known in the United States as the Infiniti Q45, plus the Bluebird mid-sized sedan. Red Stage sold smaller cars including the Sunny, known to U.S. buyers as the Sentra.
In April 2005, Nissan abandoned any attempt to distinguish the two networks. Red Stage and Blue Stage began selling all Nissan vehicles. The change is considered an interim step toward the day when Nissan vehicles will be sold at Nissan stores, and the company launches the Infiniti brand in Japan in separate stores.
Meanwhile, Carlos Ghosn - first as Nissan's COO, then CEO - weeded out inefficient dealers. In March 1999, just before the alliance with Renault, Nissan had 99 independent dealers with 1,628 sales outlets in Japan.
By encouraging weak dealers to sell out to strong ones, Nissan winnowed the number of independent dealers to 87 by March 2006. The number of stores didn't change.
Ghosn did the same at Nissan's factory stores. By March 2006, he had cut the number of factory-owned dealer companies to 54, including two that focus on fleet sales and have no sales outlets. That was down from 96 in March 1999.
Shutting down 42 companies allowed Nissan to consolidate back-office and other dealer functions. But it did not reduce the number of sales outlets, which held steady at 1,343.
The latest step in the restructuring involves dividing the business functions of the sales networks. On April 1, Nissan separated the sales and asset management functions of its factory-owned dealer companies. Now a single holding company called Nissan Network Holdings Co. effectively owns the factory stores.
Sales vs. real estate
Under this structure, company-appointed managers at the factory stores are expected to focus on sales, marketing, service and related functions. The holding company oversees real estate and other assets at the dealerships.
It remains to be seen how the holding company will change the dealer landscape. But consider a case in which two dealer companies - which are officially separate legal entities, even though they ultimately are owned by the same holding company - run three sales outlets within a mile of each other.
The real estate manager in charge might decide to revamp the showrooms and service bays at those outlets, in line with changes in the neighborhood's demographics.
Nissan's experience in Japan is not directly comparable to GM's in the United States. The large number of factory-owned stores in Japan has created a retail network very different from what GM confronts here.
But even in Japan, Nissan has struggled to find the right sales network to distinguish its lineup, use its real estate effectively and motivate employees.
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