YOKOHAMA, Japan — Breaking Nissan's addiction to fleet sales and incentives in the U.S. was never going to be easy. But CEO Hiroto Saikawa says the initial hurt was more than even he expected.
It showed up this month when Nissan North America reported a 28 percent plunge in April sales.
That was "too much," Saikawa conceded here last week. And worse — pangs of the adjustment will continue through this quarter as Japan's No. 2 automaker races to align U.S. supply and demand.
But Saikawa promises that the short-term pain of reduced sales will be worth the long-term gains that Nissan's dealers will begin reaping this summer.
Nissan's long-bloated inventories finally will be dialed back to healthier levels. Sales will be refocused on profit-boosting retail business instead of low-margin fleet. And a reinvigorated U.S. dealer network will be cashing in on a flood of new products.
But first, Nissan must weather the transition.
"We may anticipate some kind of performance deterioration," Saikawa acknowledged last week while announcing fiscal year financial results at Nissan Motor Co.'s global headquarters. "We will just swallow that and improve profitability in the U.S. It will be better in the later part of the year."
Saikawa is trying to pivot the company away from fleet sales and incentives in an effort to shore up brand value and margins. But that redirection comes at a risky time. U.S. light-vehicle sales are softening, and that could make it tougher to snap old habits of juicing sales.
Saikawa unveiled his plan for the shift in February, and Nissan began dialing back incentives and fleet sales in the carmaker's January- March fiscal fourth quarter. North America is already feeling the impact.
Nissan said the quarter's profits were hurt by the scaling back of wholesale shipments to cull a global inventory overload. Its worldwide backlog of 990,000 unsold vehicles shrank to 880,000 in March, the company said. But the U.S. wholesale pullbacks cost Nissan some ¥25.2 billion ($237.2 million) in the three-month period.
That fueled a 15 percent decline in North American operating profit and contributed to a 12 percent slide in the parent company's operating profit.
The restructuring, however, jolted U.S. operations in April, when the Nissan and Infiniti brands reported a combined 28 percent drop in sales on lower incentives and fleet deliveries.