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

YOKOHAMA, Japan — Nissan Motor Co. concedes it waited too long to start its U.S. retail reform.

Just as the carmaker tries to break its addiction to incentives and fleet sales, the U.S. slowdown is making it harder as rivals throw more cash on the hood. As a result, Nissan's push to improve U.S. profits is taking more time and money than planned.

"We couldn't assume how hard it would be in these circumstances," CFO Hiroshi Karube acknowledged this month while announcing a 21 percent decline in Nissan's global operating profit for the July-September quarter.

Karube blamed the uphill battle on flatlining total industry volume, or TIV, in the U.S. Total U.S. sales inched ahead just 0.5 percent through October after falling 1.8 percent in 2017.

"On the economic side in the U.S., a lot of things are uncertain," Karube said. "TIV is peaking. Enhancing quality of sales was harder in terms of time and cost.

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

Nissan hopes to rein in its long-standing practices of generous incentives and robust fleet sales. North American regional operating profit climbed 13 percent in the company's fiscal second quarter ended Sept. 30. But Karube said the Japanese carmaker had been aiming higher.

Nissan made some progress cutting incentives and inventories in the latest quarter. But the improvements weren't enough to offset the hit from lower wholesale volume, unfavorable foreign exchange rates and rising raw material costs.

There is only so much Nissan can do against slumping overall demand, Karube said.

"We don't have a magic wand," he said.

CEO Hiroto Saikawa wants to pivot Nissan away from profit-draining fleet sales and incentives in the U.S. in an attempt to raise brand value and margins.

Saikawa has said Nissan is prepared to sacrifice some volume to bolster margins. Last spring, the automaker began pulling back fleet deliveries, culling bloated inventories and easing pressure on dealer sales-incentive programs, even as the U.S. light-vehicle market softens.

An influx of new or redesigned models has helped Nissan wean itself from incentives.

Fresh offerings now hitting the U.S. include the Kicks subcompact crossover and Altima midsize sedan, and Infiniti's QX50 compact crossover. But the eagerly awaited redesigned Altima lands in a crowded segment that has had demand drop 16 percent this year.

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

That bucked the industry trend, which had a 3.1 percent increase in per-vehicle spending. But Nissan's outlays were still above the industry average of $3,734 per vehicle.

By contrast, U.S. incentives at 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 reel in U.S. incentives is ongoing.

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

Nissan North America has been whittling U.S. inventories. Vehicle stocks declined to a 53-day supply on Oct. 1, from a 67-day backlog on Sept. 1 and an 86-day level on Sept. 1, 2017, according to the Automotive News Data Center. On Oct. 1, Nissan had 259,500 vehicles in inventory in the U.S., down from 335,600 vehicles on Oct. 1, 2017.

Karube said Nissan will stay the course, even if it means a long slog.

"Nissan is trying to rectify things we didn't do well in the past," Karube said. "We will steadily work on improving brand value, make the products better, make the distribution network stronger. That's what we are doing."