Nissan posts record annual loss due to pandemic, chip shortage

TOKYO -- Nissan Motor Cop. reported a record annual loss on Tuesday as the coronavirus pandemic hit vehicle sales and a global shortage of semiconductors forced the automaker to cut production.

Nissan said in a statement that its annual operating loss grew in the year ended March 31 to 150.65 billion yen ($1.38 billion) from a 40 billion yen shortfall in the previous year. The automaker has not made a profit since the year ended March 2019.

However, it beat its February forecast of a 205 billion yen loss because of a sales recovery in China and cost cutting.

The global auto industry has been grappling with a chip shortage since the end of last year, exacerbated in recent months by a fire at a chip plant in Japan and blackouts in Texas, where a number of chipmakers have factories.

Nissan, which is pulling back from the global expansion pursued by ousted Chairman Carlos Ghosn, had to cut production of its best-selling Note compact car in Japan and make short-term output adjustments at its North American operations last quarter due to the chip shortage.

CEO Makoto Uchida has predicted that the company will return to profitability this year as it pushes to cut costs and rouse stagnating consumer interest with new models. But Nissan’s performance amid the pandemic relative to peers such as Toyota Motor Corp. and the toll the chip shortage is weighing on the beleaguered automaker’s ability to produce cars highlights lingering fragility.

While Nissan’s business transformation is making steady progress, there is “continued business risk due to semiconductor supply shortage and raw material price hike in this fiscal year,” the company said in its statement Tuesday. “While working to minimize the impact of these risks and factoring the potential impact, Nissan has set operating profit forecast at plus or minus zero.”

Nissan is one year into a turnaround plan that involves churning out 12 new models in the 18 months through November, slashing global production capacity and reducing incentives to boost margins. Recovering demand for cars is boosting sales of new models such as the Rogue crossover and global deliveries increased year-on-year in February. In March, they were up 51 percent, led by China where Nissan gets more than 35 percent of its sales.

Sales for the recently ended fiscal year however were down 12 percent year-on-year, dragged lower by losses in the first half when Covid lockdowns disrupted global markets. The semiconductor shortage is also expected to cost the auto industry millions in car sales this year and Nissan “is likely to struggle earlier and longer than others,” Bloomberg Intelligence analyst Tatsuo Yoshida said.

Chip disruptions

The chip shortage will continue to worsen until around December when chip production catches up with demand, some analysts say. Supply chain-related disruptions are likely to knock total global vehicle sales to 86.7 million units in 2021, “far below” pre-pandemic levels of 92.5 million units in 2019, according to the latest auto industry outlook from Fitch Solutions.

Nissan has had rolling factory stoppages and production cuts since it first warned of a chip shortage in January. The automaker said in February it expected to sell 150,000 fewer vehicles in the fiscal year ended in March. It’s trying to offset the impact of the shortage by prioritizing production of popular models and cutting back on some tech components in cars.

Global retail volumes for fiscal year 2021 are expected to increase by 8.6 percent to 4.4 million units, Nissan said Tuesday. It said it has sufficient liquidity to steer through the challenging environment, with year-end cash and cash equivalents for the automotive business totaling 1.9 trillion yen. Nissan also has access to around 2.2 trillion yen in unused committed credit facilities.

The company’s strategy of focusing on margins in addition to new models should help profitability in the latter half of the current fiscal year, but right now, Nissan is “still having to grit its teeth through the transition period,” Yoshida said.

Last week, the Yokohama-based automaker said it would sell its entire stake in Daimler AG for 1.15 billion euros ($1.4 billion), a move SMBC Nikko analyst Toshihide Kinoshita wrote was “a positive step forward” in Nissan’s push to restore profitability.

Reuters and Bloomberg contributed to this report.