Nissan appeared to be coping with mounting pressures — some of it due to problems stemming from the controversy surrounding its ousted chairman, Carlos Ghosn. Nissan CFO Hiroshi Karube last week blamed the scandal of Ghosn's arrest on allegations of financial improprieties for depressing Nissan sales in the Japanese market. Karube said that the scandal still dominates headlines in Japan and is turning off prospective customers.
"Every day there are lots of media reports," Karube said. "Non-Nissan customers are hesitant to buy Nissan cars, or at least the number is limited, so in February and March, sales fell."
But Nissan's more immediate problem was with the continuously variable transmissions it uses in its vehicles. Nissan said it has earmarked an extra ¥66 billion ($590.5 million) to extend warranties to seven years, from five, on CVTs used in certain U.S. models. The campaign covers more than 3 million vehicles sold from 2012 to 2017, including the Sentra, Versa and Altima sedans, Karube said. The CVTs begin to rattle and vibrate with age.
"That's what a large number of customers are disappointed with," Karube said.
In its April 24 profit warning, Nissan said its net income plunged 57 percent to ¥319.0 billion ($2.85 billion) in the fiscal year ended March 31, from ¥746.9 billion ($6.68 billion) the year before.
The result is dramatically lower than the $3.67 billion that Nissan forecast in February. And the February target was itself a downgrade from the company's original full-year outlook.
Nissan also cut its operating profit forecast for the second time. The company now expects operating profit to slump 45 percent to $2.85 billion. Operating profit margin will shrink to 2.7 percent, from the already meager 3.9 percent Nissan had been aiming for.
Nissan will announce full details of its fiscal year earnings on May 14.
Ghosn himself has decried the condition of his former company.
In a video message recorded earlier this month, the day before he was arrested for a fourth time, Ghosn disparaged Nissan for an "absolutely mediocre" performance. He cited three profit warnings in recent years, declining share price, lack of leadership and "many scandals."
"For somebody like me, it's sickening," Ghosn said of Nissan's current state. "I'm worried because, obviously, the performance of Nissan is declining."
But Nissan pointed the finger back at Ghosn for many of its problems.
Karube said the decline in U.S. volume was a "normalization" of sales following years under Ghosn in which volume was artificially boosted with costly incentives and fleet business. Nissan Group's U.S. sales fell 12 percent through March, in an overall market down 3.2 percent.
Nissan's earnings have been further dented by an $83.7 million charge booked to cover the deferred compensation allegedly owed Ghosn. That sum forms the crux of two indictments against Ghosn that accuse him of not reporting it in financial filings.
Last week, the fallen auto executive was slapped with a fourth indictment, the most serious yet. The latest aggravated breach of trust indictment accuses Ghosn of causing financial damage to Nissan by diverting $5 million into his own pocket through intermediary companies.
Ghosn, 65, who denies all wrongdoing, was released again on bail, this time $4.5 million, and restricted in his contact with his wife. He faces up to 15 years in prison if found guilty. Trial is still likely months away.
Naoto Okamura contributed to this report.
