Winds lift Japan's automakers, but not Nissan

TOKYO — Nissan Motor Co.'s financial struggles of the past two years are well known. But as Japan's automakers last week reported year-end results and upbeat forecasts for the year ahead, it was evident again just how serious Nissan's situation remains.

Nissan stood out as the only Japanese automaker still struggling to right itself as the pandemic lifts and consumers clamor for new vehicles. The company booked its largest-ever operating loss in the fiscal year ended March 31 and said last week it expects another net loss in the current fiscal year, making a third-straight year of red ink.

In terms of operating profit, Nissan hopes to simply break even this fiscal year, even as its competitors forecast big gains ahead.

But Nissan has a long way to claw back. The automaker was already reeling from imploding sales and falling profits when the pandemic broadsided its business. The worldwide shortage of microchips has further torpedoed output and dented results.

Nissan said it lost about 65,000 units of planned production in the fiscal year ended March 31 because of the chip shortage. It expects to lose another 250,000 through March 2022.

Nissan's important U.S. business showed signs of improving, with higher net revenue per vehicle, lower incentives, increased market share and better franchise values. But worldwide sales dropped 18 percent to 4.1 million vehicles in the just-ended 12-month period. Though Nissan expects sales to increase to 4.4 million in the current fiscal year, that level is still below the annual tallies the company booked pre-pandemic of more than 5 million.

Under CEO Makoto Uchida's Nissan Next midterm plan, Nissan wants to achieve an operating profit margin of 5 percent and a sustainable global market share of 6 percent by March 31, 2024. But external factors are throwing up roadblocks.

"We believe we can achieve 5 percent operating margin eventually," Uchida said. "But if you look at the immediate challenges today in fiscal year 2021, there is a big impact from semiconductor and commodity price hikes. So at this point in time, in operating profit, we foresee coming out even."

Many of Nissan's Japanese rivals, by contrast, are now reloading for a rapid rebound, after a year of being hammered by pandemic-forced factory shutdowns and supply chain bottlenecks.

Most of the group last week released forecasts for their new fiscal year that plot a big bounce back as they put operating troubles behind them.

Toyota now expects near-record revenue, Subaru expects its operating profit to double and even Mitsubishi plans to get back into the black after tumbling to a massive fiscal-year loss.

Toyota got an early jump on securing microchip supplies and is now largely shrugging off the ongoing shortage, saying it expects only a minimal impact on its operations. "Do we foresee any major impact? No," declared Toyota CFO Kenta Kon. "But we don't think we can rest and be relaxed."

He said Toyota's sales forecast for the fiscal year ending March 31, 2022, is conservative and takes into account the risk of possible supply interruptions.

But the automaker is nonetheless forecasting a 14 percent jump in global wholesales to 8.7 million vehicles in the current fiscal year. It has pegged North American sales to grow 18 percent to 2.7 million vehicles, and European deliveries to increase 15 percent to 1.1 million.

A confident Toyota also said it will pump a record ¥1.16 trillion ($10.5 billion) into R&D in the current fiscal year — an amount that represents about 3.9 percent of its anticipated sales. The increase will go largely into supporting Toyota's push for electrification.

Toyota predicted that its rebound in global sales will underpin a 14 percent boost to operating profit to ¥2.5 trillion ($22.69 billion) in the current fiscal year, for a robust operating profit margin of 8.3 percent. Achieving that target would mark Toyota's return to pre-pandemic profit levels and represent its biggest operating profit since notching an all-time high in the fiscal year ended March 2016.

Revenue is expected to reach ¥30.0 trillion ($272.26 billion), just shy of the all-time high of ¥30.2 trillion ($274.07 billion) in the fiscal year ended March 31, 2019.

Subaru Corp., which is 20 percent owned by Toyota, is likewise zooming back to health.

The all-wheel-drive specialist said the chip crisis took 61,000 vehicles out of production in the fiscal year ended March 31. Crimped supply chains were one reason Subaru's full-year operating profit tumbled by more than half and worldwide sales retreated 15 percent to 860,000.

Subaru is not venturing a forecast for the impact of the chip shortage for this fiscal year because the situation remains murky.

The company is facing ultra-tight inventory levels, which pose a problem in feeding dealers new vehicles as demand rekindles across the U.S. and Japan, executives said.

Subaru is especially sensitive to the chip shortage because of its small scale, limited number of models and extensive use of commonized parts across the lineup, CEO Tomomi Nakamura said.

"As for sales, there is a robust recovery in demand in Japan and the U.S.," Nakamura said. "We can't satisfy customer orders at the moment. We are considering ways to adjust assembly line shifts flexibly in the second half of the year, and we are in discussion with our labor unions about this," he said, referring to its Japanese operations.

The U.S. is by far Subaru's largest market and generated 71 percent of its sales in the most recent fiscal year. As the U.S. recovers from the pandemic, so will Subaru. The company forecast a 16 percent surge in global sales to 1 million vehicles for the current year and a near doubling of operating profit.

In 2018, before the pandemic hit, Nakamura had set a target for a midterm operating profit margin of at least 9.5 percent. But in light of the more severe business environment, he has scaled that back to 8 percent.

Subaru achieved an operating margin of just 3.6 percent in the fiscal year ended March 31, down from 6.3 percent in the preceding fiscal year.

Subaru is focused on lifting its U.S. market share to 5 percent through strengthening its retail network and increasing penetration in Sunbelt states where it has traditionally been weaker.

Subaru's U.S. market share reached 4.2 percent for 2020 calendar year.

"Our inventory situation is not balanced well," Nakamura said of the critical U.S. market, adding that Subaru had only an 18-day supply at the end of April.

"But we are good at managing with low inventory levels, so we will try to ride this difficult period out until our supply recovers."

Naoto Okamura contributed to this report.