YOKOHAMA, Japan (Reuters) – Nissan Motor has warned that its annual profit will mark the six-year lows on the decline in global sales, emphasizing the challenges it faces while grappling with the repercussions of the shocking arrest and ousting of its former president Carlos Ghosn.
The Japanese automaker, in its first results since Ghosn was arrested in November, revealed a charge of $ 84 million linked to the deferred compensation for the executive that was charged with denouncing his salary to Nissan in 2010-2018.
The scandal has stirred global car markets and created tensions between Nissan and its automaking partner, French Renault, raising concerns about the future of the companies Ghosn wanted to integrate.
The gloomy outlook points to an urgent need for Nissan and Renault to strengthen their partnership, but the ties have been strained since the Japanese automaker first moved to remove Ghosn as president afterwards. arrest on November 1
Nissan wants to stabilize alliance operations, said Chief Executive Hiroto Saikawa, who this week plans to meet new Renault president Jean-Dominique Senard in Japan as they look for ways to cement their partnership.
In view of that meeting, the Nissan CEO stated that he wanted both companies to make better use of their size to be more competitive and efficient in areas such as production and procurement, respecting the 39, mutual autonomy.
"In recent years there has been much talk about the" convergence "of the two companies' operations," said Saikawa, referring to one of Ghosn's alliance's main objectives. "As we stabilize our operations, we must re-examine whether investments (towards convergence) are the most efficient."
This could mean a re-evaluation of the alliance's growth targets until 2022, Saikawa said at a Tuesday briefing.
Nissan, which is almost 60 percent larger than Renault for sales, remains young in its shareholding structure. Renault holds 43.4 percent of Nissan, while Nissan only has a 15 percent stake without a right to vote in Renault.
Japan's second largest automaker projected an operating profit of 450 billion yen ($ 4 billion) for the year to March, down 22% from the previous year and 17 % compared to a previous forecast, hurt by the slowdown in global sales.
This would be Nissan's lowest operating profit since 2013.
(For an interactive chart on Nissan's operating profit, vehicle sales, click on tmsnrt.rs/2POSji4)
SELL A SKID
Nissan cut its annual global retail vehicle sales increased by 5.5% and projected weaker sales in China, its largest market and the United States.
Saikawa said Nissan will avoid achieving the goals sales using discounts, a strategy that damaged its profitability in North America, the world's second largest car market.
"We have been able to meet 60 to 70 percent of our (global) goal for the year up to the third quarter," said Saikawa. "If we are not careful how we recover that deficiency in the fourth quarter, we may find ourselves in similar situations we have seen in the past."
"So we want to improve our performance by improving sales quality," he added.
Nissan plans to sell 5.6 million vehicles worldwide in March, compared to a previous target of 5.93 million.
While seeing sales in China still growing, the world's leading automotive market, has reduced its forecasts for the country to 1.56 million units by 1.70 million units.
In the United States, sales have now declined by 8.6% in the year to 1.46 million units, from 1.55 million last year.
(For an interactive chart on vehicle sales of Japanese automakers in the United States, China, see tmsnrt.rs/2RjnBuA)
Nissan and its domestic rivals, including Toyota Motor Corp, have struggled with slow sales and falling profits North America. Their margins were squeezed as they resorted to heavy discounts to drive up demand in a competitive US market where sales stood at record levels.
While it was able to repair some of its profits in North America as the reduction of stocks of the old models allowed to reassemble on the heavy discount of the United States, the decline in demand will test the ability of Nissan to be disciplined with its incentives.
(For an interactive chart on the annual sales of global vehicles of Japanese automakers, see tmsnrt.rs/2RnFOr2)
GHOSN SALARY PROVISION
The dark prospect arrives while Nissan is grappling with the Ghosn scandal and the consequent control of its corporate governance.
Nissan said it recognized about 9 billion yen ($ 84 million) in additional expenses related to payments to Ghosn. This announcement comes after it has been indicted alongside Ghosn with the non-disclosure of compensation.
Although it is possible that a Japanese court could order Nissan to pay Ghosn for this amount, Saikawa said it was "unlikely" that spending would be realized.
This provision refers approximately to the amount that Ghosn was accused of underestimating in his 2010-2018 salary at Nissan.
Ghosn denied all charges against him.
Report of Naomi Tajitsu; Editing by Himani Sarkar