Scandal-hit Nissan cuts profit forecast

Japan’s Nissan Motor Co reported its smallest quarterly profit in three years and cut its annual outlook, hurt by rising expenses in a competitive North American market and costs stemming from improper final inspection procedures at home.

TOKYO • Japanese car giant Nissan yesterday downgraded its annual operating profit forecast after a damaging inspection scandal in its domestic market, as its chief executive vowed to regain customers' trust.

Nissan said it now expects to make an operating profit of 645 billion yen (S$7.72 billion) for the year to March, a cut from its previous forecast of 685 billion yen.

The manufacturer left its forecasts for net profit and sales unchanged at 535 billion yen and 11.8 trillion yen respectively.

Before presenting the figures to journalists, Nissan CEO Hiroto Saikawa bowed long and deep in apology. "I would like to express my apologies to customers, partners, dealers and all the people who have been supporting Nissan," he said.

The scandal has "undermined trust", he said, adding: "We would like to do our best to regain the trust of all of you."

Last month, Nissan said it was recalling some 1.2 million cars in Japan that had failed to meet domestic rules on final vehicle inspections. It confirmed that tests were performed by staff who were not certified to check that vehicles were up to Japanese government standards.

The carmaker suspended all domestic production for a few weeks before resuming earlier this week, sending its passenger car sales plummeting more than 55 per cent in Japan last month.

"Considering the impact from the inspection issue-related costs in Japan and the pace of progress in our cost-cutting efforts, we are revising down our operating profit forecast," the maker of the Altima sedan said in a statement.

Excluding the impact from the inspection scandal in Japan and costs linked to litigation in the United States, Nissan said its operating profit was "in line with our initial forecast".

For April-September, its net profit edged down 2.1 per cent year on year to 276.51 billion yen while operating profit dropped 17 per cent to 281.83 billion yen. Sales rose 6.2 per cent to 5.652 trillion yen as the number of cars sold globally edged up 4.6 per cent to 2.73 million vehicles. In Japan, it sold 283,000 vehicles over the period, up 34.1 per cent, it said.

In addition to falls in domestic sales last month, the firm also saw hundreds of orders scrapped in Japan due to the suspension of factory operations, a Nissan official in charge of the local market told reporters. She said the firm would continue to see the impact of the scandal this month but "we are expecting to recover in December".

Mr Saikawa pledged that the company would announce details of an internal probe into the inspection issue in the coming days.

Mr Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm, said the impact of the scandal is now "quite visible". He told AFP before the announcement: "It's not only a matter of its brand image. The scandal is now affecting Nissan's real business."

The number of cars sold in China rose 6.7 per cent and the figure for the European market edged up 3.6 per cent, but sales volume in North America slipped 1.3 per cent, reflecting slowing demand.

Long-time Nissan boss Carlos Ghosn this year stepped down from Nissan's CEO to focus on overhauling scandal-hit Mitsubishi Motors. He took charge at troubled Mitsubishi after Nissan threw it a lifeline last year, buying a one-third stake as it wrestled with a mileage-cheating scandal that hammered sales. He also heads France's Renault and remains Nissan chairman.

Following the results, the firm's shares closed up 0.67 per cent at 1,118.5 yen, outperforming the overall market, which ended down 0.10 per cent.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on November 09, 2017, with the headline 'Scandal-hit Nissan cuts profit forecast'. Print Edition | Subscribe