Thursday, January 15, 2009

Nissan cuts Japan production amid reports of loss

Report in AP today confirms the deep rooted problems faced by Japanese auto makers. Keep a close look out to see how the Japanese mind deals with such issues. No knee jerk reactions like the Americans. Editor

Nissan Motor Co said on Thursday it is slashing domestic production by 64,000 vehicles in February and March to trim inventories and adjust to a continuing drastic slide in global demand.

The bad news comes on the heels of media reports on Thursday that said Japan's No 3 automaker is likely to post an operating loss in the fiscal year through March, joining a growing list of big Japanese corporate names expected to slide into the red. Since September, Nissan has already announced, over several times, domestic production cuts that combine to a reduction of 225,000 vehicles, spokeswoman Haruko Wada said. The company had initially expected to produce 1.38 million vehicles in Japan for the fiscal year.

Like other exporters, Nissan has been hammered by the double blow of falling overseas sales stemming from the global financial crisis and the stronger yen, which erodes foreign income. The latest reports follow dismal forecasts from top automaker Toyota Motor Corp, which projected last month a 150 billion yen ($1.69 billion) operating loss for the fiscal year ending March 31 _ its first such red ink in 70 years.

Earlier this week, media reports and analysts predicted Sony Corp would also report an operating loss this fiscal year. Sony did not comment.

Operating profit is seen as a direct indicator of core business performance while net profit reflects taxes, dividends, asset sales and other items.

The Yomiuri, the nation's top-selling newspaper, and Kyodo News agency reported Nissan would sink into operating losses for the fiscal year through March.

That would mark its first operating loss under Chief Executive Carlos Ghosn, the outspoken executive who has led a turnaround at Nissan after arriving from alliance partner Renault SA of France in 1999.

Tokyo-based Nissan, which makes the Z sportscar and Infiniti luxury models, said in a release the reports were not based on an announcement, but did not deny they could post a loss. To reduce Japan production, Nissan is halting production in February for 13 days at its Tochigi plant, 11 days in Kyushu and 9.5 days at Oppama, it said. Plans for March were still undecided. Toyota and Honda Motor Co have also reduced production in Japan, laying off thousands of temporary assembly line workers. In yet another painful sign of troubled times, Nissan said last week it will slash its British work force by 1,200. Nissan now employs about 5,000 people at its plant in Sunderland, northern England.

Japanese exporters have been pinched as the dollar has slid from about 110 yen a year ago to below 90 yen in recent weeks. For every yen the dollar falls, Nissan can expect to lose 14.5 billion yen, according to the company. Losses related to currency fluctuations are worse for Toyota because it has bigger North American sales. In October, Nissan drastically cut its forecasts for the fiscal year through March, slashing its operating profit target to 270 billion yen from 550 billion yen.

Global demand has continued to fall since then. The credit crunch and the hard times have pummeled the US market, where Japanese automakers make a bulk of their profit. Data from automakers show US sales fell to 13.2 million vehicles in 2008, down 18 per cent from 2007. In December alone, US sales plunged 36 per cent, and Nissan's slid 31 per cent on year. Although the Japanese have been expanding in China, Brazil, Russia and other new markets, they are still small compared to the US and Europe.

Adding to the woes, the Japanese market, which had been stagnant for years, is also contracting. Japan sales of new vehicles fell to 3.2 million vehicles last year, the lowest in 34 years. Nissan Chief Operating Officer Toshiyuki Shiga said he was counting on a revival in the US market.

"The recovery will get moving once financing problems settle down and American individual consumer sentiments start looking up," he told reporters recently.

No comments: