Nissan: Down but a Long Way From Out
March 26, 2007
By Peter Nunn
Suddenly, the world is jumping on Carlos Ghosn and Nissan, and with reason. The six-year bull-run engineered by the iconoclastic business champion has now hit some unexpected bumps in the road.
Profits are down, sales are down. Nissan's management is reshuffling. And analysts and editors are asking tough questions of a CEO who has known almost nothing but success since he famously brought Nissan back from its near-death experience in 1999, earning huge plaudits from around the world in the process. It's a rare rebuke for "Le Ice Breaker."
How has this Nissan fall-off happened and, more to the point, been allowed to happen? The intensity of global competition, price wars and surging raw material costs aside, you could say a lot of it has to do with product, or the lack of it.
Ghosn's Revival Plan
When Ghosn came to Nissan in summer 1999, he famously created the Nissan Revival Plan (NRP), which totally restructured the way Nissan worked. The revival plan began in late 1999 and brought Nissan back into the black with a record consolidated net profit of $2.97 billion by 2002.
Then came Nissan 180, which kicked off in April 2002. These two plans generated a lot of new product, most of it geared to North America where Nissan also put down $1.4 billion to open a new plant in Canton, Mississippi, to build trucks and full-size SUVs.
As a result of a sharp U.S. sales decline, Nissan offered buyouts to employees at its two plants in Tennessee, including its Smyrna plant, its first North American assembly plant. Nissan announced last week that 775 workers -- or about 12.5% of its 6,200-employee workforce -- had accepted the offers. The offer included a cash payment of $45,000 plus $500 for each year worked by the employee opting for the buyout.
Product Flood, Product Drought
Insiders say the near brush with bankruptcy in 1999 had a harrowing effect on the company. A concerted effort was made to bring out as much new product as fast as possible to show that Nissan was alive and well. The move put Nissan back on track and drove up sales and profits.
Between 2000 and 2004, Nissan's pedal was fully to the 
metal but by the end of Nissan 180 in October 2005, the product pipeline had almost, but not quite, run dry. In the U.S., where Nissan generated most of its profits, there was a yawning gap before key new volume models -- Versa, new Altima and Sentra -- made it to the showrooms.
At the same time, the U.S. truck market went soft, a factor nobody could have predicted two years previously, and the incentive wars heated up. Slower large truck and SUV sales along with increased incentives prompted Nissan to lower its forecast.
Edmunds.com Analysis: Nissan in the U.S.
Nissan sales in the U.S. peaked in 2005, and then declined by 5.3% from 2005 to 2006. At the same time that sales decreased, Nissan’s inventories were climbing, prompting the automaker to boost its incentive spending, according to an analysis by Edmunds.com’s AutoObserver.
Year |
Total_Volume |
Market_Share |
TCI |
Days_To_Turn |
2002 |
739,448 |
4.4% |
$875 |
47 |
2003 |
789,226 |
4.8% |
$1,156 |
56 |
2004 |
985,988 |
5.9% |
$1,518 |
54 |
2005 |
1,076,584 |
6.4% |
$1,776 |
57 |
2006 |
1,019,249 |
6.2% |
$2,309 |
60 |
Through February | ||||
2006 |
160,132 |
6.7% |
$2,087 |
61 |
2007 |
167,862 |
7.2% |
$1,767 |
61 |
(TCI - True Cost of Incentives)
Nevertheless, despite the significantly higher incentive spending, Nissan sales did not improve. Decreases were particularly pronounced in full-size truck and sport-utility vehicle sales. Only the Nissan Frontier and Murano as well as the Infiniti M showed increases.
Make |
Model |
2005 |
2006 |
% Change |
Nissan |
350Z |
27,278 |
24,635 |
-9.7% |
Nissan |
Altima |
255,371 |
232,457 |
-9.0% |
Nissan |
Armada |
39,508 |
32,864 |
-16.8% |
Nissan |
Frontier |
72,838 |
77,510 |
6.4% |
Nissan |
Maxima |
75,425 |
69,763 |
-7.5% |
Nissan |
Murano |
74,454 |
81,362 |
9.3% |
Nissan |
Pathfinder |
76,156 |
73,124 |
-4.0% |
Nissan |
Quest |
40,357 |
31,905 |
-20.9% |
Nissan |
Sentra |
119,489 |
117,922 |
-1.3% |
Nissan |
Titan |
86,945 |
72,192 |
-17.0% |
Nissan |
Versa |
22,044 |
n/a | |
Nissan |
Xterra |
72,447 |
62,325 |
-14.0% |
Infiniti |
FX35 |
23,916 |
20,228 |
-15.4% |
Infiniti |
FX45 |
2,869 |
2,426 |
-15.4% |
Infiniti |
G35 |
68,728 |
60,745 |
-11.6% |
Infiniti |
M35 |
14,952 |
19,394 |
29.7% |
Infiniti |
M45 |
9,048 |
6,264 |
-30.8% |
Infiniti |
Q45 |
1,129 |
393 |
-65.2% |
Infiniti |
QX56 |
14,715 |
11,696 |
-20.5% |
The picture is brightening this year with sales up 4.8 percent through the first two months of 2007 compared with the same period last year and despite a reduction in incentive spending. Edmunds.com predicts Nissan will sell 104,000 units in March 2007, up about 1.1 percent from March 2006. Nissan's market share is expected to be 7.0 percent in March 2007, up slightly from 6.8 percent in March 2006 and February 2007.
Nissan is seeing some sales improvements in several key models, including the redesigned Altima and Infiniti G35. The Nissan Murano and Infiniti FX crossovers continue to do well as the Nissan Versa. Sales of the heavily freshened Quest minivan are up as well.
Nissan: U.S. Outlook
Nissan’s outlook for the near future –- next 18 months –- is promising, thanks to new product. The Armada, Pathfinder and Titan are freshened in 2008. The Sentra V-Spec is new. The Altima Coupe and Nissan Rogue, nicknamed the “baby Murano,” are likely to do well. And next year’s much-anticipated Skyline will create some excitement as it fills a halo slot above the Z.
“If Nissan can maintain current market share on its large trucks and SUVs, which account for about 100,000 sales a year, the automaker will be in good shape,” said Alex Rosten, manager, Pricing and Market Analysis, Edmunds.com’s AutoObserver.
Make |
Model |
2006 YTD |
2007 YTD |
% Change |
Nissan |
350Z |
4,019 |
2,697 |
-32.9% |
Nissan |
Altima |
36,838 |
46,508 |
26.3% |
Nissan |
Armada |
5,211 |
5,160 |
-1.0% |
Nissan |
Frontier |
11,391 |
9,956 |
-12.6% |
Nissan |
Maxima |
10,214 |
8,417 |
-17.6% |
Nissan |
Murano |
14,409 |
14,595 |
1.3% |
Nissan |
Pathfinder |
12,759 |
9,828 |
-23.0% |
Nissan |
Quest |
3,641 |
5,054 |
38.8% |
Nissan |
Sentra |
19,752 |
16,169 |
-18.1% |
Nissan |
Titan |
12,949 |
11,284 |
-12.9% |
Nissan |
Versa |
0 |
9,622 |
n/a |
Nissan |
Xterra |
11,648 |
9,904 |
-15.0% |
Infiniti |
FX35 |
2,624 |
3,010 |
14.7% |
Infiniti |
FX45 |
315 |
264 |
-16.2% |
Infiniti |
G35 |
8,478 |
10,321 |
21.7% |
Infiniti |
M35 |
2,942 |
2,826 |
-3.9% |
Infiniti |
M45 |
950 |
671 |
-29.4% |
Infiniti |
Q45 |
104 |
13 |
-87.5% |
Infiniti |