Nissan Motor officials dismissed rumors that the troubled automaker is looking to sell of part or all of its stake in smaller Japanese automaker Mitsubishi Motors.
While still under the leadership of former CEO Carlos Ghosn, Nissan purchased a 34% stake in Mitsubishi which was suspected of teetering on the brink of bankruptcy. Since then, Nissan’s experienced it own difficulties, including the sudden and controversial departure of Ghosn, who was arrested by Japanese prosecutors, on charges of financial malfeasance — much of that coming from information provided by Nissan.
“We are not in any discussion or consideration of changing the capital structure in our partner companies. We are moving ahead with many projects,” Nissan COO Ashwani Gupta said in an interview at the Reuters Automotive Summit teleconference.
(Nissan reports smaller loss than expected for second quarter earnings.)
Gupta was responding to a report from Bloomberg News, which cited unidentified sources who said the company was looking to sell off the third leg of Renault Nissan Mitsubishi Alliance. Ghosn paid $2.3 billion for the struggling automaker, and he was later named chairman of it. The move mirrored the $6 billion acquisition of Nissan, led by Ghosn as Renault’s chief, in 1999.
He quickly eliminated the possibility of a full takeover of the smaller Japanese company, suggesting the plan was to share platforms and accelerate development of electrified powertrains. That all went by the wayside with Ghosn’s arrest in November 2018 and his subsequent ouster.
Since then Nissan’s sales have steadily decline, and the current CEO Makoto Uchida – one successor removed from Ghosn – is looking to lead the automaker back into the black, with a smaller portfolio of more profitable vehicles.
The company reported a record operating loss of $3.2 billion for its second quarter, which was 28% better than the company forecast earlier. Strong sales in China, which is farther along in its recovery from the COVID-19 pandemic than the rest of the world, plus improving sales in the U.S. helped cut into the operating loss. Sales in China rose 4% during the quarter, including 12.8% in September.
(Nissan aims to be back in black next year.)
The company’s revenues dropped as well, falling to $18.2 billion from $25 billion during the year-ago period. Overall, through the first six months of fiscal year 2020, Nissan’s revenue has fallen 38.1% while profits have shifted to significant losses in the interim with its operating margin moving from 0.6% down to a -5.1 percent.
However, Nissan’s CEO Makoto Uchida said the company’s recovery plan, Nissan NEXT, is having positive impact on the company’s bottom line. Currently, the focus centers on three points:
- Improving quality of sales by focusing on retail sales, lowering incentives and improving revenue per unit;
- Reducing inventory levels between Nissan and dealers; and,
- Reducing fixed costs and optimizing costs across business operations
Officials noted it expects to reduce fixed costs by 300 billion yen by the end of FY 2020. Additionally, the company added to its liquidity to help it through the pandemic and its restructuring plans, issuing $8 billion and 2 billion euros in debt, and had a 2 trillion-yen credit line with lenders.
(Nissan takes aim at former CEO with $95M lawsuit, Ghosn fires back in new book.)
As a result of the better than expected news, Nissan revised its earnings forecast, predicting a full-year operating loss of 340 billion yen compares with the 470 billion-yen loss it forecast three months ago. It also raised is global sales forecast to 4.165 million vehicles compared with 4.13 million earlier. However, that’s still a significant drop from last year’s 4.93 million vehicles.