Nissan warns of $4.5bn annual operating loss

Nissan has warned it faces its biggest ever operating loss this year, blaming a pandemic-driven collapse of demand in key markets and the “severe impact” of Covid-19 on global operations.

Delivering results for the first quarter of the financial year ending in March 2021, Nissan forecast an annual operating loss of Y470bn ($4.5bn), a figure that would be the worst on record and the crisis-hit carmaker’s second consecutive year of red ink at the operating level. 

The grim outlook comes as the company battles a number of woes including what some executives have described as a “deeply troubled” relationship with the French carmaker Renault, its largest shareholder and alliance partner of the past two decades.

The two groups, along with the third partner Mitsubishi Motors, have embarked on a programme in which each member of the trio will focus on different parts of the global market — a deliberate departure from the more directly collaborative relationship envisaged by the alliance’s former head, Carlos Ghosn.

Nissan’s full-year forecast came as it logged a Y153.9bn operating loss for the three months to the end of June. Analysts said this suggested the company did not expect to see either a V-shaped revival of fortunes or any significant benefits of an extensive restructuring programme announced in May. 

Excluding profits from its finance division, the company anticipates as much as Y670bn in operating losses for its automotive division alone. 

The turnround plan involves streamlining Nissan’s portfolio of models, fierce cuts in production around the world and the closure of its plant in Barcelona. 

But Koji Endo, head of equity research at SBI Securities, said Nissan’s cost cuts were not sufficient to revive its fortunes unless there was a dramatic rebound in global car sales, which is unlikely at the current pace of recovery. 

“The results are much worse than expected,” Mr Endo said, adding the benefits of Nissan’s restructuring measures were not visible in its forecast for this year. 

During the three-month period, Nissan’s global vehicle sales were just 643,000 units — a 48 per cent drop from the same period a year earlier propelled by huge declines in the North American and Chinese markets. Nissan’s full-year forecast includes a prediction that its global sales volume will fall 16.3 per cent, roughly matching the overall market trend. 

Nissan’s recently installed chief executive Makoto Uchida said on Tuesday that the results and full-year forecast were within the company’s expectations.

“We suspended production at many plants globally due to the Covid-19 pandemic,” Mr Uchida said. “The plants that resumed production also suffered from low utilisation rates due to declining sales. As a result, the company’s performance has been impacted by this challenging business climate.”

Many of Nissan’s miseries predate Covid-19 and reflect both the company’s aggressive global expansion earlier in the decade and the chaos that followed the 2018 arrest of the charismatic Mr Ghosn.

Even before his detention on charges of financial misconduct — which he denies — sales teams in Japan had begun complaining of a lack of new models while analysts had noted a broader dip in competitiveness.

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