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Nissan concedes its turnaround won't be quick

by Drew Johnson

The company is working to shore up its flagging U.S. operations.

Things aren't exactly going swimmingly for Nissan at the moment. The company's previous CEO, Carlos Ghosn, has been indicted in Japan for financial improprieties, and Nissan's sales have been on the decline in the U.S. And the automaker's current CEO has warned that things will get worse before they get any better.

Hiroto Saikawa, Ghosn's successor, made those comments at Nissan's quarterly earnings conference. Saikawa and his team are facing the monumental task of altering Nissan's course in the United States, where sales have been prioritized over profits for the last several years.

Because of that shift in strategy, Saikawa expects Nissan's United States sales to fall in the short-term as the company weens itself off fleet sales and deep discounts to move product.

"Unfortunately, a temporary decline in volume is unavoidable," Saikawa told Automotive News. "It will take time to deliver results. The top management should be patient enough to wait for this.”

It remains to seen, however, just how long top management will have to wait for results. Nissan's U.S. retail sales tumbled by 6.3 percent in 2018, and the company started 2019 with a January sales decline of 18 percent. Moreover, Nissan's global operating profit margins have dwindled from 6.1 percent about two years ago to a predicted 3.9 percent for the fiscal year ending March 31. Saikawa blames the U.S. for that sharp decline.

"The margin of Nissan is not something we are proud of," Saikawa conceded. "The North American operation of Nissan is the major cause of that.”

Despite a need to boost profitability in the U.S., Nissan is still heavily relying on incentives to drive sales. During the October-December stretch, Nissan's average U.S. incentive inched up 1.5 percent to $4,389. In contrast, industry-wide incentives fell 3.4 percent during the period to an average of $3,714.

Nissan is currently working to pare down its vehicle supply, which should eventually work to reduce the company's need to spend on U.S. incentives.

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