Ghosn expects huge drop in net income

Nissan Motor Co, Japan's third- largest automaker, forecast the biggest drop in net income in nine years because of a stronger yen and weaker demand in the United States, its most profitable market.

Net income will likely fall 30 percent to 340 billion yen ($3.3 billion) in the year ending March 31, compared with 482.3 billion yen in the previous year, the Tokyo-based automaker said in a statement yesterday. Sales will fall 4.4 percent to 10.4 trillion yen.

Nissan's Chief Executive Officer Carlos Ghosn joins Toyota Motor Corp and Honda Motor Co in predicting lower earnings as the yen's 7.7 percent gain against the dollar this year erodes the value of overseas sales.

Record gasoline prices and job insecurity have also cut demand for Titan pickup trucks and Pathfinder sport-utility vehicles.

"There's no way Japanese automakers can make up for the slump in the US market," said Ichiro Takamatsu, chief investment officer at Alphex Investments Co in Tokyo, which manages $60 million in assets. "They are suffering from their huge reliance on the US."

Nissan's operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may fall 31 percent to 550 billion yen this fiscal year, compared with the 620 billion yen estimate by the analysts.

Toyota, Honda

"Take a look at all the headwinds we're facing in 2008," Ghosn said yesterday. "We're not being pessimistic, we're being prudent."

Including Nissan, all eight Japanese passenger carmakers have said operating profit will fall this fiscal year. Toyota, Japan's biggest automaker, on May 8 forecast operating profit will drop 30 percent for the period. Operating profit at Honda, the country's No 2, may fall 32 percent, the company said on April 25.

Record gasoline prices and a sluggish economy in the US may cut auto demand to the lowest since 1995, according to Standard & Poor's.

Nissan has gained market share from General Motors Corp and Ford Motor Co as US drivers opt for smaller, fuel-efficient models including Nissan's Versa compact car.

The price of regular gasoline gained 8 percent to $3.29 a gallon in the quarter ended March and cost $3.72 a gallon as of Sunday.

Nissan rose 3.2 percent to 960 yen at the 3 pm close of trading in Tokyo, before the company announced earnings. The shares have fallen 22 percent so far this year.

In the US, sales may be little changed at 1.06 million vehicles for the year ending March 31, 2009, even as global sales may rise 3.4 percent to 3.9 million vehicles, Nissan said.

The carmaker predicts that growth will come from Russia and a number of other emerging markets.

The company based its forecast on exchange rates of 100 yen to the dollar and 155 yen to the euro, compared with 114.4 yen and 161.6 yen a year earlier.

A stronger yen will cut Nissan's operating profit by between 270 billion yen and 280 billion yen this fiscal year, Nissan said.

"Japanese manufacturers have to accept that the era of the cheap yen is probably over," said Michael Wynn-Williams, an automotive analyst for Global Insight Inc in London.

Agencies

(China Daily 05/14/2008 page16)