Amid The Virus Threat, Japan’s Nissan Reports 83% Drop In Profits

Troubles that started soon after the arrest and ouster of its former Chairman Carlos Ghosn is persisting for the Japanese car maker Nissan. Its profits are on a downward slide and the company now braces for more hits because of the outbreak of the coronavirus in China which has upended the supply chain of the global auto industry.

A drop of 83 per cent year in year in the operating profits of Nissan was reported on Thursday for the quarter ended December 31, at 54.3 billion yen or $495 million, the company said.

There was a drop of 1.5 per cent in the stocks of the company in Tokyo as Nissan also missed the market expectations for earnings. Analysts expected that the company would make operating profits of 56.7 billion yen or $516 million for the quarter according to data of Refinitiv.

The latest reported quarter is the fourth straight quarter that the company has reported a drop in profits on the back of a slump in global sale of its vehicles since the Ghosn debacle.

“We are making progress, but sales volumes have been weak so we need to do more restructuring than initially planned,” Makoto Uchida, Nissan’s new CEO and its third since September, told reporters.

Nissan now fears that that the fast spreading and deadly coronavirus will also now affect its Chinese business as well as its business in other parts of the world, and issued a warning for the current quarter.

“The market remains tough in part because of the novel coronavirus outbreak,” Uchida said during the earnings presentation Thursday.

The temporary closure of factories in China to prevent the spread of the coronavirus since the Lunar New Year holidays has meant that many global car makers including Nissan were feeling a shortage of supply of parts crucial for assembling of cars as many are manufactured in China. This forced Nissan to announce last week of a temporary impact in production at its Kyushu plant in Japan. The company said that it was trying to restart production in two of its plants in China starting February 17.

The spread of the virus in China has hit the global auto industry because it had originated in the Chinese city of Wuhan, where a large number of factories in the supply chain of the global auto companies as well as factories of the companies themselves are located, is the epicenter of the epidemic. There are large factories in Wuhan of the number of global auto companies including Nissan as well as General Motors, Renault, Honda and Peugeot owner PSA Group. All of the factories have been temporarily locked down since late January.

China’s auto production and sale is likely to be hit much harder because of the spread of the novel coronavirus compared what happened during the 2003 SARS outbreak, said China’s auto industry association.

Poor performance since the arrest and ouster of Ghosn of Nissan has already forced the company to device strategies for cost cutting by slashing jobs, closing down of manufacturing sites and reducing product portfolios in the market.

(Adapted from CNN.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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