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Nissan pivots from volume to profitability in North America

by Drew Johnson

Nissan will no longer chase volume alone.

Nissan may be putting the pedal to the metal in China, but company CEO Hiroto Saikawa wants the automaker's North America boss to take his foot off the gas.

That decree is in sharp contrast to the one put out by Saikawa's predecessor, Carlos Ghosn. Around the turn of the decade Ghosn, now chairman of Nissan, set the goal of hitting a 10 percent North American market share by 2017. Nissan hit that goal, but largely at the expense of profitable and brand value.

Denis Le Vot, Nissan's newly appointed chairman of North American, will now have to figure out a way to reduce the company's dependence on incentives and fleet sales for volume. Saikawa has given Le Vot 60-days to come up with a plan.

"Hopefully, we will be able to reach a very solid point in two years," Saikawa told Automotive News. "This is the first mission for the new chairman."

Nissan has been ramping up production despite a dip in North American sales, resulting in a glut of vehicles languishing on dealer lots. Nissan currently has a 65-day supply of vehicles on hand, up from a 59-day supply at the beginning of January. In order to move that metal, Nissan has increased its average incentives spending to $4,572 per vehicle, or about $600 more than the industry average.

As a result of that kind of spending — combined with the slimmer margins of fleet sales that are so critical to Nissan's volume push — the company's North American operating profit has plummeted by 41 percent.

Although the exact details of Nissan's turnaround plan are still being ironed out, the company will start with cutting supply. Nissan is aiming to slash about 100,000 vehicles from its inventory by the end of next month, which it believes will reduce incentives spending by around $400 per vehicle. Increasing brand value will take much longer and will be evaluated on the company's residual values.