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Nissan Motor Company (NSAN.Y)
Nissan Reports First Annual Loss in 10 Years
This week has gotten off to a rough start for some leading Japanese companies. Just this morning, Hitachi - a large Japanese manufacturer of a wide variety of products - announced the largest annual net loss ever by a Japanese manufacturer. Also this morning, two major Japanese automobile manufacturers announced their annual data, and the results weren't much better. And while both companies posted losses, Nissan's losses far surpassed those of Mazda. What does this loss mean for Nissan, and how long will it be before the company is able to recover?
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For the fiscal year ending in March, Nissan reported net revenue of 8.437 trillion yen, and an annual net loss of 233.7 billion yen ($2.4 billion). The company's performance declined throughout the year, with fourth quarter results actually worse than the entire year's results (with a net loss equivalent to $2.8 billion), pulling down the profits from the previous quarters. This was a disappointing year for Nissan, because it was the first time the company had posted an annual net loss in about 10 years, and the first time since Chief Executive Carlos Ghosn had taken on the position of CEO. It was a drastic difference from last year, when the company reported a profit of 482.3 billion yen.
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Nissan officials are blaming the loss on three different things. First, the financial crisis in the United States. Although the company is headquartered in Japan, they typically do a lot of business in the United States. This year, however U.S. sales dropped 19.1%, the largest percentage drop of any area. The global slowdown is the second reason; and although U.S. sales might have looked the worst, worldwide sales were down as well, an average of 9.5%. The third reason was a strong yen; as the yen improves against other currencies, the value of money earned from other countries goes down.
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However, on the positive side, both the company and analysts had been expecting losses greater than the actual results. In February, Nissan had forecasted a net loss of 265 billion yen, and revenue of 8.3 trillion yen, two goals which the company was able to surpass even with such a disappointing fourth quarter. Looking ahead, the company is still forecasting losses for the upcoming fiscal year, but they expect they will be lower, at about 170 billion yen. And optimistically, they hope that by the following year, ending in March 2011, they should be returning to a profit.
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CEO Ghosn seems determined to turn this company around. He has already done this for the company once, bringing the company from near bankruptcy when he started about 10 years ago, to the profitable company it has been in recent years. And although he had previously stated that he would not stay at Nissan more than 10 years, he has recently announced that he does not want to leave the company until they become profitable once again. The economy has taken a hit on the majority of auto manufacturers, leaving Mazda, Toyota (TM: Charts, News, Offers), and others in the same boat. Ghosn seems determined to focus hard, on growing cash reserves, and also focusing on hybrids and electric vehicles. Ghosn has done it once; in the next year or two, investors will see if he's able to do it again, and be the hero that Nissan needs.
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Profile |
Click here to view a detailed profile of Nissan Motor Company.
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