Jan. 8 (Bloomberg) -- Nissan Motor Co. Chief Executive Officer Carlos Ghosn said rising steel prices will hurt carmakers' profits in 2007, adding to pressure on earnings as the company fails to meet sales targets for the U.S. and Japan.

``Steelmakers are asking for another price increase in 2007,'' Ghosn said in an interview in Detroit on Jan. 7. That will cause ``a deterioration of the profitability of the industry as a whole,'' he said.

Nissan's first-half operating profit fell for the first time in eight years as Japan's second-biggest carmaker paid more for steel and other commodities. The company said yesterday it will miss sales targets this fiscal year in its two biggest markets because of a lack of new models.

``An increase in commodity prices will continue to be a burden on the automakers in 2007 and would hurt cost reduction efforts,'' said Atsushi Osa, who helps manage $4.1 billion at Sumitomo Mitsui Asset Management Co. in Tokyo. ``There will be a limit to what level automakers can absorb the cost gains.''

Brazil's Cia. Vale do Rio Doce, the world's largest iron ore exporter, raised prices on shipments to Posco, South Korea's largest steelmaker by 9.5 percent for 2007. Last year, CVRD, which usually sets the benchmark price, won a 19 percent price increase for iron ore.

Sales Targets

The company's U.S. sales for the 12 months to March 31 will probably be about 1.07 million units, unchanged from the previous year and below its goal of 1.1 million, Chief Operating Officer Toshiyuki Shiga said yesterday in Detroit, where he and Ghosn are attending the North American International Auto Show. Nissan gets as much as 60 percent of its annual operating profit in the U.S., where it ranks sixth in terms of sales.

``I have announced a double-digit increase in our sales in the U.S. but it obviously didn't happen,'' Ghosn said. ``It was a surprise for us.''

Higher steel and other commodities costs cut Nissan's fiscal first-half operating profit by 65.8 billion yen ($556 million) in the six months ended Sept. 30.

``The automotive industry has lost all of its pricing power,'' Ghosn said. ``If this is going to continue, it's going to precipitate consolidation in the industry.''

Last year Ghosn sought an alliance with General Motors Corp., the world's largest carmaker, in part to reduce purchasing costs. GM rejected the proposed partnership.

New Models

Nissan is working to revive U.S. sales with the new Versa compact car and redesigned versions of the Sentra and Altima sedans. The carmaker plans to introduce 11 new or redesigned vehicles globally in the year starting April 1, including the Rogue small crossover.

``We can expect to see sales increasing for Nissan as it brings out new models,'' said Koji Endo, an analyst at Credit Suisse First Boston in Tokyo, who rates the shares ``outperform.''

Shares of Nissan, 44.3 percent owned by Renault SA, fell 0.8 percent to 1,443 yen at the close of trading on Jan. 5 in Tokyo. Today is a holiday in Japan.

In Japan, Nissan doesn't expect sales for the year ending in March to reach 800,000 vehicles, its most recent domestic sales forecast. The automaker had announced a target of 846,000 vehicles in April before Ghosn said in June sales might fall as low as 800,000.

``We are going to be very prudent in making forecasts from now on because of the amount of uncertainties and the amount of headwinds facing the industry,'' said Ghosn.

To contact the reporter on this story: Kae Inoue at the North American International Auto Show in Detroit kinoue@bloomberg.net

Last Updated: January 7, 2007 22:22 EST