Nissan Comes Roaring Back

Hot models like the 350Z and G35 Coupe have been giving the long-troubled Japanese carmaker a turbo boost

By Irene Kunii

There's no place like Tokyo for checking out some of the world's coolest-looking road machines. Chances are that if you've recently come across a stop-in-your-tracks stunner in your city, you were looking at the Fairlady Z or the Skyline Coupe -- better known in the U.S. as the 350Z and the G35 Coupe. These and other models -- like the sleek luxury Cima sedan, or the Infiniti Q45 in the U.S., and the Murano SUV -- are made by Nissan (NSANY ). The Japanese carmaker has come roaring back from a near-death experience in the late 1990s, and analysts say the stock may still have room to run.

Most of the credit for the revival goes to the renowned Carlos Ghosn, Nissan's president and CEO, who has aggressively revamped the entire company since arriving from Renault four years ago. The result, as boasted Ghosn at a recent presentation, is that Nissan is "not only back in the global race, but we're among the pacesetters."

The proof is in Nissan's head-turning products and numbers. In earnings announced on May 21, it reported that net profits rose 33%, to $4.23 billion, in fiscal 2002, which ended on Mar. 31 -- the third record-setting performance in as many years. Operating profits soared by 51%, to $6.3 billion, on sales of $58.4 billion, up 10% over the previous year. Next year, a change in Nissan's tax rate means things won't be quite so stellar. It expects net profits to be flat, but year-over-year operating profits should rise 11%.

"LE COST-KILLER."

  Most analysts are enthusiastic about Nissan. Noriaki Hirakata of Morgan Stanley Dean Witter in Tokyo and Clive Wiggins of Lehman Brothers Japan both recommend it as an "overweight." Christopher Richter, industry analyst at HSBC Securities Japan, rates it a buy. The stock closed at $15.14 on May 21, down about 10% from its recent high in January. "You could argue that the market has already factored in Nissan's earnings," says Richter. "But if you're in the market for one Japanese carmaker, then go with Nissan."

Despite the already considerable progress in turning around the troubled outfit, the best thing Nissan has going for it is the 49-year-old Ghosn's much-respected talents. He was dispatched to Nissan in 1999 after Renault stepped in to save the Japanese company. Nissan had some $18 billion in debt, its operating profit margins were among the industry's lowest at 1.4%, and many of its models lacked pizzazz.

Just months after his arrival, Ghosn kicked off his three-year Nissan Revival plan. He and his team streamlined management, shut about a half-dozen factories, and ended relations with inefficient Japanese parts suppliers. Ghosn, who had earned the nickname "Le Cost-Killer" while at Renault, got rid of noncore assets like stakes in telecommunications operations and other businesses.

MERIT BADGE.

  At the same time, he moved to spiff up Nissan's dowdy product line while developing new vehicles in categories where it lagged behind its rivals. A case in point: The subcompact March, which has been a raging success in the Japanese market. Nissan sold 158,000 units in 2002, the highest volume of any of its models in Japan over the past 12 years. That helped boost Nissan's share of the tough Japanese car market to 19% in 2002, from less than 18% the previous year. It was the first significant rise in Nissan's Japanese market share in 31 years. "We did not inflate sales by giving additional incentives," says Ghosn, adding that consumers bought Nissan vehicles on their merits.

Perhaps the biggest image and morale booster for Nissan has been the Z, known as the Fairlady Z in Japan and the 350Z in North America. In its first eight months on the U.S. market, the 350Z has sold 23,000 units and now ranks as the best-selling sports car in America. That's just what Ghosn had been hoping for. He sees the Z as a key weapon in establishing Nissan as a premier carmaker in the global marketplace. And if the stylish Z can help polish Nissan's brand, and selling power, so much the better.

READY FOR RECOVERY.

  Some observers fears that worldwide consumer demand may be weak over the next few months. And Ghosn describes Nissan's makeover as a work in progress. After eliminating debt and creating a lean cost base, he's now focusing on building market share in the U.S., Europe, Japan, and Mexico and South America. In 2003, Nissan will launch a total 23 new models in these four regions.

"There's no problem at a car company that good products cannot solve," Ghosn says. And if a rebound in the U.S. economy materializes, as expected, and helps boost global growth, Nissan is poised to reap the rewards. Its hot and snazzy new models prove it's already off to a roaring start.

Kunii writes for BusinessWeek in Tokyo

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