Nissan's Ghosn Has Harder Job Than He Thinks

Renault Nissan CEO Carlos Ghosn has long driven himself hard to meet publicly stated financial goals. He didn’t disappoint this week, when he made good on his fourth quarter assessment that Nissan was undergoing a serious setback in his efforts to turnaround the company and would post lower earnings for the year.

Indeed, Nissan posted its first annual decline in seven years under Ghosn. Auto chieftains like Bill Ford, GM’s Rick Wagoner and DaimlerChrysler’s Dieter Zetsche would give their left clutch for that kind of earnings record. But Ghosn isn’t just anyone. He has been the rock-star of the auto industry for years, and widely credited with being the magician of Tokyo for putting Nissan on profitable ground after its hidebound Japanese management had run the company into the ground in a rats’ nest of corruption and affiliated Nissan companies all feeding at the car company’s trough.

This setback, which has forced Ghosn to postpone his public financial goals for a year, makes the Bono of the auto industry look a little more like, I dunno, Elvis Costello. The analogy means that he’s as apt to post a very human financial result from now on, rather than over-achieve everything.

Ghosn and his team have failed to achieve two important goals—it has not staked out any kind of leadership in a technology area, and it has not established a sustained big brand idea around either the Nissan or Infiniti brands.

Let’s look at what first quarter U.S. sales tell us. Altima sales are up nicely, 21%, and on track to sell close to 300K. The Murano crossover is up 14% , but with a lot of spiffs.

The problems are obvious: Sales of the new Sentra are down 16% despite more interest in smaller, more fuel efficient cars. Pathfinder is down 24%. Titan is running 11% lower. Xterra is down 16%. The Infiniti division is up 11.5%, but that is misleading, because it’s only because the highest volume model, G35 sedan, is newly designed and up 64%. Everything else in the Infiniti showroom is disappointing. The new Versa sub-compact sold 16,100 in the first quarter, putting it on track to sell 64,000 for the year. That’s undoubtedly affected Sentra sales. Profits, though, are skimpy or non existent on the Versa.

Nissan remains a brand that new people are attracted to because of an irresistible new design, or because they have a terribly satisfying past with the brand or dealer. That’s a tough thing to depend on because Nissan has a poorly rated dealer body, compared with its Japanese and even U.S. rivals.

Ghosn says he is banking on 11 new models to be introduced globally this year, including the X-Trail, Altima coupe, Infiniti G37 coupe and Rogue compact crossover. He said such a deluge of new products would change fortunes.

They probably will. But here is the dirty secret of the auto industry. Once you start building those vehicles, the company’s fortunes alredy start to change because car companies start booking revenues and profit as soon as they start shipping vehicles. That stream of new products will easily buoy fnancials into next year. The test will come the year after that when dealers know if they need to cut back orders to match disappointing demand, and if Nissan has to spend up on rebates to move the metal.

In short, with two weak brands yet to be fixed, don’t talk to me about better results until the market has a chance to absorb these products and we know how much consumers are “pulling’ them into their driveways versus Nissan having to “push” them with discounts. With so many new products, me and anyone reading this blog could boost Nissan’s financial results for a while given the way the accounting rules work.

Nissan has not been known for its deft launches of new models and new designs. And its shift of U.S. headquarters from LA to Nashville has caused huge executive upset and churn.

Ghosn has driven some of the great results at Nissan by making some fundamental cultural and decision-making shifts at the top. The rest of the turnaround depends largely on execution below him. And he has yet to prove that he can will that to happen.

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