Nissan’s overly ambitious goals fuel distrust among investors, suppliers

(Bloomberg) — Nissan Motor Co.’s latest outlook cut exposed the Japanese automaker’s tendency to overpromise and underdeliver, testing the trust of investors and suppliers.

The manufacturer has missed its original annual sales target in eight of the past nine fiscal years, with the gap exceeding 10% in four of those years, according to data compiled by Bloomberg. The company lowered its initial target for the fiscal year ending in March by 8.1% to 3.4 million vehicles.

Tatsuo Yoshida, senior auto analyst at Bloomberg Intelligence, said Nissan’s tendency to overpromise is a habit developed when Carlos Ghosn was at the helm of the company. By comparison, Toyota Motor Corp.’s sales have never missed forecasts by more than 10% during the same period, while Honda Motor Co. has only seen two declines of similar magnitude. Six years after Ghosn’s unexpected exit, Nissan still can’t shake off his operating style, let alone establish a new one, Yoshida said.

Chief Executive Officer Makoto Uchida seemed to realize this, saying “Nissan needs to do a better job of measuring the accuracy of its targets.” Uchida, who forfeited half of his pay starting this month, also told reporters at the earnings conference , the automaker is “affected not only by external challenges, but also by our own specific issues.”

Nissan’s rapid decline has opened the door for one of Japan’s most influential activist investors to deepen the company’s troubles.

A fund controlled by Effissimo Capital Management Pte bought a 2.5% stake in the automaker, which fell after the company reported quarterly results earlier this month. Speculation abounds as to why Effissimo has resurfaced now, but it’s a shocking reminder of the company’s dramatic standoff with Toshiba in 2021, which ultimately resulted in the firing of its CEO.

Nissan’s market capitalization is about 1.5 trillion yen ($9.7 billion) and has been shrinking since peaking at nearly 6 trillion yen in 2015. Nissan is currently Japan’s fifth-largest automaker by market capitalization, behind Toyota, Honda and Suzuki Motor Corp. Subaru Corporation

Ghosn, who joined Nissan’s executive ranks in 1999 after French automaker Renault rescued the automaker, made three promises in his turnaround plan, including helping the troubled company out of trouble and Promising to resign if he failed to achieve any of these. Ultimately, all of his goals were met ahead of schedule, and Nissan posted record profits.

Since then, the long-term goal has shifted to expanding production capacity and expanding scale to challenge Toyota and major U.S. automakers. That puts Nissan on a path to higher incentives and fleet sales as it aspires to sell more vehicles.

Nissan’s aging product lineup is arguably Nissan’s biggest challenge.

While Toyota and Honda have significantly updated their models in North America, Nissan’s most recent major updates were the 2021 Pathfinder and Frontier. The automaker plans to launch a plug-in hybrid version of the Rogue in fiscal 2025, followed by a model using the company’s Rogue. e-Power gas-electric technology will be launched next year.

Nissan ranked behind Toyota Motor Corp and Honda Motor Co Ltd in a survey published in November by Japanese weekly Diamond magazine, which asked partners of major automakers to rank Nissan based on the credibility of its production plans.

SBI Securities analyst Koji Endo said the accuracy of Nissan’s sales forecasts has been “exceptionally low” in recent years. Endo added that the company had been repeating a cycle of missing targets and adopting stopgap measures to cut costs for some time.

That continues; Nissan revealed earlier this month that it plans to cut 9,000 jobs and cut production capacity by a fifth, largely blaming falling sales in North America and China.

As the impact of these cost cuts trickles downstream, the pain of Nissan’s rapid decline will affect the profits of its numerous suppliers and business partners. Nissan already ran into trouble with extrusion parts makers earlier this year.

Yoshida said suppliers risk losses if they believe Nissan’s forecasts. “That’s why they took these numbers from Nissan and lowered their targets.”

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