Nissan's U.S. Operation Has Become a 'Major Problem Child'

Illustration for article titled Nissan's U.S. Operation Has Become a 'Major Problem Child'
Photo: AP

Some very bad news for Nissan in the United States, Ford’s aluminum bet pays off, Mercedes-Benz plans to slim down and much more for The Morning Shift of Monday, May 20, 2019.


1st Gear: Nissan’s American Slump

It turns out Nissan has other problems besides the financial misconduct charges facing former megaboss Carlos Ghosn and the management shakeups that came along with that. The automaker has been aggressively focused on growing market share in the U.S. over the past decade, and it did that in large part by hiking incentives and focusing on rental car fleet sales.

But as General Motors and the other American automakers learned once, while those can be useful tools, they’re a shitty way to run your company because they cut heavily into overall profits. That’s where Nissan is out now, and current CEO Hiroto Saikawa is demanding a recovery, according to Bloomberg:

The U.S. used to be Nissan Motor Co.’s biggest source of profit, helping fund expansion plans around the globe. Now, its operation in the country is a major problem child and challenge for embattled CEO Hiroto Saikawa.

Nissan said this week that U.S. sales plunged 9.3% in the fiscal year ended in March and predicted a further drop, sending shares to their lowest since 2012. The company’s profit margin in the country has shrunk to about 1% to 2%. Saikawa, 65, called the results “rock bottom” and pledged a recovery.

“We need to revive the U.S. operation,” the chief executive officer said as Nissan reported its lowest earnings in a decade. “We have excessive capacity and unprofitable operations, which are becoming a big burden.”

The slump comes at a time when new car sales are down across the board and nearly every automaker is predicting a tough year. I’d add Nissan in particular seems to be struggling with brand identity and lackluster designs—the company in recent years seems to be mostly known for cash-on-hood deals rather than class-leading products. Its lineup is also fairly old in several key areas, like the Frontier truck, which has been around since 2005.

Here’s more on the market share vs. profit thing:

The U.S. predicament stems from Nissan’s focus on market share. Under its “Power 88” plan announced in 2011, the carmaker sought to grow its global share to 8% by 2017. The company never set a formal target for the U.S., but executives made clear they were aiming for 10%. Nissan managed to hit that mark for part of 2017, in part by hiking incentives and fleet sales to rental-car companies.

“Setting your metrics to market share — exclusively or predominately — increases an opportunity where you can make decisions that result in a lower profitability for the business,” Stephanie Brinley, an analyst at IHS Markit, said by phone. “In some cases we’re seeing that Nissan may have gone in that direction.’’


Fleets and incentives only get you so far. Maybe Carlos Ghosn wasn’t the genius everyone thought he was?

2nd Gear: Ford Was Right

There was a ton of skepticism when Ford announced a big push into aluminum truck bodies years ago. Remember the bear ads? There was a lot of questions as to whether the aluminum would be more expensive to fix than what rivals were offering.


Anyway, data from insurance companies shows that wasn’t really the case after all, but it took Ford a lot to get there. From Automotive News:

But insurance data shows that an extraordinary effort to train dealers, educate insurers and design the vehicle to be as repair-friendly as possible helped make it ultimately cheaper to fix and replace than the previous generation, a goal to which Ford engineers aspired from the project’s inception.

“It was our moonshot,” Dave Johnson, Ford’s global director of service engineering operations, said in an interview. “We wanted them to be insurable on par with a steel F-150.”

[...] The Highway Loss Data Institute, an affiliate of the Insurance Institute for Highway Safety, has not studied overall insurance costs, which are determined by factors such as a driver’s age, gender and location, but its latest data on collision claim coverage yielded surprising results. Collision claim severity for aluminum F-150s is roughly 7 percent lower than on the steel predecessor, in part because of cheaper repairs. But the frequency of collision claims has risen about 7 percent, resulting in an unchanged overall loss.

When the pickup was introduced, insurers predicted that costs would hold steady unless claims data indicated a need for an adjustment.

“Given the fact it was aluminum intensive, and prior aluminum vehicles indicated collision claim severities increased, there was concern the same would occur with the F-150,” Matt Moore, senior vice president of the Highway Loss Data Institute, told Automotive News. “Simply put, when we look at the overall losses relative to the other pickup trucks, there’s not a change, which was not consistent with expectations.”

A spokeswoman for State Farm said that insurance prices for the aluminum pickup are roughly in line with those of the previous model.


And F-Series sales certainly haven’t suffered in recent years. Very much the opposite.

3rd Gear: Mercedes Cuts Back

Did you know that when you include various engine and body style options, Mercedes sells about 90 different models in the U.S.? That needs to change as sales decline, reports Automotive News, and dealers seem fine with it.

“We are going to see models go away within the next 12 months,” said one dealer who attended the closed-door meeting and asked not to be identified. “Within the next 90 days, we might see some of those announcements.”

Mercedes also will prune the number of options and equipment packages it offers, according to people who heard the presentation, eliminating poor-selling ones while making the most popular options standard equipment on certain models or tacking them onto existing feature packages.

The Mercedes dealer compared the brand’s product range to the voluminous menu at a Cheesecake Factory restaurant.

“It’s 14 pages, and there’s a hundred choices on each of the 14 pages,” he said. “I need a Ph.D. to figure out what the hell I want. I just want a chicken Caesar salad.”


You may be thinking this is a result of the German arms race—you know, BMW comes out with a GranTurismoxDriveCoupe that’s a smaller four-door SUV thing with a sloping roof and then Mercedes and Audi have to do the same thing forever, and so on. And you’d be right!

Product portfolio inflation isn’t limited to Mercedes. Rival BMW more than doubled its U.S. offerings to 17 nameplates since 2000, while Audi nearly tripled its portfolio to 14 nameplates.

The German premium brands have been in a “fragmentation arms race” over the last several years, almost to the point of confusing the consumer, said Jeff Schuster, president of global forecasting at LMC Automotive.

“It has gotten to the point of being just too much to manage customer model confusion, vehicle logistics and manufacturing,” Schuster said. “Each of these models require marketing support, education at the dealer level, even service and parts inventory.”


Once again, there are too many cars. There should only be one car, and it should be the Subaru BRZ.

4th Gear: The SUV Market Is More Competitive Than Ever

And as there are too many cars, automakers that rushed hard into the crossover game are now facing stiffer competition than ever before. Hyundai and Kia are among them. Those two suffered from sedan-heavy lineups for too long, and they are hoping stuff like the Palisade and Telluride will help turn things around. But they’re up against a lot.


One more from Automotive News:

“Up until a year and a half ago, give or take, if you produced an SUV, that’s pretty much all you had to do,” said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book. “It didn’t have to be a great SUV, or a perfectly styled SUV. Now, there’s so many SUVs that the market is saturated with them,” he said.

In addition to the Telluride, and the Palisade that goes on sale this summer, all-new crossovers include the Subaru Ascent that showed up for the 2019 model year and the Volkswagen Atlas that arrived as a 2018 model. Despite the burst of activity, analysts said, there’s still plenty of upside for the Korean newcomers.

For the first four months of this year, the Ascent sits in fifth place in sales and the Atlas in sixth place, behind the Explorer, Highlander, Chevrolet Traverse and GMC Acadia. The Buick Enclave and the Telluride round out the top eight. The Honda Pilot, with sales this year just shy of the Traverse’s, is a midsize crossover, another segment facing disruption from new players, including the reborn Honda Passport and Chevrolet Blazer.


I still question the “just make a product, it doesn’t even have to be great” mentality, but what do I know! Nobody listens to me.

5th Gear: Jaguar Land Rover Turning It Around?

Maybe. Despite losing money and (much denied) rumors of a looming sale, Jaguar Land Rover seems to be doing better lately for parent company Tata. From Reuters:

Tata Motors Ltd’s fourth-quarter profit fell less than expected on Monday, with the Indian automaker saying tighter control of expenses and a turnaround at its Jaguar Land Rover (JLR) unit helped dull the impact of economic slowdown at home.

Three months ago, Tata promised “decisive action” to cut costs at JLR and improve cash flow after weak sales at the British luxury car brand led Tata to post the biggest-ever quarterly loss in Indian corporate history.

India’s biggest automaker by revenue earned 11.17 billion rupees ($160.26 million) in net profit for the three months ended March 31 - its first quarterly profit in the fiscal year.


We’ll see if it sticks.

Reverse: The Spirit of St. Louis


Neutral: What Does Nissan Need To Do To Turn It Around?

Where would you start?

Editor-in-Chief @ Jalopnik, 2015-2019.



Neutral: an interesting, but attainable vehicle.

It has been a while since Nissan made something that was new, interesting, and also attainable. When the GT-R came out about a decade ago, it was an amazing car, but it wasn’t all that attainable. The 350Z and 370Z are attainable but aren’t all that interesting. The 350Z aged very poorly and it never really caught on and I think that is why the 370z never took off, even though it looks a lot better. The old pathfinder and xterra were cool and interesting, but no longer made. The frontier was a great truck in 2005, but its a bit long in the tooth. I had a 4th gen maxima that was a blast with it’s 6 speed, but alas, the new ones are not very enjoyable