Nissan profit to drop below Renault's for first time in decade

TOKYO -- Nissan is on track to miss its full-year profit goal, earning less than alliance partner Renault for the first time in a decade and underscoring the challenges the companies face in charting a post-Carlos Ghosn future.

The Japanese carmaker, which has been struggling to reignite earnings and sales while dealing with the fallout from the arrest of its ex-chairman, slashed its preliminary operating profit for the second time to 318 billion yen ($2.8 billion) for the year ended March, from 450 billion yen.

Nissan cited higher costs related to U.S. warranties, an "adverse operating environment" and the "impact of recent corporate issues on sales."

In a statement on Wednesday, Nissan said sales had taken a hit in the aftermath of the arrest of Ghosn, contributing to a decline in profit to its lowest since the year ended March 2010.

This is the second cut to the automaker's operating profit forecast in two months and adds pressure on CEO Hiroto Saikawa just as he works to draw a line under Ghosn's legacy by overhauling corporate governance and seeking a more equal footing with Renault, Nissan's biggest shareholder.

With the latest preliminary profit figure, which probably won’t change when Nissan reports earnings on May 14, the automaker will earn less than Renault on a dollar basis for the first time since both posted losses in 2009. Renault reported 3 billion euros ($3.4 billion) in operating profit for the latest year. When Renault first took a stake in Nissan in 1999, the French automaker was more profitable than Nissan.  Renault owns 43 percent of Nissan.

Nissan cutting guidance by 30 percent for 2019 operating income could knock 1.5 euros, or about 10 percent, off Renault's earnings per share, according to Bloomberg Intelligence.

Tatsuo Yoshida, an analyst at Sawakami Asset Management. said Nissan's profits were inflated in the past few years. "Sales were stretched in the U.S. and they sold more cars than they could, mainly by pushing fleet sales. Now it's the real Nissan and it's natural their profits are coming down."

Falling profit has been a headache since before Ghosn was first arrested in November on allegations of financial misconduct. Currently in jail following his fourth arrest, Ghosn, who denies wrongdoing, could learn as early as Wednesday whether he will be released on bail for a second time.

Nissan has struggled to reduce costly sales incentives in the United States. For years it has relied on heavy discounting in its biggest market to sell its Rogue SUV and Altima sedans to expand market share, under aggressive targets set by Ghosn.

Saikawa has pledged to stop chasing share and instead focus on improving profit margins.

Nissan has also turned its focus to China as its next major growth market, just as vehicle sales in the world's biggest auto market have slowed.

Since his ouster at Nissan in November, Ghosn has accused his former colleagues of a boardroom coup aimed at scotching his plan to merge Nissan and Renault.

In a video statement shown to reporters earlier this month, Ghosn said Nissan had "management problems" since he gave up the CEO role two years ago, which had resulted in profit warnings.

While Nissan's troubles could raise the need for stronger co-operation with Renault, the Japanese automaker appears to be resisting closer ties with a partner it exceeds in both vehicle sales and profitability.

"Now is not the time to think of such things," Saikawa said on Monday, in response to a Nikkei report that Nissan would reject an integration proposal from Renault.

"At the moment we are focused on improving Nissan's earnings performance. Please give us time to do that," he said.

Bloomberg and Reuters contributed to this report