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Diplomatic Spat with China Crimps Nissan's Full-Year Forecast

Nov. 6, 2012
Nissan Motor Co. (IW 1000/26) on Tuesday slashed its full-year profit forecast by 20% as it pointed to slumping sales in China stemming from a bitter territorial dispute, as well as the effect of a strong yen and weakness in Europe.

Nissan Motor Co. (IW 1000/26) on Tuesday slashed its full-year profit forecast by 20% as it pointed to slumping sales in China stemming from a bitter territorial dispute, as well as the effect of a strong yen and weakness in Europe.

Nissan also cut its full-year sales forecast for China -- the automaker's biggest single market -- by 13%, as the diplomatic spat between Tokyo and Beijing sparked a consumer boycott of Japanese goods.

Nissan, part-owned by France's Renault SA (IW 1000/78), said it now expects to sell about 1.2 million vehicles in China -- the world's largest vehicle market -- in the year to March, down from a previous forecast of 1.4 million units.

Japan's automakers have seen a steep drop in sales in China, with Honda last week blaming the ongoing row -- and a strong yen -- for a 20% cut to its annual profit forecast.

"The China factor is still unpredictable as this is politics, not business," Shigeru Matsumura, auto analyst at SMBC Friend Securities in Tokyo, told AFP.

"Foreign-exchange risks will also remain a key factor with a considerable impact on [automakers'] earnings."

Toyota Motor Corp. (IW 1000/8), less dependent on the China market than Nissan and Honda, on Monday warned that it will sell about 200,000 fewer vehicles in China in the second half of its fiscal year and take a 30 billion yen hit to the bottom line.

Tensions Flaring Up Again

The long-standing territorial row flared again in mid-September after Tokyo's nationalization of an East China Sea island chain that also is claimed by Beijing, setting off huge demonstrations across China and a consumer boycott of Japanese exports.

Japanese factories and businesses across China temporarily closed or scaled back operations over fears of being targeted by angry mobs.

On Tuesday, Nissan said it now expects net profit for the year to March of 320 billion yen ($4 billion), down 20% from its earlier estimate of 400 billion yen.

The China spat will cut 60 billion yen alone from Nissan's annual operating profit, the automaker said.

"The number of visitors to dealerships in China is recovering gradually ... and we are making our utmost efforts to normalize the business as quickly and swiftly as possible," Nissan COO Toshiyuki Shiga told a press briefing on Tuesday.

"It is too early to think about changing our strategy for China," he added.

But CEO Carlos Ghosn has warned that Nissan will think twice about making new investments in China amid the row. It has several production plants in China, with a new factory in the northeastern city of Dalian planned for 2014.

The automaker's first-half profit, meanwhile, slipped 2.8% to 178.3 billion yen on sales of 4.5 trillion yen, which were up 4.1% on-year.

The company recorded double-digit rises in sales in Asia outside Japan and North America, while Europe sales fell about 3.2%, it said.

"After factoring in the projected negative impact of a strong yen, disruption in China and continuing weak market conditions in Europe, Nissan has revised downward its full-year forecast," the company said in a statement.

Annual sales were expected to dip to 9.81 trillion yen, down from 10.30 trillion yen, Nissan said.

Japanese firms also have struggled with the high yen, which has weighed on the nation's manufacturers by making their products less competitive overseas and shrinking repatriated foreign income.

The yen hit record highs around 75 against the dollar late last year and remains strong.

Copyright Agence France-Presse, 2012

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