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Monday October 29, 8:21 PM A Good Week for Nissan's Ghosn For Nissan Motor (NSANY) Chief Executive Carlos Ghosn, 2007 looks as if it's ending a lot better than it started. Today in Tokyo, Ghosn took time out from the Tokyo Motor Show, which opens to the public Oct. 27, to announce the Japanese automaker's interim results. In sharp contrast to fiscal 2006, which ended with Nissan's operating profits falling for the first time in six years -- for the year ending Mar. 30 -- Ghosn revealed steady sales and operating earnings growth for the six months through September. For the period, Nissan's sales rose 11.7% to $42.4 billion. While net income dropped 22.5% because of exceptional gains the year before, the all-important operating profit figure rose 5.3% to $3.1 billion. What's more, despite falling industry sales in the U.S., Europe, and Japan, vehicle sales increased 6.3% during the six months, to 1.8 million units, and Ghosn reiterated that Nissan will sell 3.7 million vehicles for the full year, a record for the company. "We've made progress on many fronts. We're on track to deliver our full-year objectives," Ghosn told reporters at a press conference at Nissan's headquarters in Tokyo's Ginza district. Nissan's operating margin is regaining ground on Toyota Motor (TM), which, at over 10% in the last quarter, is the most profitable Japanese automaker. Nissan's increased to 8.4% in the three months ending September, compared to 6.1% in the April-June quarter. Overcoming Disturbing Difficulties Indeed, while Nissan's earnings don't stack up particularly well when compared to Honda Motor (HMC), which posted stellar six-month operating earnings of $4.5 billion a day earlier -- a rise of 28.1% -- Ghosn can breathe a sigh of relief that problems from earlier in the year are fading. Those difficulties shouldn't be underestimated. After Nissan made an embarrassing profit revision in February [BusinessWeek.com, 2/5/07], $4.7 billion was wiped off its stock price with one stroke. Then in April, the company's full-year results missed several self-imposed targets -- a disturbing sign, since meeting tough challenges had been a hallmark of Ghosn's success at the company. The shortfalls caused some analysts to question Ghosn's dual role as chief of Nissan and France's Renault, which holds a controlling stake in the Japanese carmaker. Today's results suggest the company is getting back on track. "When you consider the problems they had, and compared with the industry as a whole, Nissan's profitability is pretty good," says Ashvin Chotai, director of Asian Automotive Industry Research at Global Insight. Pessimistic on Future Sales Ghosn, who added that Nissan expects to meet its profit and sales targets for the current financial year, could also point to increasing market share in stagnant, mature auto markets. In the U.S., where Nissan makes about 60% of its operating profits, sales increased 5.4% in the six months through September, compared to an overall market contraction of 2.4%, on solid sales of the Versa subcompact and Altima sedan. That advance helped Nissan's market share rise half a percentage point to 6.3%. For all that, Ghosn was still downbeat on U.S. industry sales for this year and next, projecting vehicle sales of 15.5 million to 16 million in 2008, compared to an expected 16 million this year. "We don't foresee a growing market in 2008 in the U.S." he said. "This will have an impact on all car manufacturers." In Europe, another stagnating market, Nissan's sales rose 10.5% to 304,000, driven by a doubling of sales in Russia. And in Japan's distressed auto market, which has shrunk for 26 months in a row, Nissan's sales fell 5% to 332,000, although even that was better than other automakers and enabled Nissan's share to increase by half a percentage point, to 13.4%. Hot Cars, Hot Topics The better than expected results came after a confident performance from Ghosn at the Tokyo Motor Show. On Oct. 24, onlookers on a packed show floor watched Ghosn show off Nissan's new GT-R supercar, which revives the brand after a five-year hiatus. The consensus at the show -- and on blogs -- was that it was worth the wait [BusinessWeek.com, 10/24/07]. Still, it's perhaps another big Ghosn project [BusinessWeek.com, 4/23/07] -- a $3,000 car to be developed by Nissan, Renault, and Indian partner Bajaj Auto -- that could really test Ghosn's mettle in the coming months. The supercheap car has been a hot topic on the edges of the Tokyo show, although most industry insiders seemed decidedly pessimistic about its chances. Ghosn remains confident. He reckons a three-way partnership could be ready to enter production by 2010 -- not too long after Indian automaker Tata Motors is expected to show off an ultra-low-cost car at the Delhi auto show in January. "Cost is the main challenge and we have to make it robust," Ghosn says. But is it possible? "Certainly it is. We know Tata is announcing this car in the Indian market in 2008. And if Tata can do it, we can do it."