Nissan Profits Tumble 16%

Profits at Nissan Motor Co. fell 16 percent to $764 million in the April-June period as demand for its largest and most lucrative vehicles slumped in the United States

Nissan, Japan's third-largest automaker, also was hit by higher taxes in the first quarter of the Japanese fiscal year, which begins on April 1, and lower sales in the anemic Japanese market.

The results, marking a third consecutive drop in Nissan's quarterly profit, illustrate the risks Japanese automakers face as they expand their U.S. model ranges to include more trucks and SUVs.

Demand for such vehicles weakened as U.S. gas prices climbed back above $3 a gallon.

Nissan fared worse than its rivals because its truck lineup is aging. Its U.S. truck sales were down 11 percent in the first six months of 2007, while overall U.S. truck sales contracted just 1.2 percent.

Small cars such as Nissan's new Versa subcompact are selling well, but they generate smaller profits than trucks such as the Pathfinder and Xterra.

"Our results for the first quarter were in line with our expectations, considering factors such as weaker product mix and higher raw material prices," Nissan CEO Carlos Ghosn said in a statement Tuesday.

But he said the company was holding to its target for a 4 percent rise in full-year profit.

Nissan plans to introduce 11 new or redesigned vehicles this year, including an Altima coupe and the next Murano crossover.

Last month, Ghosn said Nissan's board members would forego their bonuses after the company missed its targets for the year ended on March 31, its first annual profit decline in seven years.

Ghosn, a Brazilian-born Frenchman, came to Nissan in 1999 from Renault, its major shareholder, and executed a spectacular turnaround, boosting its profit margins above 10 percent.

But Nissan's operating margin slipped to 6.1 percent in the first quarter even as vehicle sales rose 6 percent to 875,000 vehicles and revenue rose 10.7 percent to $20.25 billion.

"Stripping out the strong foreign-exchange contribution, Nissan's operating margin has tumbled to 5.1 percent of revenues, probably the lowest point in seven years," said Pierre-Yves Quemener, a Paris-based analyst at Kepler Equities.

J.P. Morgan analyst Takaki Nakanshi said profits may fall again in Nissan's second quarter as the worsening U.S. product mix continues to take its toll.

"We see little to fuel any upturn until the latter half of fiscal year 2007, when the new products should make their mark," he said.

Christine Tierney / The Detroit News

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