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Nissan to hit 8% operating margin within 3 years: CEO

Nissan to hit 8% operating margin within 3 years: CEO
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First Published: Tue, Jun 28 2011. 04 34 PM IST
Updated: Tue, Jun 28 2011. 04 34 PM IST
Yokohama (Japan): Nissan Motor Co’s chief executive said on Tuesday he hopes the company can reach its operating profit margin target of 8% during the first three years of a newly announced business plan.
Carlos Ghosn unveiled a six-year growth plan, called “Nissan Power 88”, on Monday targeting an 8% global market share and operating profit margin by the business year ending in March 2017.
The margin target would place Nissan at the top level of profitability among mass-volume car makers, and compares with the 6.1% it achieved in the business year that ended this March, at an average dollar rate of ¥85.7.
Asked if the margin target, which assumes a similar dollar rate, of ¥85, was achievable during the first, three-year phase, Ghosn said: “Hopefully, yes.”
The yen’s strength is among the biggest handicaps for Japanese automakers, reducing the value of earnings made overseas when converted back into yen.
In an interview with a small group of reporters, Ghosn said that while Nissan would never be immune to the yen’s swings, the company was working to shrink the difference between yen-based costs and revenues, which he said amounted to about ¥1.5 trillion ($18.5 billion) last year.
“We are reducing this gap, to probably less than ¥1 trillion (by the end of the midterm plan),” Ghosn said, adding that would help shield Nissan against currency volatility.
No greenfield plants outside China, Brazil
The other pillar of Nissan’s business plan is for an increase in global market share to 8% by 2016-17 from a record 5.8% last year. Based on Ghosn’s assumption that the global car market would top 90 million by then, the goal would represent additional sales of 3 million cars at Japan’s No.2 automaker, to at least 7.2 million vehicles.
Much of that growth will be in emerging markets such as China and Brazil, where Nissan is planning new factories to fuel its expansion. But outside those two countries, Nissan will not need greenfield manufacturing sites and will instead expand capacity at existing factories, Ghosn said.
Nissan is stretched for production capacity in the United States as sales expand, but Ghosn said he expected its major manufacturing base in Mexico to play a bigger role in serving the US market.
“By building the plant in Brazil, we’re going to relieve Mexico from some of its duties to South America,” Ghosn said. Nissan said on Monday it was planning a 200,000-vehicles-a-year factory in Brazil, and would announce China-specific expansion plans in July.
Nissan could in future build cars for the Infiniti premium brand in North America, however, as sales of those vehicles more than triple to half-a-million in six years, Ghosn said. Most Infiniti models are currently built at Nissan’s Tochigi plant, north of Tokyo, after production of the QX56 SUV was moved back to Japan from the Canton, Mississippi, factory in early 2010.
“I cannot imagine that 500,000 Infiniti cars at the end of the plan are going to be shipped from one location. The natural location would be North America or China,” Ghosn said.
Nissan expects to double Infiniti sales in China this year as the luxury segment there booms, he added.
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First Published: Tue, Jun 28 2011. 04 34 PM IST