Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 13, 1990 TAG: 9005100580
SECTION: BUSINESS PAGE: BUS-4 EDITION: METRO
SOURCE: DORON P. LEVIN THE NEW YORK TIMES
DATELINE: LENGTH: Long
The third-largest Japanese auto maker in the market tried three times unsuccessfully to introduce a mini-van, failed to anticipate changes in American taste, and underwent a name change that alienated some dealers and confused consumers.
But industry experts agree that the company has repeatedly demonstrated an ability to recover from such incidents and indeed is likely to get stronger if its gamble to expand production in the United States pays off.
"In this automotive market with this much competition you've got to be ready to cut your losses and try something else right away," said Peter Van Hull of Arthur Andersen & Co. "You can't ride a problem too long."
This month, for example, Nissan said it would halt exports from Japan of the Axxess, an oddly styled mix of mini-van and small station wagon that proved ill-matched to the tastes of American consumers.
The car was Nissan's third unsuccessful try since 1986 at introducing a mini-van in the United States.
Because Axxess had been expected to sell only about 1,500 units a month, it was a relatively minor debacle.
A far more distressing problem has been the declining sales of the subcompact Sentra, Nissan's most popular model, which fell 28 percent in the first four months of the year from the period a year earlier.
Sentra was intended to be a money-maker for dealers, but its squared-off exterior has made the car look dated.
Sales of Nissan's new Infiniti luxury car, introduced with a widely debated advertising campaign last November, also are slow, most industry analysts agree. The company sold only 5,356 Infinitis in the United States in the four months ending April 30, compared with 18,284 for the rival Toyota Lexus and 44,317 for the Acura, Honda's luxury model.
All told, sales of Nissan cars in the United States were down 12 percent in the period from the first four months of 1989, and the company's market share has fallen to 4.7 percent so far this year, from 5.1 percent in the corresponding period a year earlier.
In the last three years, the company's share of the United States car market has fluctuated between 4.5 percent and 5.5 percent.
Despite these difficulties, Nissan, which changed its name from Datsun in 1981, is solidly profitable.
While it does not break out figures for its U.S. operations, which sell about 25 percent of its cars, it reported record net income in the year ended March 1989 of $868 million, a 78 percent increase from a year earlier, on sales of $36.4 billion.
And the company expects to announce within three weeks a profit increase of at least 5 percent for the fiscal year that ended March 31.
Nissan was the second-largest Japanese auto maker worldwide, behind Toyota. (It also trails Honda in the United States.)
Industry experts say the company, like its Japanese rivals, continues to succeed because of its ability to quickly recover from mistakes.
To replace the Axxess, for example, another Nissan entry is just around the corner. It is being built in a joint venture with Ford Motor Co. and will appear within two years.
As for the 4-year-old design of the Sentra, a replacement will be introduced this fall more in keeping with current automotive design. "Nissan initially may have made a mistake by not giving Sentra a more rounded look," said Mark Lasher, general manager and partner of Koepel Nissan in New York City. "But you can say that the company listens to us, the dealers. They've learned you can't just make what you want and then drive sales by offering incentives."
While most domestic auto makers completely remake car models about once every 10 years, Nissan and other Japanese auto makers have reduced their cycle time to three or four years. "From what we've been told, Nissan is going to be down to two years pretty soon," Lasher said.
Yoshikazu Hanawa, president of Nissan's North American operations, said he wants to increase Nissan's share of the U.S. car market to 8 percent from the current 4.7 percent.
To help accomplish this, Nissan is doubling production capacity at assembly plants in Smyrna, Tenn., and Aguascalientes, Mexico.
Hanawa explained that Nissan wants to keep Japanese exports to the United States at a minimum, while supplying the American market as much as possible from local plants.
Analysts in the United States who follow Nissan think Hanawa's goal is ambitious, but Baring Securities in London recently issued a buy recommendation on Nissan common stock based on several factors, including improvements in the auto maker's mass-market vehicles, the Sentra and the compact Stanza.
Previously, niche vehicles including Nissan's 300 ZX sports car and its Maxima luxury car, which hold smaller profit potential, were the company's primary focus, according to Paul Fraker, automotive analyst for Baring.
Jean-Claude Gruet of UBS Securities is also recommending Nissan, whose American depositary receipts are traded on the NASDAQ national list. Because the company's shares are not widely traded in the United States, Nissan is not followed by the major American brokerages.
Because Nissan competes in the United States against Honda and Toyota, both of which have stronger products as measured by sales, Nissan has faced the choice of quickly fixing marketing mistakes or getting buried by some of the most successful vehicles in the market.
The Sentra, for example, must compete against the Toyota Corolla and the Honda Civic, while the Stanza is matched against the Toyota Camry and the Honda Accord, the nation's best-selling vehicle.
Robert Thomas, vice president and general manager of the Nissan division in the United States, said the drop in Sentra sales were due to the company's decision to sell fewer cars to rental-car companies. Discounted fleet business increases sales volume but can squeeze profits.
by CNB