October 16, 2003


Carlos Ghosn
President and CEO

Nissan Motor Co., Ltd.

 I. Introduction

Good afternoon, ladies and gentlemen.

Today, we are at the midpoint of NISSAN 180. Once again, our numbers will speak for themselves as we expect to report record half-year operating profits for the seventh time in a row.

Record earnings are a signal that Nissan continues to deliver effective performance – despite unfavorable market conditions. In all of our key markets, total industry volumes are down. Record levels of incentives – particularly, but not exclusively in the United States – are creating a challenging sales environment… and foreign exchange rates are fluctuating, creating additional uncertainty in global markets. Even so, against this backdrop, Nissan continues to adapt and operate with consistency. We are staying the course, implementing NISSAN 180 step by step and delivering our commitments as announced.

Our revenue is up 8.2%… and our operating profit will reach 401 billion yen, giving an operating margin of 11.3% – which is, to date, the highest margin reported by any global automotive manufacturer. We have no interest in hollow gains. Our desire is gain with value… growth with profits.

Today, I will brief you on our first-half global business and sales performance and review our first-half preliminary financial results. I will then update our outlook and forecast for the full year. As always, today’s numbers are preliminary and limited to the most significant numbers of our profit and loss statement and still subject to slight adjustment when final and complete disclosure will be made to the Tokyo Stock Exchange on November 6.

II.  First-half business review

In the first half of this fiscal year, two important decisions for the future of Nissan that I had previously announced became reality: our new factory in Canton, Mississippi, produced its first car in May… and on July 1, on the other side of the world in China, the new Dongfeng Motor became operational.

Nissan’s presence in the American minivan and full size pick-up truck and SUV segments has begun. Combined, these segments represent almost as many annual unit sales as the entire registered vehicle market in Japan! We are building from scratch, but we are encouraged by the initial reaction to our products – first from the media and now from newly found customers.

It took us 25 months to go from groundbreaking to the start of production. Our manufacturing department delivered the plant on time, on plan and on budget. In the global automotive industry, this achievement is remarkable and, so far, unmatched. I would like to acknowledge the thousands of men and women in Japan and in the United States who have worked so hard to make this performance possible. I am particularly proud of what they have been able to show so far, and I am confident they will continue to perform with the same pattern.

Turning to China, the market continues to grow at an impressive pace. China is one of the biggest truck markets in the world and the fastest growing passenger car market. With Dong Feng, we cover all segments – with passenger cars under the Nissan brand… and light commercial vehicles, buses, coaches and heavy-duty trucks under the Dong Feng badge. Our 50% ownership structure of Dongfeng Motor Company Limited remains unique, and I am confident that it will produce significant results, particularly in the post- NISSAN 180 period.

The new management team has begun working on a mid-term business plan. They will communicate that plan to you next month.

In addition to these two major events, we continued to prepare for tomorrow’s profitable growth with several other business decisions. In May we announced the creation of Nissan Light Truck Company, which went into operation on October 1. This company, which is 85% owned by Nissan and 15% by Nissan Diesel, will support our growth in the expanding global light duty truck and commercial vehicle markets.

To further reinforce our design and advanced engineering departments, we decided to build what we call the Imagination Factory – a major expansion of our facilities and transformation of the way we work in Atsugi, Japan, that will be completed in 2006. Innovations in design, product concept and technology have been and will continue to be major determinants of success in the global automotive industry.

III. First-half sales performance

So where do we stand today at mid-year?

Our global sales are reported on a fiscal year basis – that is, for the first six months of the current fiscal year. For Japan and the U.S., results are computed from April to September. In Europe, Mexico and South Africa, fiscal year results are computed from January to June. So for the first six months of fiscal year 2003, Nissan’s sales in all regions totaled 1,467,000 units, an increase of 5.9%. If you look strictly at the April-to-September results from all regions, the sales increase comes to 7.3% – which gives a good indication of how our sales are accelerating on a worldwide basis.

In the first half of the fiscal year, total industry volumes dropped in all the major markets where we compete except China. Volumes were down in Japan, in the United States, in Europe and in Mexico. Simultaneously, incentives rose, reaching record levels in the United States, for example.

With such market conditions, the strength of our new products drove our sales growth. Of the 28 all-new products we will launch globally during the three years of NISSAN 180, 12 were launched during fiscal year 2002, and their sales are helping to drive our volume increases. In the current fiscal year, we are launching 10 new models… eight of which are now on sale in global markets.

Let’s look at our performance on a regional basis, starting with Japan.

In our domestic market, we sold 387,000 units in the first half of fiscal year 2003, up 0.9% from the same period last year. If we take just the registered vehicles, excluding mini-cars, our sales increased 3.7%. These gains have been made as the total industry volume has decreased 1.3%, including mini-cars.

The work we have done over the past three years to renew our product lineup and bridge any gaps is visible on the streets. We now have three models in the mini-vehicle segment… a stronger entry-level lineup, with the March and Cube series… with the Cube Cubic serving as a link between the compact lineup and our improved minivan lineup. In the first full month of sales of the Cube Cubic, Cube became the second leading selling car in Japan.

The launch of the Presage minivan in July re-established Nissan as a credible competitor in this segment. In the first three months, sales were 8.7 times greater than the previous model.

Our domestic market share of registered vehicles now stands at 19.4%… and our target to sell an additional 300,000 units in Japan during NISSAN 180 is on track.

Turning to the United States, our sales in the first half of fiscal year 2003 came to 420,000 units, up 11% compared to the first half of fiscal year 2002. Our U.S. market share is now 4.7%, up half a point since last year.

We are making gains in both our Nissan and Infiniti channels. Nissan Division sales are up 6.3% in the first half… with robust sales of new models such as the Quest minivan and Murano crossover… and continuing strong sales of our Altima and Maxima sedans and 350Z sports cars. Our Infiniti Division is enjoying record-setting performance… with sales up 39.7% over fiscal year 2002 levels… due to the attraction of competitive new models such as our G35 sport sedan and coupe and FX45. All these new models demonstrate Nissan’s dynamic repositioning ability, which the marketplace is affirming with higher sales that are not artificially propped up by significant incentives.

I have shown this slide repeatedly and again today to demonstrate that we are not changing our position on incentives. And if you had any doubts, we are doing the same with our Infiniti Division. Volume gains will not come at the detriment of profits at Nissan.

One other note about what’s happening in America – the biggest story is yet to unfold. The Titan is coming.

The launches of the Quest minivan and Pathfinder Armada assembled in Canton happened exactly as planned – a tribute to the efficiency of the Nissan Production Way. Next week, Titan production begins… and the Infiniti full-size SUV is not far behind. The product offensive is accelerating, and American buyers will decide how successful our entry will be.

Moving to Europe, Nissan sold 267,000 units from January to June, up 6.6% from the same period in 2002. Our market share increased to 2.7% from 2.5% in the first half of last year.

Our new Micra has greatly exceeded our expectations, achieving sales of 80,000 units since its launch in January through June, which is the fiscal year basis… and 126,000 through the end of September, 51% above the previous model. The Micra has just been nominated by the European Car of the Year jury as one of seven finalists for this year’s award. Customer demand for Micra led us to increase our production capacity by 25% to 200,000 units at our Sunderland Plant – which, by the way, was named Europe’s most productive plant for the seventh straight year.

Our range of SUVs and 4x4s in Europe is also doing well, with X-Trail up 46% and the Pick-up up 37% in the period from January to June 2003 compared to the same period last year.

At the Frankfurt Motor Show last month, we launched the 350Z, and already it is receiving the same enthusiastic reception that greeted the car in Japan and the United States.

Turning to the General Overseas Markets, including Mexico and Canada, our performance has been strong, with 393,000 unit sales in the first half of the fiscal year, up 5.3% from the same period last year. Since the General Overseas Markets is a region made up of numerous countries, calculating an overall market share does not have much meaning.

Even so, let me highlight a few of the most significant markets.
In China, sales of 48,000 units marks a 33% increase over the same period last year. Recently launched models that are produced locally, such as the Paladin SUV and the Sunny sedan, are selling at full capacity. We are encouraged by this strong start as we still have five new vehicles to launch by 2006.
In Taiwan sales increased 31%, to 34,000 units.
In Australia, sales were up 20%, to 32,000 units.
Of the major GOM markets, only Mexico volumes declined 6.1% in a market down 3.5%.

IV. First-half 2003 financial preview

Let us now turn to our preliminary first-half financial results. All the figures I present today are preliminary and subject to minor change before full audited financial disclosure is filed on November 6.

Revenues are expected to reach 3.56 trillion yen in the first half of fiscal 2003, up 8.2% from the same period in fiscal year 2002, driven primarily by our growth in volumes and a higher mix. Changes in the scope of consolidation impacted revenues marginally by 14 billion yen, including the deconsolidation of Nissan Koe. In addition, the negative impact of the previously announced change in lease accounting in Japan is 10 billion yen.

Operating profits are expected to be up 15.2% to 401 billion yen, compared to the first half of fiscal year 2002. The operating margin is projected to be 11.3%. What were the drivers?

1) The effect of foreign exchange rates to first-half operating profits was nil. The negative impact from a weaker dollar was completely offset by more favorable rates for other currencies, particularly the euro and the pound. The average dollar rate came to 118 yen compared to 123.1 yen in the first half of last year… while the euro moved from 116.3 yen to 131.3 yen.

2) Changes in accounting methods relating to the treatment of vendor tooling and the Canton lease facility had a 9 billion yen positive effect on operating income, which is completely in line with the guidance I gave you last April. The change in scope of consolidation subtracted 1 billion yen from first-half operating profits.

3) Combined higher volumes and mix contributed 61 billion yen in operating profits in the first half of fiscal year 2003 compared to fiscal year 2002. With the exception of Mexico, higher volumes contributed to an improvement in consolidated operating profits in every market. Mix improvement in the U.S. offset the drop in Japan and Europe.

4) The activities of our finance companies brought an additional positive contribution of 8.4 billion yen.

5) Selling expenses produced a negative impact of 37.5 billion yen, which, as I informed you last April, was expected due to the launch of new products built in Canton as well as higher levels of incentives in Japan, the United States and Europe.

6) Manufacturing expenses had no impact as gains in productivity were offset by 9 billion yen in specific start-up costs in Canton.

7) Purchasing continued to turn in a strong performance as lower purchasing costs generated a positive contribution of 92.3 billion yen to operating profits. We are continuing on the same trend as last year with costs coming down at an annual pace of 6%.

8) Product enrichment and the cost of regulations had a negative impact of 37.5 billion yen, which is very consistent with what we have seen in the past few years.

9) R&D expenses generated a negative impact of 30 billion yen as we continue to reinforce technology and product development under NISSAN 180.

10) General, administrative and other expenses produced a negative impact of 11.9 billion yen as we invest in some key support functions such as communications, financial controls and information systems. We have also increased product liability insurance to face higher costs as our unit sales grow worldwide.

On a regional basis, three regions report improved profitability while one declined.

Profits coming from Japan are up compared to last year's level. We expect to report 193.3 billion yen compared to last year's 174.2 billion yen profit.

In North America, which includes the United States and Canada, profitability rose significantly. Our operating profit increased from 114.1 billion yen to 160.1 billion yen this year, driven by higher volumes and a richer mix.

Europe is continuing to increase its contribution to profit with a stronger showing in the first half. Europe increased profits from 7.0 billion yen in the first half of 2002 to 11.5 billion yen this half.

Finally, the contribution of the General Overseas Markets to our total profits declined, from 44.9 billion yen to 31.6 billion yen. This was due to lower profits coming from Mexico and the Middle East.
Inter-regional eliminations will result in a positive 4.6 billion yen contribution compared to 8.1 billion yen in the first half of last year.

Non-operating items should come to a negative 10.8 billion yen, giving an ordinary income projection of 390.3 billion yen, compared to last year’s level of 323.5 billion yen.

Finally, net income after tax is expected to be 237.7 billion yen, lower than last year's 287.7 level. This drop in net income despite a higher operating profit is due to several factors not related to current operations.
First, extraordinary gains this year are much lower than in the first half of fiscal year 2002. Last year, we benefited from a one-time positive contribution of 56.4 billion yen from the sale of the former Murayama plant.
Second, as I told you last April, Nissan is returning to a normal taxpaying mode. The consolidated effective tax rate of the first half of fiscal year 2003 is projected to be 34%, meaning a payment of 125.2 billion yen, compared to a tax rate of 21.7% and a payment of 79.3 billion yen in the first half of last year.
Finally, minority interests – which are profits in fully consolidated companies that we do not own 100% – are expected to be negative by 5.2 billion yen compared to a positive 2 billion yen in the first half of last year.

On the balance sheet side, as I indicated to you last April, net automotive debt, which was eliminated two years ahead of the NISSAN 180 commitment, is no longer used as a driver of our financial performance. Instead, we are using return on invested capital. At the half year, we are on track to achieve our annual ROIC target of at least 20%.

At the end of March 2003, net automotive debt had fallen to a 9 billion yen cash positive position. Using the same accounting standard, we expect to close the first half of fiscal year 2003 with a 21 billion yen net debt position.

As we disclosed in April, the inclusion of the Canton facility on our balance sheet for an amount of 117 billion yen would have increased net automotive debt to 108 billion yen in fiscal year 2002. We also announced that we would include lease obligations in Japan starting in fiscal year 2003 for an amount of 153 billion yen. With these adjustments made, net automotive debt of 278 billion yen will be reported for the first half of fiscal year 2003. We maintain our forecast that, for the full year, net automotive debt at the new accounting standards will be reduced to 150 billion yen.

V. Outlook for fiscal year 2003

As we consider the risks and opportunities before us, the most significant risk relates to volume and mix in the Japanese market. Our major opportunity continues to be the swift implementation of NISSAN 180.

In Japan, where we anticipate the total industry volume to be 5.8 million units, which is unchanged from our initial forecast, we are projecting unit sales of 837,000 units, including mini-cars, down from our initial forecast of 867,000. In the U.S., where total industry volumes have been stronger than expected, we have revised our full fiscal year forecast from 15.5 to 16 million units. Nissan sales should come to 870,000 units, up from our initial forecast of 852,000. In Europe, industry volumes should be unchanged from our initial plan of 17.9 million units. We expect sales of 530,000 units, also unchanged from our initial plan. In General Overseas Markets, including Mexico and Canada, we forecast sales of 803,000 units, up from our initial forecast of 791,000 units.

In total, even if the regional breakdown is slightly changed from our initial forecast, we are still expecting global unit sales of 3.040 million units for the full year, up 9.7% from fiscal year 2002.

Recognizing recent trends in foreign exchange markets, we are changing our assumption for the second half of the fiscal year to adjust the yen/dollar rate from 120 yen per dollar to 110 yen per dollar… while the yen/euro assumption remains at 125 yen per euro. With this change, today we are filing an unchanged financial forecast for the full year with the Tokyo Stock Exchange. We expect full-year revenues to reach 7.45 trillion yen… operating profits to be 820 billion yen, which would give an 11% operating margin… ordinary profit to reach 781 billion yen… and a net profit after tax of 495 billion yen.

VI. First-half 2003 financial preview

The pattern of performance you have seen us demonstrate since the beginning of the Nissan Revival Plan is the same. We are systematically pursuing our vision to establish lasting, profitable growth for Nissan. Step by step, we are making gains. We are delivering our commitments.

We are not depending on any single market or any single vehicle segment to sustain us. Nissan is a global company, supported by an increasing number of pillars and open to any opportunity for the future.

We are pleased to be making significant progress… but we are still not satisfied with our current results. Even at the top level of operating profitability in our industry, we are convinced that Nissan’s performance has not peaked. We still have much more potential to deliver in the years to come. You can expect the best from Nissan.

Thank you for your attention. Now let’s move to your questions.

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