Fiscal Year 2004 Results and NISSAN Value-Up

Media conference

April 25, 2005

Carlos Ghosn, President & CEO, Nissan Motor Co., Ltd.

Fiscal year 2004 was a tough year, full of both anticipated and unexpected risks, but Nissan lived up to all the challenges.Today, Nissan is reporting a record year – a record in terms of revenues, operating profit, net income, sales volume and production.

I want to recognize and thank the men and women who work for our company around the world for their motivated performance.They have been consistently creating real value for Nissan and all our stakeholders.

I will begin with a review of our business performance during fiscal year 2004, which is final disclosure, and I will give you our forecast for this year.After a summary of our performance during NISSAN 180, I will close with a presentation of our new three-year business plan – NISSAN Value-Up – which we started implementing on April 1.

FY 2004 sales performance

I will begin with an update on our sales.

Global sales came to 3,388,000 units, which exceeded our forecast of 3,380,000 units.This record level represents an increase of 10.8%, or 331,000 units, over fiscal year 2003 and is 281,000 units more than the previous record level set in 1990.In fiscal year 2004, we released nine all-new models globally.

Along with record sales, a global production record was also achieved.Nissan’s manufacturing plants produced 3,378,000 units, which is 293,000 units more than the previous record.

In Japan, sales came to 848,000 units, a slight 1.4% increase.Our brand and products continue to gain recognition.The Fuga was voted the “RJC Car of the Year,” and in March, the Note, Tiida, Cube and March were among the top 10 best-selling models in Japan.Our market share increased four-tenths of a percent to 14.6%.

In the United States, sales rose 18.4%, to 1,013,000 units – and, for the first time, sales crossed the 1-million mark.Our U.S. market share for the full year came to 6%, up from 5.1%.

The Nissan Division grew by 20.4%, driven by truck sales.With solid contributions from the new Frontier, new Pathfinder and Titan, truck sales were up 47.6%, and the Altima continues to make a strong contribution to car sales.

The Infiniti Division achieved yet another record year, due to the attraction of competitive models such as our G35 sport sedan and coupe.Sales were up 6.5% from the previous year, to 132,000 units.

In Europe, where reporting is on a calendar-year basis, sales were basically flat, at 544,000 units.Strong sales of the X-TRAIL and Pick-up helped offset a lack of new passenger cars.

In General Overseas Markets, including Mexico and Canada, sales were up 19.5%, to 983,000 units.Sales in China were up 92.7% to 194,000 units, and the Teana was named the “Car of the Year 2005.”

FY04 financial performance

As to our consolidated financial performance, there is no surprise.

Consolidated net revenues came to 8 trillion 576.3 billion yen, up 15.4% from last year.Higher volume and mix made a positive impact of 707 billion yen.Movements in foreign exchange rates produced a negative impact of 173 billion yen.Changes in the scope of consolidation, including Dongfeng Motor and Yulon Nissan Motor, impacted revenues positively by 432 billion yen.

Consolidated operating profit improved by 4.4% to a record 861.2 billion yen.As a percentage of net revenue, our operating profit margin came to 10.0%.

Analyzing the variance between last year’s operating profit and this year’s, several factors are considered:

  • The effect of foreign exchange rates produced a 78 billion yen negative impact.
  • The change in the scope of consolidation produced a positive impact of 31 billion yen.
  • The impact of higher volume and mix contributed 284 billion yen, mainly driven by the U.S. sales volume increase.
  • Selling expenses increased by 114 billion yen, also mainly due to U.S. sales.
  • The improvement in purchasing costs amounted to 131 billion yen.
  • Product enrichment and the cost of regulations had a negative impact of 92 billion yen.
  • We spent an additional 44 billion yen in R&D to reinforce product and technology development.
  • Cost reductions from manufacturing efficiency were offset by the costs associated with the Canton Plant capacity expansion, resulting in increasing manufacturing and logistics expenses by 15 billion yen.
  • Warranty costs had a negative impact of 41 billion yen.
  • General, administrative and other expenses increased by 25.7 billion yen.

By region, operating profits in Japan came to 341.1 billion yen compared to 352.5 billion yen in fiscal year 2003.The drop was mainly due to unfavorable exchange rates and an increase in R&D expenses, which reached a record level.

Profitability in the United States and Canada came to 379.7 billion yen compared to 351.8 billion yen last year.The increase was due to higher volume.

Europe’s operating profit level came to 56 billion yen from 49.2 billion yen.The rise was due to an improvement in mix and a higher contribution from Russia.

In General Overseas Markets, including Mexico, operating profits came to 84.8 billion yen compared to 66 billion yen.The increase was mainly due to the new consolidation of Dongfeng Motor and Yulon Nissan Motor.

Ordinary profit came to 855.7 billion yen, up from 809.7 billion yen in fiscal year 2003.

Net income reached 512.3 billion yen, an increase of 8.6 billion yen.

Net automotive debt is eliminated.In fact, we had 205.8 billion yen in cash at the close of fiscal year 2004.

At the annual general meeting of shareholders on June 21, we will propose a 12-yen-per-share year-end dividend, as previously announced, giving a full-year dividend of 24 yen per share for fiscal year 2004.

By the end of NISSAN Value-Up, our plan is to pay an annual dividend of no less than 40 yen per share, which is a 66% increase over the FY04 level.

FY05 outlook

Now I would like to review our outlook for fiscal year 2005.

Assuming a relatively flat total industry volume of 61 million units globally, Nissan’s sales are forecast to come to 3,618,000 units, which is a 6.8% increase over the prior year.

Worldwide, we will launch six all-new models, leading to 20 regional product events.In Japan, we will launch five models, including the Serena we are introducing today and the new Otti, a minicar supplied by Mitsubishi Motors that will go on sale in June.In Europe, we will launch the Micra convertible coupe.No new model launches are planned in North America this year.We will be preparing for the significant next wave of new products to come in 2006 and 2007.

In Japan, our sales objective is 933,000 units, a 10% increase over last year, based on a flat total industry volume assumption of 5.8 million units.

In the United States, our sales objective is 1,047,000 units, an increase of 3.3%, based on a flat total industry volume assumption of 16.9 million units.

In Europe, our sales objective is 550,000 units, a 1.1% increase over last year.Our objective is based on a flat total industry volume assumption of 16.1 million units for Western Europe.

For General Overseas Markets, including Mexico and Canada, our sales objective is 1,088,000 units, which is a 10.7% increase.

As usual, any new fiscal year brings risks and opportunities.2005 is a year with a very high level of uncertainty and, for the first time, many more risks than opportunities.The risks include volatility in exchange rates, higher interest rates, higher commodity prices, higher energy prices, higher incentives and uncertainty about the level of growth in the U.S. and Japanese markets.The only opportunity resides in delivering NISSAN Value-Up quickly and effectively.

In light of all these factors, we have filed the following forecast with the Tokyo Stock Exchange, using a foreign exchange rate assumption for the year of 105 yen per dollar and 130 yen per euro.This forecast includes the consolidation of Calsonic Kansei, of which Nissan now owns 41.2%.

  • Net revenue is forecasted to be 9 trillion yen, up 4.9%.
  • Operating profit is expected to be 870 billion yen, up 1% from fiscal year 2004.
  • Ordinary profit is expected to reach 860 billion yen.
  • Net income is forecasted to be 517 billion yen.
  • Capital expenditures are expected to reach 540 billion yen.
  • R&D expenses are forecast to reach 450 billion yen.

In July 2005, when we change our company’s retirement benefit scheme, as announced in March 2005, we will improve our pension funding by making a lump-sum contribution of 228 billion yen.This cash contribution will include the use of debt markets in Japan while interest rates are still attractive.


Fiscal year 2004 marked the end of our NISSAN 180 business plan.Obviously, NISSAN 180 cannot be closed completely until the end of September 2005.But we know that we have already delivered two of the plan’s three critical commitments.

We committed to an 8% operating profit margin, and our margin has been at or above 10% for every year of NISSAN 180.

We committed to zero debt, and today we have more than 200 billion yen in net cash under the new and more demanding accounting standards.

Our only remaining commitment is the 1 million additional sales.Here, we are in reasonably good shape.At the midpoint of the measurement period, we are at 1,809,000 units, which is a slight advance compared to our commitment to reach 3,597,000 units by the end of September.

NISSAN 180 will be remembered as a period in which many significant products were introduced to satisfy specific needs of customers around the world.Products such as our first crossover and full-size truck and sport utility vehicles in North America, mini and compact cars in Japan, the Teana in China, a range of light commercial vehicles in Europe and our revival symbol, the 350Z.

As we look back at NISSAN 180, I believe this period has been an important high-performing and intense learning experience in the life of Nissan.During NISSAN 180, we took bold steps forward.Launching five new models at a new American manufacturing plant in Canton, Mississippi, was a major challenge that was successfully achieved.We also made a breakthrough in the Chinese market through our joint venture with Dong Feng.These actions and many others established Nissan at the top rank of the world’s automakers and built experience that will equip us for the challenges ahead during NISSAN Value-Up.


Before I review the components of NISSAN Value-Up, let me say a few words about its importance to Nissan.

As you know, Nissan’s position today is much different from its position six years ago or even three years ago.

In 1999, we were in crisis, and the Nissan Revival Plan was needed to drive dramatic change in order to revive our company and build a future.NRP was about revival, pure and simple.

In April 2002, when NISSAN 180 began, we wanted to complete the revival process, with an emphasis on profitable growth.1-8-0 said it all.

So what is the clear, unmistakable focus of NISSAN Value-Up?

Again, the name makes it clear:Keep the valueup.This plan is all about sustaining performance.About taking all the gains we have made in connecting with our customers, in growing volumes, in creating value, in earning profits, in improving management – and then building upon these gains.

And that’s a challenging thing to do.It’s one thing to sprint, but it’s quite another to compete in a marathon, where you have to sustain your energy, your focus, your performance, and earn your place at the lead of the pack.

With NISSAN Value-Up, you will not see a radical break from NISSAN 180.This plan is evolutionary, not revolutionary.We will take the core elements that got us to this point – namely, more revenue, less cost, more quality and speed, and maximized Alliance benefit with Renault – and build upon them.

So, with that thought in mind, let me tell you how we plan to sustain our performance with NISSAN Value-Up.

Our plan for fiscal years 2005 through 2007 plan has three critical commitments.

First is our profit commitment: to maintain the top level of operating profit margin among global automakers for each of the three years of the plan.Operating profitability remains at the center of our management system, as a way of measuring our – or any – true business performance.

Next is our volume commitment, which is to achieve global sales of 4.2 million units measured in fiscal year 2008.This represents an increase of 812,000 units over fiscal year 2004, which will become our reference year.

And I can assure you that our profitable growth will continue beyond 2008.Even as we start executing this business plan, we are already preparing for more growth to come after NISSAN Value-Up.Our growth is far from finished.

The third commitment of NISSAN Value-Up is to achieve a 20% return on invested capital on average over the course of the plan, excluding cash on hand.To build this plan, we made specific key assumptions for the next three years.We expect total industry volumes to reach 63 million units globally in fiscal year 2007, which is a reasonably conservative assumption.Our foreign exchange rate assumptions for the first year of the plan are 105 yen to the dollar and 130 yen to the euro.The last two years of the plan use a more severe assumption of 100 yen to the dollar and 120 yen to the euro.

NISSAN Value-Up will be supported by 28 new models, resulting in the start of production of 70 models worldwide, compared to 44 production starts during NISSAN 180.Nissan has a long tradition of manufacturing excellence, and the Nissan Production Way will be showcased during NISSAN Value-Up.

Of the 28 new models, 18 will be replacements for existing models and 10 will be completely new, conquest models.We will enter additional new segments, and we will introduce six models that will delight customers by being completely innovative in their concept and benefits.

In order to implement NISSAN Value-Up, we will pursue four major breakthroughs.We define a breakthrough as a proposal or project that breaks with Nissan’s current business organization, way of management or delivered performance. These proposals require a complete change in mindset and attitude.They are new frontiers for Nissan.

The first breakthrough is that our Infiniti luxury brand is going global as a Tier-1 luxury brand.

Currently, Infiniti is marketed in North America, Taiwan and the Middle East.During NISSAN Value-Up, Infiniti will be launched in Korea, China and Russia.In Japan, we will maintain our position in the luxury market under the Nissan brand and will fine-tune our luxury strategy execution during NISSAN Value-Up.We will launch Infiniti in Japan after the end of NISSAN Value-Up.

The second breakthrough of NISSAN Value-Up focuses on Light Commercial Vehicles, or LCVs.

Nissan has been selling LCVs in various markets since 1935 with the Datsun Truck.We now sell 22 Nissan-badged models, including such familiar model names as the Atlas light duty truck, Caravan, AD Van, Cabstar and Civilian light buses.

During NISSAN Value-Up, our LCV volume will increase by 40% from the FY04 level to achieve 434,000 units in fiscal year 2007.

LCV profitability is targeted to double.In fiscal year 2001, LCVs were barely profitable.In fiscal year 2004, operating margin was at 4%.By 2007, the margin is targeted to reach 8%.

The third breakthrough of NISSAN Value-Up focuses on sourcing parts and services from Leading Competitive Countries, or LCCs.

It is a necessity to extend our sourcing beyond Japan, North America and Europe as we expand our production bases in Thailand, China, Egypt and other countries.We plan to take a more efficient global sourcing approach to maximize the opportunities and to minimize our overall costs as we grow.Effective Supply Chain Management will be vital.

Our global sourcing strategy is linked to the fourth breakthrough of NISSAN Value-Up, which is significant geographic expansion.

We have already started increasing Nissan’s presence in markets such as China, Thailand, Gulf Countries, Egypt, Russia and Eastern Europe.We plan further expansion in new markets, such as India, Pakistan and others.

Accelerated kaizen activities

In addition to the four breakthroughs, NISSAN Value-Up also contains a number of continuous improvement or accelerated kaizen activities, which will focus on creating more value from existing programs.

We have specific plans to make improvements in the broad field of quality, which includes our products, our treatment of customers and our business management.

Last week, we opened the Nissan Management Institute in Japan, a learning center where we will develop leadership, critical expertise and create a hub where people can innovate, based on the Nissan Management Way.

We will continue to focus on awareness and specific actions to improve diversity, which we consider to be both an asset and an opportunity.The Diversity Development Office, which was established in October 2004, is now accelerating its efforts to promote diversity within Nissan.

We also established a Sustainability Office, and its team is focusing on strengthening activities that increase value for our stakeholders, particularly in areas related to corporate governance, the environment and social responsibility.

We continue to reap the benefits of our partnership in the Renault-Nissan Alliance.In addition to maximizing existing areas of collaboration, we are outlining new areas that will create additional value for both Nissan and Renault.As I take on responsibilities to lead both companies, you can expect the partnership to strengthen, always within the initial spirit of the Alliance.


As we stand at this transition point – completing one business plan and beginning a new one – Nissan has realized many achievements.Our revival is well known and is, in fact, complete.But, when I consider the progress we have made since 1999, one thing that gives us great satisfaction is the fact that Nissan is becoming a truly customer-driven company.

How can one know this?By looking at the evidence.

We no longer build cars to follow some other competitor, but to meet the needs of specific customers.Consider the Titan truck, the Teana, the X-TRAIL.Each has a distinctive focus.

We offer our customers cars with fresh, original designs that are clear, creative and consistent.Look at the Murano, the Cube, the Z.They are uniquely Nissan – powerful, emotional expressions of the Nissan brand.

We offer our customers rewarding performance.Nissan cars have always been and will always be known as well-engineered products.Our VQ engine is a perennial award-winner.

We have offered our customers a constant stream of attractive, competitive models – 40 in the past five years, more and better choices than ever.And more are coming, including an expanded small-car lineup for the United States.

We are continuing to improve our customer sales and service experience.This will be a critical point to deliver during NISSAN Value-Up.Beginning today, Nissan will sell all its models at every Red and Blue Stage outlet in Japan.Customers will be able to purchase any Nissan model they like at 2,600 Nissan
outlets nationwide.We believe this choice will greatly improve customer convenience and, as a result, customer satisfaction.

Nissan has again become proactive on technology.Continuing our leadership position in the sale of Ultra-low Emission Vehicles in Japan, we are significantly expanding Super Ultra-low Emission Vehicles and our new XTRONIC CVT, which contributes to CO2 reduction and fuel economy.By the end of NISSAN Value-Up, we plan to sell around 1 million CVT-fitted models worldwide – four times our actual sales today – which would have the same effect in terms of reducing CO2 emissions as selling 200,000 hybrid electric vehicles.

In the area of safety, we are introducing our new safety philosophy – Safety Shield – which classifies real-world driving into six categories and applies technologies to prevent accidents or to mitigate damage when a collision is unavoidable.This approach has already delivered the world’s first Lane Departure Warning System for passenger vehicles in North America, and we will deliver 10 new safety technologies in the next three years.

Finally, Nissan’s global expansion means that we will be able to create more value for more customers in more world markets than ever before.

Significant growth has been a consequence of our customer-focused performance, but not on detriment of a sustainable future and not on detriment of profits.Everything we do is done in order to create value that will last, including the enhancement of our brand.

You can see value in the model we are introducing today – the all-new Serena.

We describe the Serena as a big, easy, fun box.With the biggest cabin in its class, the Serena is full of convenient and friendly functional benefits.It is designed for active people to have fun with their family and friends.The Serena is a fresh new choice for our customers in Japan.

At the end of this week, when I am proposed to become president and CEO of Renault in addition to my responsibilities at Nissan, some things will change and some things will not.

What will change is the broadening of my responsibilities.What will not change is my commitment to Nissan.Working with our company’s Executive Committee and corporate officers, I will continue to be fully accountable and responsible for Nissan’s performance and results.

Results are the basis on which you will judge Nissan’s performance and, consequently, our individual performance.What counts – today and always – is what we deliver, not what we say.

During NISSAN Value-Up, we will deliver on the promise of great vehicles and value for all our stakeholders.We have a clear plan.Now we have to work hard to earn the future we aspire to.And if we do, it will be bright.