June 20, 2007
Annual General Shareholders' Meeting
Remarks for Carlos Ghosn
Even so, Nissan did make significant progress in building for the future. We have been enhancing our brand power with attractive, competitive products... investing in our people and our infrastructure... and pursuing advancements in technological innovation. We are preparing many foundations on which we can build for the long term.
Today I will report on our business for fiscal year 2006, and I will bring to your attention many actions Nissan is taking, investing in the future.
FY 2006 sales performance
Our fiscal 2006 global sales came to 3,483,000 units, 2.4% below the previous year. Around the world, we introduced 10 all-new models, including several important pillars of our line-up:
In Japan, total industry volume dropped by 4.1% - with mini-cars up 4.2 % and registered vehicles down 8.3%. At 740,000 units, our domestic sales were down 12.1%... and our market share dropped 1.2 points to 13.2%.
In the U.S., as total industry volume fell by 3.4%... overall Nissan sales decreased 4.0% to 1,035,000 units. And U.S. market share for the full year was practically flat at 6.3%.
In Europe, where total industry volume was flat, on a calendar-year basis, Nissan sales were also flat at 540,000 units.
In the General Overseas Markets, sales were up 5.1% to 1,168,000 units.
Fiscal 2006 financial performance
In '06, we did not meet our fiscal-year performance objectives, and we are taking that responsibility seriously. The bonus for Nissan's directors amounted to 390 million yen last year, but in fiscal 2006 we are not proposing to pay a bonus to the directors.
After the close of fiscal 2006, we issued bonds of 100 billion yen for corporate investors in June 2007 in order to cover future global cash demand. We recognize that we have a net cash position on a consolidated basis, but in order to optimize the return from excess cash in overseas markets and to achieve the best results for our shareholders, we are taking advantage of attractive funding costs in Japan and are issuing debt in the Japanese market. Instead of relying too much on short-term funding, we prefer to issue long-term funding when it is appropriate.
Nissan Value-Up Update
Fiscal 2006 did not boost our results toward achieving the objectives of Nissan Value-Up. But we believe the commitments are still within the potential of the company, and we remain focused on delivering them.
Accordingly, we will extend the delivery period for all Nissan Value-Up commitments by one year.
At the same time, we continue to prepare our next business plan, and we will announce it one year from now.
During fiscal 2006, we made tangible progress toward the four key breakthroughs that are central to Nissan Value-Up.
Our first breakthrough aims to establish Infiniti as a globally recognized luxury brand. In fiscal '05, Infiniti was introduced in Korea. And in fiscal '06, the brand was successfully launched in the rapidly growing Russian market.
In 2007, geographic expansion will accelerate as Infiniti enters the Chinese and Ukrainian markets... and extends across Western Europe during 2008.
To serve these new markets, new products are coming. The G35 sedan will be followed this year by the G37 coupe and the EX compact luxury crossover.
Infiniti is poised for rapid global growth.
The second breakthrough aims to build a global presence in Light Commercial Vehicles - or LCVs.
Global sales have grown 57% since the start of Nissan Value-Up to 490,000 units in fiscal '06. More importantly, the LCV business unit over-achieved its 8% operating-margin milestone. With LCVs now firmly established as a pillar of our global business, we are building on this momentum.
The third breakthrough involves developing new sources for parts, machinery and equipment, vendor tooling and services in what we call "Leading Competitive Countries."
Sourcing bases are now established in China and ASEAN for Japan... in Mexico for North America... and in Eastern Europe for Europe. To accelerate progress, the next step will be to develop a new sourcing base in India.
In fiscal '06, for Japan, North America and Europe, 15% of our purchasing, by value, was sourced from LCCs, versus 12% the previous year. In 2007, we will accelerate this trend to source 24% of our purchasing from LCCs.
The fourth breakthrough expands our geographic presence in emerging markets - the so-called BRICs - and beyond.
In Brazil, we're investing $150 million in our operations to reach sales of 40,000 units by 2009.
In Russia, we are investing $200 million in a plant in St. Petersburg that will have a capacity of 50,000 units when it opens in 2009.
In India, we are joining Renault in a partnership with Mahindra. Together, we're building a plant in Chennai that will open in 2009... with a planned capacity of 400,000 units.
In China, since 2003, we have invested $1.6 billion in our partnership with Dongfeng - with recent investments including a new engine plant and a new R&D center.
Overall, we are fine-tuning our operations in order to boost our performance. As we address short-term issues, we remain focused on our long-term goals, keeping a close eye on the motivation and engagement of our people.
For fiscal 2007, we are forecasting global sales to reach 3.7 million units, a 6.2% increase.
On April 26, we filed our forecast for fiscal year 2007 with the Tokyo Stock Exchange. Consolidated net revenue is expected to be 10 trillion 300 billion yen... consolidated operating profit, 800 billion yen... and net income after tax, 480 billion yen.
For the first quarter of '07, our budget planned lower results than the first quarter of '06, mainly due to a substantially weaker product mix and a higher effective tax rate.
Even taking this into consideration, we maintain our full-year forecast for fiscal year 2007.
I can understand your frustrations - frustrations that I share - because Nissan's share price is being discounted in the market, for a variety of reasons. A significant part of this discount is related to longer-term performance perceptions. To a lesser extent, short-term performance considerations have weighed negatively. And our share has also suffered from our accounting and financial presentations that are not considered to be sufficiently investor-friendly.
We are and will be taking action to address these concerns. And you can expect specific initiatives to be taken by our company in order to shrink this gap.
Nissan has a clear business plan, with clear objectives. We are committed to clear communications with all our stakeholders - with our employees, with our suppliers and, obviously, with our shareholders, to make sure you understand our strategies and are willing to support them.
We want to bring you the best return possible. We want to recognize your trust and contributions through transparent shareholder relations and a sustainable dividend policy. Today we will propose a 17-yen-per-share year-end dividend, giving a full-year dividend of 34 yen-per-share for fiscal 2006. We will also maintain the proposed 40 yen-per-share dividend for fiscal '07.
Building our brands
Today, although Nissan and Infiniti have made substantial progress, both brands are somewhere in the middle on the brand appeal scale. Our successes still come much more from the strengths of individual models than overall brand appeal.
So building our brand power is critically important. Patiently and consistently, we are focusing on every facet of our relationship with the customer. In parallel, we are working on two fronts:
So far, compared to our benchmarks, we're doing better on attractiveness than competitiveness. We are recognized for the attractiveness of our designs and for driving pleasure. As examples, Nissan brand icons include the Skyline and Fairlady Z in Japan... the Altima and Infiniti G35 in the U.S.... the X-TRAIL in Europe... and the Patrol in many General Overseas Market countries.
And Nissan's automotive prowess will be further reinforced, without a doubt, by the GT-R. This model will possess supercar performance that anyone can drive, anytime and anywhere.
The GT-R represents our strong heritage... showcases our present capabilities... and foretells our future promise. I don't think you should have any doubts about Nissan's passion and growing technological strength; the GT-R will help to dispel them. See the excitement for yourself as we show you a clip from one of the GT-R test drives we conducted in Germany....
Come and see the final product at the Tokyo Motor Show and in our showrooms in December.
Once we complete the 28 launches of Nissan Value-Up this year, we will begin to introduce more than 33 new products during the following three years - an average of nearly one new product each month.
Investing in people
Since our future is global - much more global than before - we need human-resource strength all over the world. That is why we are dedicated to creating a corporate culture that embraces diversity. We want the most talented and motivated people in every country to recognize Nissan as an employer where merit - and merit alone - opens every door.
We are investing in people and in working conditions that enable our people to work more efficiently and cross-functionally. For example:
I hope you will see that we are equipping our people with the tools and with working environments that will enable them to perform in a highly effective, cross-functional manner that will lead to strong results.
Investing in society
We are increasing transparency by sharing our goals and our progress toward nine key areas as outlined in the Corporate Sustainability Report scorecard, which we developed this year. We want to earn the trust of all our stakeholders as we pursue our company's sustainable, profitable growth.
In the 1990s, Nissan's finances were so fragile the company could not afford to maintain its reputation for technological innovation - the traditional core of its brand identity.
Since 1999, annual R&D expenditures have doubled to nearly 500 billion yen in fiscal 2007. But bigger budgets are only one measure of the change. Our research and advanced technology functions are now more than five times more efficient than they were in 1999.
Instead of unfocused and sporadic technical achievements, we now have a culture of consistent cross-functional innovation. And through the Alliance we have significant collaboration with Renault's R&D. Together we are advancing on all fronts.
Following the world's first 4-wheel active steering system introduced recently in the new Skyline, in fiscal '07 eight new original technologies will be featured in our products. More "world-firsts" are coming, including safety features such as the Distance-Control Assist System, Lane Departure Prevention and Around View Monitor. And starting in 2009, we will deploy more than 15 new technologies in our products each year. It is then that we will realize the fruits of all the investments we have systematically been making over the past seven years.
Our most urgent R&D challenge today is to meet society's environmental expectations. That's why 40% of our budget for advanced engineering is devoted to Nissan Green Program 2010, our five-year environmental blueprint.
For our industry, environmental sustainability represents the biggest engineering challenge. Along with Renault we will pursue every possible avenue of environmental progress - from hybrids to fuel-cells to electric cars and clean diesels.
In April, I announced Nissan will have its first-ever clean-diesel passenger car for all 50 states in the U.S. in 2010. We will launch a Nissan Maxima powered by a clean-diesel engine co-developed by Nissan and Renault.
Here in Japan, we have formed a new company with N-E-C Corporation to focus on the development and marketing of advanced lithium-ion batters, designed to power future generations of electric-powered vehicles.
Our new Advanced Technology Center will help to accelerate the research and advanced engineering of breakthrough technologies in all these areas. Focused technology will once again be a pillar of Nissan's competitive strength... and the core of our brand identity.
We know where we're going. We know how we're going to get there. We are realizing significant synergies and benefits through our Alliance with Renault. And we have enough fuel to go the distance - the resources we need to fund our future - with a 7.4% operating profit margin and strong cash flow from operations, at more than 1 trillion yen.
Strong companies are not the ones who never trip. They are the companies who always learn when they trip and adapt to keep on course as the competitive race goes forward. We have fully learned many lessons from our experience in fiscal 2006, and we are emerging with a sharper competitive edge. You can continue to expect the best from Nissan.
I will now proceed with the deliberation of the five items to be resolved in this General Meeting. You have received the items in your convocation documents. Afterward, I will be glad to take your questions.