Fiscal Year 2008 Results
Press conference
May 12, 2009
Carlos Ghosn, President & CEO, Nissan Motor Co., Ltd.
Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Co., Ltd.

Toshiyuki Shiga:
In February, when we reported our third-quarter results, we noted that Nissan - like all other global automakers - was facing a triple threat from the financial crisis, a severe economic recession and the volatility of foreign exchange rates. Despite these threatening circumstances, Nissan was able to end fiscal year 2008 with results that are better than what we forecast in February. Consolidated net revenues of 8.437 trillion yen are higher than our forecast, and the operating loss of 137.9 billion yen is lower than expected.
We were quick to take actions to adapt to the financial crisis and economic recession. Nissan is fully mobilized and working toward the recovery of our performance.
Today, I will report our business performance for fiscal year 2008 and provide an outlook for fiscal year 2009. Mr. Ghosn will then talk about our company's future direction.

FY08 sales performance
Reviewing our performance during fiscal year 2008, I begin with global sales.
FY08 sales results came to 3.411 million units, down 9.5% year-on-year. For the fourth quarter of FY08 alone, when the market environment deteriorated quickly, our sales fell 26.3% compared to the prior year.
For the full fiscal year, we had market share gains in North America and China, but losses in Japan and Europe. Our overall global market share was stable at 5.5%.
We had a solid product offensive - eight all-new models were launched globally, including the new 370Z and Cube, and there were more than 14 regional product launches.
Our products received numerous awards and top rankings, and our sports car flagship, the NISSAN GT-R, earned a long list of accolades, including the 2009 World Performance Car award in the U.S., Performance Car of the Year in the U.K., and Most Advanced Technology Award in Japan.
Let me give the sales breakdown by region.
In Japan, the TIV dropped by 11.6% year-on-year as the market plunged in the second half. Our sales reached 612,000 units, 15.1% below the previous year. Nissan's market share fell by 0.6%, to 13%.
In the United States, our sales volume dropped by 19.1%, to 856,000 units, while our market share grew from 6.7% to 7.2%, primarily due to the sales of compact cars. Two models - Versa and the new 370Z - ranked number 1 in market share in their segments.
In Europe, our sales reached 530,000 units, decreasing by 16.7%, despite high volumes in Russia and strong sales of QASHQAI. The Infiniti brand was introduced in Western Europe. Our European market share fell one-tenth of a percentage point, to 2.7%.
In the General Overseas Markets, our sales grew 7.1% to 1.136 million units. In particular, in China four new models contributed to the record-high sales of 545,000 units, and our share of passenger and light commercial vehicle sales was up 0.6%, reaching 6.2%. Nissan is the only Japanese automaker with a significant Light Commercial Vehicle presence in China. Among those automakers, Nissan now ranks third in a ranking of passenger vehicles sales, second when sales of Light Commercial Vehicles are added, and first when middle and heavy commercial vehicle sales of our joint venture company, Dong Feng Motor Limited, are included.
Nissan also introduced 11 important new technologies, including a clean diesel engine for lower CO2 emissions that meet the world's most stringent emissions regulation, an ultra-low-precious-metal catalyst for lower costs and cleaner emissions, and the new STAR WINGS smart route-guidance navigation system in China.

FY08 financial performance
Now I will review our financial results for fiscal year 2008.
Consolidated net revenues decreased 22.1%, to 8.437 trillion yen. Volume and mix had a negative impact of 11%, foreign exchange had a negative impact of 9% and accounting changes had a negative impact of 2%.
Consolidated operating profit totaled a negative 137.9 billion yen.
Net income was a negative 233.7 billion yen.
Explaining the operating profit variance analysis:

  • Volume and mix, including sales price increases, produced a negative impact of 525.2 billion yen, resulting from the decrease in global sales volume and mix deterioration in Japan and the United States.
  • The 223 billion yen negative impact from foreign exchange came mainly from the U.S dollar. Compared to last year, the appreciation of the yen against most currencies had a negative effect. The ruble had the second-largest negative impact in this period, due to higher volumes in Russia.
  • The increase in raw material and energy costs - including steel, oil and other commodities - amounted to a negative 134.2 billion yen.
  • The negative impact from the increase in provision for residual risk on leased vehicles in North America was 91.8 billion yen.
  • The remaining variance was a positive 45.5 billion yen. Higher selling expenses and other expenses were offset by the positive impact of purchasing cost-reduction efforts.

Given our declining profitability, as we announced on February 9, we will not propose a year-end dividend to our shareholders, resulting in a full-year dividend of 11 yen per share.

Recovery plan progress
Over the course of fiscal year 2008, our revenues fell by 22% and our production declined by 16%, compared to the prior year. As soon as we saw the first signs of decline, we adapted quickly and put in place actions to preserve cash and recover profits.
In line with the drop in market demand, we eliminated work shifts and scheduled non-production days or shorter work hours at all our vehicle and powertrain plants worldwide. These actions reduced our global production volume for fiscal year 2008 by 772,000 units from our planned volume - a 20% decrease.
We took swift actions to tighten our control of global inventory, which peaked in November 2008 at 720,000 units. By March 2009, inventory was down to 470,000 units, a level 26% lower than the previous year. We continue to monitor the balance of sales, inventory and production carefully.
Measures are in place to reduce our labor costs in high-cost countries by 20% in fiscal year 2009 compared to fiscal year 2008. Globally, fixed costs, including labor costs, will be reduced by more than 200 billion yen. We are keeping hiring to a minimum, reduced overtime, cut travel by 75% and implemented non-work days. Our right-sizing activity is on schedule.

FY09 outlook
Let's move to our FY09 outlook.
We expect our global sales to reach 3.08 million units, down 9.7%.
With a TIV assumption of 54 million units, a 13% decrease year-on-year, our market share is expected to rise 0.2% to 5.7%, which will be a record high.
Our global production volume is forecast to be 2.95 million units. For the first half of fiscal 2009, our production volume is planned to increase by more than 10% compared to the second half of fiscal 2008 and we will see a reduction in the number of non-work days.
We will launch eight new products globally in fiscal year 2009, with 14 regional product launches. The plan includes:

  • the PIXO with low CO2 emissions in Europe and the long-awaited Patrol in the Middle East;
  • in Japan, the Fuga, the new mini and the NV200 - a next-generation global LCV;
  • starting from Asia, the new global entry car to be launched at the end of fiscal year 2009; and
  • the G37 Convertible and the 370Z Convertible in the United States. The new Cube launched there this month.

We will continue working on advanced technologies. Seventeen new technologies will be commercialized in fiscal year 2009, of which 12 are to be deployed in the next-generation Fuga/Infiniti M.
In this fiscal year, we will spend 70% of our research and advanced engineering budget on environmentally friendly technology, compared to 54% from the previous year.
We are on track with our Nissan Green Program 2010 environmental action plan. For example, in fiscal year 2007, we exceeded our 1 million-unit CVT sales objective. In fiscal year 2008, the first clean diesel was released with X-TRAIL, as planned. This fiscal year, we will promote the Nissan ECO series in Japan - 14 models that benefit from the new preferential tax scheme for environment-friendly vehicles.
In fiscal year 2009, risks involve foreign exchange, distressed suppliers, raw material price rebound and further deterioration of the TIV. We consider that opportunities lie in exchange rates and in the hard synergies we will develop with our Alliance partner, Renault.
In light of our outlook for fiscal year 2009, we have filed our forecast with the Tokyo Stock Exchange, using a foreign-exchange-rate assumption of 95 yen to the dollar and 125 yen to the euro.

  • Net revenues are expected to be 6 trillion 950 billion yen.
  • Operating loss is expected to be 100 billion yen.
  • Net loss is expected to be 170 billion yen.
  • R&D expenses will amount to 400 billion yen.
  • Capital expenditures are expected to be 350 billion yen.
  • We are focusing our efforts to obtain a positive free cash flow.

The evolution in operating profit, compared to the fiscal 2008 results, is mainly linked to four key factors:

  • the impact of foreign exchange, which is expected to be a negative 170 billion yen;
  • the impact of the deterioration in volume and mix, which will have a negative impact of 200 billion yen;
  • the impact of purchasing cost reduction with raw material prices down compared to last year, which is expected to be a positive 150 billion yen; and
  • the impact of others, mainly driven by fixed costs, which is expected to be a positive 257.9 billion yen.

Now I invite our CEO, Carlos Ghosn, to deliver his remarks.

Carlos Ghosn:
Ending fiscal year 2008 with better-than-expected results is good, but the absolute numbers show that we still have significant challenges before us. The crisis is ongoing, and market conditions are still volatile. Nissan's recovery plan has been embraced by all employees and is fully engaged. The plan has two main objectives - to return to positive free cash flow and to positive consolidated operating profit as soon as possible.
First, we are focusing on actions to preserve cash.
At the end of fiscal year 2008, the value of our global inventory - including new vehicles, used cars, parts and materials - was 735 billion yen. Even though our sales volume in the second half of fiscal year 2009 should increase compared to the second half of fiscal year 2008, we will keep the inventory level flat through a tight control of used cars, parts and materials as well as new vehicles.
Capital expenditures will be reduced to 350 billion yen, a 9% reduction from the FY08 level. Of the 350 billion yen, 50% will be dedicated to new vehicles. As already announced, we have decided to postpone, reduce or cancel specific capital investments until there is better visibility regarding the duration of the economic crisis.
Another source of cash is the sale of already identified non-core assets and non-core activities. The potential amount to be gained in FY09 is 70 billion yen, more than half of which is related to the sale of real estate assets. Decisions about whether to sell non-core assets or increase borrowing at reasonable rates will be taken in function of the situation in financial markets.
Next, we are taking actions to improve our profitability.
Monozukuri cost reduction is the biggest and most important contribution to deliver our plan. Due to the volume reduction, it will not be easy to realize the 5% cost reductions this year, but our monozukuri functions - Engineering, Purchasing, Manufacturing and Supply Chain Management - are working with our suppliers to develop concrete action plans. Major opportunities are linked to parts diversity and complexity reduction and to exchange rates.
Our initiatives are mainly focusing on four action plans:

  • Our aim is to double the volume per part, on average, and reduce parts complexity by 50% by fiscal year 2012. In fiscal year 2009, we will reduce the total number of vehicle and service parts by 35% compared to fiscal year 2007.
  • We are accelerating the depth and scope of Leading Competitive Country sourcing, working with suppliers to raise their monozukuri capabilities. We are on track to localize more than 90% of parts for new vehicles built in LCC markets, starting with the global entry car.
  • We will pull ahead new-model cost-reduction activities. Upstream involvement, starting with R&D, will include early-phase cost analysis as sourcing decisions are made. The scope is now being expanded to include After Service. In fiscal year 2009, we will address 114 parts commodities in Nissan and 57 parts commodities with our Alliance partner, Renault, within this scope.
  • Finally, we will minimize cash-out throughout the supply chain, the key driver of which is disciplined inventory control.

Monozukuri cost-reduction activity was the key to the success of the Nissan Revival Plan, and it will be the key to this recovery plan as well.
We are taking actions to reduce our company's projected exposure to the volatility of foreign exchange. We are making plans related to overseas production opportunities for vehicles, powertrains and in-house parts. In FY09, we will allocate 70,000 units to overseas production, making minimal investments to take advantage of available capacity in existing plants. We will introduce the QASHQAI+2 in NMUK for South Africa, Singapore and Magreb, leveraging the current FX benefit of the weaker British pound. Another example is the production of the D22 (Frontier) in Mexico for Mexico, Latin America and the Caribbean markets.
We continue to focus on the competitiveness of our plants in Japan, where domestic production will be at the level of 1 million units. Japan is our home country and will remain our base for our global business. We will concentrate on strengthening our plants' ability to remain competitive.
We expect to increase our global market share even though fixed marketing expenses will drop by 22% compared to the FY08 level. We will maximize our global marketing assets and give priority to highly visible models in key markets. Emphasis will be given to emerging markets, such as China, where four-fifths of all new cars sold are bought by people who are first-time car buyers.

Direction for the future
What indicators will we use to know when this crisis is over?
There are two clear indicators:

  • when we see no further global market TIV decline; and
  • when our net income after tax returns to positive and our forecast is that it will remain positive.

. As long as there is a credit issue in the global economy, positive free cash flow will be our leading indicator, but concern for the present does not overshadow our vision for the future. We are balancing short- and long-term objectives in order to remain viable and prepare for the major evolutions that are occurring in our industry.
We are moving forward with our zero-emission leadership strategy, which involves the development of electric vehicles and fuel cell vehicles. Electric vehicles will be launched first, and our production plans are on track. Vehicle production will begin in Oppama in the fall of 2010, and we are also exploring other production sites around the globe. Oppama will be the mother plant, assuring competitive quality and performance. We will start up with production of 50,000 units a year, ramping up volume as mass-marketing begins in fiscal year 2012. The EV motor will be produced in Yokohama, and the inverter will initially be produced in Zama.
The core technology for the electric vehicle - Nissan's compact laminated lithium-ion battery - is being produced by our affiliate AESC in Zama. This new generation of laminated cell is the result of 17 years of development. In the same size as the previous generation battery, this delivers higher reliability and performance - with twice the power and twice the energy. So, the progress is clear. We have already received orders from competitors that are eager to benefit from our advanced battery technology.
We will unveil our new electric vehicle for the first time in early August, at the opening of our new global headquarters, but I remind you that Nissan's zero-emissions strategy is unique because it goes beyond the vehicle itself. Taking this new technology to mass production requires building up the necessary infrastructure and securing the economic conditions for success through partnerships with governments and other third parties. This is our vision, and we are working aggressively to make it happen.
Quality leadership continues to be a corporate objective. Our internal indicators show positive trends, and our efforts to improve product and service quality are producing encouraging results in external surveys.
In addition to our normal product lineup renewal, we continue to move forward with our plans for affordable, fuel-efficient entry cars. With our A-platform car, we will offer the space, technology and comfort of a B-segment vehicle with the fuel efficiency and overall cost of ownership of an A-segment vehicle. Our first global entry car, which will be the successor of the March/Micra, will be produced in Thailand at the end of fiscal year 2009.
We continue to focus on BRICs and the Middle East/North Africa and are well positioned to grow in emerging markets when economic growth resumes and demand rises.

  • In Brazil, we will introduce the whole Livina family as well as flex-fuel technology for Tiida and Sentra in 2009.
  • Our plant in St. Petersburg, Russia, will begin local production in June [2009], starting with Teana.
  • In India, the Chennai plant will open in 2010 with the start of production of our new global entry car.
  • In China, our Light Commercial Business continues to expand. Production has begun at our new engine plant in Shiyan, the launch of the NT400 Cabstar will be in mid-2009, and the launch of a new assembly plant in Zhengzhou will come in 2010.
  • In the Middle East, our sales have grown by 12% in a market that was up 4%. With the new Patrol to be launched at the end of FY09, Nissan will redefine the boundaries of the large SUV segment.

Finally, we have a tremendous competitive advantage in our Alliance with Renault. Economies of scale are vital to enable companies to get through the crisis and still invest in tomorrow's technologies. We have a solid partnership built upon 10 years in the Alliance - a significant, unique experience in a car industry that is now going through a wave of consolidation. The maturity we now have makes it possible for the Alliance to go on to a new stage of strengthening and extending synergies between Nissan and Renault.
In the past, the Alliance was a preferred option to maximize the performance of each partner. Today, however, the economic environment and the situations of Nissan and Renault have completely changed. Against this new backdrop, we will use the Alliance as a priority lever to counter this crisis and prepare for what will follow. It's no longer an option.
We are working on a plan to accelerate synergies that will generate 180 billion yen of additional free cash flow for the Alliance in 2009 - 90 billion for Nissan and 90 billion for Renault.
In terms of our dividend policy, I would like to emphasize that the payment of a globally competitive dividend continues to be the driver of our strategy and relationship with Nissan shareholders. We will make no forecast about paying a dividend in fiscal year 2009. Once positive free cash flow is attained, we will adjust our dividend policy accordingly.

Ten years ago, when the Renault-Nissan Alliance was formed, Nissan proved its capabilities in a crisis situation, and we are seeing the same kind of rapid-response effectiveness today. In the fourth quarter of fiscal 2008, we made a 400 billion yen improvement to net automotive debt and a 300 billion yen contribution to cash on hand. This was achieved in three months amid conditions that remain highly volatile.
We know how to adapt and face a crisis, but that is not all we are about. Nissan has knowledge and skill that are being used to create innovative products, such as zero-emission vehicles and breakthrough global entry cars; to build a presence in emerging markets; and to become more cost-efficient and offer greater value to our customers. We value the strengths that come from our diverse workforce and in our Alliance with Renault.
The effective execution of all these measures will make it possible for Nissan to not only weather the current crisis but also to be ready for the future.