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2020-05-04

Nissan's plan to focus further on the U.S., Japan, China

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The "operational performance plan" is due to be announced on May 28, and goes beyond fixing issues from the aggressive expansion drive of ousted leader Carlos Ghosn, the people said.

Pursuit of market share, especially in the U.S., led to steep discounting and a cheaper brand. The people told Reuters that under the new three-year plan-first reported here-Nissan aims to restore dealer ties and refresh lineups to regain pricing power and profitability.

"This is not just a plan to cut costs. We rationalize operations, reprioritise and refocus our business on planting seeds for the future, "said one of the people.

The plan also aims to curb competition and expand cooperation with partners in the alliance, the people said. Nissan will follow Mitsubishi Motors Corp (7211.T) in plug-in hybrid electric vehicle technology, with the smaller peer taking the lead outside of China and Japan in Asian market. France's Renault SA (RENA.PA) will probably focus on technology for electric vehicles and Europe.

Mitsubishi and Nissan refused to comment. Renault did not respond immediately to a request for comment.

The plan, chiefly led by Chief Operating Officer Ashwani Gupta rather than the low-key chief executive of Nissan, Makoto Uchida, is aimed at freeing resources to invest in products and technology for the United States, China and Japan, the people said.

"While we are reducing our R&D spending this year versus last year and making other savings, the net effect is that we are pumping those freed-up resources back into core markets and core products," said one of the people who declined to be identified as they were not allowed to talk to the media about the matter.

The plan is likely to take up to two weeks to finalize, with sales and earnings targets complicated by the anticipated long-term impact of government measures taken worldwide to halt the coronavirus outbreak on auto sales, the people said.

In July, Nissan targeted an operating margin of 6 percent on revenue of 14.5 trillion yen ($135.83 billion) by March 2023 versus 3 percent and a forecast of 13 trillion yen at the time of March 2020, the results of which are expected to be released later this month. The management has changed since, with the appointment of Uchida and Gupata in December.

To be sure, for Japan's second-largest automaker by volume after Toyota Motor Corp (7203.T), focusing on its three core markets does not mean a total retreat from elsewhere.

By stepping up efforts with its Qashqai and Juke crossover sport utility vehicles (SUVs), Nissan will attempt to maintain a presence in Europe. In Asia, it plans to further expand sales in Thailand and the Philippines, which generate around 90 percent of sales and profit in the region excluding China, Japan and India with Australia.

Still, its new plan calls for tighter, targeted line-ups in countries like India, Indonesia, Malaysia, South Africa, Russia, Brazil and Mexico-such as focusing on the beefy Patrol SUV in Africa and the Middle East. That means Nissan may need to shut down more than the 14 assembly lines that were announced in July. It also announced plans for halting production in Indonesia in March.

Previously, Nissan had put its global annual production capacity at over 7 million vehicles based on three daily shifts per facility. The new plan is based on two shifts which put capacity at about 5.5 million, the people said, with the 14 closures.

Under the plan, the Yokohama-based automaker aims to remain on the U.S. market where the perception of being a bargain-basement brand is to be eliminated. Although its sales in North America have increased, its operating margin has diminished.

"Everything has been based on volume growth for several years, then we shifted our focus to sales quality, and we did it overnight," one of the people said. "We did it too quickly, and our business was shocked."

Nissan's American models have an average age of more than 5 years. The automaker plans to launch new and significantly redesigned cars, including a next-generation Rogue crossover SUV, to lower that to 3.5 years, the people said. It will also cut sales to rental operators and other fleet operators, they said.

Nissan has also been slow in launching models in Japan. Under the new plan, six new or redesigned models will be introduced by the automaker over the next three years to bring the average lineup age from an undisclosed figure to below 2,5 years, the people said. Domestically, the average age of Competitive Auto Brands lineups is generally between two and three years.

Nissan's new plan in China involves designing vehicles more specifically for consumers on the world's largest automobile market, rather than offering cars designed for U.S. consumers. It will need to reposition its China-only Venucia brand to better respond to competition from a multitude of indigenous brands, the people said.