Good article in the Times today. There is something
about Tennessee as well. As usual with a possible
turnaround situation there are conflicting: bad and good
news. I think the price of the stock already reflects all
the bad news so I see little risk at these levels. Does anyone here know the current BOOK VALUE?
I post portions of the article and the link to the full article.
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The world's attention was focused on Nissan when it became a surprise supporting player in the drama surrounding Daimler-Benz AG's global plans.
Daimler is toying with buying control of Nissan's truck-making affiliate, and Nissan's eagerness to sell -- it approached Daimler about a potential deal -- is a clear sign that it is finally feeling the heat.
At Wednesday's press conference, Nissan teased the investment community with a hint that it might consider some kind of a merger, saying it would explore "possible cooperative relationships with other companies" and then refusing to elaborate.
"This could be a very aggressive plan," said Edward Brogan, an analyst at Salomon Smith Barney in Tokyo. "But this is a company that has a track record of promising more than it can deliver."
Specifically, Nissan vowed to concentrate on its ailing U.S. business, lift operating profit margins to percent in five years and reduce its debt load by 25 percent in two years, to about $22.3 billion.
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And Wednesday, taking a step that was once unthinkable in the top echelons of Japanese business, Hanawa said profits would come first at Nissan. "Relying on expanding sales," he said, "will no longer
be the centerpiece of our strategy."
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While Nissan's new plans appear to go further than previous efforts, nothing in the past has done much to reverse the company's fortunes -- despite the bold headline on last year's annual report, "Back
on Track and Shifting Into High Gear."
In the last five years, even though the company has cut $2.7 billion from its costs, expenses have kept rising, making Nissan one of the highest-cost carmakers.
Its pile of debt has grown to some $30 billion, and its stakes in various subsidiaries and affiliates put its risk even higher. The strain put on its cash flow by those obligations is what ultimately forced it to seek outside help from Daimler.
Nissan's willingness to consider the sale of its headquarters buildings, which straddle a narrow street in the expensive Ginza district of downtown Tokyo, is taken here as a sign that the company means business.
As one of Japan's oldest companies, Nissan owns substantial real estate, some of which was accumulated a century or more ago. "They're swimming in billions of paper profits, which they do not
carry on their balance sheet," said Woodworth, the consultant.
Outsiders and many insiders say having a valuable cushion has discouraged any true overhaul. "Those real estate assets are both a blessing and a curse for Nissan," said an executive at a competing
automaker. "They have great value, yes, but they also encourage complacency."
Nissan's other assets -- its stakes in several parts suppliers and banks -- are more of a mixed bag.
Like Nissan Diesel, which cannot make its interest payments without help, at least nine Nissan
suppliers are suffering from stretched cash flow, according to Christopher Redl, an analyst at Morgan Stanley Dean Witter in Tokyo.
Nissan's access to credit at a time when Japanese banks have curtailed lending to all but the bluest of blue chip clients seems remarkable. Even though Moody's Investors Service has warned that it may
downgrade its credit rating, Nissan is able to borrow at rates similar to those paid by Toyota, whose balance sheet is garnished with some $20 billion in cash.
It has been able to keep credit flowing in part because it owns small stakes in many of its lenders, like the Industrial Bank of Japan and Fuji Bank, and in part because the banks are already on the hook to Nissan for a lot of money.
But that may come to an end. As financial deregulation takes hold, Japanese banks are being forced to make lending decisions based on creditworthiness rather than relationships.
This may have contributed to the move to reduce debt. "As we see competition get keener and keener, we need to reduce it as soon as possible and concentrate on our cash flow," Hanawa said Wednesday.
That potential problem, however, pales in comparison to the challenges Nissan has created for itself in the car business, particularly in the United States.
High costs at its Tennessee manufacturing facility, a push for sales at whatever price and lackluster products have damaged its already weak franchise. Now, Nissan may move production of its Maxima sedan to the Tennessee plant. And future ads will compare the Altima directly with the Accord and Camry.
Not only is Nissan being hammered in sport utilities, but its own used cars are giving its new models run for the money. Nissan is now paying the price for aggressively promoting leasing of its new cars with low prices -- by some estimates, as many as 40 percent of its sales in America come from leasing -- and overly optimistic estimates of the value its leased cars would have on return. Recalculating those estimates is what pushed Nissan into the red again.
The company said Wednesday that it would reduce the costs of vehicles made in the United States by $1,000 apiece and reduce inventories and leased sales.
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