Nissan faces long, rocky road to cut U.S. discounts, rental sales

DETROIT/TOKYO (Reuters) - Nissan Motor Co Ltd said on Tuesday it had hit “rock bottom” with a 45% drop in annual operating profit. The automaker’s troubles in the United States, including a failure to deliver on a slew of promises to dealers, are a major reason why.

Nissan’s U.S. operations, once a big contributor to its international sales and profit, are now emblematic of its global challenges. Under ousted chairman Carlos Ghosn, Nissan’s U.S. operations gunned for ambitious sales goals by pitting dealers against each other in a battle for sales bonuses, and cranking up sales to fleets, dealers said.

Speaking to reporters on Tuesday, Chief Executive Officer Hiroto Saikawa said U.S. profit margins had hit a low level of between 1% and 2%.

He acknowledged Nissan had failed to honor its promises and aimed to bring its fleet sales down to 15% to 17% of total sales by around 2022 - from a high of around 40% in the first quarter. Bulk sales to rental-car fleets undermine resale values and hurt retail consumers at trade-in time, dealers said.

“It’s going to take more time than we thought to recover from this situation,” Saikawa said.

Nissan dealers complain the Japanese automaker has provided few specifics of a turnaround plan, and has not delivered on its past promises.

“We’ve heard a lot of talk, but we haven’t seen any action,” said U.S. Marine, managing partner with Sutherlin Nissan in Orlando, Florida.

Marine said dealers were skeptical because so-called stair step bonus programs remain in place that reward dealers with cash only if they hit monthly sales targets.

The programs can force dealers to slash profit margins to hit the targets, or risk seeing rival Nissan franchises get bonus money instead, dealers said. Profitability at his Nissan dealership has fallen by 50 percent in the last three years, Marine said.

“It’s depressing and deflating for a dealer when we get our new objectives for the quarter and they’re so high that some dealers are saying, ‘Screw it ... we’re going to focus on selling used cars,’” Marine said.