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Nissan hopes to break even after record loss, but chip shortage won't help

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TOKYO – Nissan expects to break even this business year, defying expectations for a return to profitability, as the global chip shortage curbs the car maker’s recovery from a record annual operating loss.

“The fiscal year 2020 was a year dominated by the COVID-19 pandemic and impacted by multiple factors including growth of environmental awareness and political as well as economic changes,” said Chief Executive Makoto Uchida.

The forecast by Nissan, Japan’s No.3 carmaker by sales, to break even for the year that began April 1 was lower than a 241.7 billion yen ($2.23 billion) profit predicted by SmartEstimate.

“If we look at the immediate challenges today, there is a big impact from business risks like semiconductor and commodity price hikes … so at this point in time, we are foreseeing operating profit coming out even,” Uchida said on an online earnings call, adding that Nissan will give updates on its outlook guidance after the first quarter.

The global auto industry has been grappling with a chip shortage since the end of last year, exacerbated in recent months by a fire at a plant of key automotive chip maker Renesas Electronics Corp in Japan and blackouts in Texas where a number of chipmakers have factories.

That forced Nissan to cut production by 130,000 vehicles in the year just ended, although the company has been able to recover half of that production, Chief Operating Officer Ashwani Gupta said.

The ongoing shortage of semiconductors, mainly due to the fire at Renesas’s plant, will impact Nissan in the first quarter and will also likely affect Nissan’s production of 500,000 vehicles this year, Nissan executives said.

The company expects to recover half of the affected production in the second half of the year, they said.

The alliance partner of Renault SA will slash production at several factories in Japan in May, three sources with direct knowledge of the plan told Reuters last month. It will also adjust production schedules at plants in North America and Mexico.

Nissan has also struggled to make money as it pulls back from the global expansion pursued by ousted chairman Carlos Ghosn that left it with an aging vehicle lineup. It has not made a profit since the year ended March 2019.

The company said its annual operating loss in the year ended March 31 widened to a record 150.65 billion yen ($1.4 billion), from a 40 billion yen shortfall in the previous year.

However, it beat its February forecast of a 205 billion yen loss thanks to cost cutting and a sales recovery led by China and the United States.

Nissan plans to sell 4.4 million vehicles this business year, up from 4.052 million in the previous 12 months but still significantly less than the 4.9 million vehicles it sold two years earlier.

“Despite headwinds, we have reduced our losses more than we forecasted due to accelerated transformation focused on rationalization and quality of sales, while enhancing investments in new products and technologies,” Gupta said.

Mitsubishi Motors Corp, the junior partner in the three-way alliance with Renault, on Tuesday forecast an operating profit of 30 billion yen for the full year ending March.

Nissan’s bigger rival Toyota, which is due to report annual results on Wednesday, said in February that it expects a 54% rise in profit for the year that ended in March. It became the world’s biggest car maker last year and has shielded its operations better than its peers from the chip shortage.

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