Ghosn: Tough Year Ahead for Industry

2008 Nissan Rogue

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It’s going to be a very tough year for the auto industry, especially in developed markets like theU.S. and Europe, warned Carlos Ghosn, CEO of the Euro-Japanese alliance partners, Renault and Nissan. Sales in the States could tumble to as low as 16 million, the executive forecast, down roughly a million from 2006. And with the “headwinds tough, you’re going to see a lot of things happen,” not all good, said Ghosn, during an interview at the Detroit auto show.

For one thing, the Renault/Nissan chairman said he would be surprised not to see a new round of consolidation in the global auto industry, including possible new alliances along the lines of the two companies he manages. But Ghosn also insisted that Nissan is well-positioned to continue posting industry-leading profit margins, even with sales in a slump.

The prior year was actually not all that good for Nissan, the executive acknowledged. It required “a lot of hard work,” including the move of its U.S. headquarters from Los Angeles to Nashville , “and not so many (good) results.” But Ghosn said much of that work should pay off in 2007. Of course, it helps to have an array of new products reaching market, including the updated Sentra and Altima sedans.

The company’s new Versa minicar, meanwhile, has outpaced even Nissan’s own, ambitious expectations, with sales running about 50 percent above initial forecasts. The minicar segment is going to be one to watch, said Ghosn, but he cautioned that the challenge is to find a way to produce a competitive small car at a reasonable profit.

Part of the problem faced by Nissan and its competition is the steady rise in commodity costs. Steel is set to go up again, noted Ghosn, adding that it is almost impossible, in the current, competitive environment, to pass those added costs onto consumers. So Nissan has had to find ways to absorb about $1 billion in added commodity prices annually.

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