From the Financial Times' lex blog
Will Nissan hit its targets of an 8 per cent operating profit margin and an 8 per cent global market share by 2017? Does it matter? The answers are "probably not" and "no," respectively.
Monday's big after-market event -- the presentation of a six-year business plan at the company's waterfront HQ in Yokohama -- was mostly for internal consumption. A 48-slide briefing told investors very little they did not already know. The largest novelty is a name for Nissan's emerging market-led growth strategy for the next six years: "Power 88."
It was Nissan's focus on China, Russia and Brazil -- it is the leading Japanese auto maker in each -- that had caused its shares to outperform the domestic sector by almost double-digits this year.
That investment case is still intact, despite the implausibility of the two numbers. Nissan's operating margin has averaged 6.5 per cent since Carlos Ghosn arrived as chief operating officer in 1999; lifting it to a "sustainable" 8 per cent amid aggressive expansion would require a flawless management of the product cycle in the U.S., which still accounts for a third of sales.
The 8 per cent global market share target is also a stretch, given that Nissan already added 1.2 percentage points, to 5.8 per cent, between 1999 and 2010.
The fact that only one Nikkei 225 stock fell more than Nissan on Tuesday suggests that investors took the opportunity to book profits. But the market should remember that, of Japan's big three, only Nissan expects to shift more units this year than last, thanks largely to the locally-customised models rolling off standardized production lines in Thailand, India, China and Mexico, supported by strong local sales teams.
Even if it falls short of its targets then, its momentum remains intact. Since Mr Ghosn took over, betting against him has not been a smart strategy. It still isn't.