Nissan Curbs Production After Misjudging Slowdown in U.S. Demand

(Bloomberg) -- Nissan Motor Co. is slowing production at several assembly plants to keep the supply of vehicles on U.S. dealers’ lots in check after being caught off guard by weaker consumer demand.

Japan’s second-largest automaker is aiming to have a 50- to 60-day supply of cars and trucks in August, when dealers start transitioning to sell 2019 model-year vehicles, said Dan Mohnke, U.S sales chief for the Nissan brand. Nissan reached 86 days of inventory as of Sept. 1 last year, and the company increased incentive spending and shipped more cars to rental companies and other fleet customers to help bring that number down.

“We didn’t do a very good job of forecasting the softness that was coming, so we’re kind of playing catch-up here from a production standpoint,” Mohnke said in an interview in Las Vegas ahead of the National Automobile Dealers Association’s annual convention. “Some of the other competitors maybe did a little bit better job of seeing that earlier and adjusting earlier. We’re adjusting essentially right now.”

Nissan has struggled more than some of its Japanese peers to adjust to the U.S. auto market slowing down for the first time since the global recession. In February, the company cut its earnings forecast for the fiscal year ending this month, as costlier sales incentives in the U.S. weigh on operating profit. Toyota Motor Corp. and Honda Motor Co. both lifted their projections.

While Nissan gained U.S. market share last year, its 13 percent increase in incentive spending per vehicle was the biggest jump among the six largest carmakers, according to Autodata Corp. The company also boosted fleet sales by 15 percent last year, Zohaib Rahim, an analyst at Cox Automotive, said in an email.

As of March 1, Nissan’s supply of vehicles was at 60 days, according to Automotive News Data Center. Mohnke, who was named a senior vice president in October, said he expects to reduce dealer inventory further in the April-to-June quarter.

“They’re saying all the right things,” Paul Sansone Jr., the executive manager of a Nissan dealership in Neptune, New Jersey, said in an interview. “But the question is, if they come up a little bit short if their objectives, will they hit the panic button again? The jury is still out on that one.”

©2018 Bloomberg L.P.

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