Nissan Motor ADRNSANY

Morningstar Rating

Stock Research and Analysis

by David Whiston, CPA, CFE

Nissan Motor has come a long way since its problems in the late 1990s, which caused it to form a partnership with Renault RNO. Although the firm is finally on stable ground, falling demand for autos and the weak dollar will create difficulties for management as it implements the next strategic plan. Read more

Bulls Say

Significantly lower pension and retiree health-care costs give Nissan a cost advantage over the Detroit Big Three.

The alliance with Renault gives Nissan an opportunity to get scale and cross-sell in markets that would not otherwise be easily accessible.

The company's push into electric vehicles and ultra-low-cost cars is in the right direction to meet future demand.

We calculate that Nissan's automotive business burned several billions of dollars less than Toyota's TM or Honda's HMC did. Read more

Bears Say

Environmental laws are becoming stricter, which will make cars more expensive to produce and more expensive for consumers to buy.

The weak dollar will make increasing profits harder for Nissan than in the past.

The auto industry suffers from global overcapacity that creates pricing pressure and makes it difficult to earn high economic profits for all participants.

Nissan North America has experienced large management turnover, with eight executives leaving in the past two years. This constant change is a distraction in a market that accounts for about 35% of unit sales.

General Motors and Ford F may become more formidable competitors if they ever finish restructuring. Read more

Strategy

Nissan's five-year plan centers on quality and zero-emission vehicles. Emerging-market growth will be key to generating revenue increases, and electric vehicles should be in demand in the U.S., Japan, and Europe regardless of which way gas prices go. Read more

Management

Nissan's management structure differs from most, as the board is a joint alliance of Nissan and Renault executives. Carlos Ghosn has been CEO of both Nissan and Renault since 2005 but has recently stated that there may be a time when the alliance returns to having a separate CEO for each company, as was originally done. Read more

Profile

Founded in 1933, Nissan sold 3.41 million vehicles in fiscal 2008. Its market share is 13% in Japan and 7.2% in the United States; 69.4% of unit sales come from Japan, Europe, and North America. Read more

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