Nissan Motor Co., Ltd. - Company Profile, Information, Business Description, History, Background Information on Nissan Motor Co., Ltd.

17-1, Ginza 6-chome
Tokyo 104-8023

Company Perspectives:

Nissan's challenge is to enhance its corporate value and to build a corporate foundation that will enable the Company to win out in the competitive environment of the 21st century. The management team is also keenly aware of its responsibility to meet the expectations of shareholders by reinstating dividend payments as soon as possible. We will do our utmost to achieve a new corporate consciousness and to implement sweeping improvements in our corporate structure. We look forward to the continuing support and guidance of our shareholders as we strive to attain these goals.

History of Nissan Motor Co., Ltd.

Established in 1933, Nissan Motor Co., Ltd. was a pioneer in the manufacturing of automobiles. Nearly 70 years later, Nissan has become one of the world's leading automakers, with annual production of 2.4 million units, which represented 4.9 percent of the global market. Domestically, the company sells 774,000 vehicles on an annual basis, placing it second behind Toyota Motor Corporation. About 35 percent of Nissan's vehicles are sold in Japan, 25 percent in the United States, and 20 percent in Europe. In the North American market, the company's top models include the Infiniti, Maxima, Altima, and Sentra passenger cars, the Quest minivan, the Frontier pickup truck, and the Pathfinder sport utility vehicle. After losing money for most of the 1990s, Nissan entered into a global alliance with Renault S.A. in March 1999, with the French company taking a 37 percent stake in Nissan. A massive restructuring was then launched.

Early History

In 1911 Masujiro Hashimoto, a U.S.-trained engineer, founded the Kwaishinsha Motor Car Works in Tokyo. Hashimoto dreamed of building the first Japanese automobile, but lacked the capital. In order for his dream to come true, he contacted three men--Kenjiro Den, Rokuro Auyama, and Keitaro Takeuchi--for financial support. To acknowledge their contribution to his project, Hashimoto named his car DAT, after their last initials. In Japanese, 'dat' means 'escaping rabbit' or 'running very fast.'

Debuting in 1914, the first DAT was marketed and sold as a ten horsepower runabout. Another version, referred to as 'datson' or 'son of dat,' was a two-seater sports car produced in 1918. One year later, Jitsuyo Jidosha Seizo Company, another Nissan predecessor, was founded in Osaka. Kwaishinsha and Jitsuyo Jidosha Seizo combined in 1926 to establish the Dat Jidosha Seizo Company. Five years later, the Tobata Imaon Company, an automotive parts manufacturer, purchased controlling interest in the company. Tobata Imaon's objective was to mass-produce products that would be competitive in quality and price with foreign automobiles.

In 1932, 'Datson' became 'Datsun,' thus associating it with the ancient Japanese sun symbol. The manufacturing and sale of Datsun cars was taken over in 1933 by the Jidosha Seizo Company, Ltd., which was established in Yokohama that year through a joint venture between Nihon Sangyo Company and Tobata Imaon. In 1934 the company changed its name to Nissan Motor Co., Ltd., and one year later the operation of Nissan's first integrated automobile factory began in Yokohama under the technical guidance of American industrial engineers.

Datsun cars, however, were not selling as well as expected in Japan. Major U.S. automobile manufacturers, such as General Motors Corporation (GM) and the Ford Motor Company, had established assembly plants in Japan during this time. These companies dominated the automobile market in Japan for ten years, while foreign companies were discouraged from exporting to the United States by the Great Depression of 1929.

With the advent of World War II in 1941, Nissan's efforts were directed toward military production. During wartime, the Japanese government ordered the motor industry to halt production of passenger cars and, instead, to produce much needed trucks. Nissan also produced engines for airplanes and torpedo boats.

Postwar Recovery and Overseas Expansion

After World War II, the Japanese auto industry had to be completely recreated. Technical assistance contracts were established with foreign firms such as Renault, Hillman, and Willys-Overland. In 1952 Nissan reached a license agreement with the United Kingdom's Austin Motor Company Ltd. With American technical assistance and improved steel and parts from Japan, Nissan became capable of producing small, efficient cars, which later provided the company with a marketing advantage in the United States.

The U.S. market was growing, but gradually. Nonetheless, Nissan felt that Americans needed low-priced economy cars, perhaps as a second family car. Surveys of the U.S. auto industry encouraged Nissan to display its cars at the Imported Motor Car Show in Los Angeles. The exhibition was noticed by Business Week, but as an analyst wrote in 1957, 'With over 50 foreign car makers already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the U.S. market for itself.'

Nissan considered this criticism as it struggled to improve domestic sales. Small-scale production resulted in high unit costs and high prices. In fact, a large percentage of Datsun cars were sold to Japanese taxi companies. Yet Kawamata, the company's new and ambitious president, was determined to increase exports to the United States. Kawamata noted two principal reasons for his focus on exports: 'Increased sales to the U.S.A. would give Nissan more prestige and credit in the domestic markets as well as other areas and a further price cut is possible through mass producing export cars.'

By 1958 Nissan had contracted with two U.S. distributors, Woolverton Motors of North Hollywood, California, and Chester G. Luby of Forest Hills, New York. Nevertheless, sales did not improve as quickly as Nissan had hoped. As a result, Nissan sent two representatives to the United States to help increase sales: Soichi Kawazoe, an engineer and former employee of GM and Ford; and Yutaka Katayama, an advertising and sales promotion executive. Each identified a need for the development of a new company to sell and service Datsuns in the United States. By 1960 Nissan Motor Corporation, based in Los Angeles, had 18 employees, 60 dealers, and a sales total of 1,640 cars and trucks. The success of the Datsun pickup truck in the U.S. market encouraged new dealerships.

Datsun assembly plants were built in Mexico and Peru during the 1960s. In 1966 Nissan merged with the Prince Motor Company Ltd.--gaining the Skyline and Gloria models--and two years later Datsun passenger cars began production in Australia. During 1969 cumulative vehicle exports reached one million units. This was a result of Katayama and Kawazoe's efforts to teach Japanese manufacturers to build automobiles comparable to U.S. cars. This meant developing mechanical similarities and engine capacities that could keep up with American traffic.

The introduction of the Datsun 240Z marked the debut of foreign sports cars in the U.S. market. Datsun began to receive good reviews from automotive publications in the United States, and sales began to improve. Also at this time, the first robotics were installed in Nissan factories to help increase production.

1970s and 1980s: From Economy Cars to Luxury Sedans

In 1970, Japan launched its first satellite on a Nissan rocket. Only five years later, Nissan export sales reached $5 million. But allegations surfaced that Nissan U.S.A. was 'pressuring and restricting its dealers in various ways: requiring them to sell at list prices, limiting their ability to discount, enforcing territorial limitations,' according to author John B. Rae. In 1973 Nissan U.S.A. agreed to abide by a decree issued from the U.S. Department of Justice that prohibited it from engaging in such activities.

The 1970s marked a slump in the Japanese auto industry as a result of the oil crisis. Gasoline prices started to increase, and then a number of other difficulties arose. U.S. President Richard Nixon devalued the dollar and announced an import surcharge: transportation prices went up and export control was lacking. To overcome these problems, Nissan U.S.A. brought in Chuck King, a 19-year veteran of the auto industry, to improve management, correct billing errors, and minimize transportation damages. As a result, sales continued to increase with the help of Nissan's latest model, the Datsun 210 'Honeybee,' which was capable of traveling 41 miles on one gallon of gas.

In 1976 the company began the production of motorboats. During this time, the modification of the Datsun model to U.S. styling also began. Additions included sophisticated detailing, roof racks, and air conditioning. The new styling of the Datsun automobiles was highlighted with the introduction of the 1980 model 200SX.

During the 1980s Nissan established production facilities in Italy, Spain, West Germany, and the United Kingdom. An aerospace cooperative agreement with Martin Marietta Corporation also was concluded, and the Nissan CUE-X and MID4 prototypes were introduced. In 1981, the company began the long and costly process of changing its name from Datsun to Nissan in the U.S. market.

The new generation of Nissan automobiles included high-performance luxury sedans. They featured electronic control, variable split four-wheel drive, four-wheel steering, an 'intelligent' engine, and a satellite navigation system, as well as other technological innovations. Clearly, the management of Nissan had made a commitment to increase expenditures for research and development. In 1986 Nissan reported that the company's budget for research and development reached ¥170 billion, or 4.5 percent of net sales.

During the late 1980s, Nissan evaluated future consumer trends. From this analysis, Nissan predicted that consumers would prefer a car with high performance, high speed, innovative styling, and versatile options. All of these factors were taken into account to form 'a clear image of the car in the environment in which it will be used,' said Yukio Miyamori, a director of Nissan. Cultural differences also were considered in this evaluation. One result of this extensive market analysis was the company's 1989 introduction of its Infiniti line of luxury automobiles.

The use of robotics and computer-aided design and manufacturing reduced the time required for computations on aerodynamics, combustion, noise, and vibration characteristics, enabling Nissan to have an advantage in both the domestic and foreign markets. The strategy of Nissan's management during the late 1980s was to improve the company's productivity and thus increase future competitiveness.

Sustained Difficulties in the 1990s

By the start of the next decade, however, Nissan's fortunes began to decline. Profits and sales dropped, quelling hopes that the 1990s would be as lucrative as the 1980s. Nissan was not alone in its backward tumble, however: each of the major Japanese car makers suffered damaging blows as the decade began. The yen's value rose rapidly against the dollar, which crimped U.S. sales and created a substantial price disparity between Japanese and U.S. cars. At the same time, the United States' three largest automobile manufacturers showed a surprising resurgence during the early 1990s. According to some observers, Japanese manufacturers had grown complacent after recording prolific gains to surpass U.S. manufacturers. In the more cost-conscious 1990s, they allowed the price of their products to rise just as U.S. manufacturers reduced costs, improved efficiency, and offered more innovative products.

In addition, the global recession that sent many national economies into a tailspin in the early 1990s caught Nissan with its resources thinly stretched as a result of its bid to unseat its largest Japanese rival, Toyota Motor Corporation. Toyota, much larger than Nissan and possessing deeper financial pockets, was better positioned to sustain the losses incurred from the global economic downturn. Consequently, Nissan entered its ninth decade of operation facing formidable obstacles.

The first financial decline came in 1991, when the company's consolidated operating profit plummeted 64.3 percent to ¥125 billion (US$886 million). Six months later, Nissan registered its first pretax loss since becoming a publicly traded company in 1951--¥14.2 billion during the first half of 1992. The losses mounted in the next two years, growing to ¥108.1 billion in 1993 and ¥202.4 billion by 1994, or nearly US$2 billion. To arrest the precipitous drop in company profits, Nissan's management introduced various cost-cutting measures--such as reducing its materials and manufacturing costs--which saved the company roughly US$1.5 billion in 1993, with an additional US$1.2 billion savings realized in 1994. Nissan also became the first Japanese company to close a plant in Japan since World War II and cut nearly 12,000 workers in Japan, Spain, and the United States from its payroll. Nissan also was staggering under a debt load that reached as high as US$32 billion and threatened to bankrupt the company. Only intervention from Nissan's lead lender, Industrial Bank of Japan, kept the company afloat.

There were some positive signs in the early 1990s to inspire hope for the future. Nissan's 1993 sales increased nearly 20 percent, vaulting the car maker past Honda Motor Co., Ltd. to reclaim the number two ranking in import sales to the all-important U.S. market. Much of this gain was attributable to robust sales of the Nissan Altima, a replacement for its Stanza model, which was introduced in 1992 and marketed in the United States as a small luxury sedan priced under $13,000. To the joy of Nissan's management, however, the Altima typically was purchased with various options added on, giving the company an additional $2,000 to $3,000 per car. Nissan also was encouraged by strong sales of its Quest minivan, which was introduced in the United States in 1992 and had been developed jointly with Ford Motor, which marketed its own version, the Ford Windstar.

Nissan's losses continued through the fiscal year ending in March 1996, cumulating to US$3.2 billion over a four-year span. The company's return to profitability in fiscal 1997 came about in part because of the cost-cutting program and in part from the yen's dramatic depreciation against the dollar. Despite the return to the black, Nissan remained a troubled company. From its 1972 peak of 34 percent, the company's share of the Japanese auto market had fallen to 20 percent by early 1997. Competition from the more financially stable Toyota and Honda played a factor in this decline, but Nissan also hurt itself by failing to keep pace with changing consumer tastes both in Japan and in overseas markets. For example, Nissan was behind its rivals in adding minivans and sport utility vehicles to its product lineup, having for years dismissed these sectors as passing fads. Meanwhile, minivans, sport utility vehicles, and station wagons accounted for half of all passenger car sales in Japan by early 1997, up from just more than ten percent in 1990. In the U.S. market, the Altima lost ground to two midsized rivals, the Honda Accord and the Toyota Camry, because Nissan's model was smaller and thus less desirable. In the luxury car sector, Toyota's Lexus line became the hot brand in the United States, triumphing over the Infiniti. Because of these and other factors, Nissan returned to the red for fiscal years 1998 and 1999. Although the losses were not as large as earlier in the decade, the company's continued sky-high debt load--which stood at US$19.7 billion in late 1998--did not bode well for Nissan's future.

1999 and Beyond: The Renault Era

The late 1990s was a period of intense consolidation in the auto industry, stemming from rapid globalization, the increasing cost of developing ever more sophisticated vehicles, and worldwide automotive production overcapacity. The November 1998 merger of Daimler-Benz AG and Chrysler Corporation that formed DaimlerChrysler AG was the largest partnership created in this period, but there were a number of smaller mergers, acquisitions, and strategic alliances as well. Both Nissan and Renault S.A. of France were eagerly looking for a partner in order to compete in the 21st century. Nissan was rebuffed by both DaimlerChrysler and Ford and Renault was turned away by other Japanese automakers, before the two companies reached an agreement on a global alliance in March 1999. The combination of Nissan and Renault made strategic sense in that the companies' main sales territories and production locales were complementary. In vehicle sales, Nissan was strongest in Japan and other parts of Asia, the United States, Mexico, the Middle East, and South Africa, while Renault concentrated on Europe, Turkey, and South America. The production side followed a similar pattern. On a global basis, the two companies held just more than a nine percent market share, which would position the combination number four in the worldwide auto industry.

As part of the agreement, Renault pumped US$5.4 billion into cash-hungry Nissan in exchange for a 37 percent stake in Nissan Motor and a 22.5 percent stake (later raised to 26 percent) in Nissan Diesel Motor Co., a heavy truck unit. Although it did not secure complete control of Nissan, Renault gained veto power over capital expenditures and installed Carlos Ghosn (rhymes with 'bone') as Nissan's chief operating officer (he became president as well in 2000). The Brazilian-born Ghosn was an executive vice-president at Renault and had engineered a rapid turnaround there after joining the company in 1996. French newspapers tagged him with the nickname 'le cost killer' because of his tenacious approach to cost cutting--his Renault restructuring slashed US$3.5 billion in costs over a three-year period.

The capital injection from Renault quickly reduced Nissan's debt load to ¥1.4 trillion (US$13 billion). Ghosn rapidly began implementing a massive restructuring of Nissan. Nonautomotive operations began to be divested, including mobile and car telephone operations and the aerospace division. Nissan's forklift unit was likely to be sold and Nissan Diesel was a candidate for sale as well, given that Nissan Motor had declared that making cars and light trucks was its core business. In early 2000 Nissan sold a stake it held in Fuji Heavy Industries Ltd. As for the automotive operations, Ghosn in October 1999 laid out a tough cost-containment program slated to be completed by 2002. The program included: a 14 percent workforce reduction--representing 21,000 jobs, primarily in Japan--through attrition, early retirement, and noncore business spinoffs; the closure of five production plants in Japan in 2001 and 2002; the slashing of ¥1 trillion (US$9.5 billion) in annual costs, including a 20 percent reduction in purchasing costs and a 20 percent cut in overhead, the latter to include the elimination of one-fifth of Japanese Nissan dealers; and a 50 percent reduction in debt, to ¥700 billion (US$6.5 billion). Ghosn also began tackling the crucial need for a revitalization of Nissan's bland line of vehicles by substantially increasing capital spending, toward a goal of speeding new products to market four times faster than before. Although such a restructuring was by this time routine in the United States and becoming more commonplace in Europe, Ghosn's plan ran counter to many established business practices in Japan. The biggest question was whether Ghosn could implement the plan without resorting to large-scale layoffs in Japan, which would likely face fierce opposition from workers and labor unions and even from leaders of other Japanese firms. Perhaps to underscore the seriousness of his mission and his determination to turn Nissan around, Ghosn also announced that he would resign if Nissan was not profitable by March 2001.

Principal Subsidiaries: Autech Japan, Inc.; JATCO Corporation; NDC Co., Ltd.; Nissan Altia Co., Ltd.; Nissan Car Leasing Co., Ltd.; Nissan Finance Co., Ltd.; Nissan Koe Co., Ltd.; Nissan Kohki Co., Ltd.; Nissan Motor Car Carrier Co., Ltd.; Nissan Texsys Co., Ltd.; Nissan Trading Co., Ltd.; Nissan Transport Co., Ltd.; Rhythm Corporation; Tachi-S Co., Ltd.; Tennex Co., Ltd.; Vantec Corporation; Nissan Sunny Tokyo Motor Sales Co., Ltd.; Nissan Prince Tokyo Motor Sales Co., Ltd.; Tokyo Nissan Motor Sales Co.; Aichi Nissan Motor Co., Ltd.; Nissan Capital of America, Inc. (U.S.A.); Nissan CR Corporation (U.S.A.); Nissan Design International, Inc. (U.S.A.); Nissan Finance of America, Inc. (U.S.A.); Nissan Forklift Corporation, North America (U.S.A.); Nissan Motor Acceptance Corporation (U.S.A.); Nissan Motor Corporation in Guam; Nissan Motor Corporation in Hawaii, Ltd. (U.S.A.); Nissan North America, Inc. (U.S.A.); Nissan Research & Development, Inc. (U.S.A.); Nissan Textile Machinery Corporation in U.S.A.; Nissan Canada, Inc.; Nissan Canada Finance, Inc.; Nissan Mexicana, S.A. de C.V. (Mexico); Nissan European Technology Centre Ltd. (U.K.); Nissan International Finance (Europe) PLC (U.K.); Nissan Motor (GB) Ltd. (U.K.); Nissan Motor Manufacturing (UK) Ltd.; Nissan Europe N.V. (Netherlands); Nissan Finance, B.V. (Netherlands); Nissan International Finance (Netherlands) B.V.; Nissan Motor Netherland B.V.; Nissan France S.A.; Nissan Bank GmbH (Germany); Nissan Design Europe GmbH (Germany); Nissan Motor (Schweiz) AG (Switzerland); Nissan Motor Iberica, S.A. (Spain); Nissan Financiacion, S.A. (Spain); Nissan Motor España, S.A. (Spain); Nissan European Technology Centre España, S.A. (Spain); Nissan Italia S.p.A. (Italy); Nissan Finanziaria S.p.A. (Italy); Nissan Motor Co. (Australia) Pty, Ltd.; Nissan Datsun Holdings Ltd. (New Zealand); Nissan Middle East F.Z.E. (United Arab Emirates); Nissan Motor (China) Ltd.

Principal Competitors: Bayerische Motoren Werke AG; DaimlerChrysler AG; Fiat S.p.A.; Ford Motor Company; Fuji Heavy Industries Ltd.; General Electric Company; General Motors Corporation; Honda Motor Co., Ltd.; Hyundai Group; Isuzu Motors Limited; Kia Motors Co., Ltd.; Mazda Motor Corporation; Mitsubishi Group; Outboard Marine Corporation; PSA Peugeot Citroen S.A.; Saab Automobile AB; Suzuki Motor Corporation; Toyota Motor Corporation; Volkswagen AG; AB Volvo; Yamaha Corporation.


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Further Reference

Armstrong, Larry, 'Can Nissan Regain Its Youth?,' Business Week, July 13, 1998, p. 132.Beatty, Sally Goll, 'Mixed Message: Nissan's Ad Campaign Was a Hit Everywhere But in the Showrooms,' Wall Street Journal, April 8, 1997, pp. A1+.Chang, C.S., The Japanese Auto Industry and the U.S. Market, New York: Praeger, 1981.Chrysler, Mack, 'Tackling a Big Turnaround: Nissan Chief Says Automaker's Suffering Is Solvable,' Ward's Auto World, December 1998, p. 14.Crate, James R., 'Japan's Big Five Atone for Sins of Late '80s: Drive to Cut Costs Focuses on Proliferation of Parts,' Automotive News, May 17, 1993, p. 19.------, 'Nissan Posts $273 Million Loss,' Automotive News, November 1, 1993, p. 8.Diem, William, 'The Renault Nissan Deal,' Ward's Auto World, May 30, 1999.Edmondson, Gail, and Emily Thornton, 'He Revved Up Renault. Will Nissan Be Next?,' Business Week (international ed.), April 12, 1999, p. 23.Edmondson, Gail, et al., 'Dangerous Liaison: It Could Take 10 Years for Renault-Nissan to Yield a Return,' Business Week (international ed.), March 29, 1999, p. 22.Gross, Ken, 'Doomed to Niches?,' Automotive Industries, May 1992, p. 13.------, 'Learning from Mistakes,' Automotive Industries, March 1994, p. 64.Inaba, Yu, 'Nissan Motor Company: Aiming for the Top Spot,' Tokyo Business Today, December 1988, pp. 50+.------, 'Nissan's Management Revolution,' Tokyo Business Today, October 1989, pp. 38+.Johnson, Richard, 'Nissan Loss Widens to Nearly $2 Billion,' Automotive News, June 6, 1994, p. 6.Maskery, Mary Ann, 'Nissan Gets First Taste of Red Ink,' Automotive News, November 9, 1992, p. 6.Miller, Karen Lowry, and Larry Armstrong, 'Will Nissan Get It Right This Time? After a Decade of Trouble, the Carmaker Is Making Major Changes,' Business Week, April 20, 1992, p. 82.'Nissan Earnings Dive 64.3 Percent,' Automotive News, June 3, 1991, p. 4.Sapsford, Jathon, 'A Tuned-Up Nissan Takes on Its Rivals,' Wall Street Journal, August 12, 1997, p. A10.Shirouzu, Norihiko, 'Nissan Calls Truck Unit Noncore, Possibly Signaling Eventual Sale,' Wall Street Journal, February 18, 2000, p. A12.------, 'Nissan's Revival Relies on Operating Chief's Agility,' Wall Street Journal, October 18, 1999, p. A37.Simison, Robert L., 'Nissan's Crisis Was Made in the U.S.A.,' Wall Street Journal, November 25, 1998, p. B1.Simison, Robert L., and Norihiko Shirouzu, 'Nissan Unveils Tough Program to Cut Costs,' Asian Wall Street Journal, October 19, 1999, p. 1.Sobel, Robert, Car Wars: The Untold Story, New York: Dutton, 1984.Strom, Stephanie, 'Can Nissan Turn on a Centime: Trying to Revamp a Company and a Corporate Culture,' New York Times, October 14, 1999, p. C1.------, 'No. 2 and Not Enjoying the Ride: Nissan Announces New Losses and Sweeping Changes,' New York Times, May 21, 1998, p. D1.Taylor, Alex, III, 'The Man Who Vows to Change Japan Inc.,' Fortune, December 20, 1999, pp. 189-90+.Thornton, Emily, 'Remaking Nissan,' Business Week (international ed.), November 15, 1999, pp. 38+.Thornton, Emily, and Kathleen Kerwin, 'Back in the Mud: Nissan's Makeover Hasn't Jump-Started Profits,' Business Week (international ed.), November 2, 1998, p. 26.Thornton, Emily, and Larry Armstrong, 'Nissan's Slow U-Turn: Its Recovery Is Far from Complete,' Business Week, May 12, 1997, p. 54.Thornton, Emily, et al., 'A New Order at Nissan,' Business Week, October 11, 1999, p. 54.Updike, Edith, et al., 'Japan Is Back,' Business Week, February 19, 1996, pp. 42.+Weinberg, Neil, 'Member of the Pack,' Forbes, May 19, 1997, p. 65.Woodruff, David, 'Cultural Chasm: Renault Faces Hurdles in Bid to Turn Nissan Around,' Asian Wall Street Journal, March 31, 1999, p. 1.

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