Nissan Falling Victim to Car Recession

  • Share
  • Read Later

Nissan hit the car industry with news that was worse than expected. It will not only post a very large loss for the year, it will cut 20,000 jobs.

What is more stunning than the $2.9 billion loss for the car company's fiscal year is that it represents the first operating loss Nissan has had in 14 years, according to Reuters. Read "Nissan's CEO on the Auto Industry's Woes"

Nissan hit the car industry with news that was worse than expected. It will not only post a very large loss for the year, it will cut 20,000 jobs.

What is more stunning than the $2.9 billion loss for the car company's fiscal year is that it represents the first operating loss Nissan has had in 14 years, according to Reuters. (Read "January Auto Sales Go from Bad to Worse".)

At this point, none of the large global car companies have been able to avoid red ink. While the numbers may be worse as GM, Ford, and Chrysler. the viability of more stable firms with better balance sheets could be threatened if the depression in car sales stretches to the end of this year.

The plans for government to bail out car companies may quickly move beyond some US and UK and could even happen in Japan. Toyota and Honda probably have the balance sheets to last through a two- or three-year downturn. It is not clear that Nissan does.

If Japan starts to put money into some of its weaker auto companies and the US only gives The Big Three modest financing, Japanese car firms may actually be in a position to gain market share in America by being able to financially “outlast” the domestic car companies. Any funds the Congress agrees to provide to GM and Chrysler need to take that into account.

Which car companies do well in the US over the next year may well be based on which can get the most government funding to keep production capacity online.

Douglas A. McIntyre

Read "Four Steps to Ending the Foreclosure Crisis."

For constant business updates, go to 24/7wallst.com.