Nissan Europe boss suffers sales slide to prep for profitable future

Nissan's sales in Europe fell by over a quarter in the first nine months as the company suffered headwinds ranging from an aging model lineup, difficulties adapting to WTLP regulations and management turmoil related to the departure of its scandal-hit leaders Carlos Ghosn and Hiroto Saikawa. The sales decline has happened under the watch of Nissan Europe Chairman Gianluca de Ficchy, who was appointed to the role in April 2018. But, as he told Automotive News Europe Correspondent Nick Gibbs, the drop is a calculated move to cut unprofitable channels and get leaner ahead of a big push into electrification.

Why have your vehicle sales fallen so sharply and what are you doing to stop the decline?

We have been undergoing a significant transition for the last one-and-a-half to two years. First, there have been many changes in the market with the new [WLTP emissions] regulations coming in. At the same time, we really wanted to focus on the most profitable channels and try to create a healthier business and a really good brand position for the future. Most automakers have been continuously pushing into channels such as rentals or fleets. Since 2017, Nissan Europe's self-registrations have decreased by about 100,000 units. I think the value of the brand is something we have to preserve for the future.

Despite the move to more profitable sales channels Nissan Europe still lost money in the first half. Why?

Yes, we are losing money, and we probably would not lose as much money if we weren't doing what we are doing. During a transition phase you reduce your volumes, resulting in a lack of synchronization between your revenue stream and your costs. We expected this.

How are you reducing costs?

We are working to optimize the structure to fit the volume levels we will have in the future, not the current levels. We are doing this because we have an aging lineup.

What is your time frame to renew your product range?

The lineup will be completely renewed in the next year and a half. We are launching the new Juke now, then we will add the new Qashqai and X-Trail. Plus, the new electric crossover, previewed by the Ariya concept.

How will the new models help your price structure?

The combination of our aging lineup and our move into more profitable channels meant we could not just focus on volume because it would create a significant discrepancy in the price position of the vehicles. We wanted to avoid this. All the new vehicles will have a reasonable price.

What are the restructuring actions?

To try to be as lean as possible, we have restructured the Barcelona plant, affecting about 600 to 700 people, due to the reduced volumes. This process, which is underway now and was approved by the unions, includes voluntary redundancy schemes. We also cut the third shift at our Sunderland plant in the UK due to the contractions in volumes.

Were there job losses at Sunderland?

Only about 100 to 200 people.

This summer Nissan talked about worldwide job cuts of around 12,000 and a 10 percent reduction in capacity utilization. Are those 700 to 900 jobs the extent of the European losses?

We do not expect additional reductions.

What is the future for Barcelona? Does it need another model now?

The strategy is to continue production of pickups [the Nissan Navara, Renault Alaskan and Mercedes X class are made there] and the e-NV200 electric van. We stopped production of the NV200 with the conventional engine but estimate the number of e-NV200s will rise significantly. Of course, as for any other plants, we are discussing locations for new vehicles.

One report said you were looking to sell your European plants. Is that true?

We do not normally comment on speculation. We plan to continue producing the e-NV200 and the pickups in Barcelona. I do not see an opportunity to sell the plant at the moment.

You previously said a hard Brexit would make your business case for Sunderland unviable. Is that still the case?

If it means the implementation of WTO tariffs of 10 percent, the overall business equation is not sustainable for us because 70 percent of our vehicles are exported to Europe.

Are you reconsidering whether to build the next Qashqai there?

Our assumption is that we will produce the Qashqai at Sunderland. If you want to make any change of that magnitude it takes time because it takes years to create the ecosystem needed to support the production of a new vehicle. We have been preparing the launch of Qashqai for a while.

Where else could you produce it?
The best solution is to produce the car in the UK because Sunderland is one of the most efficient plants we have. It's also an exceptional factory in terms of quality. But I'm warning everyone that if there is a hard Brexit and the UK government and EU authorities do not agree to stop tariffs, that would make the overall equation unsustainable for us in the long run.

What is Brexit's toll on Sunderland?

The high degree of uncertainty we have been living with is creating a problem because any decisions on where to locate a new vehicle for production are on hold.

What is your diesel mix now and when do you foresee diesel sales ending?

We have seen a significant drop in diesel to about 30 percent of sales. We are adapting ourselves to follow that trend, but a more relevant question is: What's the future of conventional engines? We underestimate the weight of the future regulation. One part of that is related to automakers hitting the fleet target of 95 grams per kilometer starting next year. We know how to be within the targets. But the EU says we have to go to 75g/km by the end of 2024. How many conventional engines can reach that threshold? None of them. So how is the business going to be sustainable if we do not adapt ourselves to that trend? The second factor is the impact of local taxes that customers will have to pay based on the level of CO2 their cars produce. For example, in the Netherlands the tax bill can be as high as 20,000 euros per car.

What percentage of your sales will be electrified models by 2022?

In our most recent midterm plan we assumed the overall electrified market will be about 20 percent to 24 percent by 2022, but we want 42 percent in Europe.

Why do you want to be that far above the overall market?

We want to position ourselves on the higher end because we are convinced that if you want a sustainable business model in Europe that meets both corporate and customer regulations, you need to be far above that average. We want everybody to know that Nissan is about electrification.

Renault's interim CEO, Clotilde Delbos, said recently there was "a desperate need" for Renault and Nissan to work closer together to bring about economies of scale. You're not currently sharing electrified technologies or platforms with Renault. Do you plan to?

I am strongly convinced that the alliance is a powerful opportunity that we have today and tomorrow.

You have the e-Power hybrid coming, while Renault has its own full hybrid and plug-in hybrid solution. Why not share these?

At the moment, we have only announced e-Power. We need to go step by step and to see how things develop. The spectrum of solutions that you can potentially introduce is very broad.