Nissan CEO: Hybrids showing sales slowdown

updated 8:27 p.m. ET April 12, 2006

NEW YORK - Nissan Motor Co. Chief Executive Carlos Ghosn said Wednesday he feels vindicated that hybrids could be seeing a sales slowdown, since he has repeatedly warned that it is too early to fully back the technology.

Ghosn also said Nissan employees have been given another month to decide whether they want to move from southern California to the company’s new U.S. headquarters in Nashville. Employees now must tell the company by May 1 if they plan to move this summer.

Ghosn said the long-term financial and organizational benefits of the move outweigh the short-term disruption. He downplayed the problems the move will cause, saying Nissan has received 20,000 applications from people interested in working in Nashville.

Ford Motor Co. said last week it would offer zero-percent financing on the Ford Escape and Mercury Mariner hybrids nationwide. Ghosn said hybrids already are money-losers for automakers because of the expense of developing them, so to put incentives on top of that indicates hybrid sales are slow.

“At least admit I was the only guy saying, ‘Watch out, the consumer decides, don’t be excited about it,”’ Ghosn said in an interview with reporters at the New York Auto Show. “I have some kind of satisfaction of being a little bit right on this one.”

Ford Americas President Mark Fields said Wednesday that Ford decided to expand the incentives because they had proven popular in Washington and San Francisco, where they were first released. Ford doesn’t break out its hybrid Escape sales from traditional Escape sales, but Fields said March was the hybrid Escape’s best month since it was introduced last fall.

Ghosn said some consumers are finding hybrids don’t save enough gas to justify their extra expense. Hybrids run alternately on gasoline or electricity. He said vehicles running on diesel or ethanol might hold more promise.

Still, Nissan is on track to release a hybrid version of the Nissan Altima sedan later this year. Ghosn said the product makes business sense because of California’s air quality regulations.

“I didn’t say I didn’t believe in it. I said it’s too early,” he said.

J.D. Power and Associates predicts hybrids will make up 1.5 percent of sales this year, up only slightly from the same period last year even though there were more hybrid models on the market.

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J.D. Power predicts hybrids will make up nearly 5 percent of the market by 2013. That’s greater than current levels but far less than the 20 to 30 percent some analysts have predicted.

Ghosn also took aim at incentives earlier Wednesday, saying they have diminished the value of vehicles through constant discounting and bland design.

Ghosn said incentive spending has been going down in recent months, but automakers still spent $3,500 per vehicle on incentives in 2005. That was money that wasn’t being invested in good design or new vehicles, he said.

“You’d be hard-pressed to name another industry in which so much emphasis is placed on discounting to move products,” Ghosn said at the opening of media preview days at the New York Auto Show.

According to Edmunds.com, an online vehicle information service, Nissan spent an average of $2,314 per vehicle in March. That was less than the average of $3,205 per vehicle at U.S. manufacturers, but almost $1,000 more than Toyota Motor Corp.

Ghosn said some manufacturers are churning out too many vehicles that are too similar just to keep their factories operational, and “the customer gets the message that those products are not worth the prices printed on their stickers.”

“Manufacturers must reawaken passion for cars and trucks and restore the value to the minds of our customers,” he said.

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Ghosn said Nissan increased its U.S. market share by offering well-designed vehicles that got an emotional response from buyers, like the Nissan Murano crossover and Infiniti G35 sedan. Nissan unveiled the 2007 G35 on Wednesday.

Nissan’s U.S. market share rose to 6.3 percent last year from 4 percent in 1999. At the same time, General Motors Corp. and Ford saw their market share fall. Both U.S. automakers are now cutting jobs and closing plants to try to limit overproduction.

Ghosn wouldn’t comment on GM and Ford’s restructuring efforts.

“I don’t think the solution comes from the outside,” he said, adding that he rarely took others’ advice when he was restructuring Nissan in the late 1990s.

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