Ghosn effect: Nissan, Renault operating profit forecast to decline this fiscal year

Bloomberg

What kind of financial blow has the widening scandal surrounding Carlos Ghosn delivered to Nissan Motor Co. and Renault SA? Investors are about to get a glimpse when closely watched earnings releases come out this week.
The alliance partners have spent the last two months coping with a major reputational hit from Ghosn’s arrest, indictments by Tokyo prosecutors over alleged financial improprieties and an unflattering spotlight on both companies’ corporate governance controls.
Then there’s the sluggish sales in China and the US, Britain’s potentially jarring exit from the European Union and huge investments in electric and autonomous vehicles hovering over the entire auto industry.
Taken together, these negatives could leave the alliance partners falling behind competitors such as Volkswagen AG and Toyota Motor Corp. in the race to adapt to the changing terrain. The risks may be greater for Nissan since the lion’s share of allegations against Ghosn reflect his tenure there, and its business challenges are tougher than
Renault’s.
Nissan is struggling in China and the US, and it owns the largest automotive plant in Britain. The Yokohama-based company reports earnings February 12, providing the first indications of its performance since Ghosn’s arrest in November. Renault’s earnings are due two days later, just after an internal probe found Ghosn may have improperly used a company sponsorship deal to help pay for his Marie Antoinette-themed wedding in Versailles.
“Automakers are starting 2019 with a hangover,” said Pierre Quemener, an analyst at MainFirst Bank AG in Paris. As for the Renault-Nissan alliance, “there’s not much upside to be expected from it at this point.”
Nissan’s operating profit is forecast to fall 10 percent to 517.1 billion yen ($4.7 billion) in the fiscal year ending in March, the lowest in five years, according to analysts surveyed by Bloomberg. Renault will probably report an 8.8 percent decline in operating profit for last year to 3.47 billion euros ($3.93 billion).
For years, Nissan’s earnings dwarfed Renault’s, making a significant contribution to the French carmaker’s bottom line.

A bigger global footprint and sales 46 percent larger than Renault’s may be motivating Nissan Chief Executive Officer Hiroto Saikawa’s push to rebalance their alliance — which includes Mitsubishi Motors Corp. — to give his company more say in strategic decisions.
Renault’s new chairman, Jean-Dominique Senard, pledged to work toward mending the partnership. He’s also expected to unveil his plans for Renault’s governance to the board next month, a person familiar with the matter said.