TOKYO -- Nissan Motor announced on Wednesday a sharply lower-than-expected profit forecast for the year ended March, hit by weak sales in its core U.S. market.
The automaker downgraded its projection of its operating profit forecast by 45% from the previous year and by 132 billion yen ($1.2 billion) from the previous forecast, to 318 billion yen.
Additional expenses arising from the implementation of a warranty extension campaign caused a 66 billion yen drop in profit. Weak sales in its core U.S. market resulted in a 43 billion yen reduction in its profit.
Its net income is expected to decline by 57% from the previous year to 319 billion yen.
The announcement marked the Japanese automaker's second earnings downgrade in less than three months, highlighting the challenges facing the company following the removal of former Chairman Carlos Ghosn.
Nissan cut its operating profit forecast by 90 billion yen in February, blaming weak sales in the U.S., China and other markets.
The sales environment has failed to improve. In late March, Nissan announced it had sold 4.97 million vehicles globally from April 2018 to February 2019, a 4% drop from the same period a year earlier. While it logged sales growth in Japan and China, sales in the U.S. and Europe fell 10% and 14%, respectively.
In the U.S., which generates about 40% of Nissan's operating profit, the company is changing its strategy of boosting sales by offering sales incentives. The incentives, used by dealers to cut retail prices, are a cost burden for Nissan.
But it is not easy to change the consumer mindset of being able to buy cars at a discount, as the reduction in sales incentives leads to a drop in vehicle sales.
At the company's earnings conference in February for the results from April to December 2018, CEO Hiroto Saikawa told reporters the car maker is still not at a stage where it can sell its vehicles at proper prices in the U.S., as it is attempting to shed its old habit of pushing sales and overstretching.
Before Wednesday's planned announcement, Nissan was expecting revenue to fall 3% from a year earlier to 11.6 trillion yen. Operating profit was seen declining 22% to 450 billion yen, with net profit plunging 45% to 410 billion yen.
Earlier this month, France's Renault, which holds a 43% stake in Nissan, made a proposal to integrate with the Japanese automaker, sources told Nikkei. Continuous deterioration of Nissan's earnings would weaken its power to negotiate with Renault.
Two decades since Nissan suffered a management crisis and France's Renault came to its rescue, the partnership that was supposed to make the Japanese automaker more efficient has been shaken by Ghosn's arrest in November on allegations of financial misconduct.
Earlier this month, Nissan shareholders voted to formally remove Ghosn from its board, after he was arrested for the fourth time. Ghosn has denied any wrongdoing.