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Business

Nissan sales skid 20% on inspection scandal

Shipment stoppage could impact large subcontractor network

TOKYO -- Nissan Motor's sales in Japan have been trending down following an inspection scandal that has forced the automaker to slam the brakes on domestic shipments, raising concerns about repercussions for its more than 10,000 subcontractors.

Domestic sales sank nearly 20% year on year from Oct. 1 to 20, falling to 12,300 units, as car buyers shunned offerings by the tarnished Yokohama-based automaker. Japan's auto sales as a whole, meanwhile, grew just under 10% to about 177,200 units with help from brisk new-car sales.

Nissan froze all domestic car shipments as of last Friday after learning that improper safety checks by unqualified employees at Japanese factories continued even after the automaker first disclosed the issue on Sept. 29.

Sales streak spoiled

The scandal will likely bring to a halt Nissan's 11-month streak of year-on-year domestic sales growth through September.

The decline in sales of passenger cars produced at the domestic factories affected by the scandal has been particularly steep, plummeting by over 20% to about 8,900 units for the period. Sales of minivehicles manufactured by partner Mitsubishi Motors under a supply arrangement also dropped 10%.

One dealer in the northeastern Tohoku region said that sales of Nissan's new Leaf electric vehicle, which hit the market on Oct. 2, have been in line with the plan but that new customers had stopped coming in since the scandal. Tokyo-area dealers are worried about having enough personnel to handle the recall, covering 1.16 million vehicles, after notices are sent to owners in early November.

All eyes are now on how long the shipment stoppage will last. Although Nissan hopes to resume supplying in about two weeks, it must first submit a report to the transport ministry outlining measures to prevent a recurrence, and receive its approval.

The ministry has taken issue with Nissan's management structure that allowed the improprieties to become routine. The shipment halt could drag on if the carmaker's prevention plan is deemed insufficient.

Bracing for damage

Meanwhile, the area surrounding Nissan's Oppama plant in Yokosuka is unusually quiet. Shutters are down at many factories and only a handful of trucks and people are on the streets. Nissan even sent out a notice saying it will not participate in a local fall festival. "It will probably impact employment if shipments are stopped for a while," worried one man in his 60s.

The Nissan group has a total of 14,651 subcontractors employing 790,611 people nationwide, according to Teikoku Databank. Small to midsize companies with annual sales of at least 100 million yen but below 1 billion yen ($879,800 to $8.79 million) make up 53.4% of that tally. Should the shipment stoppage continue it could be a matter of life or death for small and midsize companies highly dependent on Nissan, warned Teikoku.

"Orders will probably fall 2-3% if the halt on shipments continues for two weeks," said an official at a company that repairs autobody panels. Some companies are maintaining operations by increasing production for other automakers.

Scandals have forced other automakers to suspend production or shipments in the past. In April 2016, Mitsubishi stopped producing and selling minicars, which it jointly developed with Nissan, for about two-and-a-half months after the doctoring of fuel efficiency data was reported. Sales subsequently suffered and the automaker booked 201.5 billion yen in related losses for fiscal 2016.

On Monday night, Nissan gathered 400 to 500 business partners to discuss the improper inspections. When asked when shipments are expected to resume, the embattled automaker simply replied, "as soon as possible."

(Nikkei)

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