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Nissan slashes profit forecast after announcing Japan recalls

[TOKYO] Nissan Motor Co cut its annual profit forecast after announcing a recall of vehicles in Japan that went through an inspection process deemed faulty by the government.

Nissan halted production at domestic plants for local sales since Oct 19, sending deliveries down by about 50 per cent in October, according to the car dealers association in the country. Output at five of the six factories - which produce about 1,000 vehicles a day for the Japan market - restarted on Nov 7.

The shares fell as much as 2.3 per cent in Tokyo trading.

The inspection by unauthorised officials is the first major crisis for chief executive officer Hiroto Saikawa, who took the helm in April and has personally pledged to get to the bottom of the lapses. Nissan conducted vehicle inspections that don't comply with Japanese regulations for almost four decades, according to a person familiar with the situation. Incidents at Nissan add to the problems for Japan Inc, already reeling under a scandal at Kobe Steel Ltd.

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Nissan on Wednesday said that operating profit in the year ending in March may be 645 billion yen (S$7.7 billion), lowering it from the 685 billion yen forecast earlier.

Nissan reducing the estimate comes after Toyota Motor Corp and Honda Motor Co both raised their annual profit forecast because of a declining yen.

Nissan's sales in Japan jumped 34 per cent for the first half this fiscal year, as an electric motor-powered version of the Note compact became a hit in the country and the new Serena minivan's ProPilot autonomous driving features attracted consumers. Minicar sales rebounded 94 per cent from a year earlier, when Nissan suspended sales of the models supplied by Mitsubishi Motors Corp after the latter was found fabricating fuel economy data.

That momentum ended in October, as Nissan was found using unauthorised personnel to sign off on cars for domestic sales.

The carmaker had also been boosting incentives to find buyers in the US.

A major drag on profitability is the higher-than-average incentives in the US, its largest market. While the carmaker bucked an industry-wide slump by increasing its deliveries 1.1 per cent this year through September, its average incentives in the January-September period jumped 18 per cent to US4,179 per vehicle - the highest among Asian auto brands.

Nissan will have to fend off increasing competition especially in the mid-size sedan market as Toyota updated its Camry and Honda introduced a new Accord this year. The Camry and Accord are the best-selling mid-size cars in the US, while Nissan's Altima trails with sales falling 18 per cent this year through September.