JAPAN NISSAN EARNS
Itsuo Inouye  /  AP
Visitors look at Nissan cars displayed at the company's headquarters in Tokyo Tuesday. Nissan's profit for the first fiscal quarter rose 4.2 percent despite slipping vehicle sales.
By AP Business Writer
updated 7/25/2006 10:58:29 AM ET 2006-07-25T14:58:29

Nissan Motor Co., which has drawn the limelight for discussing a possible alliance with General Motors Corp., reported a 4.2 percent jump in profit for the latest quarter Tuesday but acknowledged it was selling fewer vehicles around the world because of a dearth of new models.

Group net profit at Japan’s second-largest automaker during the April-June quarter totaled 110.2 billion yen ($945 million), up from 105.7 billion yen in the same period a year ago, partly because of an absence of special charges the previous year for accounting changes and a pension plan.

Quarterly sales rose 3.1 percent to 2.2 trillion yen ($18.9 billion) from 2.1 trillion yen. But Nissan sold fewer vehicles during the quarter at 826,000 vehicles, down 6 percent from a year earlier.

“As we predicted, the first half is proving to be challenging as we face significant headwinds and only one new model introduction,” Chief Executive Carlos Ghosn said.

Sales held up because of a boost of about 100 billion yen ($858 million) from the weaker yen. Without currency fluctuations, sales would have dropped from a year ago, said Nissan Corporate Vice President Joji Tagawa.

Nissan had warned previously the first half of fiscal 2006 would be tough, and has promised a stronger second half, when it plans to release eight new models around the world. The Tokyo-based company maintained its profit forecast for the full fiscal year ending March 2007 at 523 billion yen ($4.5 billion).

The company’s profit also got a lift because it reported losses for accounting changes and a pension plan a year ago.

Ghosn, who also heads Nissan’s partner Renault SA of France, has recently begun talks with GM Chief Executive Rick Wagoner about a possible partnership among the three automakers.

Ghosn said last week that the initial, 90-day talks will focus on the advantages of having the three automakers work together, rather than address the question of whether the companies should take stakes in each other. Renault owns 44 percent of Nissan, which in turn owns 15 percent of Nissan.

If the talks pan out, the emerging alliance will cover all three major auto regions — the U.S., Japan and Europe — and will be the biggest ever in sheer size, boasting a combined production of 15 million vehicles, or nearly one-fourth of world production.

Some have been skeptical about what Nissan may have to gain from taking on troubled GM at a time when Nissan itself needs to keep growth going. Nissan shares have dipped since the talks with GM surfaced, underlining such doubts.

Detroit-based GM is struggling to revive its business after losing $10.6 billion last year and seeing its market share dwindle in North America. About 35,000 hourly workers recently agreed to retire or take buyouts and GM has announced plans to close a dozen plants by 2008.

Ghosn won’t elaborate on details but he said what’s being looked at are benefits similar to what was gained from the Renault-Nissan alliance, including cost savings from buying auto parts together and sharing research while keeping the separate identities of the Nissan and Renault brands.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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