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Exclusive: Nissan clears up Aussie stock issues

Grass cleared: Nissan Australia managing director and CEO Richard Emery sits on the grass that 18 months ago was filled with unsold cars.

Some stock still remains, but Nissan Australia MD says oversupply issues fixed

7 Apr 2015

NISSAN Australia managing director and CEO Richard Emery says the oversupply and stock issues the company faced when he took the top job 18 months ago have gone, declaring that there are no more vehicles “on grass” in Australia.

In an exclusive interview with GoAuto, Mr Emery confirmed that while there was still some older stock remaining with dealers and at Nissan headquarters in Victoria, the bulk of unsold passenger cars, SUVs and light-commercial vehicles it was holding at various locations around Melbourne in late 2013 has been sold.

GoAuto revealed in October 2013 that Nissan and its dealer network were holding six months’ worth of stock – as many as 40,000 cars – after introducing overly ambitious sales targets that were not met.

While the company has always maintained the stock numbers were not as high as we calculated, senior management – starting with interim CEO Peter Jones and then Mr Emery, who officially started on April 1, 2014, but was working behind the scenes after being recruited some months earlier – implemented strategies to clear the backlog and improve dealer relations that had become strained due to the oversupply.

Succeeding Bill Peffer who resigned in September 2013, Mr Emery said last week there were “mechanical” things that were easy to adjust, such as ordering less stock, but cutting supply from the factory was more challenging.

“There are ways of fixing it,” he said. “You can panic and fix it quickly, but that has a detrimental impact on the business, on residuals and lots of other things, and I suppose one thing I found when I got here was just to calm everybody down and say, ‘Look, this can be fixed, but let’s fix it in a managed and robust manner over time’.

“Two things get a stock imbalance fixed – you have to try and sell more cars of the ones you have got, and you have got to stop the supply line where you can. It’s not easy to stop a production line in terms of your commitment to production.” Mr Emery said the company’s Japanese parent agreed with his plan to take a more measure approach in getting rid of the stock, rather than a ‘slash and burn’ approach that he said could have had a long-term detrimental effect.

“If there was anything that the change in the organisation, whether that be me or the approach we took when I arrived, was just to take a deep breath and manage our way through it over an extended period of time, convincing Japan that that was the right approach, rather than the short-term burn which would have had a detrimental approach on the business over longer term.

“So the fact that we took a robust, sustainable attitude to moving through that stock and put programs in place to let that happen, we stopped being the on-sale brand, but we still found a way – as I sit here today – to getting our stock back to where it needs to be.” Mr Emery said he was pleased with the progress of the stock-reduction strategy, but acknowledged there was still some of it lingering at dealers.

“(The) dealer stock position has virtually halved from 18 months ago,” he said.

“Have we still got some difficult stock in our stock and in dealer stock in terms of mix and some aged stock? Yeah we do, but it’s manageable, and not a weight round our neck as it potentially was a year ago.

“You could ring a dealer and he could say, ‘I have got this yellow Patrol I can’ t get rid of because I have only sold white ones’, but by no means would I say that that is a problem.” Mr Emery was reluctant to attribute blame for the oversupply on former Nissan Australia management, the Japanese parent company or any other stakeholder, but said it should have been addressed earlier to avoid becoming as big as it did.

“I don’t think it’s about blaming the plans that were put in place,” he said. “It’s okay to be confident about some new models lines and maybe be a little over confident.

“I think for me where it broke down was the point in which you say, ‘Actually, we are not going to get there, let’s pull back’. I think they stuck, stubbornly, to a plan that didn’t look like it was going to be deliverable, too long.

“Whether that was Japan, local, a combination of dealers as well, sticking stubbornly to a plan that wasn’t going to make it, I am not the judge of that because I wasn’t around.

“We weren’t overrun with cars, but our stock level versus what our sales rate was was imbalanced. If we had been hitting our number then we weren’t overstocked. We’d build a stock level to a certain volume. We weren’t meeting that volume, so therefore the stock carry was out of kilter with the reality of what the business case was. We stubbornly stuck to that over-ambition.” Asked how Nissan will avoid any similar issues in future, Mr Emery said it came down to a “cultural mindset change” and not getting caught up in constantly improving end-of-month or yearly sales results.

“I would say that what the business needs to lack going forward is ego,” he said. “I will say to you, where car companies come unstuck in this space is when the organisation or individuals get suckered into dealing with a VFACTS number and that being the only measure of success.

“To be honest, VFACTS at the end of the month or year, that’s CEOs’ egos. It’s not about what’s good for the business. I have an ego, everyone has to if you are going to be in this role and in this industry, but I don’t have an ego about VFACTS numbers.

“The number will be what the number will be. And we probably got suckered into taking actions to create a number, which is not an accurate reflection of where our business was at. And if we remove that element of ego from our business, it won’t happen again.” While the oversupply issue involved a mix of Nissan models, Mr Emery admitted that the Pulsar small-car range has taken the longest to fix.

The sedan arrived in early 2013 ahead of the hatch mid-year, but sales never met the high expectations of the company’s previous management. While it sold 14,065 units in its first year on sale, it quickly dipped 25 per cent to 10,515 units in 2014 against competition from Mazda’s 3 and the Toyota Corolla.

Mr Emery acknowledged the “over-ambition” with the Pulsar, and said the company was working on more realistic goals for its contender in the crowded small-car space.

“We have reset the expectation on Pulsar. I needed to get that ambition back in line to what was realistic. I worked really hard in first six months to make sure we had ambitions but not completely out of kilter with market opportunity – there were some elements of our expectations for some model lines that were just blown out.

“What I wanted to do was make sure all the key stakeholders, be it dealers, Japan and ourselves, had a realistic view of what was possible. Did that mean that Japan had to walk away from volume expectations over the last year? Sure, but they knew we needed to get the business back on track.

“That was made clear to me in the recruitment process and … they gave me the rope if you like, to get fiscal year 2014 to get all of those things dealt with.

“It also means that now we have done that, their expectations in terms of what we do in 2015 and 2016 an onwards, are robust yes, but they don’t have over-ambition in them in terms of being realistic.”

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