As yen drops, Nissan sets new profit target for struggling Infiniti brand

KAMINOKAWA, Japan Tue May 14, 2013 2:06am EDT

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KAMINOKAWA, Japan May 14 (Reuters) - Nissan Motor Co CEO Carlos Ghosn set a new profit target for its premium brand Infiniti, which in recent years has hardly contributed to the Japanese automaker's operating profit as it struggled to export profitably with a persistently strong yen.

Infiniti, produced mostly in Japan and exported overseas, accounted for less than 1 percent of Nissan's operating profit in the last two years, Ghosn told reporters on Tuesday. Nissan booked an operating profit of 523.5 billion yen ($5.15 billion) for the year ended March.

While the yen has been depreciating in recent months, trading at around 101 yen against the dollar from 78 yen back in October, Ghosn expects a boost in Infiniti's profitability.

"Fundamentally so far, Infiniti's contribution to the operating profit of Nissan has been practically erased by the abnormal strength of the yen," Ghosn told reporters at Nissan's Tochigi plant in Japan. "Infiniti will bring back a very significant contribution to the operating profit of Nissan," he said, adding that he is hopeful the Japanese currency will further weaken to about 110 yen against the dollar.

Nissan's senior vice president and head of Infiniti, Johan de Nysschen, added that the company aims to bring Infiniti's operating profit margin either equal with or more than that of the Nissan brand by next year.

Nissan posted an operating profit margin of 5.4 percent in the financial year ended March.

EXPANDING PRODUCTION GLOBALLY

Nearly 14 years after the launch of its first car, the Q45 luxury sedan, Infiniti continues to be largely a U.S.- centric brand with meagre overseas sales.

Most of the vehicles are produced in Japan, though the brand is not sold at the home market, and years of a strong yen has made it unprofitable to export cars from Japan.

In the financial year ended March, Infiniti sold 172,615 vehicles globally, up 12.1 percent year-on-year. The company aims to nearly triple that to 500,000 by the financial year ending March 2017.

To do so, de Nysschen said in January that he expects the brand to be building more than half of its vehicles outside Japan in the medium term.

Nissan, which currently builds most of the Infiniti vehicles at the Tochigi plant in Japan, as well as at Kyushu in Japan and Smyrna, Tennessee in the United States, has already announced its plans to start building the premium vehicles at its Xiangyang plant in China from 2014, as well as at the Sunderland plant in the United Kingdom from 2015.

The company aims to make China the second biggest market for Infiniti after the United States, so that the world's biggest auto market will account for about 40 percent of Infiniti's global sales by 2016-17.

Ghosn said that the company is also planning to build more Infinitis in North America.

"There is no doubt that part of expansion of Infiniti is going to happen in North America," he said on the sidelines of a ceremony to mark the start of productions of the new Q50 sedan at the Tochigi plant. He declined to give details about the site.

Infiniti's best selling model is the G sedan, accounting for more than a third of total annual sales. The successor of the G37 sedan, with a new name Q50, will go on sale in the United States in the summer.

($1 = 101.7450 Japanese yen)

(Editing by Matt Driskill)

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