June 25, 2008 / 5:24 AM / in 11 years

Nissan CEO braces for worst in U.S.

YOKOHAMA, Japan (Reuters) - Nissan Motor Co (7201.T) Chief Executive Carlos Ghosn said industrywide sales in the United States could fall well below 15 million vehicles this year as high gas prices and a sluggish economy sap demand, and warned of another push by steelmakers to hike prices.

Nissan Motor Co. President and Chief Executive Officer Carlos Ghosn attends a news conference after the company's annual shareholders' general meeting in Yokohama, south of Tokyo June 20, 2007. REUTERS/Toru Hanai (

Ghosn also said Japan’s No. 3 automaker would likely lift car prices in Japan, as it has already done in Europe, the United States and most other markets to offset a surge in the price of raw materials such as steel.

The U.S. market is another major concern. Industrywide sales are on pace to drop below 15 million units this year, a sharp contraction from 16.15 million in 2007 as more Americans shun trucks and sport utility vehicles, Ghosn said.

“If we take the trend of the market in May and June it looks like we are going to be much below 15 million. Now I’m not sure if this is going to continue for the rest of year,” Ghosn told a news conference. “We are preparing ourselves for the worst.”

Toyota Motor Corp (7203.T), Japan’s largest automaker, warned again on Tuesday that it could fall short of its sales target for the United States as it grapples with weak demand for trucks.

But Ghosn said Nissan was well positioned to take advantage of a shift in market demand to sedans and fuel-efficient cars. It has been increasing capacity for passenger cars like the Maxima sedan and the Versa subcompact, he said.

“You have a completely different situation between trucks, SUVs and passenger cars. It’s not that the whole market is going to go down,” said Ghosn, who is also chief executive at top Nissan shareholder Renault (RENA.PA).

STEEL PRICE TALKS

Ghosn said Nissan may in theory need to raise prices by an average of about 2-3 percent in Japan, which generates nearly half of Nissan’s annual group sales of 10.8 trillion yen.

“We are increasing prices in most of the markets where we are competing,” Ghosn said. “Japan is not going to be an exception.”

China’s Baosteel Corp (600019.SS) and Australian miner Rio Tinto agreed this week to a 96.5 percent price hike, the biggest in at least a decade in annual iron ore term contracts, and Japanese steelmakers are likely to agree to a similar size hike.

Steelmakers will likely look to pass on those costs through another round of negotiations with carmakers, he said.

“And if it’s not going to happen in 2008, it’s going to come in 2009, and it’s going to be messy,” Ghosn said.

Shares of Nissan gained 0.2 percent to end the day at 899 yen, while the benchmark Nikkei average .N225 fell 0.1 percent.

Reporting by Nobuhiro Kubo and Nathan Layne; Editing by Chris Gallagher

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