There's a reason why people set career goals and companies create sales targets: Without knowing where you're going, it's harder to get there.
So it's worrying that Nissan Motor Co. CEO Hiroto Saikawa spent much of an hour-long press conference Wednesday, called to discuss the first-half financial results, trying to get questioners to back off an 8 percent target for the operating-profit margin. That aspiration is at the heart of the carmaker's new mid-term plan, called "Path to 2020: Sustainable Growth."
It's a perfectly reasonable number, but that doesn't mean the company will achieve it, or hit it every year, Saikawa said. Instead, the "spirit" behind the mid-term plan is "to create an environment where we would have the potential to reach 8 percent," Saikawa said.
It's easy to see why he's trying to divert attention. In the quarter ended Sept. 30, Nissan's operating margin was around 4 percent. The last time the carmaker managed an 8 percent margin was in 2005.
Also Wednesday, Nissan cut its annual profit forecast by almost 40 billion yen ($351 million), to reflect a production shutdown and million-plus recall for improper final vehicle inspections. If the damage remains limited to what's known, Nissan may be able to beat its reduced forecast by year-end. If things worsen, further lowering the bar will make that lofty mid-term target look even more unrealistic.
Meanwhile, Nissan is getting hit in the U.S., where sales volume in the first half declined by 0.4 percent from a year earlier. As competition ratchets up, Nissan will probably hand out more profit-gobbling incentives to lure buyers.
And it's not as if all the fancy self-driving cars, ride-hailing services and electric vehicles Nissan foresees will be free to develop, market and sell. So it's hard to see a trajectory where profits are going up, not down.
I get that Saikawa is trying to reorient his team away from the tradition of tailoring plans to a particular set of numbers, without thinking creatively about larger goals like brand awareness, consumer trust and truly innovative products.
He has said Nissan's previous approach stretched the company too far, and that instead of a maniacal focus on growth, he's intent on creating a culture of slow and steady expansion.
But setting out ambitious targets then playing them down isn't such a good strategy, either. Unless there's transparency and dependability on which goals to trust and which to ignore, it will be difficult to get investors to put their money on a promise.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.
© Copyright 2023 Bloomberg L.P. All Rights Reserved.