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Nissan Motor cuts profit outlook to a near-decade low

Nissan Motor cut its full-year profit forecast to its lowest in almost a decade because of weakness in the United States, just as it adjusts to life without Carlos Ghosn and charts its future with the partner Renault SA.

The automaker expects operating profit for the year ended March to drop 45 percent against a year ago to 318 billion yen ($2.84 billion), from a previous forecast for 450 billion yen, on expenses associated with extending vehicle warranties in the United States, its biggest market.

Nissan also blamed the arrest of Carlos Ghosn for tarnishing its brand and adding to the decline in profit to the lowest since the year ended March 2010.

This is the second cut to Nissan’s operating profit forecast in two months and puts pressure on CEO Hiroto Saikawa just as he works to draw a line under Ghosn’s legacy by renovating corporate governance and seeking a more equal footing with Renault.

At its full-year results on May 14, the automaker is going to book a 66 billion yen provision for costs associated to extending the warranty on its continuously variable transmission system installed in about 3 million Sentra and Altima sedans and Versa subcompact models from 2012 and 2017 for the U.S. market.

Following complaints that the major powertrain component made excessive noise and vibrations with age, the automaker stated it decided this week to extend their warranty to seven years from five in hopes of building brand loyalty in an industry where it has been having a hard time for the last three years.

Falling profit has been a concern for Nissan since before Ghosn was first arrested in November on allegations of financial misbehavior. Ghosn denies wrongdoing.

Ghosn has repeatedly alleged Nissan executives of mismanagement since his elimination. He characterized his ouster as a boardroom coup. Now the automaker is telling that Ghosn’s arrest has hurt business.

“Everyday, there are many reports of the case,” Nissan CFO Hiroshi Karube stated on Wednesday, referring to the scandal. “Non-Nissan users are hesitant to buy our cars,” said Karube.

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