Nissan Motor Co., Ltd.
Annual Report 2013

Plain-text annual report

AnnuAl RepoRt 2013 ContentS contents ContentS This annual report presents the results of Nissan Motor Company's business activities for fiscal 2012. It is also provides an opportunity for investors to deepen their understanding of the Nissan management team. President and CEO Carlos Ghosn and other executives share their vision of Nissan's philosophy and the direction the company is heading today. 02 03 04 05 06 09 12 14 vIsION MIssION kEy FIGuREs TECHNOLOGy FINANCIAL HIGHLIGHTs MEssAGE FROM THE CEO MEssAGE FROM THE COO MEssAGE FROM THE CFO 16 ABOuT THE MID-TERM PLAN 17 18 20 21 22 23 27 30 31 Ev TOPICs FIsCAL 2012 sALEs PERFORMANCE FIsCAL 2013 sALEs OuTLOOk NEW TECHNOLOGIEs IN FIsCAL 2013 AWARDs RECEIvED IN FIsCAL 2012 FIsCAL 2012 FINANCIAL REvIEW FINANCIAL sTATEMENTs EXECuTIvEs CORPORATE GOvERNANCE Cover photo: Infiniti Q50 Viewing this Report this annual report is an interactive pDf. You can use the navigation tabs and buttons to access the information you need. l Section Tabs contents corporate face time management messages click the tabs to jump to the top page of each section. l Navigation Buttons l Link Buttons go back one page Jump to linked page return to previously viewed page Jump to information on the web go forward one page ■ Financial Data to obtain more detailed financial information, please visit our ir website. website ■ this annual report contains forward-looking statements on nissan’s plans and targets, and related operating investment, product planning and production targets. please note that there can be no assurance that these targets and plans will actually be achieved. achieving them will depend on many factors, including nissan’s activities and development as well as the dynamics of the automobile industry worldwide and the global economy. ■ For further information, please contact: nissan motor co., Ltd. investor relations Department 1-1, takashima 1-chome, nishi-ku, Yokohama-shi, Kanagawa 220-8686, Japan tel: 81 (0)45-523-5520 fax: 81 (0)45-523-5770 e-mail: nissan-ir@mail.nissan.co.jp global corporate communications Department global communications Division tel: 81 (0)45-523-5552 fax: 81 (0)45-523-5770 01NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time visionNissan: Enriching People’s LivesNissan has a clear vision for the future, and − with our Alliance partner, Renault − we are working with passion to achieve it. Our mission is to enrich people's lives, building trust with our employees, customers, dealers, partners, shareholders and the world at large.02NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time MissionNissan provides unique and innovative automotive products and services that deliver superior measurable values to all stakeholders* in alliance with Renault.* Our stakeholders include customers, shareholders, employees, dealers and suppliers, as well as the communities where we work and operate.1957 Datsun 1000 Sedan 210Datsun 1000 Sedan (210) was released in 1957. The following year it was entered in the 1958 Australian Rally, an exceptionally grueling international rally. In its first competition, the Datsun 1000 won its class championship to make the Datsun name famous internationally.That feat provided the impetus for initiating the company's first vehicle exports to the United States later that year. It also led to the launch of Nissan's first overseas production in Taiwan in 1959. The Datsun 1000 was instrumental in paving the way for Nissan's subsequent advance into overseas markets.1969 Datsun Z S30The S30 was the first-generation Z car. It was created by transforming a light open-top sports car into a Grand Touring (GT) car with a closed body, reflecting the changing trends of the times. The graceful styling of the S30 with its lower, longer and wider dimensions captivated car fans the world over.1982 March/Micra K10The March embodied a variety of concepts unprecedented in Japanese cars. For example, a model life of approximately ten years was envisioned from the outset. Outstanding levels of basic performance were attained though extensive weight savings. And the styling was intended to have timeless appeal. The current generation of the March continues to provide these same values today.1989 Infiniti Q45 G50In autumn 1989 Nissan launched its new Infiniti brand in the United States with the Q45 as its flagship model. Presented as a “Japan original,” this large, luxurious sedan was an expression of Japan’s unique aesthetics and detailed attention to passenger comfort. The Q45 attracted considerable attention in the target U.S. market, as well as in its home country of Japan. 1935 Datsun 14In April 1935, less than two years after Nissan's establishment, the first small “Datsun 14” passenger car rolled off the assembly line at the Yokohama Plant. The plant had just been newly built as Japan's first mass production facility for automobiles.Founded in December 1933, Nissan will celebrate its 80th anniversary at the end of this year. We will continue providing our unique and innovative products and services to the world as we move into our future.2010 Nissan LEAF ZE0Nissan LEAF is a newly developed EV designed for the mass market, offering new mobility for a sustainable zero-emission society. Achieving outstanding environmental performance as a zero-emission vehicle with no tailpipe emissions, including CO2, Nissan LEAF is powered by a lithium-ion battery and an electric motor. It provides an unique driving experience, delivering strong, smooth acceleration performance and quietness comparable to luxury vehicles in every speed range. It also offers superior handling stability realized by its excellent weight balance.03NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time 4,914,000 Vehicles total global Retail Volume ¥9,629.6 Billion net Sales ¥523.5 Billion　 5.4 % operating margin operating profit During fiscal 2012 we rolled out 10 new models and achieved our highest sales ever. growth in vehicle sales numbers and easing of the strong yen brought about a 2.3% increase from the previous year. We aim to achieve a sustainable operating margin of 8% by the end of fiscal 2016. 6.2 % 160,530 people R&I S&P A+ BBB+ A3 Moody’S global Market Share employees (consolidated basis) long-term Credit Ratings our goal is to achieve 8% global market share by the end of fiscal 2016. We have production facilities in 20 countries and regions worldwide and offer our products and services in more than 160. (as of march 31, 2012 excluding employees number) During fiscal 2012 we saw improvement in our ratings from r&i and moody’s. key figuReS Nissan’s goal is to offer customers all around the world innovative products and services while achieving further growth. Here are some figures that show just where we are today on the road to this destination. *note: all figures cover the fiscal year ending march 31, 2013, and are current as of that date. 04NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time niSSAn’S fouR StRAtegiC teCHnology DeVelopMent fielDS Safety Realizing zero-fatality mobility. Toward a world with virtually no accidents leading to death or serious injury. our goal is to continue advancing automotive safety features and improving them across the board as a global leader in the safety field. By bringing innovative new technologies into being, we are progressing toward this goal. Realizing zero-emission society. environment to reduce overall global co2 emissions to as low a level as possible, we are pursuing the long- term goal of zero-emission mobility through our development and popularization of electric and fuel- cell vehicles. in the shorter term, we are also striving to improve the efficiency of our gasoline-powered vehicles to the greatest possible extent to reduce fuel consumption and co2 emissions. Safety Life on Board Providing new experiences and values for every moment spent in the vehicle. life on Board Environment Dynamic Performance Quality/Cost the orchard Concept Harvest plan Developing a plan to market new technologies, capabilities and functions Choosing the ideal timing for their introduction Seeding & growth Identifying core technologies to drive development in preparation for harvest Formulating strategies to boost development efforts Soil enrichment Nurturing sustainable competencies required for harvest, seeding & growth efforts Advancing the basic research that will lead to future harvests Quality/Cost from seats that offer near fatigue- free comfort throughout a long drive to vehicle interiors that give the pleasure of ownership to our customers, we aim to provide unprecedented values and experiences in all phases of driving: from the moment people enter the car through the actual driving and right up to when they get out at the end of the trip. Dynamic performance Giving drivers the experience they desire. We analyze how people perceive, judge and operate their cars from a variety of angles. in this way we produce numerical data and insightful observations even on subjective concepts like driving sensations and habits. With this input to guide our development efforts, we use the knowledge gained to polish our vehicles’ dynamic performance. page_21 click here for information on the new technologies developed in fiscal 2013. TechnologyWe pursue technological development in four areas: Safety, Environment, Dynamic Performance and Life on Board. Based on the “Orchard Concept,” we set clear goals in each of these areas and direct our development efforts toward achieving them. 05NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time finAnCiAl HigHligHtS net sales*1 operating income (loss) ordinary income (loss) net income (loss) comprehensive income net assets total assets net assets per share Basic net income (loss) per share net assets as a percentage of total assets return on equity price earnings ratio*2 cash flows from operating activities cash flows from investing activities cash flows from financing activities cash and cash equivalents at end of year net cash (auto business) employees *3 *4 ( ) represents the number of part-time employees not included in the above numbers for the years ended mar. 31, 2013 mar. 31, 2012 mar. 31, 2011 mar. 31, 2010 mar. 31, 2009 2012 2011 2010 2009 2008 millions of yen millions of yen millions of yen millions of yen millions of yen millions of yen millions of yen yen yen % % times millions of yen millions of yen millions of yen millions of yen millions of yen number ¥9,629,574 ¥9,409,026 ¥8,773,093 ¥7,517,277 ¥8,436,974 523,544 529,320 342,446 734,657 545,839 535,090 341,433 290,600 537,467 537,814 319,221 189,198 311,609 207,747 42,390 - (137,921) (172,740) (233,709) - 4,073,993 3,449,997 3,273,783 3,015,105 2,926,053 12,805,170 11,072,053 10,736,693 10,214,820 10,239,540 750.77 703.16 890.73 81.70 29.2 9.95 11.08 390,897 (957,137) 455,627 798,361 915,861 160,530 (36,449) 166,881 (37,314) 81.67 28.4 11.22 10.79 696,297 (685,053) (308,457) 840,871 619,863 157,365 (34,775) 161,513 (35,099) 76.44 27.4 11.30 9.65 (331,118) 110,575 1,153,453 293,254 155,099 (27,816) 159,398 (28,089) 663.90 10.40 26.5 1.59 77.02 (496,532) (663,989) 761,495 644.60 (57.38) 25.6 (7.62) - 890,726 (573,584) (135,013) 746,912 (29,658) (387,882) 151,698 (17,600) 157,624 (17,908) 155,659 (20,107) 160,422 (20,649) 667,502 1,177,226 notes: *1 net sales are presented exclusive of consumption tax. *2 price earnings ratio for fiscal 2008 is not presented because a net loss per share is recorded. *3 the number of part-time employees has been changed to present the average number of part-time employees for the fiscal 2008 compared with the year-end part-time employees for the previous fiscal years. *4 staff numbers, which are presented as the lower numbers in the “employees” line, include those of unconsolidated subsidiaries accounted for by the equity method as reference data. 06NISSAN MOTOR COMPANY ANNuAl RePORT 2013corporate face time key figures for fiscal 2012 global industry demand in fiscal 2012 reached 79.33 million vehicles, up 4.8% from fiscal 2011. nissan's global sales volume climbed 1.4% to 4.914 million vehicles, an all-time high, and global market share declined 0.2 points to 6.2%. net sales climbed 220.6 billion yen for the year to reach 9,629.6 billion yen. operating profit was 523.5 billion yen, for a profit margin of 5.4%. Global sales volume/Market share Net sales (thousands of units) 6,000 5,000 4,000 3,000 2,000 1,000 0 (%) 12.0 (Billions of yen) 12,000.0 4,845 4,914 10.0 10,000.0 4,185 3,411 3,515 5.5 5.5 5.8 6.4 6.2 2008 2009 2010 2011 2012 8.0 6.0 4.0 2.0 0 (fY) 8,000.0 6,000.0 4,000.0 2,000.0 0 8,437.0 7,517.3 8,773.1 9,409.0 9,629.6 537.5 545.8 523.5 Operating Income（loss） (Billions of yen) 600.0 400.0 200.0 0 –200.0 311.6 –137.9 2008 2009 2010 2011 2012 (fY) 2008 2009 2010 2011 2012 (fY) global sales volume (left) market share (right) Net Income（loss） (Billions of yen) 400.0 300.0 200.0 100.0 0 –100.0 –200.0 –300.0 42.4 –233.7 Free Cash Flow（Auto business） Net Cash（Auto business） 319.2 341.4 342.4 459.3 375.5 379.5 248.6 (Billions of yen) 500.0 400.0 300.0 200.0 100.0 0 –100.0 –200.0 –300.0 –251.7 (Billions of yen) 1,000.0 800.0 600.0 400.0 200.0 0 –200.0 –400.0 915.9 619.8 293.3 –29.7 –387.9 2008 2009 2010 2011 2012 (fY) 2008 2009 2010 2011 2012 (fY) 2008 2009 2010 2011 2012 (fY) 07NISSAN MOTOR COMPANY ANNuAl RePORT 2013management messages MAnAgeMent MeSSAgeS to our stakeholders in pursuit of our mid-term business plan goals: Global Market Share Operating Margin Fy2012 5.8 % Fy2016 8.0 % Fy2010 6.1% Fy2016 8.0 % Six tactics under Nissan Power 88 Strengthening brand power Enhancing sales power Enhancing quality Zero-emission leadership Business expansion Cost leadership page_16 click here for more information on nissan power 88. Carlos GhosnPresident and Chief Executive OfficerToshiyuki ShigaChief Operating OfficerJoseph G. PeterChief Financial Officer08NISSAN MOTOR COMPANY ANNuAl RePORT 2013MeSSAge fRoM tHe Ceo management messages nissan continued progress under nissan power 88, our mid-term plan, during fiscal year 2012 despite a range of challenges. the company delivered net income in line with its full-year guidance and generated significant automotive free cash flow while strengthening its balance sheet. However, the company struggled to meet its goal for full-year operating profit. the company’s results reflect a number of achievements, which we will build upon in 2013, and they highlight opportunities for progress. We continue to pursue our goals of achieving 8% global market share and a sustainable 8% operating profit margin by fiscal year 2016. in 2012, our products generated positive recognition. the note was crowned the rJc car of the Year for 2013 in our important home market of Japan. meanwhile, in china, the new sylphy was named car of the Year in the country’s overall automobile awards ceremony. and the Venucia r50 took home the award for “most economical vehicle.” separately, the worldwide visibility of the nissan brand was recognized when we achieved our highest- ever ranking on interbrand’s global top 100 brands. in the 16th nikkei environmental management survey, nissan was named first among automotive companies and second overall. and nissan has dramatically increased its ranking among “Best global green Brands”—being named 5th among 50 top brands. nissan has now sold more zero-emission vehicles than any other automaker. since we introduced nissan Leaf in December 2010, we’ve sold about 70,000 worldwide as of the end of June 2013. nissan Leaf also ranked first in the influential Kelley Blue Book list of Best green cars of 2013. the fighting spirit is very much alive within nissan, and we are prepared to seize the opportunities. another area where we saw significant growth in the last fiscal year was with our infiniti premium brand. in 2012, we achieved a new sales record of 173,000 units, an increase of 12% from the previous fiscal year. We also initiated sales in chile, the Dominican republic, south africa and australia. in December, infiniti announced that the sunderland plant in the United Kingdom will manufacture an all-new premium compact car in 2015. to further increase brand awareness, for the formula one 2013 season, we have significantly expanded our partnership with red Bull racing, to become title sponsor and technical collaborator. Carlos GhosnPresident and Chief Executive Officer09NISSAN MOTOR COMPANY ANNuAl RePORT 2013management messages fiRMly foCuSeD on ouR goAlS pRepAReD foR futuRe CHAllengeS nissan faced a number of challenges during fiscal year 2012. Like other Japanese automakers operating in china, the company was negatively impacted by political tensions and demonstrations surrounding the islands dispute. When the islands dispute began last summer, it had a swift and significant impact. in the second week of september, showroom traffic suddenly declined by 57% and retail sales dropped by more than 50%. While activity has since improved, the challenges we faced in 2012 have not been fully overcome and won’t be for some time. However, we anticipate that nissan and Venucia product launches will boost sales, especially the introduction of the new teana, which is the flagship of the nissan brand in china. We also plan to increase dealer network coverage by opening 40 new nissan dealers and 20 new Venucia dealers. in addition we will increase the number of infiniti outlets from 60 to 66. We also further leveraged our industry partnerships to increase sales and set the stage for further sales growth in the years ahead. the 14-year-old alliance between nissan and renault continues to be a model partnership and one where both companies benefit from combined investment, reduced costs and overall operational efficiencies. in 2012, we expanded the alliance to include aVtoVaZ, russia's largest carmaker. the alliance aims to secure a 40% share in the fast-growing russian market. earlier this year, we announced a fuel-cell technology collaboration among nissan, Daimler and ford. our goal is to accelerate the launch of the world’s first affordable, mass- market fuel-cell electric vehicle by as early as 2017. each of these achievements is in line with our nissan power 88 goals, which start with producing and selling world-class products. as part of the nissan power 88 strategy, we are committed to delivering one new vehicle every six weeks, on average, for all six years of the nissan power 88 term. in 2012, we fulfilled this goal and introduced 10 innovative new models, including three global growth models, altima, note and sentra, in markets worldwide. our activities were especially strong in several high-growth markets, including thailand, australia and Brazil, where we saw significant improvements over last year. to continue expanding and maximizing our operations in global growth markets, we invested a record amount to increase production capacity during 2012. for fiscal year 2013, we will continue to execute our nissan power 88 strategy. i want to note that, in 2013, our capacity-building investments will exceed 2012’s record levels. and we’ll continue to focus these investments in high-growth markets. 10NISSAN MOTOR COMPANY ANNuAl RePORT 2013management messages in the United states last year we confronted supply issues surrounding globally, nissan will launch seven “global growth” models, including the new models, when important design changes ended up slowing down the supply chain. these issues have been almost solved, and we’ve improved the supply process to prevent future problems. We view fiscal year 2013 as an opportunity to grow again in the U.s. market. We are in the midst of launching six core models over a 15-month period. this started with the altima, pathfinder and sentra during fiscal year 2012. this year we will launch four new products, including the nissan Versa note and rogue. We also have appointed a number of new leaders in the americas region to ensure that our operations are fully aligned to exceed customer expectations. a key to increasing momentum in this market is implementation of the “right car, right place, right price” strategy, which was developed by the new team and aims to improve the number of times that a nissan vehicle appears during a customer’s new car internet search and to let us better project what models and what equipment will be in demand by region. two previously noted in the americas and the note and Qashqai in europe, the teana in china, and the X-traiL throughout asia. We also are preparing for the introduction of the Datsun brand. it has been more than 30 years since the company offered Datsun models, and the brand returns with all-new products that will first go on sale in india beginning in early 2014. Datsun models will be offered in as many as three additional countries shortly after the india launch, including indonesia, russia and south africa. We will support our growth plans across all brands by expanding the global dealer network from 9,100 outlets to 9,600 outlets by the end of fiscal year 2013. as you can see, the fighting spirit is very much alive within nissan. although we faced unanticipated challenges during fiscal year 2012, we learned valuable lessons. the company has identified the necessary countermeasures in order to strengthen performance during fiscal year 2013, and we are prepared to seize the many opportunities that lie ahead. carlos ghosn president and chief executive officer nissan motor co., Ltd. 11NISSAN MOTOR COMPANY ANNuAl RePORT 2013MeSSAge fRoM tHe Coo management messages (manufacturing) excellence and our “mother factory” functions here. nissan’s strength has repeatedly been tested as we supported recovery and got our business locations back online in the region affected by the 2011 great east Japan earthquake, responded to the flooding that took place in thailand later that year, and addressed the setbacks arising from the islands issue with china. in each case, by leveraging our know-how and considering all options, we came up with swift, detailed countermeasures and minimized the impact of these issues to overcome them and even thrive despite the challenges. nissan learned much in the course of tackling these crises. We now have deeper capabilities in both management and at the genba level of the business frontlines, thanks to our people’s efforts to think about what needs to be done and then carry it through. nissan has evolved into a more flexible, muscular corporation as a result. leAping AHeAD ARounD tHe WoRlD even when facing harsh conditions, nissan does not focus solely on resolving the short-term issues before it. the company invests continuously in its people, brands, products and technologies to ensure sustainable growth over the longer term as well. there will be more trials in the future, but also opportunities for growth and further achievements. During fiscal 2013 we will put our hard-won knowledge and experience to work to produce solid results and propel ourselves toward the targets of nissan power 88, our mid-term business plan. the business environment is in constant flux, though, and global competition continues to grow fiercer. nissan’s task is to address this change flexibly as it hones its competitive edge and produces steady results. today we are grappling with a range of challenges, using the diversity and cross- functional approach we have fostered over time to pursue sustainable growth. As we celebrate the 80th anniversary of our founding, we work to achieve even greater success. A yeAR of ReCoRD gloBAl SAleS Let me begin by expressing my deepest thanks to all of our stakeholders, whose understanding and support for nissan’s activities underpin the growth and development that the company has achieved. During fiscal 2012 nissan faced difficult conditions on many fronts, including sluggish demand due to the sovereign debt crisis in europe and the impact on Japanese automakers of the islands issue that broke out with china in september. Despite this, we were able to create positive cash flow and build an even healthier balance sheet for nissan. our global sales also hit an all-time high of 4.91 million vehicles during the year. ever since the financial and economic crisis touched off in late 2008, nissan has faced numerous trials. all our people have come together as one and shown unwavering dedication to get us through this tumultuous period. We have reduced our costs to cope with rising fuel and raw material prices and shifted production to other markets to cope with an overvalued yen. at the same time, we have taken steps in Japan to enhance our technological competitiveness over the longer term by maintaining our monozukuri Toshiyuki ShigaChief Operating Officer12NISSAN MOTOR COMPANY ANNuAl RePORT 2013management messages in Japan, approximately 40% of the automotive market is kei light nissan is a global company that provides uniquely innovative products vehicles, an increasingly important category as nissan seeks to maintain stable sales numbers. providing a steady supply of more attractive, competitive products to our customers is a vital task. toward this end we established nmKV, a joint venture with mitsubishi motors corp., and in June 2013 launched the all-new DaYZ, the first kei vehicle with nissan involvement from the product planning stage. strengthening our product lineup in this area will increase our share of the Japanese market. in china and the United states, nissan’s largest markets, the company will accelerate efforts to expand sales. the new teana, launched in march as a flagship vehicle for the nissan brand in china, is selling well; as of april 2013, monthly retail vehicle sales have recovered to surpass the year-on-year figures. in the United states, during fiscal 2013 we aim to improve market share and profitability with an enhanced product lineup including four new models, such as the new rogue. We are also actively investing in emerging markets, where growth is strongest. nissan is constructing new and expanding existing plants in Brazil, mexico, thailand, indonesia, india and china in order to dramatically grow business there. and services to customers all around the world. it is also a quintessentially Japanese firm, with all the dedication to manufacturing excellence, human- resource fostering and hospitality that this represents. By combining our two sets of traits at a high level—our diversity as a global actor and our strengths as a Japanese company—we aim to lead the industry as a truly global firm born in Japan. the foundation for these efforts is the nissan Way. this is crystallized in the mindsets and actions of all employees who create value for the company. the nissan Way is the genesis of our corporate culture and a way to win the universal trust of customers in our brand. nissan’s goals are to constantly create future-oriented innovation from within and to foster a robust corporate organization that produces steady results. fiscal 2013 is a key year for nissan. in December we celebrate the 80th anniversary of the company’s founding. While turning our eyes to the legacy of whose who have handed the company down to us, we maintain the entrepreneurial spirit of a young company. We bring together the drive of each of our employees, our management skills and our genba capabilities to provide value going beyond our customers’ expectations, to contribute to society and to achieve even greater success for nissan. i look forward to your kind support as we continue working toward ouR ZeRo-eMiSSion Duty these goals. website click here for more information on the nissan Way. since going on sale in December 2010, the 100% electric nissan Leaf has sold about 70,000 units (as of the end of June 2013), making nissan the world leader in the eV market. as an automaker, it is our responsibility to help realize a sustainable mobility society through our zero-emission efforts. nissan is moving forward with deep conviction to achieve fuller penetration of eVs, which use no fossil fuels and produce no emissions in operation. for infiniti, our premium luxury brand, we will roll out a new Q50, our top-selling sedan model, in major global markets to enhance the brand’s power and achieve solid growth. meanwhile, to reach customers in the rising middle classes of booming emerging markets, we will release vehicles under the relaunched Datsun brand in early 2014 in india, followed by indonesia and russia and, at the end of the year, south africa. Toshiyuki ShigaChief Operating OfficerNissan Motor Co., Ltd.13NISSAN MOTOR COMPANY ANNuAl RePORT 2013MeSSAge fRoM tHe Cfo management messages A StRong yeAR DeSpite CHAllengeS fiscal year 2012, the second of our mid-term business plan, was a year of progress for nissan. this progress was made despite some significant challenges. from an external perspective, the weak european market—and more significantly, the negative impacts on our china business due to political tensions between Japan and china related to disputed territorial claims— meaningfully limited our unit sales and profit potential in the year. internally, we struggled with the ramp-up of important new product launches, the altima and pathfinder, in the key U.s. market, which constrained product availability. While the availability issue in the United states is now largely behind us, it did also negatively impact our sales performance and profit potential during the 2012 fiscal year. notwithstanding these challenges, nissan delivered solid business performance by continuing to focus on and executing the strategies and initiatives of the nissan power 88 mid-term plan. nissan’s global sales in fiscal 2012 reached 4,914,000 units, an all-time record. Looking at the fiscal 2012 financial metrics, consolidated net revenues reached 9.6 trillion yen, up 2.3% versus the previous year. operating profit stood at 523.5 billion yen and our net income was 342.4 billion yen —this is slightly above last year’s net income level even after comprehending the negative impacts on our china business income due to the Japan/china islands dispute. We generated solid automotive free cash flow of 248.6 billion yen even as we continued to invest in capacity expansions in markets such as Brazil, mexico, russia, china, india and asean, which offer significant future business growth opportunities. With this solid free cash flow generation, we continued to strengthen our balance sheet, increasing our automotive net cash position to 915.9 billion yen, an all-time high. our mid-term business plan is designed to significantly enhance shareholder value through business growth. the solid business results and improvement in our balance sheet is recognized by external rating agencies—in this regard, during the year we received rating upgrades from both moody’s and r&i and we now carry an a3 and a+ long-term credit rating with each, respectively. looking AHeAD WitH ConfiDenCe as we look forward to fiscal 2013, we expect the global automotive industry to set yet another volume record, growing to over 81 million units. Based on the continued execution of our power 88 mid-term plan strategies and initiatives and our strong product offerings, we project nissan unit sales to grow to 5,300,000 units for the year. Joseph G. PeterChief Financial Officer14NISSAN MOTOR COMPANY ANNuAl RePORT 2013management messages in terms of financial management, we will continue to focus on ensuring cost efficiency, generating positive automotive free cash flow even with the increased capital investments supporting capacity expansions in growing markets worldwide and maintaining a strong balance sheet with sufficient liquidity. the chart below summarizes the pro-forma key financial metrics of our 2013 full-year forecast. i use the term “pro-forma” as we have maintained the use of proportional consolidation of our china JV in these financial metrics for ease in comparison to the fiscal 2012 results. Under revised accounting rules that are effective with the beginning of the 2013 fiscal year, we will no longer account for our china JV using proportional consolidation but rather will switch to equity method accounting. Fiscal 2013 Management Pro-Forma Outlook (billion yen) net revenue operating profit op margin ordinary profit net income net income ratio capeX r&D sales ratio sales ratio fX rate assumptions JpY/UsD JpY/eUr fy12 actual (A) 9,629.6 523.5 5.4% 529.3 342.4 3.6% 524.5 5.4% 469.9 4.9% 82.9 106.8 fY13 pro-forma outlook (B)* 11,200.0 700.0 6.3% 665.0 420.0 3.8% 570.0 5.1% 520.0 4.6% 95.0 122.0 Vs. fY12 (B–a) +1,570.4 +176.5 +0.9% +135.7 +77.6 +0.2% +45.5 –0.3% +50.1 –0.3% +12.1 +15.2 change vs. fY12 (B/a) +16.3% +33.7% +25.6% +22.6% +8.7% +10.7% * Based on continuation of proportional consolidation of china JV in brief, on a pro-forma basis (with continued use of proportional consolidation for our china JV), net revenue is forecast to grow 16.3% to 11.2 trillion yen; operating profit is forecast to grow over 33% to 700 billion yen, representing an operating profit margin of 6.3%; and net income is forecast to grow 23% to 420 billion yen, reflecting a 3.8% net margin. please note that applying the new equity accounting methodology for our china JV would reduce the forecast pro-forma net revenue by 830 billion yen. operating profit would be 90 billion yen lower and ordinary profit would be reduced by 20 billion yen, while the net income amount would remain unchanged. in closing, our mid-term business plan is designed to significantly enhance shareholder value through business growth that drives higher revenue, profits and strong sustained free cash flow generation. We will enhance enterprise value, maintain a strong balance sheet and provide shareholders an attractive dividend. reflecting confidence in our mid-term plan and based on our outlook for 2013 including continued positive free cash flow generation, we announced in may 2013 our intention to increase the fiscal 2013 dividend by 20% to 30 yen per share. Joseph g. peter chief financial officer nissan motor co., Ltd. 15NISSAN MOTOR COMPANY ANNuAl RePORT 2013ABout tHe MiD-teRM plAn nissan poWer 88 niSSAn poWeR 88 Six tACtiCS unDeR niSSAn poWeR 88 1 2 3 4 nissan is operating its business based on the mid-term plan, nissan power 88 for the fiscal years 2011 to 2016. “power” derives its significance from the strengths and efforts we will apply to our brands and sales. our commitment is to renew our focus on the overall customer experience, elevating nissan’s brand power and ensuring quality excellence for every person who buys a nissan car. “88” denotes the measurable rewards from achieving our plan. We aim to achieve a global market share of 8% from 5.8% in 2010, and we aim to increase our corporate operating profit to a sustainable 8% from 6.1% in 2010. nissan is implementing six tactics under nissan power 88: website click here for more information on nissan power 88. 5 Business expansion 6 Cost leadership Strengthening brand power enhancing sales power to strengthen nissan’s brand power, we will expand our strength in engineering and production to the sales, marketing and ownership experience. We will raise the level of interaction with our customers to create a world-class standard of service that will build lasting relationships with every nissan car owner. We recognize that having a stronger brand will help close the gap with our top competitors in every measurable area – from revenue generation to overall opinion and purchase intention. sales power in the mid-term plan refers to fully grasping the needs of customers in each market and drastically raising sales volume and market share. in emerging markets, we will focus on building a robust dealer network with market positioning and staffing optimized to meet the needs of local nissan customers. in mature markets, where our dealer network is already established, we will take a strategic approach to improve customer loyalty and improve sales efficiency by increasing sales volume per outlet. enhancing quality nissan aims to make steady progress in improving product quality. During nissan power 88, our aim is to raise nissan into the top group of global automakers in product quality and elevate infiniti to leadership status among peer luxury products. Zero-emission leadership nissan has taken the lead as the all-time volume leader in dedicated electric vehicle sales. nissan’s eV lineup will include a light commercial vehicle and an all-electric premium car, to be launched by infiniti in the near future. together with our alliance partner renault, we intend to put 1.5 million eVs on roads worldwide by 2016. in addition, nissan continues to take a leadership role in every aspect from the development of batteries, chargers and vehicle lineup to electric grid studies, battery recycling and the use of batteries for energy storage, so that we will contribute to the establishment of sustainable mobility. regarding the 8% market share objective under nissan p ower 88, we estimate that 35% of the growth in volume will come from mature markets and 65% will come from emerging markets. We will achieve this through a steady tempo of new product launches averaging every six weeks, a continued focus on growth markets and the expansion of our infiniti and light commercial vehicle businesses. investments in manufacturing capacity expansion, particularly in china, north america, Brazil, russia and india, will enable us to increase sales volume. We have been successful in reducing costs by 5% annually, due mainly to our cross-functional monozukuri activities involving our supplier base. as our production footprint is increasing globally, we will maintain this pace by enhancing and deepening these activities in every nissan production base across the regions. moreover, evaluating not only purchasing costs but also logistics and in-house costs, we have set an objective to reduce total costs by 5% each year. together with a stronger brand, investments in products, technologies and global capacity, we aim to achieve nissan power 88 and grow further. 16NISSAN MOTOR COMPANY ANNuAl RePORT 2013eV topiCS nissan leAf is the world’s first mass-produced 100% electric vehicle and the world’s best-selling eV. Since nissan leAf first went on sale in December 2010, about 70,000 units have been sold globally as of the end of June 2013. through further improvements in vehicle performance and cost reductions, as well as efforts to enhance charging infrastructure, nissan is committed to helping bring about a society where customers can use eVs with full peace of mind. Here is the latest information on the company’s activities in the zero-emission field: 17 1 updated leAf in november 2012 we released a minor model change to nissan Leaf that incorporates improvements based on feedback collected from purchasers since the first nissan Leaf went on sale in December 2010. the vehicle’s driving range on a single full charge has been extended thanks to a overhauled electric power train, enhanced regenerative braking system, new energy-efficient heating system, substantial weight reduction and other improvements. an affordable s-grade nissan Leaf has been introduced to help bring the vehicle to even more customers. in each market, the company is reviewing vehicle options and other factors to make nissan Leaf even more convenient to use. 2 localized production of nissan leAf Begins in addition to our oppama plant in Japan—where we manufacture the nissan Leaf body—and the automotive energy supply corporation (aesc) plant in Zama—a joint venture launched by nissan and nec corporation, where nissan Leaf batteries are made—we have now started nissan Leaf body and battery production in the United states and United Kingdom. United States in January 2013, nissan ramped up Leaf assembly at our U.s. manufacturing plant in smyrna, tennessee. prior to this, in December 2012, our smyrna automotive battery plant began making batteries for nissan Leaf. When fully tooled, this plant has the capacity to produce battery modules for up to 200,000 vehicles a year to match market demand. Europe in march 2013, nissan Leaf production began at our U.K. manufacturing plant in sunderland. the vehicles manufactured there all contain lithium-ion batteries manufactured at nissan’s U.K. battery plant, which commenced operation in sunderland in 2012. 3 A new organization to promote Charging infrastructure in april 2013 we set up a new organization to promote charging infrastructure in Japan, the United states and europe. to build range confidence we have been cooperating with relevant companies, local authorities and national governments to propose the installation of charging points in appropriate locations and to share information on how to install charging stations inexpensively. nissan is engaging in various efforts with a wide range of partners to accelerate the installation of charging infrastructure. 4 promoting new Advantages to electric Vehicles　 combining nissan Leaf with our power control system makes it possible to use the vehicle’s 24 kWh high-capacity battery as a storage device to supply power to a home. it is even possible to charge the vehicle’s battery at night, when electricity usage is low, and draw power from it during the day, thereby reducing peak demand on the grid. the eV is also a potential backup electricity supply in emergencies, and can be run on electricity generated from renewable sources, such as solar power. about 1,500“Leaf to Home” systems have already been sold in Japan as of the end of June2013. the system won the ministry of economy, trade and industry (meti) minister’s prize in the grand prize for excellence in energy efficiency and conservation program. smyrna automotive battery plant As the industry leader in zero-emission mobility, Nissan is committed to the penetration of electric vehicles (EVs) in the market.Nissan LEAFSunderland automotive battery plantLEAF to HomeNISSAN MOTOR COMPANY ANNuAl RePORT 2013performance18 fiSCAl 2012 SAleS peRfoRMAnCe fiscal 2012 sales results came to 4,914,000 units, up 1.4% year-on-year. overall market share resulted 6.2%, 0.2 points down from fiscal 2011. Global Retail sales volume / Market share (Units: thousands) 8,000 6,000 4,000 2,000 0 5.6 5.6 5.4 5.4 5.5 5.5 3,389 3,569 3,483 3,770 3,411 3,515 5.8 4,185 6.4 6.2 4,845 4,914 6.5 5,300 2004 2005 2006 2007 2008 2009 2010 2011 2012 (forecast) 2013 global retail sales volume (left)　 market share (right) China in china, total industry volume rose 6.1% to 18.21 million units. Largely due to the islands dispute, nissan’s sales decreased by 5.3% to 1.182 million units. our market share decreased by 0.8 points to 6.5%. (%) 8.0 6.0 4.0 2.0 0 (fY) Retail sales in China (Units: thousands) 1,500 1,200 900 600 300 0 1,247 1,182 –5.3% 1,250 +5.8% 2011 2012 (forecast) 2013 (fY) Japan in Japan, total industry volume increased 9.6% to 5.21 million units. our retail sales decreased by 1.3% to 647,000 units, and our market share decreased 1.4 points to 12.4%. this was due to a lack of supply in the mini-car market and the introduction of the new note coinciding with the end of a government subsidy program for eco-friendly vehicle purchases. However, in the fourth quarter, we increased market share by 0.5 points to 13.9%. Retail sales in Japan (Units: thousands) 1,500 1,200 900 600 300 0 655 647 –1.3% 660 +2.0% 2011 2012 (forecast) 2013 (fY) North America in the United states, total industry volume increased 11.6% to 14.71 million units. nissan’s sales increased 5.4% to 1.138 million units. in mexico, nissan maintained its number-one market share position, with 24.8% of total industry volume and sales of 248,000 units. Retail sales in the united states (Units: thousands) 1,500 1,200 900 600 300 0 1,080 1,138 +5.4% 1,270 +11.6% 2011 2012 (forecast) 2013 (fY) NoteSylphyAltimaNISSAN MOTOR COMPANY ANNuAl RePORT 2013performance19 Europe in europe, including russia, total industry volume fell by 6.4% to 17.18 million units. our retail sales declined 7.5% to 660,000 units, reflecting the state of the market. the ongoing euro-zone debt crisis − combined with an escalation of incentives − were primary reasons for this. We also were affected by the absence of any new product launches in the last two years in europe. Despite the tough selling environment, we fought to maintain market share − and it remained unchanged at 3.9%, with record share performances in spain, the United Kingdom, and france. Other markets in other markets − including asia & oceania, africa, Latin america, and the middle east − our sales volume rose by 16.3% to 959,000 units. nissan continued to outperform the industry in many of these markets, with our overall sales growth almost double that of the industry as a whole. for example, in thailand, nissan sales increased 80.4% to 138,000 units. in Brazil, sales were up by 18.4% to 96,000 units, and in the middle east, sales were up 20.8% to 184,700 units. Retail sales in Europe Retail sales in Other markets (Units: thousands) (Units: thousands) 1,500 1,200 900 600 300 0 713 660 –7.5% 720 +9.1% 2011 2012 (forecast) 2013 1,500 1,200 900 600 300 0 959 +16.3% 1,060 +10.4% 826 (fY) 2011 2012 (forecast) 2013 (fY) MARket foCuS: ASeAn the asean region is essential to the progress of the nissan power 88 mid-term business plan. the region has a population of 600 million and motorization accompanying economic growth is steadily increasing overall demand. We can anticipate further growth in the future. nissan is implementing various measures in the asean 5 nations (thailand, indonesia, malaysia, the philippines and Vietnam) to achieve our mid-term plan targets of 500,000 annual unit sales and 15% market share. to meet increasing demand in the asean region, we plan to raise our annual production capacity from 350,000 units to 700,000 units. as part of this, our second plant in thailand is scheduled to commence operation in august 2014. During fiscal 2012 we sold 259,876 units in the asean 5, a year-on-year increase of 47.7%. in particular, sales in thailand increased 80.4% to 138,020 units, including 67,168 units for the almera. We will maintain our focus on the rapidly growing asean region. QashqaiMarchNISSAN MOTOR COMPANY ANNuAl RePORT 2013performance20 fiSCAl 2013 SAleS outlook in fiscal 2013 we will continue to execute our nissan power 88 strategy. Based on projections that total industry volume will reach 81.1 million units this year, we forecast record sales of 5,300,000 units, up 7.8% from fiscal 2012—which would give nissan a global market share of 6.5%. the rogue and infiniti Q50 are among several new vehicles we will launch during fiscal year 2013. this product offensive includes the new note and Qashqai in europe. and we are preparing for the first new model of the iconic Datsun brand, with sales beginning in early 2014 in india—to be followed soon by indonesia, russia and, by the end of 2014, south africa. our outlook by region is as follows. in Japan, nissan plans to sell 660,000 units, an increase of 2.0% from fiscal 2012. in June we launched the DaYZ, a new kei (light) car, and a new sedan is also scheduled for launch later in the year. in china, we forecast sales growth of 5.8% to 1,250,000 units. We are working hard to recover from the impact of the islands dispute, and we anticipate that nissan and Venucia product launches will boost sales— especially the introduction of the new teana. in the United states, nissan projects 1,270,000 unit sales, 11.6% growth in sales volume from the prior year. to gain share and improve profitability in the U.s. market, we are strengthening the flow of our products. We will launch four new products in the United states, including the all-new rogue and infiniti Q50. (for north america as a whole we project sales of 1,610,000 units, or 9.8% growth.) in europe including russia, sales are forecasted to grow 9.1% to 720,000 units. the new note and new Qashqai will support the sales volume. in other markets, sales are expected to increase 10.4% to 1,060,000 units. (all figures are based on forecasts as of may 10, 2013.) Fiscal 2013 sales Outlook (Units: thousands) 6,000 5,000 4,000 3,000 2,000 1,000 0 5,300 +7.8% 4,914 Japan +2.0% china +5.8% north america +9.8% (U.s.+11.6%) europe +9.1% (russia+21.2%) other markets +10.4% 2012 (forecast) 2013 (fY) TeanaInfiniti Q50DAYZNISSAN MOTOR COMPANY ANNuAl RePORT 2013performanceneW teCHnologieS in fiSCAl 2013 performance DiReCt ADAptiVe SteeRing ff-HyBRiD Sy SteM foRWARD eMeRgenC y BRAking this next-generation system reads the driver’s steering inputs and converts them to electronic signals to direct the vehicle’s tires. it transmits the driver’s steering inputs to the wheels even faster than a mechanical system, providing the driver with more easily understood feedback on road surface conditions and improving the sensation of direct control over the vehicle. the system also enables the vehicle to reduce unnecessary road-generated disturbances and insulate the driver from them, thus communicating only essential information to the driver through the steering wheel. nissan’s ff (front engine, front wheel drive) Hybrid system utilizes a unique one motor, two clutch configuration. it is combined with a highly efficient new continuously variable transmission (cVt) and a compact engine, with the optional addition of a supercharger for models that require more power. in combination with a high-power, rapid charge/discharge lithium-ion battery, it provides powerful and responsive acceleration in a lightweight and compact hybrid system. Using a highly sensitive radar sensor, the system monitors the distance from the vehicle in front and its relative speed. When the system judges that a collision may occur and deceleration is necessary, it generates a visual and audible warning to encourage the driver to slow the vehicle down. at the same time, it pushes the accelerator pedal up and smoothly applies gentle braking to assist the driver in slowing down. if there is still a possibility of collision the system will automatically apply stronger braking. it will also tighten the vehicle’s seatbelts to hold the driver and passengers more securely. eStABliSHMent of tHe niSSAn ReSeARCH CenteR SiliCon V Alley in february 2013 the renault-nissan alliance established a new research facility in sunnyvale, california. the nissan research center silicon Valley (nrc-sV) will undertake part of our global research activities as one of our main overseas research facilities. its work includes research into network-connected cars, human-machine interfaces and autonomous vehicles. autonomous vehicle technology in particular is an example of an advanced technology with key potential for our customers around the world. NissaN plaNs to commercialize 90 New techNologies duriNg the NissaN power 88 period, which will ruN through fiscal 2016. here are the maiN techNologies that we will commercialize iN fiscal 2013.We Will introduce 20 neW technologies, including the above, in certain vehicles released during fiscal 2013.21NISSAN MOTOR COMPANY ANNuAl RePORT 201322 pRoDuCt AWARDS Car of the year in Japan, the new note was crowned the automotive researchers’ and Journalists’ conference of Japan (rJc) car of the Year for 2013*3. this is the second consecutive year for nissan to receive this award, which went to nissan Leaf in fiscal 2012. AWARDS ReCeiVeD in fiSCAl 2012 CoRpoRAte AWARDS Brand Ranking nissan achieved its highest-ever ranking on interbrand’s global top 100 brands, being named 73rd*1. the company earned its first-ever place among interbrand’s Best global green Brands, ranking 21st among 50 top brands. (in fiscal 2013 nissan climbed to 5th on this list.) in china, the new sylphy was named car of the Year by the country’s main automotive press association, while the Venucia r50 took home the award for most economical Vehicle. *1 founded in 1974 in London, interbrand is a leading global brand consultancy. *2 J-Win (the Japan Women's innovative network) is an npo established to promote and enhance diversity in the workplace. *3 the rJc (automotive researchers' and Journalists' conference of Japan) is an npo consisting of automotive critics and journalists, as well as researchers working on automotive technologies. environment Management Survey in the 16th nikkei environmental management survey, nissan was named first among automotive companies and second overall. 　 Diversity in the area of diversity, we were recognized with three awards. the tokyo stock exchange selected nissan for its “nadeshiko” themed investment list of brands making active use of women. the npo J-Win presented the company with first prize in the J-Win Diversity awards 2013*2. and nissan was named to the Diversity management selection 100, a list compiled by the Japanese ministry of economy, trade and industry (meti). Nikkei Environmental Management SurveyNISSAN MOTOR COMPANY ANNuAl RePORT 2013performancefiSCAl 2012 finAnCiAl ReVieW fiSCAl 2012 finAnCiAl peRfoRMAnCe Net Sales for fiscal year 2012, consolidated net sales increased 2.3%, to 9.630 trillion yen. Net sales (Billions of yen) 12,000.0 9,000.0 8,437.0 7,517.3 11,200.0 9,409.0 9,629.6 8,773.1 6,000.0 3,000.0 0 2008 2009 2010 2011 2012 (forecast) 2013 (fY) Operating Profit consolidated operating profit totaled 523.5 billion yen, a decrease of 4.1% from last year. in comparison to last year’s consolidated operating profit, the variance was due to the following factors: l the 30.2 billion yen positive impact from foreign exchange came mainly from the Us dollar. l purchasing cost reduction efforts including raw material costs resulted in a net savings of 190.4 billion yen. l Volume and mix produced a negative impact of 57.2 billion yen. l the increase in selling expenses resulted in a 53.5 billion yen negative movement. l r&D expenses increased by 37.0 billion yen. l manufacturing expenses increased by 53.7 Operating Profit (loss) (Billions of yen) billion yen. l sales financing profit increased slightly by 0.2 billion yen. l other items, which consisted primarily of a decrease in profits from affiliated companies and Japan Dealer companies, lower remarketing gains, and higher importation costs in Brazil due to changes in the Brazil-mexico free trade agreement, resulted in a negative impact of 41.7 billion yen. 700.0 537.5 545.8 523.5 311.6 800.0 600.0 400.0 200.0 0 –137.9 –200.0 2008 2009 2010 2011 2012 (forecast) 2013 (fY) * Based on continuation of proportional consolidation of china JV 23 Impact on Operating Profit (Billions of yen) 545.8 +30.2 +190.4 –57.2 –53.5 –37.0 –53.7 +0.2 –41.7 523.5 fY11 o.p. foreX purch. cost reduction (including raw material) Volume / mix selling exp. r&D exp. mfg exp. sales finance other items fY12 o.p. Net income net non-operating profit improved 16.5 billion yen from negative 10.7 billion yen to positive 5.8 billion yen in fiscal 2012. the positive impact came from derivative loss by 14.4 billion yen, from negative 20.8 billion yen to 6.4 billion yen in fiscal 2012. as a result, ordinary profit totaled 529.3 billion yen, which was deteriorated by 5.8 billion yen from 535.1 billion yen in fiscal 2011. net extraordinary losses totaled 12.6 billion yen, a deterioration of 6.8 billion yen from the previous year’s loss of 5.8 billion yen. this deterioration was due mainly to the negative impacts such as decrease in gain on negative goodwill by 24.0 billion yen and in gain on sales of investment securities by 9.0 billion yen, despite the positive impact in decrease of loss on disaster by 29.9 billion yen. taxes totaled 146.3 billion yen, a decrease of 5.2 billion yen from fiscal 2011. minority interests had a negative contribution of 28.0 billion yen in fiscal 2012. net income reached 342.4 billion yen, an increase of 1.0 billion yen from fiscal 2011. Net income (loss) (Billions of yen) 600.0 450.0 300.0 150.0 0 –150.0 –300.0 319.2 341.4 342.4 420.0 42.4 –233.7 2008 2009 2010 2011 2012 (forecast) 2013 (fY) NISSAN MOTOR COMPANY ANNuAl RePORT 2013performance24 finAnCiAl poSition Balance sheet current assets have increased by 14.9% to 7,597.1 billion yen compared to march 31, 2012. this was mainly attributable to an increase in sales finance receivables by 951.6 billion yen, despite a decrease in trade notes and accounts receivable by 107.8 billion yen. fixed assets have increased by 16.7% to 5,208.1 billion yen compared to march 31, 2012. this was mainly attributable to an increase in machinery, equipment and vehicles, net by 452.4 billion yen. as a result, total assets have increased by 15.7% to 12,805.2 billion yen compared to march 31, 2012. current liabilities have increased by 10.0% to 4,560.2 billion yen compared to march 31, 2012. this was mainly due to an increase in short-term borrowings by 274.6 billion yen and commercial papers by 181.0 billion yen. Long-term liabilities have increased by 20.0% to 4,170.9 billion yen compared to march 31, 2012. this was mainly due to an increase in Long-term borrowings by 474.5 billion yen. as a result, total liabilities have increased by 14.6% to 8,731.2 billion yen compared to march 31, 2012. net assets have increased by 18.1% to 4,074.0 billion yen compared to 3,450.0 billion yen as of march 31, 2012. this was mainly due to net income of 342.4 billion yen and a decrease in translation adjustments by 341.0 billion yen. Free cash flow and net cash (auto business) for fiscal year 2012, nissan achieved a positive free cash flow of 248.6 billion yen. at the end of fiscal year 2012, our net automotive cash improved significantly from last year to 915.9 billion yen. We continue to maintain a close focus on our inventory of new vehicles. inventory stood at 830,000 units at the end of fiscal 2012. the company continues to manage inventory carefully, in order to limit its impact on free cash flow. Long-term credit rating nissan’s long-term credit rating with r&i is a+ with a stable outlook. s&p’s long-term credit rating for nissan is BBB+ with a stable outlook. nissan’s credit rating with moody’s is a3 with a stable outlook. Corporate Ratings aa3 a1 a2 a3 Baa1 Baa2 Baa3 Ba1 R&i S&p Moody’s 10/03 4/04 10/04 4/05 10/05 4/06 10/06 4/07 10/07 4/08 10/08 4/09 10/09 4/10 10/10 4/11 7/11 7/12 1/13 aa– a+ a a– BBB+ BBB BBB– BB+ NISSAN MOTOR COMPANY ANNuAl RePORT 2013performance25 Sales finance Due to the increase in retail sales, total financial assets of the sales finance segment increased by 25.8 % to 6,310.8 billion yen from 5,014.9 billion yen in fiscal 2012. the sales finance segment generated 146.1 billion yen in operating profits in fiscal 2012 from 140.1 billion yen in fiscal 2011. Investment policy capital expenditures totaled 524.5 billion yen, which was 5.4% of net sales. the company used capital expenditures in order to ensure nissan’s future competitiveness. r&D expenditures totaled 469.9 billion yen. these funds were used to develop new technologies and products. one of the company’s strengths is its extensive collaboration and development structure with renault’s r&D team, resulting from the alliance. nissan plans more than 90 new advanced technologies, averaging 15 per year during our mid-term Dividend nissan’s strategic actions reflect not only its long-term vision as a global company to create sustainable value but also the company’s commitment to maximizing total shareholder return. We paid year-end cash dividends of 12.5 yen per share for fiscal year 2012. as a result, total dividend payment for fiscal year 2012, combined with the 12.5 yen dividend for the interim, was 25 yen per share. please note that the year-end dividend payment for fiscal year 2012 is to be resolved at the annual general shareholders meeting. the dividend payment plan for fiscal year 2013 is to be 30 yen per share, considering the business condition, risks and opportunities for the year. Dividend (Dividend per share, in yen) plan by 2016. R&D Expenditures (Billions of yen) 456.0 5.4 386.0 5.1 520.0 469.9 399.3 428.0 4.6 4.5 4.9 4.6 600.0 450.0 300.0 150.0 0 2008 2009 2010 2011 2012 (forecast) 2013 0 (fY) r&D expenditures (left) % of net sales (right) * Based on continuation of proportional consolidation of china JV 40 30 20 10 0 （%） 8 6 4 2 30 25 20 11 10 0 2008 2009 2010 2011 2012 (outlook) 2013 (fY) NISSAN MOTOR COMPANY ANNuAl RePORT 2013performance26 fiSCAl 2013 outlook Operating profit variance analysis l the positive impact from foreign exchange is forecast at 225 billion yen, with the U.s. dollar accounting in our outlook for fiscal year 2013, we expect our global sales to reach 5.3 million units, an increase of 7.8%, which is another record level for nissan. for the majority of this variance. l the result of the purchasing cost reduction (including raw material) efforts is expected to be a positive With a total industry volume assumption of 81.1 million units, a 2.2 % increase year on year, our 160 billion yen. global market share is expected to grow from 6.2% to 6.5%. l Volume and mix are expected to produce a positive impact of 80 billion yen as a result of the growth in in consequence of our plan, financial forecast is as follows. We have used a foreign exchange rate global sales volume. l We anticipate the increase in selling and pricing-related expenses to be a negative 190 billion yen. l sales finance is expected to be a negative 15 billion yen. l costs allocated for future growth and other items are expected to be a negative 83.5 billion yen. Under the forecast of consolidated operating results for fiscal year 2013, the consolidation method of Dongfeng motor co., Ltd. is changed from a proportionate consolidation to equity method in comparison with the results until fiscal year 2012 by the adoption of ifrs 11. this change has no impact on net income though there are effects on net sales, operating income and ordinary income. n net sales 10.37 trillion yen n operating income 610.0 billion yen n net income 420.0 billion yen n capital expenditures 520.0 billion yen n r&D expenses 508.0 billion yen through the adoption of ifrs 11, operating income is expected to be decreased by 90.0 billion yen. (all figures for fiscal 2013 are forecasts, as of may 10, 2013.) assumption of 95 yen to the dollar and 122 yen to the euro: n net sales 11.2 trillion yen n operating income 700.0 billion yen n net income 420.0 billion yen nissan is on track to grow by 386,000 units during fiscal year 2013 – which will move us toward our objective of an 8% global market share by fiscal year 2016 to achieve nissan power 88. in support of this growth plan, necessary investments in r&D and capital expenditures are being made to support the long-term expansion of the company. With these factors included, the expected variance in operating profit between 2012 and 2013 is broken down as follows: Impact on Operating Profits (Fy2013 Pro Forma Outlook) (Billions of yen) +160.0 +80.0 –190.0 +225.0 523.5 –15.0 –83.5 700.0 fY12 o.p. actual foreX purch. cost reduction (including raw material) Volume/mix selling & pricing related expenses sales finance cost for future growth & others fY13 o.p. pro forma outlook * Based on continuation of proportional consolidation of china JV NISSAN MOTOR COMPANY ANNuAl RePORT 2013performancefinAnCiAl St AteMentS Consolidated balance sheets Assets Current assets cash on hand and in banks trade notes and accounts receivable sales finance receivables securities merchandise and finished goods Work in process raw materials and supplies Deferred tax assets other Allowance for doubtful accounts Total current assets fixed assets property, plant and equipment Buildings and structures, net machinery, equipment and vehicles, net Land construction in progress other, net total property, plant and equipment intangible fixed assets investments and other assets investment securities Long-term loans receivable Deferred tax assets other allowance for doubtful accounts total investments and other assets Total fixed assets Total assets 27 fy2011 as of march 31, 2012 fy2012 as of march 31, 2013 (millions of yen) fy2011 as of march 31, 2012 fy2012 as of march 31, 2013 (millions of yen) 765,423 820,008 3,210,342 77,476 665,262 153,228 200,476 266,540 506,947 (55,630) 6,610,072 615,921 1,874,277 649,509 255,333 336,206 3,731,246 120,114 371,259 5,617 92,378 144,605 (3,238) 610,621 4,461,981 11,072,053 690,817 712,165 4,161,925 107,651 711,402 104,259 309,460 244,133 608,588 (53,296) 7,597,104 641,915 2,326,711 644,656 313,243 436,088 4,362,613 121,698 448,862 13,111 103,200 161,296 (2,714) 723,755 5,208,066 12,805,170 liabilities Current liabilities trade notes and accounts payable short-term borrowings current portion of long-term borrowings commercial papers current portion of bonds Lease obligations accrued expenses Deferred tax liabilities accrued warranty costs other Total current liabilities Long-term liabilities Bonds Long-term borrowings Lease obligations Deferred tax liabilities accrued warranty costs accrued retirement benefits accrued directors’ retirement benefits other Total long-term liabilities Total liabilities Net assets shareholders’ equity common stock capital surplus retained earnings treasury stock Total shareholdersʼ equity Accumulated other comprehensive income Unrealized holding gain and loss on securities Unrealized gain and loss from hedging instruments adjustment for revaluation of the accounts of the consolidated subsidiaries based on general price level accounting translation adjustments Total accumulated other comprehensive income share subscription rights minority interests Total net assets Total liabilities and net assets 1,377,254 244,582 822,268 38,437 187,198 38,190 660,369 136 85,535 691,259 4,145,228 584,962 1,877,997 34,584 486,699 100,431 159,369 544 232,242 3,476,828 7,622,056 605,814 804,470 3,009,090 (149,542) 4,269,832 16,979 (5,108) (13,945) (1,121,059) (1,123,133) 2,415 300,883 3,449,997 11,072,053 1,336,234 519,180 779,881 219,453 181,336 32,678 659,970 116 87,424 743,973 4,560,245 678,585 2,352,450 22,795 555,249 93,519 164,503 395 303,436 4,170,932 8,731,177 605,814 804,470 3,254,206 (149,549) 4,514,941 20,897 (8,578) (13,945) (780,013) (781,639) 2,415 338,276 4,073,993 12,805,170 NISSAN MOTOR COMPANY ANNuAl RePORT 2013performanceConsolidated statement of income Net sales Cost of sales Gross profit selling, general and administrative expenses advertising expenses service costs provision for warranty costs other selling expenses salaries and wages retirement benefit expenses supplies Depreciation and amortization provision for doubtful accounts or reversal of provision for doubtful accounts amortization of goodwill other Total selling, general and administrative expenses Operating income Non-operating income interest income Dividends income equity in earnings of affiliates exchange gain miscellaneous income Total non-operating income Non-operating expenses interest expense amortization of net retirement benefit obligation at transition Derivative loss miscellaneous expenses Total non-operating expenses Ordinary income fy2011 (from april 1, 2011 to march 31, 2012) 9,409,026 7,772,832 1,636,194 (millions of yen) fy2012 (from april 1, 2012 to march 31, 2013) 9,629,574 8,022,658 1,606,916 203,650 66,181 77,278 141,508 333,745 24,630 5,445 48,718 (8,127) 5,251 192,076 1,090,355 545,839 17,174 5,776 19,103 14,756 12,343 69,152 32,892 10,146 20,816 16,047 79,901 535,090 229,067 55,099 71,320 131,660 329,771 11,855 4,544 48,361 6,199 4,612 190,884 1,083,372 523,544 14,866 4,846 11,643 19,388 15,279 66,022 27,471 9,947 6,360 16,468 60,246 529,320 special gains gain on sales of fixed assets gain on sales of investment securities gain on negative goodwill gain on contribution of securities to retirement benefit trust insurance income gain on transfer of business other Total special gains special losses Loss on sale of fixed assets Loss on disposal of fixed assets impairment loss Loss on disaster other Total special losses Income before income taxes and minority interests income taxes-current income taxes-deferred Total income taxes Income before minority interests Income attributable to minority interests Net income 28 fy2011 (from april 1, 2011 to march 31, 2012) (millions of yen) fy2012 (from april 1, 2012 to march 31, 2013) 8,716 10,643 24,086 7,048 - - 5,498 55,991 1,924 7,106 12,117 29,867 10,738 61,752 529,329 115,185 36,321 151,506 377,823 36,390 341,433 10,998 1,597 110 - 1,082 8,070 1,753 23,610 1,597 8,247 12,352 - 14,020 36,216 516,714 105,659 40,692 146,351 370,363 27,917 342,446 NISSAN MOTOR COMPANY ANNuAl RePORT 2013performance29 Consolidated statement of cash flows Cash flows from operating activities income before income taxes and minority interests Depreciation and amortization (for fixed assets excluding leased vehicles) Depreciation and amortization (for other assets) Depreciation and amortization (for leased vehicles) impairment loss Loss on disaster gain on contribution of securities to retirement benefit trust gain on negative goodwill increase (decrease) in allowance for doubtful receivables provision for residual value risk of leased vehicles(net changes) interest and dividend income interest expense Loss (gain) on sales of fixed assets Loss on disposal of fixed assets Loss (gain) on sales of investment securities Loss (gain) on transfer of business Decrease (increase) in trade notes and accounts receivable Decrease (increase) in sales finance receivables Decrease (increase) in inventories increase (decrease) in trade notes and accounts payable amortization of net retirement benefit obligation at transition retirement benefit expenses retirement benefit payments made against related accrual other subtotal interest and dividends received interest paid income taxes paid Net cash provided by operating activities fy2011 (from april 1, 2011 to march 31, 2012) (millions of yen) fy2012 (from april 1, 2012 to march 31, 2013) fy2011 (from april 1, 2011 to march 31, 2012) (millions of yen) fy2012 (from april 1, 2012 to march 31, 2013) 529,329 364,122 20,852 195,370 12,117 8,245 (7,048) (24,086) (23,968) 10,095 (22,950) 87,890 (6,792) 7,106 (10,624) - (89,495) (432,957) (70,615) 317,945 10,146 55,141 (62,695) (2,051) 865,077 23,070 (85,398) (106,452) 696,297 516,714 352,376 18,836 219,155 12,352 - - (110) (6,112) 12,378 (19,712) 85,183 (9,401) 8,247 (1,564) (8,070) 123,816 (561,046) 10,408 (147,345) 9,947 30,324 (46,178) (33,152) 567,046 20,143 (87,798) (108,494) 390,897 Cash flows from investing activities net decrease (increase) in short-term investments purchase of fixed assets proceeds from sales of fixed assets purchase of leased vehicles proceeds from sales of leased vehicles payments of long-term loans receivable collection of long-term loans receivable purchase of investment securities proceeds from sales of investment securities proceeds from sales of subsidiaries' shares resulting in changes in the scope of consolidation net decrease (increase) in restricted cash payment for transfer of business other Net cash used in investing activities Cash flows from financing activities net increase (decrease) in short-term borrowings proceeds from long-term borrowings proceeds from issuance of bonds repayment of long-term borrowings redemption of bonds proceeds from minority shareholders purchase of treasury stock repayment of lease obligations cash dividends paid cash dividends paid to minority shareholders Net cash provided by (used in) financing activities Effects of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents cash and cash equivalents at beginning of the period increase due to inclusion in consolidation Decrease due to exclusion in consolidation Cash and cash equivalents at end of the period 1,597 (400,623) 27,458 (625,646) 317,211 (4,222) 22,816 (17,340) 6,124 537 17,336 - (30,301) (685,053) (536,782) 1,379,490 135,329 (1,034,056) (88,459) 2,606 (9,015) (81,118) (62,748) (13,704) (308,457) (15,630) (312,843) 1,153,453 261 - 840,871 24 (526,818) 60,255 (709,995) 323,615 (8,439) 239 (34,155) 2,332 15,106 (14,722) (56,644) (7,935) (957,137) 377,439 1,122,914 242,754 (952,145) (182,877) 9,942 (7) (52,944) (94,306) (15,143) 455,627 67,723 (42,890) 840,871 548 (168) 798,361 NISSAN MOTOR COMPANY ANNuAl RePORT 2013performanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013exeCutiVeS DiReCtoRS of tHe BoARD AnD AuDitoRS CoRpoRAte offiCeRS Representative Directors carlos ghosn president and chairman toshiyuki shiga Hiroto saikawa greg Kelly Directors colin Dodge mitsuhiko Yamashita Hidetoshi imazu Jean-Baptiste Duzan Katsumi nakamura exeCutiVe CoMMittee MeMBeRS Auditors masahiko aoki toshiyuki nakamura mikio nakura shigetoshi ando (as of June 25, 2013) carlos ghosn toshiyuki shiga Hiroto saikawa colin Dodge mitsuhiko Yamashita Hidetoshi imazu andy palmer Joseph g. p eter takao Katagiri trevor mann Chief Executive Officer Chairman of Board President Representative Director carlos ghosn* Chief Operating Officer Representative Director toshiyuki shiga* external and government affairs intellectual asset management Design corporate governance Zero emission Vehicle planning strategy global Battery Business Unit Executive Vice President Chief Competitive Officer Representative Director Hiroto saikawa* region: asia (Japan, china, asean, oceania and other asian regions) purchasing global corporate planning (incl. oem Business) Vehicle information technology performance program Director Chief Financial Officer Joseph g. peter* finance tcsX (total customer satisfaction) sourcing steering committee tdc competitiveness promotion control ir m&a support Executive Vice President Chief Performance Officer Director colin Dodge* region: americas (north america and Latin america) Executive Vice President Director mitsuhiko Yamashita* research and Development * executive committee members global sales finance Business Unit administration for affiliated companies, marine administration office Executive Vice President takao Katagiri* global sales global aftersales global LcV Business Unit global Datsun Business Unit Japan marketing & sales Executive Vice President trevor mann* region: amie (africa, middle east, india and e urope) 30 Executive Vice President Director Hidetoshi imazu* manufacturing scm (supply chain management) Executive Vice President andy palmer* global product planning global program management global market intelligence global is global infiniti Business Unit Senior Vice Presidents Corporate Vice Presidents shiro nakamura asako Hoshino Hitoshi Kawaguchi celso guiotoko atsushi shizuta Joji tagawa Yasuhiro Yamauchi toshifumi Hirai shigeaki Kato atsushi Hirose greg Kelly shunichi toyomasu akira sakurai tsuyoshi Yamaguchi Hideyuki sakamoto makoto Yoshimoto toshiaki otani Vincent cobee Johan de nysschen shohei Kimura global marketing communications takao asami Hideto murakami shuichi nishimura Yusuke takahashi Hiroshi Karube simon sproule motohiro matsumura norio ota rakesh Kochhar toru Hasegawa Keno Kato noboru tateishi roel De Vries tony Laydon Kunio nakaguro Fellows Kimio tomita Haruyoshi Kumura (as of June 25, 2013) corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013CoRpoRAte goVeRnAnCe 31 niSSAn’S AppRoACH to CoRpoRA te goVeRnAnCe & inteRnAl ContRol nissan’s approach to corporate governance is founded on three cornerstones: compliance built on the high ethical standards of all employees, efforts to bolster information security and an effective and appropriate risk management system. our offices and factories around the world work together to support educational activities, ensuring that all employees are properly trained and understand the issues involved. fiSCAl 2012 peRfoRMAnCe n global implementation of information security training, including a self- evaluation program at the global Headquarters n Update of the statement on security-related export controls n establishment of global anti-bribery policy and implementation of employee training futuRe MeASuReS n strengthening of corporate governance & internal control on a global basis inteRnAl ContRol Sy SteMS AnD CoMpliAnCe Compliance built on the high ethical standards of all employees is integral to promoting CSR. To foster compliance awareness throughout the company, Nissan has established specialized departments and placed officers in charge of promoting compliance policy in each region where it operates. Internal Control Systems nissan places high value on transparency, both internally and externally, in its corporate management. We focus consistently on the implementation of efficient management for the purpose of achieving clear and quantifiable commitments. in line with this principle, and in accordance with Japan’s companies act and its related regulations, the Board of Directors has decided on the internal control systems to pursue these goals and on its own basic policy. the board continually monitors the implementation status of these systems and the policy, making adjustments and improvements as necessary. one board member has also been assigned to oversee the internal control systems as a whole. nissan has adopted a system under which the Board of statutory auditors oversees the Board of Directors. the statutory auditors attend board and other key meetings, and also carry out interviews with board members to audit their activities. the statutory auditors regularly receive reports on the results of inspections and plans for future audits from independent accounting auditors, as well as exchange information to confirm these reports. the statutory auditors also receive regular reports from the global internal audit office, making use of this information for their own audits. Nissan’s Internal Governance system appointment/dismissal appointment/dismissal appointment/dismissal Shareholders Board of Statutory Auditors (incl. outside statutory auditors) cooperation Global Internal Audit office audit audit report Independent Auditors report Board of Directors (incl. outside directors) Executive Committee Operations Committee direction/ supervision/ approval report/proposal Management Committees Each Function Group Companies Internal Control Committee Compliance Committee Information Security Committee Risk Management Function Crisis Management Committee training/education/implementation corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201332 Legal Compliance Framework nissan’s csr approach is founded on compliance with a strong sense of ethics held by each and every employee. We produced the nissan global code of conduct in 2001 outlining a set of guidelines for employees to put into practice, and it is being applied at all nissan group companies worldwide. We also produced guidance for directors and corporate officers regarding compliance, and we hold regular seminars and educational activities to ensure strict adherence to the rules. Under the oversight of our global compliance committee, we have established three regional compliance committees to form a system for preventing illegal and unethical behavior worldwide. to enhance legal and ethical compliance, we are working with all regions and bases of operation to ensure full awareness of compliance issues and engage in prevention of illegal activities. nissan deals severely with any employee who violates or infringes upon the global code of conduct or the laws. Fy2013 Global Compliance Committee Organization NML Board of directors operations Committee Global Compliance Committee Japan, Asia Pacific Management Committee Japan, Asia Pacific Compliance Committee Global Compliance Officer Americas Management Committee Americas Compliance Committee Africa, Middle East, India, Europe Management Committee Africa, Middle East, India, Europe Compliance Committee Nissan Motor Co., Ltd. Compliance Committee Affiliated Companies Compliance Committee dealers Compliance Committee Nissan Motor Co., Ltd. divisional Compliance Committee A compliance committee has been established in each region under the governance of the global compliance officer. The committees are responsible for discovering compliance violations at an early stage through internal auditing or reports, for solving problems, and for maintaining and improving internal awareness of the Code of Conduct. Security-Related Export Controls nissan thoroughly complies with the laws and regulations of Japan and the other countries where it does business, giving full consideration to the requirements of the international community. part of this effort includes the company’s initiatives aimed at contributing to global peace and security. nissan has established export control rules in line with Japanese and other countries’ laws and regulations to prevent the proliferation of weapons of mass destruction, conventional weapons and any goods or technologies used for their development. in line with these rules, nissan implements export controls under an independent system headed by the company’s chief operating officer. specifically, the export control function sets the process of monitoring and validating the exports which is strictly applied in operations. in order to fully implement and improve the level of internal management, the export control function and related business functions at nissan conduct employee training on export control. affiliated companies also strictly adhere to the same export control rules, thereby enhancing the entire nissan group’s level of compliance. Global Export Control Policy Framework Chief Operating Officer Export Control Global Secretariat Americas, AMIE, Asia Pacific Functions Regions Marketing and sales, R&D, supply chain management, IT, production, etc. Japan/Asia Pacific, Americas, Africa/Middle East/India/Europe corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201333 Promoting Thoroughgoing Compliance We have established a global code of conduct and have identified sections and officers at each of our operations responsible for promoting compliance measures. to ensure full understanding of the code, employees in Japan take an e-learning or video training course based on the Japanese version of the nissan code of conduct—“our promises,” revised most recently in october 2010—after which they sign an agreement to abide by it. in this way we seek to ensure across-the-board understanding, making all our people more deeply aware of compliance issues. a number of education programs to promote compliance are held regularly for employees in north america, and a set of universal guidelines has been drawn up for each country in europe. We are also carrying out compliance-related training in other regions based on guidelines that take into account conditions in each country. moreover, all group-affiliated companies have introduced their own codes based on the nissan code of conduct. additionally, we have created sets of internal regulations globally covering the prevention of insider trading, personal information management, information security, prevention of bribery and corruption and use of social media. With these regulations in place, nissan is working to prevent compliance infractions. global Code of Conduct for nissan group Principle the following standards apply to all employees in nissan group companies (collectively herein referred to as “nissan” or “company”). each member of the company is charged with responsibility to uphold and extend this code of conduct. Global Code of Conduct 1 comply with all Laws and rules 6 Value Diversity and provide equal opportunity We value and respect the diversity of our employees, suppliers, customers and communities. Discrimination or harassment, in any form or degree, will not be tolerated. 7 Be environmentally responsible nissan employees shall strive, within the business objectives of nissan, to consider environmental protection when developing products and services, to promote recycling and to conserve materials and energy. 8 Be active; report Violations nissan employees are expected to carry out their work in accordance with the code of conduct. employees who suspect that a violation of the code of conduct has occurred are obligated to report it as soon as possible, and such employees shall be protected from retaliation. nissan employees will abide by all laws of the country, and all regulations of the company, in which they work. 2 avoid conflict of interest the best interests of nissan are expected to be foremost in the minds of employees. it is prohibited to behave, act or use information in a way conflicting with company interests. 3 preserve company assets nissan employees are personally accountable for preserving and safeguarding company assets. Unauthorized use or diversion of company assets, including funds, information and intellectual property, is prohibited. 4 Be impartial and fair nissan employees must maintain impartial and fair relationships with business partners, including dealers, parts suppliers and other third parties. 5 Be transparent and accountable nissan employees shall make fair, transparent, timely and appropriate disclosure of the company’s business activities to our stakeholders, including stockholders, customers, other employees and local communities. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201334 Our Stance Against Discrimination and Harassment item 6 of nissan’s global code of conduct, “Value Diversity and provide equal opportunity,” is our requirement to accept, value and respect the diversity to be found among our employees, business partners, customers and communities where we do business, and to reject discrimination and harassment in all their forms, no matter how minor they may be. nissan executives and employees must respect the human rights of others, and may not discriminate against or harass others based on race, nationality, gender, religion, physical capability, age, place of origin or other reason; nor may they allow such a situation to go unchecked if discovered. We also work to ensure that all employees, both male and female, can work in an environment free from sexual and other forms of harassment. Internal Reporting System for Corporate Soundness to promote thorough understanding of compliance among all employees worldwide and to facilitate sound business practices, nissan employs a variety of internal reporting mechanisms. these allow employees to submit opinions, questions or requests to the company, thereby improving workplaces and operations as well as fostering a compliance-oriented corporate culture. in Japan our easy Voice system, which offers full protection to any persons offering information in accordance with Japan’s Whistleblower protection act of april 2006, has become an integral part of operations in all nissan group companies in the country. Independent Internal Audits nissan has established a global internal audit unit, an independent department to handle internal auditing tasks. Under the control of the chief internal audit officer, audit teams set up in each region carry out efficient, effective auditing of nissan’s activities on a groupwide and global basis. RiSk MAnAgeMent At Nissan, we define risk as anything that might prevent us from achieving our business goals. By detecting risk as early as possible, examining it, planning the necessary measures to address it and implementing those measures, we work to minimize the materialization of risk and the impact of damage caused should it arise. Principles for and Approach to Corporate Risk Management risk management must be a real-world activity closely linked at all times with concrete measures. Based on its global risk management policy, nissan carries out activities on a comprehensive, groupwide basis. in order to respond swiftly to changes in its business environment, nissan has set up a department in charge of risk management that carries out annual interviews of corporate officers, carefully investigating various potential risks and revising the company’s “risk map” in line with impact, frequency and control level. the executive committee makes decisions on risk issues that must be handled at the corporate level and designates “risk owners” to manage the risks. Under the leadership of these owners, the company designs appropriate countermeasures. finally, the board member in charge of internal controls (currently the chief operating officer) regularly reports to the Board of Directors on progress being made. With respect to individual business risks, each division is responsible for taking the preventive measures necessary to minimize the frequency of risk issues and their impact when they do arise as part of its ordinary business activities. the divisions also prepare emergency measures to put in place when risk factors do materialize. nissan group companies in Japan and overseas are strengthening communication in order to share basic processes and tools for risk management, as well as related information, throughout the group. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201335 in addition, we have created an area on our intranet called “companywide risk management.” information relating to risk management is also distributed to subsidiaries in Japan, north america, europe and other overseas regions, and to important affiliated companies. nissan is currently engaged in meeting the goals of the nissan power 88 mid-term business plan. to achieve the ambitious goals of raising both global market share and operating profit margins, we need to fully utilize our existing production capacity in countries around the world so that new spending can be curtailed, and we also need a highly efficient production setup so production can be restored quickly in case a plant is forced to shut down due to unforeseen circumstances. to support the mid-term business plan from a risk-management perspective, our efforts will also be expanded worldwide and throughout the supply chain by incorporating the important lessons learned from the march 2011 earthquake and tsunami in east Japan and the 2011 flooding in thailand. The Current State of Nissan’s Risk Management Below we present some of our efforts to address nissan’s corporate risks. 1 Risks Related to Financial Market 1) Automotive 1. Liquidity an automotive business must have adequate liquidity to provide for the working capital needs of day-to-day normal operations, capital investment needs for future expansion and repayment of maturing debt. Liquidity can be secured through internal cash and cash equivalents, internal cash flow generation and external borrowings. as of the end of fiscal year 2012 (march 31, 2013), nissan’s automotive business had ¥771 billion of cash and cash equivalents (compared with ¥781 billion as of march 31, 2012). in addition to cash, nissan had approximately ¥480 billion of committed lines available for drawing as of march 31, 2013. as for external borrowings, nissan raises financing through several sources including bond issuance in capital markets, long- and short-term loans from banks, commercial paper issuance and committed credit lines from banks. nissan has a liquidity risk management policy that is intended to ensure adequate liquidity for the business while at the same time ensuring mitigation of liquidity risks such as unmanageable bunched maturities of debt. in the policy, minimum required Liquidity is defined, objectively considering several factors including debt maturity, upcoming mandatory payments (such as dividends, investments and taxes) and peak operating cash needs. We also benchmark our liquidity targets with other major Japanese corporations and global auto companies to ensure we are reasonable in our assumptions. 2. Financial Market nissan is exposed to various financial-market-related risks, such as foreign exchange, interest rates and commodity prices. it is the general policy of nissan not to use derivative products as a primary tool to manage foreign exchange and commodity price risks as it does not provide a permanent solution to mitigate these risks. in some cases, nissan does hedge select currencies and commodity price risks. nissan is taking the following measures to minimize financial market risks. l foreign exchange as a company engaged in export activities, nissan is faced with various foreign currency exposures that result from the currency of input cost being different from the currency of sale to customers. in order to minimize foreign exchange risk on a more permanent basis, nissan is working to reduce foreign currency exposure by such measures as shifting production to the countries where vehicles are sold and procurement of raw materials and parts in foreign currencies. in the short term, nissan may hedge risks in foreign exchange volatility within a certain range by using derivative products in accordance with the internal policies and procedures for risk management and operational rules regarding derivative transactions. l interest rates the interest rate risk management policy is based on two principles: long- term investments and the permanent portion of working capital are financed at fixed interest rates while the non-permanent portion of working capital and liquidity reserves are built at floating rates. l commodity prices nissan purchases raw materials in the form of parts provided by the suppliers, as well as direct purchase. nissan is exposed to the price fluctuation risks of corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201336 raw materials, no matter whether purchased directly or indirectly. for precious metals, which are used in catalysts, nissan is making continuous efforts to reduce its usage by technological innovation in order to minimize commodity price risk. in the short term, nissan manages commodity price volatility exposure through the use of fixed-rate purchase contracts in which commodity prices are fixed for a period of time; nissan may also hedge risks in commodity price volatility within a certain range by the use of derivative products in accordance with the internal policies and procedures for risk management and operational rules regarding derivative transactions. l marketable securities the company may hold marketable securities for certain reasons including strategic holding, relationship management and cash management. there are risks of price fluctuation for these securities. therefore, price fluctuations in the stock and bond markets could adversely affect the company’s business performance and financial position. the company defines the authority for decision concerning such transactions within the internal policies and procedures for risk management. the company also takes measures for these risks including mandatory periodical reporting with fair value of such financial transactions. 4. Pensions nissan has defined benefit pension plans mainly in Japan, the United states and the United Kingdom. the funding policy for pension plans is to make periodic contributions as required by applicable regulations. Benefit obligations and pension costs are calculated using many different drivers, such as the discount rate and rate of salary/wage increase. plan assets are exposed to financial market risks as they are invested in various types of financial assets including bonds and stocks. When the fair value of these assets declines, the amount of the unfunded portion of pension plans increases, which could materially increase required cash pension contributions and pension expenses. as countermeasures to manage such risks, the investment policy of these pension plans is based upon the liability profile of the plans, long-term investment views and benchmark information regarding asset allocation of other global corporations’ pension plans. in addition, nissan holds global pension committee meetings on a periodic basis to review investment performance, manager performance and asset allocations and to discuss other issues related to pension assets and liabilities. 3. Counterparties the group does business with a variety of local counterparties including suppliers, sales companies and financial institutions in different regions around the world. should unprecedented conditions such as bankruptcies be triggered by a global economic crisis, the resulting interruption to business operations from production interruption and/or troubles on any other production activity at the procurement side, and any significant default by a counterparty at the sales side or financial institutions, would adversely affect the group’s financial position and business performance. the group assesses its own counterparty credit risks by conducting comprehensive ongoing reviews of suppliers’, sales companies’ and financial institutions’ financial condition based on their latest available financial information. Based on such assessment, the group is prepared to take necessary actions for risk avoidance or mitigation in a prompt manner. 2) Sales Finance 1. Liquidity nissan operates captive sales finance companies in Japan, the United states, canada, mexico, china, australia and thailand. in these countries, banks and other financial institutions also provide financing solutions to nissan’s customers and dealers. additionally, in europe and other regions, rci Banque and several other banks/financial institutions are providing financing to nissan’s customers and dealers. We monitor the liquidity of sales finance companies on an ongoing basis to ensure we have adequate liquidity to meet maturing debt and continue operations. as a policy, we target to match maturity of liabilities with maturity of assets wherever possible. in some of the countries where we operate, long-term capital markets are not developed and thus it is not always possible to be perfectly match-funded. match-funding policy allows us to meet maturing debt obligations even in an environment in which we cannot raise additional debt due to the state of capital markets. in addition to match-funding, we manage liquidity risk in sales financing corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201337 through several measures including keeping adequate liquidity in the form of cash and unutilized committed lines, unencumbered assets (mainly vehicle loans and leases), liquidity support from auto operations to the extent we have excess cash in auto operations, diversified funding sources and geographical diversification of capital market access. as of march 31, 2013, sales finance companies’ liquidity (cash and unutilized committed lines) was approximately ¥538 billion. additionally, we have a healthy mix of secured (30.8%) and unsecured and other (69.2%) funding sources, which ensure a stronger balance sheet and incremental liquidity through utilization of unencumbered assets. the pie chart below describes our diversified funding sources in sales finance business. During fiscal year 2012, we were able to raise new funding through bank loans, asset-backed securities, asset-backed commercial paper, commercial paper and bonds reflecting our diversified access to financing instruments. sales Finance Business Funding sources (As of March 2013) equity 9.0% aBs off B/s 3.3% aBs on B/s 27.5% Bonds 9.1% group finance (inter-company) 23.1% commercial paper 2.3% s/t Loan 3.0% L/t Loan 22.7% 2. Interest Rate Risk Management the sales financing business is exposed to interest rate risks. interest rate risk is defined as the potential variance in the earnings of an entity or the fair value of the portfolio that would result from a fluctuation in the general level of market interest rates where funds with differing fixed-rate periods or differing terms are financed and invested. nissan measures the risks by using the sensitivity analysis with various interest rate scenarios and determines the risk tolerance level. nissan controls the interest rate maturities of both assets and liabilities to maintain the risks within an acceptable tolerance level. the sensitivity analysis mentioned above uses statistical models, such as the monte carlo simulation method. However, the actual fluctuation of market interest rates and its impact may deviate significantly from the assumptions used in the models. nissan enters into interest rate derivative financial instruments to maintain the potential variability of interest rates at the desired level of risk exposure. the main objective of these transactions is to mitigate the risks and not to pursue speculative profit maximization. 3. Credit Risks nissan is exposed to the risks of failure to recover the full value of financial receivables for its auto credit and Lease business with retail customers and for its Dealer finance business, due to changes in the economic situation and credit quality of customers. nissan manages the credit risks closely by establishing an effective screening and collection system and structure. credit applicants are all subject to credit assessments of their creditworthiness under a detailed scoring system. Based on the information directly obtained from applicants and from credit bureaus, loan authorization is made in a comprehensive manner by considering the following points: applicant’s credit history; applicant’s capacity to pay, which is estimated by debt ratio, payment to income ratio and disposable income; applicant’s stability; and loan conditions including the loan collateral, loan advance and payment terms. in addition to carrying out this screening process, whenever required, nissan takes into account qualitative information by conducting field visits to customers or referring to past business records with nissan in accordance with characteristics of regional business practices and risks. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201338 Dealer finance for inventory vehicles is authorized on the basis of an 2 Risks Related to Business strategies and Maintenance internal rating system that takes into account the financial position of dealers, and if necessary, personal guarantees and/or mortgage collateral are taken in pledge in addition to pledges of inventory vehicle collateral. these scoring models are regularly reviewed and revised to keep them adequate in actual practice. in some regions and products, nissan also offers different pricing depending on the applicant’s credit score to compensate for the risks. as a matter of accounting policy, nissan maintains an allowance for doubtful accounts and credit losses adequately to cover probable losses. nissan makes best efforts to recover the actual losses from bad debt accounts as quickly as possible by taking necessary actions, including flexible and effective organization change for collection and utilization of third-party collection services. 4. Residual value Risks Vehicles on operating leases and some balloon-type credits, where nissan is the lessor, are guaranteed end-of-term residual value by nissan. nissan is therefore exposed to the risk that the sale value of the vehicle could fall below its contractual residual value when the financed vehicle is returned and sold in the used car market at the end of the contract term. to mitigate the risks mentioned above, nissan objectively sets contractual residual value by using the future end-of-term market value estimation by third parties such as the automotive Lease guide in north america, and the estimation from statistical analysis of historical data on the used car market in Japan. to support used car market value nissan takes several strategic initiatives, including control of sales incentives for new car sales promotion, fleet sales volume control and introduction of a certified pre-owned program. as a matter of accounting policy, nissan evaluates the recoverability of carrying values of its vehicles for impairment on an ongoing basis. if impaired, nissan recognizes allowance for potential residual value losses in a timely and adequate manner. of Competitiveness 1) Product strategy to secure our profitability and sustainable growth based on our future product lineup plan, in our product strategy developing process, we monitor the impact of various risk scenarios, such as global market changes and demand deteriorations, on our future profitability based on our plan. risk scenario examples: 1. Drastic decline of total global demand, using past examples as reference 2. a demand shift between vehicle segments drastically faster than our mid-term planning assumptions 3. a demand shift from mature markets to emerging markets drastically faster than our mid-term planning assumptions We periodically monitor the impact of these scenarios to secure our future profitability and sustainable growth, and also update our future lineup plan periodically based on the results. to improve the robustness of our product lineup against these risks, our main approach is to take the following countermeasures when planning our product strategy. n expand availability of individual products across markets to mitigate the risk n of single market demand fluctuations increase volume and efficiency per product through a consolidation and rationalization of the portfolio to lower the breakeven point and thereby reduce the profit risk of global total industry volume (tiV) declines n prepare a more balanced product portfolio meeting needs in a broader range of markets and segments reducing reliance on specific large markets 2) Quality of Products and services nissan is making a companywide effort toward “enhancing Quality,” one of the six areas of focus defined by nissan power 88, our mid-term business plan through fiscal 2016. Under this plan, actions are being carried out with numerical targets for the following areas. n product quality: Quality of our products based on the customer’s actual experiences as an owner of the vehicle n perceived quality and attractiveness: customers’ impressions of a vehicle’s quality when they look at and touch it in a dealer’s showroom corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013 39 for example, the target for “product quality” is to attain the top level in the most influential indicators (miis) in each region. in order to achieve the target, internal indicators for each model correlating with the miis have been established. progress of all quality improvement activities is monitored on an ongoing basis with those internal indicators. With respect to new model projects, in order to achieve quality targets, milestone meetings are held for processes from design, production preparation and production, at which key check points are confirmed, such as achievement of quality targets, prevention of recurring problems, and adoption of measures for potential risks related to new technology and mechanisms and design changes. commercial production can be started after confirmation at the start of production (sop) Judgment meeting, which confirms all issues are solved and quality targets can be achieved. the final decision that the model can be sold is made at the Delivery Judgment meeting after confirmation of the quality of commercial production and preparedness for service/maintenance. 3) Environment, Climate Change the automotive industry is affected globally by various regulations related to the environment and safety, such as exhaust emissions, co2/fuel efficiency, noise, chemical substances and recycling, and these regulations are getting more stringent year by year. to comply with these regulations and to meet society’s expectations, nissan formulates an environmental strategy based on materiality assessments of management risk factors, analyzing the company’s potential issues and opportunities and identifying issues that are crucial for both nissan and its stakeholders. in this context, we believe that one effective solution from a long-term perspective will be the widespread use of zero-emission vehicles. nissan started sales of nissan Leaf, the world’s first affordable, mass-produced eV, in 2010. the renault-nissan alliance, moreover, has a goal of becoming a leader in zero-emission vehicles and is considering partnering with national and local governments to promote zero-emission mobility and to help build a supporting infrastructure. as described above, nissan is implementing thorough quality checks additionally, nissan will help to reduce co2 emissions by continuously before new model launches. nissan is advancing quality improvement activities after launch as well by constantly gathering quality information from markets and promptly deploying countermeasures if problems arise. in case safety or compliance issues do occur, necessary actions such as recalls are implemented with close cooperation with the marketing side based on a management decision reached by an independent process. incidents are thoroughly investigated and analyzed, and the lessons are applied to existing or upcoming models to prevent a recurrence. in addition to the above described activities, such as quality assurance for new model projects and quality improvement activities on a daily basis, the “Quality risk management” framework has been newly developed from fiscal 2009. While quality-related risks have hitherto been assessed and dealt with for new models, the new framework represents a higher-level system to ensure successful quality management for both on-going and future projects. it involves an objective evaluation of whether risk exists and the level of such risk for the company and the assignment of responsible persons based on the level for follow-up activities. these processes are implemented by the Quality risk management committee, chaired by an executive tasked with heading this activity, twice a year. developing technologies to improve fuel efficiency in internal combustion engines and bringing them widely into the market. in particular, we will promote highly fuel-efficient, low co2 emitting vehicles named pUre DriVe, equipped with such technologies as our hybrid system, fuel efficient direct injection engine and continuously variable transmission (cVt). stricter controls on the environmental impact of substances are being implemented in countries around the world. in accordance with a globally uniform policy on reducing the use of environment-impacting substances, nissan is strengthening the management of such substances, adhering to a well-planned schedule for their reduction and advancing the use of alternative substances. We voluntarily enforce stricter standards than those required by the domestic laws of the countries where we operate in restricting the use of substances scientifically recognized as being hazardous or carrying high hazard risks, as well as those that advisory ngos have pointed out as being dangerous. Based on this policy, we have developed internal engineering standards restricting the use of designated substances. the standards identify the chemicals whose use is either prohibited or controlled, and they are applied in selecting the materials, parts and articles for nissan vehicles from the stage of initial development. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013Demand for mineral resources and fossil fuels has steadily increased in response to the economic growth of emerging countries. in addition to promoting reduced use of virgin natural resources through resource-saving and resource-recycling measures, it is becoming important to procure natural resources that have a lower impact on the earth’s ecosystems, not only from the standpoint that these resources are limited but also considering the wide-ranging effects that resource extraction has on ecosystems. nissan has raised to 25% the target for the use of recycled material in new vehicles by 2016. to achieve this, we will promote design centered on the vehicle lifecycle, reduce the use of scarce resources, reduce waste and promote expanded use of recycled materials. 40 basis, the global environment management committee (g-emc) chaired by the coo makes decisions on general direction and proposals to the executive committee. the environmental planning Department within the corporate planning and Business Development Division makes decisions on activity targets for each department and region and conducts effective follow up of the progress based on “plan, do, check, act” (pDca) management. Our Framework for Global Environment Management stakeholders Communication the issue of water resources is ever more serious with the retreat of Major Issues glaciers and rainfall fluctuation due to climate change, in addition to increasing water use due to the growing world population and economic development. nissan, which uses water resources in its production process, deeply recognizes the importance of this issue and continuously works to preserve water resources at plants around the world, such as by reducing consumption and recycling water discharged in the production process. the purchasing divisions of nissan and renault carry out supply-chain management in a manner consistent with the renault-nissan purchasing Way, a booklet outlining policies for dealing with suppliers, and the renault- nissan csr guidelines for suppliers. With respect to environmental issues, we have set standards for the efforts of our automobile parts and material suppliers in the form of the nissan green purchasing guidelines. in fiscal 2012 we added a number of environment-related criteria in selecting our suppliers to coordinate our efforts to reduce environmental impact; we now ask suppliers to furnish data regarding their co2 emission levels and energy use and also consider their management of environment-impacting substances, recycling of resources and water-conservation efforts. thus, nissan is working to achieve autonomous guidelines and targets as part of its corporate social responsibility as well as to comply with laws and regulations. in order to promote this environmental management on a global Reducing CO2 Emissions/ shifting to Renewable Energies Air, Water, soil, Biodiversity Resource Recycling Products & Technology Manufacturing & Logistics Marketing & sales Business Partners Nissan Global Environment Management sincere Eco-Innovator Nissan’s Global Environment Management Organization CEO Executive Committee COO Global Environment Management Committee Global, corporate focuses Functional, regional focuses Customers Plan PDCA Act Global Environmental Planning Department Do PDCA Check PDCA Employees Business partners Advisory Meetings, etc. Shareholders and investors Communities and future generations corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201341 4) Compliance and Reputation nissan produced the nissan global code of conduct for all employees of the nissan group worldwide. to ensure thorough understanding of the code, training and education programs such as e-learning are improved and our compliance with laws and ethical standards is monitored by the global compliance committee. nissan has also adopted an internal whistle-blowing system (easy Voice system). this allows any employees to submit opinions, questions, requests or suspected compliance issues directly to nissan’s management. additionally, we have created sets of internal regulations globally covering the prevention of insider trading, personal information management, information security and prevention of bribery and corruption. nissan makes efforts to prevent compliance infractions and reputation risk to the company by continuous implementation of various education and training programs. 3 Business Continuity 1) Natural Disaster Measures in case of an earthquake measuring 5-upper or higher on the Japanese seismic intensity scale or other natural disasters causing heavy damage affecting nissan’s business activities, a first response team (organized by the main units of the global Disaster Headquarters) will gather information and decide actions to be taken based on the information. if necessary, the global Disaster Headquarters and regional Disaster Headquarters will be set up to gather information about employees’ safety and the damage situation of facilities and to work for business continuity. at the same time, we are working with our suppliers to develop a Business continuity plan (Bcp). this includes assessment of the priority of work by each and every function and development of countermeasures to continue priority work. the Bcp will be reviewed annually in the process of the pDca cycle. Organization for Disaster Recovery (Earthquake) < first Response team > • eXaf (control center) • Hr • com & csr • mfg • pUrcH • scm • security • HQ facility management • m&s < global Disaster Headquarters > Information flow Chief Decision maker for important issues Decision/Instruction Secretariat Report Deputy Chief Responsible for supportive action Deputy Chief Responsible for recovery action Decision/Instruction Decision/Instruction Report Report communications & csr external & government affairs Human resources asset management finance supply chain management market & sales parts Logistics affiliated companies administration production control production engineering manufacturing Hr purchasing information system r&D administration Report damage situation Report damage situation Decision/Instruction Decision/Instruction < Regional Disaster Headquarters > Chief Deputy Chief Secretariat EXAF HR MFG corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201342 policy and principles in case of earthquake: 1. the first priority is human life (utilization of employee safety confirmation system) 2. prevention of secondary disaster (in-house firefighting organization, stockpiling, provision of disaster information) 3. speedy disaster recovery and business continuity (measures for hardware, improvement of contingency plan and development of Bcp) 4. contribution to local society (cooperation/mutual aid with neighboring communities, companies, local and central governments) the global Disaster Headquarters and regional Disaster Headquarters conduct simulation training assuming a large earthquake to prepare for a catastrophe. the drills test the effectiveness of this organization and contingency plan and clarify the issues to be improved. the contingency plan is reviewed based on the feedback. in the aftermath of the march 11, 2011, disaster, our periodic simulation training helped to ensure the smooth launch of our global Disaster Headquarters and regional Disaster Headquarters on the initiative of the first response team. this also helped to complete confirmation of employees’ safety and checks on the extent of the damage. additionally, based on the policy of contribution to local society, we reacted rapidly to provide rest space to people who could not return home on march 11 and to support damaged areas. at the stage of business recovery, the Disaster Headquarters and the project teams of each function continuously shared up-to-date information and were addressing the issues for production and business recovery with companywide cooperation. it was effective for the quick recovery of our total supply chain, including parts supply, production, logistics, sales and services. the response to the march 2011 disaster was reviewed during fiscal 2011 to identify issues that came to light on a function-by-function basis and to consider countermeasures. in march 2012, simulation training was conducted based on a new scenario incorporating the review findings, and the new measures were verified. simulation training continued in fiscal 2012 in an effort to enhance our response to earthquake damage. Based on a scenario of a consolidated tokai, tonankai and nankai earthquake, we confirmed our preparedness for issues that came to light during drills held the preceding fiscal year, such as responses to wide-area disruptions to our logistics network and fuel shortages. During the fiscal year, we also worked to enhance responsiveness to earthquake disasters through advance risk estimates carried out by each of the company's divisions. in the face of our expanding global operations and the need to enhance the natural disaster response of our overseas facilities, we are undertaking horizontal development of best practices at each facility and inviting overseas personnel to observe the simulation training held in Japan. in addition, we conducted communication training (four times during fiscal 2012) among our overseas facilities based on a scenario of a major disaster in various regions of the world. Utilizing the pDca cycle, disaster measures will be advanced to address additional issues raised during training and in response to recent changes in the government’s anticipated seismic scale announcements. the global Headquarters building, where the Disaster Headquarters has been set up (built in august 2009), has an earthquake-resistant structure using vibration-controlling brace dampers. safety is assured even in the case of a maximum-level earthquake at the site. inspections after the march 2011 earthquake confirmed that the building had no problems whatsoever with its safety and functions. 2) Pandemic in response to the outbreak of H1n1 type influenza in april 2009, nissan established a global policy for infection prevention. each region has organized a response team and has promoted concrete countermeasures based on the policy. infection status can be monitored globally thanks to firmly developed reporting lines between the global response team and each regional team. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013 nissan has promoted countermeasures based on three basic principles stated in the global policy, which are: 1. first priority on employees’ health and lives 2. prevention of the spread of infection 3. continuity of business operation as specific actions, nissan established the “guidelines for employees’ action” which stipulated actions to be taken by employees, sections and companies, and kept employees informed. nissan also developed a Business continuity plan (Bcp) for each business section, with several triggers to invoke the Bcp depending on the infection ratio, to maintain business continuity even under a high infection situation. nissan will keep prepared for contingencies like avian flu through its pDca cycle, such as by updating response team members and the Bcp, carrying out educational activities for infection prevention and stockpiling sanitary and medical goods. 3) Countermeasures for Production Continuity Risk nissan’s production division has dealt with various risks related to the three elements of production, as listed in the chart at right. particularly for natural disasters, we have identified the measures needed to restart production within our established goal of two weeks following a large-scale disaster. We have worked over the years on continuous prevention countermeasures to physical infrastructure (quakeproofing and reinforcement of buildings and other facilities), maintained an operations recovery manual to shorten recovery time and regularly executed Bcp simulation drills. We are also strengthening the resilience of our global production network by establishing a Bcp for parts exports to enable continued operations at our overseas plants. in addition to such countermeasures to natural disasters, it is absolutely important to manage risks associated with parts procured from Leading competitive countries (Lccs) in order to expand markets globally. to deal with such risk, nissan has been conducting risk assessment before making sourcing decisions, providing support for improvement activities after sourcing, implementing quality checks at key points in the production and logistics process to prevent the production and utilization of imperfect parts 43 and undertaking activities to confirm and help improve supply capacity in order to secure global market expansion and growth. specifically, in addition to existing organizations to manage supplier risk in north america, europe and Japan, new bodies are being created in thailand, china and india to reinforce our global efforts to prevent risks associated with the supplies of parts. Facilities l Reinforcement of buildings & machinery (continued) l Regular audits of each business facility l Review of facility recovery manual (FY11) l Same as on the left l Revision of equipment standard based on the assessment result l Same as on the left l Installation of flexible manufacturing system (completed) l Regular check of demand projection and production capacity; implementation of measures l Development of complementary production system for main powertrains l Share past incident experiences and reflect them in preventive maintenance l Reflect them in equipment standards l Thoroughgoing energy conservation efforts l Flexibility in plant operations and working hours in response to requests from the government or power companies HR/Workforce Purchased parts/ Raw materials 3 elements of production Risk factor Natural disasters (earthquakes) l Reinforcement of office buildings (completed) l Development of earthquake response manual, implementation of evacuation drills (once/year) l Conducting of disaster prevention drills (once/year or more) Fire Workplace injury Pandemic l Risk assessment based on F-PES (Fire Prevention Evaluation System) (once/year) l Risk assessment based on SES (Safety Evaluation System) (once/year) l Assessment for health & safety management system (once/year) l Development of flu response manual (FY09) l Assessment of earthquake preparedness of major suppliers located in high quake-risk areas (FY08) l Planning to adopt damage reporting system on web base (FY10) l Confirmation of BCPs to be implemented at time of disaster by suppliers in high quake-risk areas (FY11) l BCP for parts exports to continue production at overseas plants (FY12) l Same as on the left l Same as on the left l Requested suppliers to develop response manual coordinated with Nissan Demand fluctuation l Backup from other Nissan plants (as needed) l Backup from other companies (as needed) l Employment of short-term employees (as needed) Regular check of demand projection and supply capacity; implementation of measures Machinery breakdown Electric power shortage Expansion of LCC- manufactured parts Decrease of skilled workers/experts l Planning and implementation of training program at each plant to develop skilled workers (FY10) l Global development of human resources through the Global Pilot Plant program (FY11) l Development of experts to teach technical skills (planning and implementation from FY12) l Assessment of monozukuri ability before supplier sourcing and support for improvement activities after sourcing l Quality assessment at production preparation phase l Quality check at mass production phase (action “Gate 1-3”) l Establishment of organization for supplier risk management at operations in major LCCs (FY12) corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013 44 4) supply Chain Continuity control was enhanced as follows to prepare for increased supplier risk. l response to suppliers’ financial risk 1. risk assessment (annual) in order to minimize the cost of risk, nissan adheres to the following global insurance management policy. this policy has provided appropriate coverage for damage resulting from the unpredictable and massive disasters that the world has seen in recent years. n Work with alliance partner renault to conduct financial assessments of n predictable risks with low impact and high frequency suppliers based on the latest data on a global basis 2. prompt decision on risk avoidance n prompt decision-making by a cross-functional committee based on risk assessment findings n thoroughgoing monthly management of risks for each supplier and anticipated expenditures n steady implementation of the above operational process l response to suppliers’ disaster risk 1. ensuring business continuity in fiscal 2012, major efforts to cope with disaster risk in the supply chain that were continued from the preceding year included: n promoting visualization of the supply chain (enabling smooth initial response by ascertaining in advance the links between parts and the vehicles produced, as well as the attendant risks, through research of supply chain conditions) n following up on the Bcp established for suppliers n implementing checks of suppliers’ initial response process (making revisions through coordination among production, development and purchasing divisions) 2. Bcps for overseas operations in fiscal 2012, nissan introduced measures taken in Japan to overseas operations besides thailand (north america, europe, china and india) and started to work on supply chain Bcps for those regions. 5) Risk Financing and Loss Prevention 1. global insurance management policy nissan manages hazard risk on a global basis with risk financing techniques that combine self-retained risk with external risk transfer via insurance. retained risks up to an acceptable level on a consolidated basis by the company n Unpredictable risks with low frequency and high impact or shock value risks whose financial impact may exceed the acceptable level of self- retention are transferred outside the company via insurance 2. global insurance programs in order to minimize the cost of hazard risks and manage risks occurring globally and interdependently in a concentrated manner, global insurance programs have been established for main lines of insurance. the finance Department in the global Headquarters decides insurance conditions and structures, and negotiates directly with insurance companies for these global programs. the insurance companies are important strategic partners, and they are thus decided in consideration of risk spread and financial solvency. the following risks are covered in this way: n property damage and business interruption by accidents the program covers risks not only for property damage but also for business interruption and contingent business interruption due to accidents, taking into consideration the global expansion of the supply chain for products and parts. coverage limits are determined based on the probable maximum loss amount measured by third-party experts. We achieved further improvement and optimization of insurance conditions by negotiating with insurance companies together with our alliance partner renault from fiscal 2011. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 201345 n transportation and storage of vehicles and products for sales this program covers risks relating to transportation and the supply chain for parts and products globally. By covering risks spread geographically under a global program, we can manage loss data on a global basis and ensure stability of insurance costs. from fiscal 2011, this program was also combined with renault’s program for negotiating with insurance companies to achieve best possible results utilizing synergies of scale. n product liability to manage this risk, we have insurance programs suitable for the legal systems and practices in each region. the programs are led by the global Headquarters in order to implement a consistent strategy globally. n indemnity liability for unanticipated accidents during operations or caused by owned or managed facilities (general liability) While keeping in mind the legal systems and compensation criteria of various countries, a globally uniform program is being implemented to ensure consistent worldwide coverage and to achieve lower insurance costs. 3. Utilization of captive insurance company for the purpose of more efficient self-retention on a consolidated basis for insurance programs other than general liability, nissan global reinsurance, a Bermuda-based captive insurance company (an insurance company of the nissan group) is utilized to reinsure a certain amount of risk for each of our global programs. Utilization of a captive insurance company enables the following: n Helps to reduce insurance costs by obtaining the minimum necessary insurance n each group company can obtain necessary coverage n can gather and analyze loss data below self-retained limit 4. Loss prevention activities nissan conducts loss prevention activities to improve loss results and reduce the cost of premiums on an ongoing basis. since the global insurance programs have been introduced, loss prevention activities have been promoted more actively and globally to maintain low premium rates. examples of nissan’s loss prevention activities include conducting risk-engineering surveys and obtaining recommendations for safety from third-party experts, creating manuals for actions in the event of typhoons and constructing hail nets to prevent hail damage. infoRMAtion SeCuRity Nissan shares its Information Security Policy with group companies worldwide and implements necessary measures through the Information Security Committee, bolstering its capability to prevent information leaks and other such incidents. Furthermore, we carry out various in-house programs every year to thoroughly educate and motivate employees to uphold their responsibilities in this regard. Protecting Personal Data and Reinforcing Information Security nissan recognizes its social responsibility to properly handle customers’ personal information, in full compliance with Japan’s personal information protection act. We have set up internal systems, rules and procedures for handling personal data. all group companies in Japan are fully enforcing these processes. moreover, nissan shares with group companies worldwide its information security policy as its basis to reinforce overall information security. our information security committee implements measures as necessary to further strengthen information security in order to prevent information leaks and other such incidents. to thoroughly educate and motivate employees to uphold their responsibilities in this regard, we institute regular in-house educational programs every year. corporate governanceNISSAN MOTOR COMPANY ANNuAl RePORT 2013

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