By Tom Pfeiffer
PARIS, Sept 27 (Reuters) - Nissan Motor Co expects its new Micra compact car to spur an increase in European profits in the Japanese automaker's current fiscal year, President Carlos Ghosn said on Friday.
Nissan, whose financial year ends next March, returned to profit in Europe last year after it merged some operations with French partner Renault SA to cut costs, and reined in its market share ambitions to target only profitable growth.
Former Renault executive Ghosn, feted as the auto industry's comeback king after rescuing Nissan from near collapse, said he was targeting average annual sales of 160,000 units over the lifetime of the new Micra, "though in the first year you can expect more than that."
"We need hits in Europe," Ghosn told reporters at the Paris motor show. "We hope that the Micra will be that car."
"In 2002, our profitability in the European market will increase even though the market is down...We think now we can grow in a sustainable manner with strong products."
Nissan is looking to shed its image in Europe for dowdy designs, and has revamped the Micra to improve its appeal to style-conscious European buyers.
The car faces stiff competition in Europe's small-car market, the second-largest segment of the market and one where profit margins are razor thin.
All of Japan's automakers have had a tough time making any money in Europe, which is widely seen as the world's most competitive car market because of a profusion of products and competitors.
For a new entrant it is especially tough. With such a small slice of the market, Nissan and fellow Japanese makers Toyota Motor Corp and Honda Motor Co Ltd lack the necessary commercial muscle to impose prices.
LACK OF LOCAL PRESENCE
Another problem has been the lack of a sizeable local manufacturing base, which leaves them at the mercy of import duties and currency swings. Toyota has led the way in building a network of new plants in Europe.
On Wednesday, Toyota officials told Reuters that the company expects to post its first profit in Europe in the current fiscal year, proving that the policy is finally starting to pay dividends after years of heavy investment.
Nissan, meanwhile, has leaned on Renault, which owns a 44.4 percent stake in the Japanese firm. The two are merging their dealership networks in Europe and gradually rolling out new generations of vehicles with common assembly systems to save on procurement and manufacturing costs.
The Micra, known in Japan as the March, is the first car to be rolled out using the alliance's new smaller "B" platform. Renault expects to launch a new version of its Clio using the same system in 2004.
Nissan and Renault were last year obliged to abandon their goal of a combined 17 percent European market share, because Renault's progression was not as rapid as hoped and after Nissan decided not to sacrifice market share for profits.
"We are not for growth for the sake of growth," Ghosn reiterated on Friday. "The biggest engine of profits is growth of volume, but that cannot be done in just any old way."
He said the goal of merging the two firms' distribution networks into regional "hubs" remained the same, though the pace with which that would happen may be faster or slower.
Nissan shares on Friday rose 1.6 percent to 927 yen, while Renault's stock was 0.7 percent higher at 45.43 euros at 1130 GMT, compared to a 0.8-percent gain by the wider Dow Jones Stoxx European autos index .