By Naomi Tajitsu
TOKYO (Reuters) - Nissan Motor Co forecast on Thursday a smaller-than-expected full-year hit from the yen's strength as it sees the currency stabilising, and said it would be ready to deal with any changes to U.S. trade policy.
Japan's second-largest automaker could be exposed if U.S. President Donald Trump raises tariffs on U.S. auto imports from Mexico, where it produces more than 800,000 cars annually, dwarfing production in that country by other Japanese automakers.
Nissan exports roughly half of its Mexican output to the United States, a key market where it also has production plants.
Global automakers have come under pressure as U.S.-bound auto exports have riled Trump, who has criticised compatriot Toyota Motor Corp and other automakers for not locally producing more cars sold in the United States.
Japan's automotive exports are likely to be high on the agenda when Japanese Prime Minister Shinto Abe meets with Trump for summit talks in Washington on Friday.
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"There is likely to be changes in U.S. trade policy and these may have many pluses and minuses for us," Nissan Corporate Vice President Joji Tagawa told reporters at an earnings briefing. "We will deal with them as they come."
Nissan, which has an 18-year alliance and cross-shareholdings with France's Renault, posted a weaker-than-expected operating profit of 163.5 billion yen ($1.46 billion) for the third quarter, weighed down by higher marketing costs, and a stronger yen.
While vehicle sales rose in North America, its biggest market, third-quarter operating profit in the region tumbled 72 percent from a year ago as the automaker ramped up incentives to sell more cars in the United States, where competition is fierce.
The overall profit decline from a year ago comes despite an improvement in domestic sales as a result of strong demand for the latest versions of its new Note compact hatchback and Serena van models which were launched last year.
Nissan maintained its forecast that the yen would average around 105 yen to the U.S. dollar in the year to March, and left its forecasts for full-year net profit and operating profit unchanged.
Tagawa said that signs that the yen had found its footing after months of volatility suggested that the full-year currency hit to operating profit may be smaller than the 250 billion yen budgeted in May.
"The dollar/yen rate averaged around 106.6 yen through the end of the third quarter ... if the current rate holds around the same level, we could suffer a smaller full-year currency loss," Tagawa said.
Nissan has enjoyed brisk sales in North America, particularly due to strong demand for its Rogue sport utility vehicle (SUV) in the United States, where vehicle sales rose 5.2 percent during the quarter.
Vehicle sales in China continued to be strong, although the company has warned of slower sales there as tax breaks for small-engine cars are cut.
($1 = 112.2700 yen)
(Reporting by Naomi Tajitsu; Editing by Muralikumar Anantharaman)