Nissan’s efforts to navigate tougher conditions in the car industry and address internal weaknesses have worsened, forcing the automaker to cut jobs, and production, and revise its forecasts for the fiscal year.
The Japanese automaker plans to lay off 9,000 workers worldwide and reduce production capacity by 20% as part of broader cost-cutting measures, following a sharp 94% drop in net income during the first half of the year. The 9,000 job cuts will reportedly reduce Nissan’s workforce by about 7%.
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Additionally, Nissan will sell part of its stake in Mitsubishi Motors after burning through ¥448.3 billion ($2.9 billion) in cash over the past 6 months.
Bear in mind that in recent years, Nissan announced that it would cut more than 10,000 jobs globally in 2019, and next year, announced that it would cut more jobs along with the closure of two of its key plants.
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These disastrous results will hit CEO Makoto Uchida hard, as he is giving up half his compensation starting this month. Uchida acknowledged that Nissan has been impacted “not only by external challenges but also by our specific issues,” referring to the rapid rise of Chinese automakers and Nissan’s overly ambitious sales targets. Uchida said:
“Meeting our sales goals will be a challenge. We need to rebuild our strength so that we can pivot toward a more positive direction.”
Nissan now expects its operating income to drop to just ¥150 billion for the fiscal year ending in March, a 70% decline from its earlier forecast. The company also cut its revenue outlook by over 9%, indicating it now anticipates virtually no growth for the year.
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CEO Makoto Uchida, who took over in 2019 during a critical period following the departure of former chairman Hiroto Saikawa who himself took the helm of affairs in 2018 after the ouster of the celebrated chairman Carlos Ghosn, has struggled to steer the company back on course. Nissan faces intense competition from rivals like Tesla and China’s BYD, leaving it trailing behind other major Japanese automakers. According to James Hong, an analyst at Macquarie Securities Korea:
“The only way for Nissan to improve sales is through price cuts.”
Nissan plans to sell nearly a third of its stake in partner Mitsubishi Motors, reducing its current holding by just over 34%. The roughly 10% stake Nissan will sell through the Tokyo Stock Exchange is valued at approximately ¥68.6 billion as of Thursday’s market close.
The move comes as Nissan is about 8 months into a 3-year turnaround plan aimed at revitalizing the company, though setbacks have already emerged. In July, Nissan slashed its annual operating profit forecast from ¥600 billion to ¥500 billion due to weak sales in China, Japan, and North America.
For the quarter ending in September, Nissan reported a profit of ¥32 billion, well below the consensus estimate of ¥65 billion and significantly lower than the ¥208 billion earned in the same period last year. According to Bloomberg Intelligence analyst Tatsuo Yoshida:
“The decline in second-quarter profit wasn’t surprising, but the result was even worse than anticipated. The main issue is the gap between the company’s goals and what is realistically achievable.”
Uchida’s recovery plan includes expanding Nissan’s electric vehicle lineup, forming new partnerships, and aiming to sell an additional 1 million cars annually by 2027. However, analysts have criticized the company’s lineup for lacking excitement and hybrid models, especially as demand for EVs has softened.
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Like many global automakers, Nissan is facing challenges in China, the world’s largest car market. In June, the company announced it would stop production at its Changzhou plant due to declining sales.
Earlier this year, Nissan reduced its production target for the current fiscal year by 50,000 units to 3.65 million vehicles. With global sales down nearly 4% to 1.6 million units between April and September, hitting that target will be difficult.
In March, Nissan agreed with Honda and Mitsubishi Motors to collaborate on developing in-house software, potentially putting them in competition with Toyota and its alliance with Subaru, Suzuki, and Mazda.
Source: Japan Times
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