Nissan slashes 9,000 jobs, cuts production by 20% amid 94% income drop, CEO to take 50% pay cut
Nissan Motor Co.’s struggles to cope with tougher car industry conditions and address internal weaknesses have spiralled, leaving the automaker no choice but to slash payroll, production and its forecasts for this fiscal year. Nissan CEO Makoto Uchida to forfeit half of his compensation.
Nissan Motor Co. has announced sweeping cuts to its workforce, production levels, and financial forecasts as the company grapples with intensifying industry challenges and internal weaknesses. The automaker will cut 9,000 jobs and reduce manufacturing capacity by 20% after seeing a steep 94% drop in net income for the first half of the fiscal year. In addition, Nissan plans to sell off part of its stake in Mitsubishi Motors Corp. after burning through ¥448.3 billion ($2.9 billion) in cash over six months, Bloomberg reported.
The company's shares tumbled nearly 10% in early Friday trading in Tokyo, reaching their lowest point since October 2020, according to the report.
These financial woes come with personal costs for Nissan CEO Makoto Uchida, who will forfeit half of his compensation, as per the Bloomberg report.
Uchida acknowledged the dual challenges of external market pressures and internal missteps, including ambitious sales targets set by Nissan amid surging competition from Chinese automakers, as per Bloomberg report.
“Meeting our sales goals will be a challenge,” Uchida said. “We need to rebuild our strength so that we can pivot toward a more positive direction, the Bloomberg report quoted him as saying.
Nissan has revised its operating income projection down to ¥150 billion for the fiscal year ending in March, a 70% reduction from earlier forecasts. Revenue expectations have also been slashed by 9%, signalling minimal growth ahead, Bloomberg reported.
Uchida, who took the helm in 2019 following the departure of former chairman Carlos Ghosn, has struggled to stabilize Nissan while facing competition from Tesla and China’s BYD. “Nissan is the weakest one,” said James Hong, an analyst with Macquarie Securities Korea. “The only way for the company to improve sales is through price cuts," Hong said as per Bloomberg.
Ratings Concerns Mount
Nissan’s financial ratings could be at risk following these grim results, with Bloomberg Intelligence’s Joel Levington noting that the company’s situation appears “extremely tough".
To cut costs, Nissan will reduce its stake in Mitsubishi Motors, selling about a third of its holdings, equivalent to roughly 10% of its total shareholding, worth around ¥68.6 billion, the Bloomberg report added.
Uchida has been pursuing a three-year turnaround plan aimed at revitalising the business, but setbacks have mounted. In July, Nissan cut its profit forecast from ¥600 billion to ¥500 billion, following weak sales in key markets like China, Japan, and North America, as per the Bloomberg report.
In the most recent quarter, Nissan’s profit of ¥32 billion fell far below analyst estimates of ¥65 billion and even further behind the ¥208 billion reported a year prior. “The decline in second-quarter profit wasn’t a surprise, but the figure itself was even lower than expected,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “The main problem is the gap between what the company wanted to achieve and what was realistically possible," he said.
Future Plans Amid Declining Demand for EVs
Uchida’s vision includes expanding Nissan’s electric vehicle lineup and forming new partnerships, with a goal of selling an additional 1 million cars annually by 2027. But analysts argue that Nissan lacks enough hybrid models to meet current consumer demand, which is shifting away from EVs. “The demand for hybrids is what’s allowing Toyota and Honda to enjoy strong profitability,” noted Hong. “That strategy also needs to be revisited," as quoted by Bloomberg.
Nissan, like other legacy automakers, is struggling to capture market share in China. In June, it halted production at its Changzhou plant in response to sluggish sales.
For the current fiscal year, Nissan expects to produce around 3.2 million vehicles, down 7% from last year, and has reduced its retail sales outlook to 3.4 million vehicles, with forecast cuts across major markets including North America, China, Japan, and Europe.
(With Inputs from Bloomberg)
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Business NewsCompaniesNewsNissan slashes 9,000 jobs, cuts production by 20% amid 94% income drop, CEO to take 50% pay cut
First Published:8 Nov 2024, 10:37 AM IST
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