Nissan Motor is making significant progress on a global restructuring plan to right-size operations and return to profitability as it moves on from the scandalised exit of former leader-turned-international fugitive Carlos Ghosn, according to a media report.
The Japanese automaker was on track to hit targets set in its Nissan Next turnaround plan a year ahead of its March 2024 schedule, chief operating officer Ashwani Gupta said in an interview with CNBC.
“Despite the headwinds, we have pulled ahead the recovery by one year,” Gupta, who’s Heading the change, told CNBC during a video interview from Nissan’s headquarters in Yokohama, Japan.
“We are much more ahead than what we said and that helped us in overcoming the headwinds of the pandemic in 2020.”
Nissan Next is a combination of cost-cutting, product investment and cultural change following roughly two decades under Ghosn, who fled Japan to Lebanon in December 2019 while awaiting trial on charges of financial misconduct. The turnaround plan was announced by Nissan CEO Makoto Uchida as a roadmap to sustainable profitability to “compete effectively for the next decade”.
CNBC noted much of the focus was on shrinking the size of the company’s operations to focus on higher profits rather than growth and sales volumes – missions of Ghosn. Nissan still has a way to go regarding profitability but Gupta said there were early signs of improvement.
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Nissan lost JPY367.7bn ($3.4bn) in the first three quarters of its 2020 fiscal year, which ends 31 March, 2021. But it generated an operating profit of JPY27.1bn ($250m) in the third quarter – JPY100bn ($921m) ahead of its initial target. It also has cut JPY330bn ($3bn) in fixed costs compared to its initial plan of JPY300bn ($2.8bn).The company came in ahead of plan largely by slashing fixed costs, such as closing plants, exiting markets like South Korea and reducing plant shifts globally, Gupta told CNBC. Other targets under the transformation plan include cutting global production capacity by 20%, doubling its operating profit margin to 5% and slightly increasing its global market share from 5.8% to 6%.
CNBC said early results have analysts cautiously optimistic Nissan can turn itself around.
“Our impression is broadly one of improvement,” Morgan Stanley analyst Kota Mineshima said in an investor note last month after third quarter earnings.
According to CNBC, JP Morgan analyst Akira Kishimoto said a prompt recovery in Nissan’s North American operations would significantly help the automaker’s turnaround. “We are monitoring the progress made in restructuring to rebuild global earnings, but the company also needs breakthrough solutions to address the serious downturn in sales in North American and European markets,” he wrote to investors.
Nissan is not going all-in on all-electric vehicles, which has become a major focal point of some automakers and Wall Street. The company plans to release eight all-electric vehicles by 2023. Nissan views EVs as a “consequence not the objective”, according to Gupta. His comments may be surprising given Nissan was the first major automaker to release an all-electric vehicle called the Leaf in 2010. But sales of the vehicle and segment were not as strong as expected. The automaker has only sold roughly 500,000 Leafs since the vehicle was introduced.
Nissan is taking different approaches to electrification in markets such as Europe, China and the US based on consumer demand. The plans include new hybrid models with small internal combustion engines with batteries that Nissan is calling e-Power as well as all-electric vehicles.
Nissan expects sales of its EVs and e-Power vehicles to reach 1m by the end of its turnaround plan. All new vehicles are expected to offer an EV or hybrid version by the early 2030s, according to the company.
“I think we have to understand what the customer is looking for,” Gupta told CNBC, adding the US was far behind in EV adoption compared to China and Europe, where the company is largely concentrating its new electrified models.
Sales of all-electric vehicles were less than 4% of the global market in 2020, according to IHS Markit.
Ghosn, who was attributed saving saving Nissan some 20 years ago, is a ghost as far as Gupta is concerned: “For us, that is the past. From December 2019, with the new leadership team, we have launched a new culture which is driven by value not by volume,” he told CNBC.
Gupta characterised the alliance as being “very strong”. He told CNBC the company does not plan to discuss a merger or further ownership between the companies. Instead, Gupta said the companies are focusing on eliminating duplication of resources and sharing operations.
“This is a new way of transactional relationship to improve each others’ performance,” he said. “And I think we are moving ahead with the same principle.”