Nissan reportedly is reversing former chairman Carlos Ghosn’s expansionist strategy and planning aggressive cost cuts to deal with an unexpected sales slump.
A Reuters report, citing multiple anonymous sources, said the car maker planned to axe at least 4,300 salaried jobs and shut two factories as part of broader plans to improve profitability by at least JPY480bn (US$4.4bn) by 2023.
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This follows a turnaround plan announced last in July and was likely to include cutting the range of cars offered, as well as production options and trims for each model line, slashing jobs mostly at head offices in the US and Europe, reducing advertising and marketing budgets, the news agency’s sources said.
“The situation is dire. It’s do or die,” a source close to Nissan’s senior management and the company’s board told Reuters.
Most of the planned cuts and measures to enhance efficiency were presented to Nissan’s board in November and received general approval, two sources said.
A Nissan Motor spokeswoman declined to comment to Reuters.
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By GlobalDataThe report noted, on Ghosn’s watch, Nissan had embarked on global expansion, boosting capacity to add new models, driving more deeply into markets such as India, Russia, South Africa and southeast Asia, and spending heavily on promotions and marketing to hit targets.
Many of those new models are missing sales goals and executives at Nissan’s Yokohama headquarters estimate up to 40% of its global manufacturing capacity is unused, or under-used, Reuters said.
Executives reportedly are concerned Nissan could post another loss for its carmaking business for the last quarter of 2019 and possibly for all its operations in the fiscal year ending 31 March.
One source told Reuters that would most likely hinge on whether Nissan books big restructuring expenses in its current financial year, or waits until the fiscal year ending 31 March 2021.
Reuters noted Nissan had last July said it would cut 12,500 jobs from 14 sites around the world and reduce its model range by 10%.
At the time, Nissan officials told Reuters that meant shutting one production line at each plant.
Sources have now told the news agency Nissan is considering shutting two plants permanently, on top of the reductions at the 14 other sites.
People “familiar with the plans” said the axe was also likely to fall at Nissan’s North American head office in Tennessee and its European headquarters in Geneva because they were bloated with high spending sales and marketing staff.
One source with direct knowledge of the turnaround plan said Nissan’s marketing teams globally account for almost JPY1 trillion (US$9.1bn) a year, or about 45% of the automaker’s annual fixed costs of JPY2.1 trillion ($18.3bn).
Nissan had been saddled with the excess, “thanks to (Ghosn’s) highly aggressive, expansionist volume goals, which we failed to achieve”, the Reuters source said.
Reuters noted Ghosn had told a news conference in Beirut on 8 January Nissan’s poor performance since 2017 was down to Hiroto Saikawa, who formally took over from him as Nissan CEO in April 2017 [he subsequently resigned in September 2019 in the wake of a scandal over his compensation and over-payments].
“He was CEO and he was responsible for it,” Ghosn said.
Reuters also noted Nissan was aiming to achieve an operating margin of 6% on revenue of JPY14.5 trillion by March 2023 compared with 3% from JPY13 trillion forecast for the fiscal year ending 31 March 2020, according to the plans announced in July.
Since then, however, operating performance had worsened by more than expected, making it likely its new management team would have to find savings significantly above the JPY480bn yen currently envisaged to hit its targets, three Reuters sources said.
Three of the news agency’s sources said the collapse in Nissan sales globally was a major factor in forcing the company to consider restructuring above and beyond the measures outlined in July.
They said Nissan’s sales worldwide would likely fall toward 5m vehicles, or slightly above, way short of its sales goal of 5.5m for the current financial year.
Restructuring efforts had been disrupted by the political turmoil following Ghosn’s departure in 2018, his flight from Japan in December and subsequent accusations against former colleagues at Nissan.
According to five Reuters sources, the upheaval had rattled Nissan’s top management team so much that it paralysed their ability to execute many of the planned restructuring moves smoothly.
Worse, the latest turmoil lasted from December to mid-January when the board curbed the influence of “anti-alliance” forces sabotaging the plans, two Reuters sources said.
The report noted Nissan’s new CEO Makoto Uchida took the reins at the start of December with Ashwani Gupta, who has worked at Mitsubishi, Nissan and Renault, as chief operating officer.
“Whoever the action was aimed at, the upshot is that Gupta is now completely freed from pressures from those anti-alliance forces to carry out all the planned turnaround measures,” one of the Reuters sources said.
“He should do so without hesitation as the board has cleared the way.”
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