After posting a weak set of financial results, Nissan has announced cost-cutting plans that will result in thousands of jobs lost from its global operations. The company said that it aims to reduce fixed costs by 300 billion yen (compared to FY2024) and variable costs by 100 billion yen (compared to FY2024) while maintaining a healthy free cash flow.
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To achieve this, Nissan said it will cut global production capacity by 20% and reduce its global workforce by 9,000. It currently employs around 133,000 people globally, but it’s not clear where the job cuts axe will fall.
The company said it is implementing various measures to lower selling, general, and administrative expenses, decrease the cost of goods sold, rationalise its asset portfolio, and prioritise capital expenditures and investments in research and development.
The company also plans to advance the introduction of new energy vehicles (NEVs) in China, and plug-in hybrids and e-POWER in the US, while ‘simultaneously increasing sales per model to enhance model efficiencies.’
Analysts say the company has been caught off-guard by a surge in demand for hybrid models in some markets, notably the US.
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By GlobalDataNissan aims to reduce vehicle development lead time to 30 months and deepen collaboration with Renault Group, Mitsubishi Motors Corporation (MMC), and Honda Motor Co., Ltd., while ‘exploring more strategic partnerships in the areas of technology and software services.’
To facilitate swift decision-making for the turnaround actions, Nissan will appoint a Chief Performance Officer responsible for sales and profit, effective December 1.
Nissan President and CEO Makoto Uchida said: “These turnaround measures do not imply that the company is shrinking. Nissan will restructure its business to become leaner and more resilient, while also reorganising management to respond quickly and flexibly to changes in the business environment. We aim to enhance the competitiveness of our products, which are fundamental to our success, and set Nissan back on a path of growth. As a cohesive team, we are dedicated to working together to ensure the successful implementation of our plans.”
Latest results fall below analyst expectations
Nissan’s cost-cutting announcements followed a downbeat set of quarterly financial results which came in well below analyst expectations and saw it lower its forecast operating profit for the fiscal year from 500 billion yen to just 150 billion yen.
In the three-month period to 30 September (fiscal Q2), operating profit was down to 31.9 billion yen compared to 208.1 billion yen in the same quarter last year. Revenues were down to 2,986 billion yen against 3,146 billion yen in the same quarter of last year.
In the fiscal first half, consolidated net revenue decreased by 79.1 billion yen to 5.98 trillion yen, with consolidated operating profit decreasing 303.8 billion yen to 32.9 billion yen, representing an operating profit margin of just 0.5%.
FY H1 global sales volumes decreased year-on-year by around 4% to 1.6 million units, hit by lower sales in key markets – notably the US and China.
Nissan said Profitability was affected by higher selling expenses and inventory optimisation efforts, particularly in the US, along with rising manufacturing costs.
After the disappointing set of quarterly results, there are also pay cuts for the company’s top management. Nissan CEO Makoto Uchida will ‘voluntarily forfeit 50% of his monthly compensation starting in November 2024’ and the other Nissan executive committee members will also ‘voluntarily’ take a pay reduction accordingly.
