Nissan is set to overhaul its financial structure through a cost-cutting strategy that avoids the closure of manufacturing plants, reported Bloomberg citing people familiar with the matter.

The company is concentrating on reducing and consolidating production lines both in Japan and abroad, as well as potentially adjusting employee work shifts, the sources said.

This approach is part of an effort to revitalise finances ahead of a potential capital tie-up with Honda.

In December, Nissan and Honda signed a memorandum of understanding to explore a merger through the establishment of a joint holding company.

Both companies would become wholly-owned subsidiaries of this new entity. The proposed deal with Honda, which would effectively divide Japan’s automotive industry into two factions, has intensified the examination of Nissan’s business operations.

Reuters recently reported that Japan's Mitsubishi Motor, a smaller partner of Nissan, may opt out of the planned merger between Nissan and Honda.

Last year, Nissan announced plans to axe 9,000 jobs worldwide and reduce production capacity by 20%.

These measures are part of a broader strategy to ensure sustainable profitability and cash generation, even with an anticipated annual sales volume of 3.5 million units by fiscal 2026, Nissan said.

Nissan CEO Makoto Uchida earlier maintained that all options are under consideration to aid the company's recovery.

In December, Honda CEO Toshihiro Mibe stated that Nissan's turnaround is essential before any alliance can be formed. Both companies are required to be independently sustainable for a successful integration.

Last week, Bloomberg reported that Nissan plans to cease production of its AD compact van at a Japanese facility later this year.