Nissan outlines plans to become smaller and more cost-efficient

By Naomi Tajitsu Time of article published May 28, 2020

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Tokyo - Nissan outlined a new plan on Thursday to become a smaller, more cost-efficient car company after the coronavirus pandemic exacerbated a slide in profitability that culminated in its first annual loss in 11 years.

Under the new four-year plan, the Japanese carmaker will slash its production capacity and model range by about a fifth to help cut 300 billion yen (R48.7bn) from fixed costs.

It will shut plants in Spain and Indonesia, leave the South Korean market and pull its Datsun brand from Russia as part of a strategy unveiled on Wednesday to share production globally with its partners Renault and Mitsubishi Motors.

"I will make every effort to return Nissan to a growth path," Nissan Chief Executive Makoto Uchida said, adding that the company had learned from its past mistakes of chasing global market share at all costs.

"We must admit failures and take corrective actions," he said, adding that starting with top-level managers, the company had to break its inward-looking culture which in the past has stymied efforts to deepen cooperation with Renault.

The biggest challenge

Uchida said improving the company's cash flow was its biggest challenge. He reiterated that Nissan's cash liquidity was good even though it had negative free cash flow of 641 billion yen in the year ended in March.

Nissan declined to give any forecasts for its current financial year which started in April due to the uncertainty created by the coronavirus pandemic. It also declined to give details on how many jobs it was cutting.

In what is Nissan's second recovery plan in less than a year, Uchida pledged a return to profitability with a core operating profit margin above 5% and a sustainable global market share of 6%.

Nissan chief executive Makoto Uchida. Picture: Reuters.

Nissan posted an annual operating loss of 40.5 billion yen for the year to March 31, its worst performance since 2008/09. Its operating profit margin was -0.4%.

The carmaker said on Thursday that it sold 4.9 million vehicles last year, up from an earlier estimate of 4.8 million.

That was still the second decline in a row and a fall of 11% from the previous period but meant Nissan clung on to its position as Japan's second biggest carmaker, just ahead of Honda and a long way behind Toyota.

Pandemic pressure

Even before the spread of the novel coronavirus, Nissan's slumping profits had forced it to row back on an aggressive expansion plan pursued by ousted leader Carlos Ghosn. The pandemic has only piled on the urgency to downsize.

Nissan, Renault and Mitsubishi Motors said on Wednesday that they would work more closely on developing and producing cars to reduce costs and ensure their alliance's continued existence.

Renault is due to announce its own restructuring plans on Friday, which are expected to include job cuts despite resistance from the French government.

The new four-year plan is the vision of Uchida and Chief Operating Officer Ashwani Gupta, who took over after months of internal turmoil following Ghosn's arrest in 2018.

Under the plan, Nissan will curb its ambitions for sales growth to target annual sales of about 5 million units, Reuters reported in April, a cut from a previous goal of 6 million cars outlined in July by then-CEO Hiroto Saikawa.

Spain said on Thursday that the closure of Nissan's plant in Barcelona could cost the company as much as 1 billion euros and that investing in the factory would be a cheaper alternative.

Protesting workers burned tyres and blocked the entrance to the Barcelona factory following the announcement.

Reuters

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