AP Photo/Jae C. Hong.
AP Photo/Jae C. Hong.

Nissan to cut 9 percent of workforce, shrink product line-up

By Naomi Tajitsu Time of article published Jul 26, 2019

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Yokohama - Nissan unveiled its biggest restructuring plan in a decade, axing nearly a tenth of its workforce and flagging possible plant closures to rein in costs that ballooned when Carlos Ghosn was CEO.

The cuts announced on Thursday followed a collapse in Nissan's quarterly profit, highlighting how a crisis - brought about by sluggish sales and rising costs - is deepening at Japan's second biggest car company in the wake of a financial misconduct scandal over Ghosn. Ghosn has denied the charges.

The dismal quarter will pile pressure on Chief Executive Hiroto Saikawa, who has been tasked with shoring up the carmaker's performance at a time when the industry is struggling worldwide.

China's slowing economy, further depressed by a trade war with the United States, has hit demand, even as American consumer confidence has faltered.

Tougher emission regulation has taken as toll on diesel car sales in Europe, and an increase in electric vehicle sales and ride-sharing has worsened a drop in sales at the world's biggest car makers.

Job cuts

Nissan will reduce at least 12 500 positions globally by March 2023 - its deepest job cuts since 2009 - and slash production capacity, mainly of compact cars at underutilised plants abroad. The move will shrink its product line-up by about 10%, Saikawa said, without elaborating on which vehicles would be culled.

The carmaker had 138,000 employees as of March 2018.

"We are mainly targeting sites where we made investments to produce compact cars under the Power 88 plan," Saikawa told reporters at a briefing at Nissan headquarters, referring to an aggressive growth strategy spearheaded by Ghosn in 2011 to grab 8% global market share and an 8% operating margin.

Saikawa said a total of 14 facilities would be affected.

Nissan's job cuts expand on redundancies initially announced in May, which affected eight facilities including in Spain - where trucks and vans are made - and Indonesia, where the Micra and some Datsun models are manufactured.

Nissan also produces compact cars at facilities in Mexico, Russia, France, and Thailand.

Roughly half the announced job cuts so far have cost the company around 40 billion yen, and further layoffs could cost about the same, chief financial officer Hiroshi Karube said.

'Very poor' profitability

Years of heavy discounting and fleet sales, particularly in the United States, has left Nissan with a cheapened brand image and low vehicle resale values, and also hit profits.

Nissan's first-quarter operating profit plunged 98.5% to 1.6 billion yen (R207bn), its worst performance since a loss in the March 2008 quarter.

"Profitability is very poor at the moment," Saikawa said, but added that the company was pushing to achieve its revenue target of 14.5 trillion yen and operating margin of 6% through the end of fiscal 2022.

The carmaker said global vehicle production will fall 10% through the year to March 2023 while global sales till then will increase modestly to 6.0 million units annually from the current 5.5 million.

The company maintained its profit forecast of 230 billion yen for the year ending March 2020, a 28% drop from last year and its weakest in more than a decade.


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