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Nissan slashes 9,000 jobs, cuts CEO’s pay in half. Here’s why
Nissan Motor Co.’s struggles to cope with tougher car industry conditions and address internal weaknesses have spiraled, leaving the automaker no choi
Nissan Faces Major Losses, Announces Job Cuts and Capacity Reductions Amidst 94% Profit Plunge
Nissan’s shares dropped after announcing 9,000 job cuts, capacity reductions, and stake sale in Mitsubishi following a 94% profit slump.
Nissan’s shares fell as much as 10% in early morning trading in Tokyo on Friday, to their lowest since October 2020.
The calamitous results will prove costly for Chief Executive Officer Makoto Uchida, who’s forfeiting half his compensation starting this month. The CEO told investors Nissan has been affected “not only by external challenges, but also by our specific issues,” alluding both to the breakneck rise of Chinese automakers and Nissan setting overly ambitious sales targets.
“Meeting our sales goals will be a challenge,” Uchida said. “We need to rebuild our strength so that we can pivot toward a more positive direction.”
Nissan now sees its operating income plunging to just ¥150 billion in the fiscal year ending in March, down 70% from its previous forecast. Management also lowered their revenue outlook by more than 9%, meaning they now expect virtually no growth for the year.
Uchida has been at the helm since 2019, when Nissan was facing an existential crisis in the wake of former chairman Carlos Ghosn’s departure. .
“Nissan is the weakest one,” said James Hong, an analyst at Macquarie Securities Korea. “The only way for the company to improve sales is through price cuts.”
Nissan to Cut Jobs and Reduce Stake in Mitsubishi Motors as Turnaround Efforts Falter Amid Slumping Profits
Nissan will sell almost a third of its shareholding in partner Mitsubishi Motors, paring its current stake of just over 34%. The roughly 10% holding that Nissan will offer up through the Tokyo Stock Exchange was worth about ¥68.6 billion at the close of trading Thursday.
Uchida is roughly eight months into a three-year turnaround plan to reinvigorate the business, though Nissan already had to backtrack somewhat earlier this year. In July, the company cut its annual operating profit outlook to ¥500 billion from ¥600 billion, due to poor sales in China, Japan and North America.
Profit for the quarter that ended in September was ¥32 billion, falling short of the consensus estimates for ¥65 billion and further still from the ¥208 billion earned a year ago.
“The decline in second quarter profit wasn’t a surprise, but the figure itself was even lower than expected,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “The main problem is the gap between what the company wanted to achieve, and what was realistically possible.”
The plans Uchida has laid out include expanding Nissan’s lineup of electric vehicles, forging new partnerships and selling an additional 1 million cars a year by 2027. But analysts have said the company’s new lineup lacks enough hybrid models — a big problem when consumer demand for EVs is waning.
“The demand for hybrids is what’s allowing Toyota and Honda to enjoy strong profitability,” Macquarie’s Hong said.
Like many international legacy automakers, Nissan is struggling in China, the world’s biggest car market. In June, the company said it would cease production at a plant in Changzhou amid slumping sales.
Nissan Slashes Production and Sales Forecasts, Cuts Jobs Amid Strategic Alliances with Honda and Mitsubishi
Nissan is now expecting to produce about 3.2 million vehicles in the year ending in March, almost 7% fewer than the last fiscal year. The company also lowered its retail sales outlook to 3.4 million vehicles, paring forecasts for each of its major markets: North America, China, Japan and Europe.
In March, Nissan agreed with Honda Motor Co. and Mitsubishi Motors to work together on software development, batteries and other EV components. The alliance could pit the trio against Toyota Motor Corp. and its tie-ups with Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp.
Uchida said Thursday that strategic partnerships with Renault SA, Mitsubishi Motors and Honda will boost Nissan’s investment efficiency and product. The job cuts he announced amount to about 7% of Nissan’s workforce.
