Battling headwinds in China and the U.S., Nissan has announced major job cuts for the year, cutting its annual operating forecast by 70%. As per Nissan’s restructuring plans, 9,000 jobs will be eliminated and 20% of the global manufacturing capacity will be cut.
Japan’s third-largest automaker has faced a prominent decline in its sales and revenue since 2019, which led to the removal of chairman Carlos Ghosn and a reversal of its partnership with Renault SA. The company was also forced to recall 300,000 SUVs in the U.S. back in 2022, after a major defect in the car that caused the hood to open suddenly while driving. Such setbacks have gradually chipped away at the company’s profit margins.
Image: Nissan breaks ground on Decherd training center
Nissan’s Job Cuts Signal a Dedicated Attempt at Turning the Business Around
From what we know of Nissan’s restructuring plans, the 9,000 cuts will be spread across its global holdings and no details have been announced on which teams will be primarily affected. The company will work to cut its capacity by a fifth of their current numbers to ease some of the expenses at the business and refocus its resources on its plan of action.
Along with the job cuts, Nissan is also planning to cut its CEO pay by half starting this month. No end date has been advertised for this strategy, but the pay cut will likely progress until the business numbers are back under control. CEO Makoto Uchida spoke to investors to explain their strategy, stating that the company had been affected “not only by external challenges but also by our specific issues.”
Undoubtedly, this is in relation to the various setbacks the company has faced in the Chinese market compounded by the rise of Chinese automakers. The internal challenges refer to the company’s overly optimistic sales targets that the business has failed to meet.
Nissan is also expected to sell a third of its shareholding in partner Mitsubishi Motors, reducing its ownership from 34% to around 24%. This should generate around ¥68.6 billion for the automaker. The decline in ownership will cause a change in the relationship and decision making power for Nissan, but the partnership will proceed nonetheless.
Nissan Faces a Significant Profit Decline
Nissan announced the job cuts after its earnings update showed a net income decline of 94%. Its operating income fell to ¥150 billion in the fiscal year ending in March, a 70% decline from previous forecasts. This was the second edit to its estimates after a 17% cut earlier in the year. The revenue outlook was also lowered by over 9%.
Nissan’s operating profit declined for the July-September second-quarter period by 85% to ¥32.9 billion, below the LSEG consensus estimate of ¥66.8 billion. The company has witnessed a steep fall in demand, which has caused the business to stumble.
According to CNBC, its global sales fell 3.8% to 1.59 million vehicles for the first half of the financial year. This was a result of a drop in its two primary markets, China and the U.S., which account for almost half of its global sales in terms of volume. The company saw a 14.3% decline in its sales in China and a 3% fall in the U.S.
“Nissan will restructure its business to become leaner and more resilient, while also reorganizing management to respond quickly and flexibly to changes in the business environment,” CEO Makoto Uchida explained in a statement.
Nissan is not the only automotive business that has seen a decline in demand and sales, particularly due to competition from China. The EV segment has grown significantly enough to challenge Tesla’s dominance in the category, but even otherwise, their fluctuations in the Chinese market have affected businesses from luxury brands like Ferrari to sturdy, reliable brands like Stellantis.
