Nissan Braces for Pain as Weak Profits Force Restructuring
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Nissan Motor Co. confirmed reports of a 90% drop in quarterly operating profit and a broader restructuring a day before posting results, underscoring the Japanese automaker’s struggle to get back on stable footing.
Operating profit for the fiscal first quarter will be several billion yen, the Nikkei newspaper reported July 24, indicating a result well below analysts’ average prediction for a 66% drop to $342 million in the April-June period. In the first three months of the year, profit plummeted 98%; Nissan hasn’t delivered such weak back-to-back earnings since the depths of the 2008-09 financial crisis.
Separately, Kyodo News earlier reported that Nissan is planning to cut at least 5,200 additional jobs globally to improve its performance, on top of a plan unveiled in May to shed 4,800 positions. In total, the reductions make up more than 7% of the workforce. Nissan board member Motoo Nagai, speaking to reporters on July 24, said any restructuring measures to be announced by the carmaker “won’t be simple.”
As part of the planned cost reduction measures, Nissan is considering production cuts in markets including Southeast Asia and Latin America, according to people familiar with the matter. Nissan declined to comment.
(Noriko Hayashi/Bloomberg News)
Nissan has been struggling to get back on stable ground following the arrest in November of Carlos Ghosn, the former chairman and architect of the global alliance between Nissan, Renault SA and Mitsubishi Motors Corp. Profit last year hit a decade low, and Nissan’s shipments are slumping in the U.S., where years of sales incentives eroded margins and expanded volumes through fleet sales. With an out-of-sync product cycle and aging model lineup, Nissan unveiled a plan in May to roll out new models. Such revamps, however, take time.
Nissan appeared to experience some trouble responding to the steady onslaught of media reports. Though the figures reported by the Nikkei on the company’s fiscal first quarter were roughly correct, the carmaker won’t be able to release its results until they’ve been approved by its board of directors on July 25, Nissan said in a statement. Even the statement, which was reworded at least once as it was being posted to Nissan’s website, came shortly after the company said it wouldn’t comment on the newspaper’s report.
“Once chasing nothing but volume under Ghosn, Nissan is now scrapping that strategy and is shifting its focus more on profitability,” said Koji Endo, an analyst at SBI Securities. “In order to achieve this, they are reducing the size of the company — this includes its inflated capacity and number of employees, as well as a bunch of unprofitable cars and trucks.”
Nissan is planning to refresh all core models, introduce 20-plus new products and focus on American retail sales over the next three years. The carmaker recently revamped the Nissan Skyline with design changes and features to make it more appealing to the Japanese market, and is also betting that passenger cars, especially electric sedans, will help drive future sales in China, Latin America and other growing markets.
Vehicle sales in the U.S. fell 15% in June, bringing the decline this year to 8.2%. Deliveries in China, Nissan’s biggest market, dipped 0.3% in the first half.
