Nissan Motor, Japan’s third-largest automaker, unveiled a $2.6 billion cost-saving plan on Thursday, which includes 9,000 job cuts and a 20% reduction in global production capacity in response to declining sales in China and the United States. The company also slashed its annual operating profit forecast by 70% to 150 billion yen ($975 million), marking its second downward revision this year.
The company needs help in the world’s two largest markets, as nimble local manufacturers have taken advantage of the growing demand for electric vehicles. It is also losing market share in the United States, where consumers prefer to buy more fuel-efficient hybrids rather than gas-only models. In the first half of this year, average Nissan dealerships earned less than they did in the same period last year despite spending millions on marketing and offering various deals to lure customers.
In a statement, CEO Makoto Uchida said the company faced a “severe situation” and needed urgent measures to improve its performance. He promised to create a “leaner and more resilient” business that can respond quickly to changes in the marketplace.
The plan focuses on decreasing fixed costs, cutting back on variable costs, and rationalizing the asset portfolio. It also includes cutting back on development costs for EVs and SUVs and prioritizing research and investments in areas that can deliver the most growth and profitability. The company said it would appoint a chief performance officer to expedite decision-making during the turnaround process.
It is still being determined how many jobs will be eliminated as it depends on the results of the ongoing restructuring efforts. The company is already undergoing layoffs in the US and cutting production capacity in China and other markets. It is also reducing its stake in its alliance partner Mitsubishi Motors to 34 percent from 35 percent. According to a statement, the company’s senior management team will forfeit 50% of their monthly compensation starting this month.
Nissan’s stock is down 32% this year. The company’s sales slump follows bleak quarterly financial results that are well below analyst expectations. It reported a 93 percent drop in net income for the three months that ended in September.
The company has been working to boost EV sales by expanding its lineup and forging partnerships with other carmakers. However, the effort has been hampered by low prices for hybrids and other alternative-energy vehicles and slowing demand in China and the United States. In addition to slashing its profit outlook, the company is reducing its production capacity and selling back 10 percent of shares in its alliance partner, Mitsubishi Motors. Its shares fell as much as 4.6% in Tokyo trading on Thursday.
