Activist hitches long ride on Nissan’s turnaround
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.
By Katrina Hamlin
HONG KONG, Nov 12 (Reuters Breakingviews) -Nissan Motor 7201.T could be a long, potentially uncomfortable ride for an activist. Hedge fund Effissimo Capital Management has bought a 2.5% stake in the struggling Japanese carmaker, disclosures on Monday showed, sending shares up 13% the following day. But the $9 billion marque already announced ambitious plans to cut costs, and there is limited scope to speed things up. It’s a risky bet that CEO Makoto Uchida can pull off a tricky manoeuvre in a tight spot.
Effissimo’s stake highlights how activist investors have become key players in Japanese corporate finance. Yet Uchida has already taken a leaf out of the shareholder value playbook. His proposals last week included slashing headcount by 9,000 and production by 20% to bring total capacity down to about 4 million cars per year. He is also looking to sell fewer models and wring more sales out of each one, an effective strategy that Tesla TSLA.O has deployed to crank out double-digit operating margins since 2020. All of that should help raise Nissan’s own margin, which was just 0.5% in the first half of its financial year ending in March 2025.
In addition, Nissan sold a 10% stake in Mitsubishi Motors 7211.T worth roughly $450 million, adding to a cash pile needed to invest in battery-powered and hybrid models.
There’s probably not much more fat to cut. Effissimo could nudge Uchida to sell more of Nissan’s remaining stakes in alliance partners Mitsubishi and Renault RENA.PA, or part of the listed car parts unit, Nissan Shatai 7222.T, in which the hedge fund has held a stake since 2007. However, Effissimo will have a small voice: its 2.5% stake is dwarfed by Renault, which controls 15% of Nissan’s voting rights. And untangling the Renault relationship is no easy task. Besides, Nissan will need partnerships more than ever to maintain economies of scale in an increasingly challenging market.
More likely Effissimo is taking advantage of an affordable entry point. Nissan’s shares are valued at around 0.2 times the current book value, lower than the industry average of around 1.3, according to LSEG data. That reflects its vulnerable position. The company, which cut its operating profit forecast for the full year by 70% on Thursday, is facing strong headwinds in its two largest markets, the U.S. and China, where it must grapple with electrification and intense competition. That cheap share price means the bet could pay off, but it’s likely to be a long and bumpy journey.
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CONTEXT NEWS
In a regulatory filing on Nov. 11, Nissan Motor disclosed Cayman Islands-registered ECM Master Fund as a shareholder with a 2.5% stake as of end-September. ECM Master Fund is affiliated with activist investor Effissimo Capital Management, according to SEC filings.
Nissan last week announced a plan to cut 9,000 jobs and 20% of its global manufacturing capacity, slashing its annual operating profit outlook by 70%.
Nissan shares rose 13% to 415.8 yen on Nov. 12.
Nissan’s share price has languished https://reut.rs/3YEBo3c
Editing by Neil Unmack and Streisand Neto
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