Nissan to axe 9,000 jobs, cut production on weak China, US sales

Reuters

Nissan to axe 9,000 jobs, cut production on weak China, US sales

Nov 7, 2024 at 7:55 am GMT

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Costs to be cut by 400 billion yen in the current FY

Cuts operating profit outlook by 70%

Global production capacity to be cut by a fifth

China sales slump, lacks hybrids for US market

To sell up to 10% of Mitsubishi Motors for up to 68.6 bln yen

Recasts, adds context in paragraph 2, executive pay paragraph 10

By Daniel Leussink

TOKYO, Nov 7 (Reuters) -Nissan Motor 7201.T will cut 9,000 jobs and 20% of its global manufacturing capacity, the automaker said on Thursday, as it scrambles to reduce costs by $2.6 billion in the current fiscal year amid a sales slump in China and the U.S.

The plans underline the vulnerability of Japan's third-largest automaker, having never fully recovered from the disarray that led to the 2018 ouster of former chairman Carlos Ghosn and scaling back of the partnership with Renault SA RENA.PA.

Nissan cut its annual profit outlook by 70% to 150 billion yen ($975 million) on Thursday, the second time it lowered the forecast this year. Like many foreign automakers, it is struggling in China where BYD 002594.SZ and other local manufacturers are gobbling up market share with affordable EVs and hybrids that boast advanced technology.

But Nissan's graver problem may be in the United States, where it lacks a credible line-up of hybrid cars. That's in contrast to Japanese rival Toyota 7201.T, which has seen a boom in demand for gasoline-petrol hybrid cars.

Nissan misread demand for hybrids in the United States, CEO Makoto Uchida told a press conference.

"We didn't foresee HEVs ramping up this rapidly," he said, referring to hybrid EVs.

"We did start to understand this trend towards the end of last fiscal year," he said, adding that making some changes to core models didn't go as smoothly as planned.

The Yokohama-based company is planning to cut 9,000 jobs, equivalent to 6.7% of its 133,580 global employees.

It scrapped its net profit forecast due to ongoing restructuring efforts, which it said would reduce costs by 400 billion yen ($2.6 billion) this fiscal year.

PAY CUTS, LINE SPEED

Uchida said he would voluntarily forfeit 50% of his monthly compensation starting this month and the other executive committee members will also voluntarily take a pay cut.

Nissan will cut its production capacity by 20%, reduce vehicle development lead time to 30 months and deepen collaboration with its partners including Renault and Mitsubishi Motors 7211.T, it said.

Uchida declined to give any details about the timing or location of the job and production cuts.

Nissan is also selling up to 10% of its stake in Mitsubishi Motors to raise up to 68.6 billion yen ($445.45 million).

The automaker has 25 vehicle production lines globally and plans to reduce the maximum capacity of those, Chief Monozukuri Officer Hideyuki Sakamoto told reporters.

One method would be to change line speeds and shift patterns in factories, he said.

Operating profit for the July-September second-quarter tumbled 85% to 31.9 billion yen, far below an LSEG consensus estimate of 66.8 billion yen.

Nissan's global sales fell 3.8% to 1.59 million vehicles for the first half of the financial year, largely due to a 14.3% drop in China.

U.S. sales fell almost 3% to about 449,000 vehicles. Together, the two markets account for nearly half of Nissan's global sales by volume.

Honda Motor 7267.T reported on Wednesday a surprise 15% drop in second-quarter operating profit due to a heavy sales drop in China, sending shares in Japan's second-largest automaker down 5%.

($1 = 154.0000 yen)

Reporting by Daniel Leussink; Writing by Miyoung Kim; Editing by David Dolan, Edwina Gibbs and Elaine Hardcastle

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