Nissan to Cut 11,000 Jobs and Close 7 Plants
On Tuesday, Nissan Motor announced sweeping new cost-cutting measures as part of its ongoing struggle to recover from a difficult financial period. The automaker revealed it would cut 11,000 jobs and close 7 plants, marking the latest step in its efforts to turn around the company after a tumultuous year. This move follows a significant drop in the company’s profits, with operating profit falling by 88% in the past year.
Financial Struggles and Falling Profits
In the 12 months ending March, Nissan reported an operating profit of just 69.8 billion yen ($472 million), a sharp decline from the previous year. Weakening sales in key markets like the U.S. and China, combined with challenges such as a failed merger with Honda and rising costs due to U.S. tariffs, have placed significant pressure on the Japanese automaker. Additionally, the rapid growth of Chinese EV makers in markets across Southeast Asia and beyond has posed further challenges.
Leadership Change and Cost Savings Goals
Under new CEO Ivan Espinosa, Nissan is targeting cost savings of around 500 billion yen. Espinosa acknowledged the significant challenges the company faces, stating that Nissan’s rising variable and fixed costs were not sustainable in relation to the company’s current revenue. The cost-cutting initiatives include a reduction in the workforce and a shift to streamline production, with plans to reduce the number of production plants from 17 to 10 and cut parts complexity by 70%.
Impact of Carlos Ghosn’s Legacy
Analysts suggest that Nissan is still feeling the impact of the leadership era under former Chairman Carlos Ghosn, during which the company prioritized sales volume over profitability. Ghosn’s focus on maintaining high sales figures led to heavy discounts, which have contributed to an aging product lineup. Now, Nissan is scrambling to refresh its offerings and modernize its cars.
First Quarter Forecast and Future Challenges
Despite these efforts, the road to recovery may not be smooth. Nissan is forecasting a 200 billion yen operating loss in the first quarter, as the company grapples with rising costs and the ongoing effects of its earlier missteps. While the company’s leadership aims to address these issues, analysts remain cautious about the potential for a quick turnaround.
