Nissan (NSANY, Financial) has announced a strategic restructuring in response to declining sales in key markets. The company will lay off 9,000 employees globally and aims to cut its production capacity by 20%. This follows the release of its second-quarter financial results, which showed a net loss of 9.3 billion yen. In contrast, the same period last year saw a net profit of 190.7 billion yen. Consequently, Nissan has revised its full-year operating profit forecast for fiscal year 2024 to 150 billion yen, down from the prior estimate of 500 billion yen.
The Japanese automaker also plans to sell a portion of its shares in Mitsubishi Motors, a strategic partner in the Renault-Nissan-Mitsubishi alliance. Nissan currently holds 34% of Mitsubishi's outstanding shares and intends to divest up to 10% of them. This move is part of a broader effort to realign its global strategy by optimizing asset allocation and reducing costs. Nissan aims to slash fixed costs by 300 billion yen, equivalent to approximately $1.94 billion, through measures including reduced sales, general and administrative expenses, and commodity cost reductions.
The timeline and locations for the layoffs have not been disclosed, though as of the end of March, Nissan employed about 134,000 full-time staff worldwide. In a show of leadership commitment, CEO Makoto Uchida will voluntarily cut his monthly salary by 50% starting November 2024, with other executive members also taking pay cuts.
Uchida remarked that achieving sales targets will be challenging, and emphasized the need to redirect the company's trajectory towards growth. Despite the planned downsizing, Uchida is optimistic about steering Nissan back to a growth path.
Nissan's sales in major markets have been underwhelming, particularly after the departure of former chairman Carlos Ghosn in 2019. Uchida has been taking steps to revitalize the brand, including expanding Nissan's electric vehicle lineup and seeking new partnerships. The goal is to sell an additional one million cars annually by 2027. However, analysts have noted that the new product lineup lacks appeal and consumer demand for electric vehicles is softening.
Like other automakers, Nissan is facing tough competition and a shift in consumer preference away from traditional gasoline-powered cars. In July, the company significantly reduced its full-year operating profit forecast from 600 billion yen to 500 billion yen due to weak sales in China, Japan, and North America.
While the decline in second-quarter profits was expected, analysts pointed out that the figures reflect a substantial gap between Nissan's aspirations and current market realities. Shares of Nissan have fallen 27% this year, lagging behind domestic rivals Toyota and Honda. The stock saw a steep decline after weak first-quarter results were announced in July and has yet to recover.
