Nissan Motor, Japan’s third-largest automaker, has announced a significant restructuring plan aimed at addressing severe financial and operational challenges. The plan includes cutting 9,000 jobs, a 20% reduction in global manufacturing capacity, and cost-cutting measures to save $2.6 billion. The Japanese automaker has been facing a sharp decline in sales in its key markets, particularly China and the U.S., where it has struggled to compete with other automakers offering advanced hybrid and electric vehicles (EVs). This marks Nissan’s latest attempt to stabilize its operations after years of organizational turbulence and a sluggish recovery since the 2018 departure of former chairman Carlos Ghosn.
Slashing Profit Outlook and Restructuring Goals
Nissan reduced its annual profit forecast by 70%, down to 150 billion yen ($975 million), reflecting the depth of the challenges it faces. This is the second time this year the automaker has cut its profit outlook, driven by competitive pressures in China from local manufacturers like BYD. These competitors have outpaced Nissan with affordable EVs and hybrids equipped with cutting-edge technology, making it difficult for Nissan to capture market share.
In the U.S., Nissan’s challenges are amplified by its limited offering of hybrid vehicles, in contrast to Toyota, which has seen a surge in demand for its hybrid lineup. CEO Makoto Uchida admitted that the company had underestimated the demand for hybrids in the U.S., only recognizing the trend toward the end of the last fiscal year. “We didn’t foresee HEVs ramping up this rapidly,” Uchida said, emphasizing that recent efforts to adapt core models have been slow and complex.
As part of its restructuring strategy, Nissan plans to eliminate 9,000 jobs, impacting approximately 6.7% of its 133,580-strong workforce worldwide. However, Uchida declined to specify which regions or facilities would be affected. The restructuring will include reducing production capacity by 20% and streamlining vehicle development lead times to around 30 months to improve efficiency. The automaker’s 25 global production lines will see capacity adjustments, achieved by altering line speeds and adjusting shift patterns to optimize output.
Nissan’s Chief Monozukuri Officer, Hideyuki Sakamoto, explained that these changes aim to address capacity issues while maintaining operational flexibility. This reconfiguration, part of the $2.6 billion cost-saving initiative, is expected to improve Nissan’s competitive standing in a global market increasingly driven by innovation and efficiency.
Financial Strain and Voluntary Pay Cuts
In light of Nissan’s ongoing financial challenges, CEO Uchida announced a personal decision to forfeit 50% of his monthly salary. Other senior executives have also agreed to take voluntary pay cuts, demonstrating a shared commitment to the company’s restructuring goals. Despite these efforts, Nissan has withdrawn its net profit forecast for the current fiscal year due to the ongoing restructuring and unpredictable economic factors.
The recent quarterly earnings underscored Nissan’s financial difficulties, with a sharp 85% drop in operating profit to 31.9 billion yen for the July-September period, falling significantly short of analyst estimates. Nissan’s sales data paints a similar picture of declining performance, with global sales falling 3.8% to 1.59 million vehicles for the first half of the financial year. This decline was largely driven by a 14.3% drop in China and nearly 3% in the U.S., markets that together represent nearly half of Nissan’s global sales.
Nissan’s struggles are emblematic of broader challenges facing Japanese automakers in a highly competitive global market. In China, the world’s largest auto market, local manufacturers like BYD have aggressively expanded their EV and hybrid offerings, capturing market share and appealing to cost-conscious consumers. Nissan’s absence of a strong hybrid lineup in the U.S. has further limited its ability to attract customers in a market increasingly interested in fuel-efficient alternatives. In contrast, Toyota’s success with its hybrid models has highlighted Nissan’s need for a more diversified product lineup.
The challenges facing Nissan are also affecting other Japanese automakers. Honda Motor recently reported a surprising 15% drop in second-quarter operating profit, largely due to weakening sales in China. The news sent Honda’s stock price down by 5%, underscoring the challenges Japanese brands face in maintaining their market positions in both established and emerging markets.
Restructuring Through Partnerships and Asset Sales
In addition to cost-cutting measures, Nissan is looking to raise funds by selling part of its stake in Mitsubishi Motors, its alliance partner. The sale of up to 10% of its Mitsubishi holdings is expected to generate around 68.6 billion yen ($445.45 million), which will support Nissan’s restructuring efforts and boost its cash reserves.
Nissan has also pledged to deepen collaborations with partners Renault and Mitsubishi Motors to streamline operations and foster mutual growth. While Uchida provided few specifics on the extent of these collaborations, Nissan is expected to explore shared development initiatives and technology integrations that could help cut costs and drive new product innovations.
Nissan’s restructuring plan, including job cuts and production realignments, represents a substantial overhaul aimed at restoring profitability and competitiveness in a difficult market landscape. The company is betting on a leaner operational model, greater focus on hybrid and EV technology, and improved collaboration with partners to navigate current and future challenges.
While the path forward remains uncertain, Nissan’s management is hopeful that these changes will help the automaker rebuild a stronger foundation for growth. Nissan’s willingness to adapt and restructure in the face of adversity could ultimately prove critical to its recovery, but much will depend on the company’s ability to execute these plans effectively and respond to shifting market demands.
