Nissan Motor Co. (7201.T), Japan’s third-largest automaker, has announced plans to cut approximately 9,000 jobs and reduce global manufacturing capacity by 20% as it aims to cut costs by $2.6 billion for the current fiscal year. The company made this announcement on Thursday in response to weakening sales, particularly in China and the United States, where local competitors are seizing market share with more affordable and technologically advanced hybrid and electric vehicles.
The job cuts will affect around 6.7% of Nissan’s global workforce of 133,580 employees. While details on the timing and specific locations for these layoffs were not provided, this restructuring underscores the challenging environment Nissan faces as it contends with sluggish demand in its two largest markets.
The company also significantly lowered its annual profit forecast by 70% to 150 billion yen ($975 million), marking the second downward revision this year. Nissan has struggled to regain momentum after its former chairman Carlos Ghosn’s ouster in 2018, as well as a scaling back of its long-standing partnership with Renault SA (RENA.PA). This has left Nissan grappling with internal instability while rivals have surged ahead in key markets.
Struggles in China and the U.S.
Nissan’s difficulties are particularly pronounced in China, where sales have fallen 14.3% year-on-year during the first half of the fiscal year. Chinese manufacturers such as BYD Co. (002594. SZ) are gaining dominance with cost-effective electric vehicles (EVs) and hybrids that leverage advanced features, drawing significant consumer attention away from foreign automakers. In the U.S., sales were down almost 3% to about 449,000 vehicles, further pressuring Nissan as it lacks a robust lineup of hybrid vehicles to compete effectively in a market increasingly favoring hybrid technology.
Nissan CEO Makoto Uchida acknowledged that the company misjudged hybrid demand trends in the United States. “We didn’t foresee hybrid electric vehicles (HEVs) ramping up this rapidly,” Uchida stated during a press conference. He admitted that Nissan began to recognize the shifting preference toward hybrids only toward the end of the last fiscal year. Attempts to adjust core models to meet market expectations have faced hurdles, highlighting Nissan’s ongoing struggles to adapt swiftly to changing market dynamics.
Cost-cutting measures and Restructuring Efforts
As part of its cost-cutting strategy, Nissan is focused on reducing vehicle development lead times to 30 months, lowering production line speeds, and implementing more flexible shift patterns to improve factory efficiency. Chief Monozukuri Officer Hideyuki Sakamoto confirmed plans to reduce the maximum capacity of Nissan’s 25 global production lines, a move aimed at addressing overcapacity amid softening demand.
Nissan has also scrapped its net profit forecast for the year as restructuring costs remain significant. In addition to the production cutbacks, Nissan will be selling up to 10% of its stake in Mitsubishi Motors (7211.T), raising approximately 68.6 billion yen ($445.45 million).
To demonstrate leadership commitment during this challenging period, Uchida announced he would voluntarily forfeit 50% of his monthly compensation starting this month. Other executive committee members will also take pay cuts in solidarity as the company pushes forward with its restructuring strategy.
Financial Performance and Competitive Pressures
Nissan’s financial results reflect the tough conditions it faces. The company’s second-quarter operating profit fell sharply by 85% to 31.9 billion yen, far below analysts’ consensus estimate of 66.8 billion yen. Global sales volumes dropped by 3.8% to 1.59 million vehicles for the first half of the fiscal year, driven largely by declining demand in its two largest markets: China and the United States. Combined, these markets account for nearly half of Nissan’s total global sales by volume.
Nissan is not alone in its struggles. Honda Motor Co. (7267.T), Japan’s second-largest automaker, also reported disappointing results on Wednesday, with a 15% drop in second-quarter operating profit due to slumping sales in China, causing its stock to fall by 5%.
As Nissan navigates this turbulent period, it faces an uphill battle in both stabilizing its operations and regaining its competitive edge. With cost-cutting and a refocused production strategy, Nissan hopes to eventually achieve a more sustainable balance, but the road ahead remains challenging in an automotive industry increasingly dominated by hybrid and electric vehicle innovation.
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