Nissan will cut as many as 12,500 jobs as profits drop
YOKOHAMA, Japan — Nissan on Thursday said it would cut as many as 12,500 jobs and reported a deep drop in profit, suggesting its problems could be even more serious than it has previously acknowledged.
The cuts represent around 9% of the company’s global workforce of around 139,000 as of March 2018. At least some of those cuts will come in North America, where the company saw a 7.7% year-on-year drop in sales in the first five months of 2019. It said it would also reduce global production by 10% by the end of fiscal year 2022 as
it seeks to address overcapacity and revitalize its stagnant product lines.
Nissan, which operates America’s biggest car assembly plant in Smyrna, Tennessee, with more than 8,000 employees,
is struggling to overhaul its operations and fix its fractured partnership with the French automaker Renault. The alliance, which includes
Mitsubishi, is the industry’s largest, selling more than 10.7 million cars in 2018. But it was shaken by the arrest late last year of Carlos Ghosn, then Nissan’s chairman and leader of the alliance, which exposed deep operational problems and fissures within the group.
Overall, Nissan on Thursday reported a 94.5% drop in net profit for the April-to-June period, to 6.4 billion yen. Its revenue fell nearly 13%.
Nissan had prepared investors for bad news in May, when its chief executive, Hiroto Saikawa, said the company’s expected net profit would hit “rock bottom” in 2019, dropping by almost 47% by the end of the fiscal year in March. The warning followed a nearly 45% fall in profit during fiscal year 2018.
The company said it had not changed its forecast for 2019.
Nevertheless, the scale of Tuesday’s announced job cuts was a surprise, suggesting that the company’s problems could be bigger than previously thought. At its earnings announcement in May, the company had said it would need to cut back production and shed nearly 4,800 jobs, including in North America, to carry out a turnaround.
Nissan has blamed its financial difficulties on Ghosn, who since 2011 pursued an aggressive strategy of expanding the company’s market share to 8% in the countries where it operated. In the United States, its biggest market, that meant offering large discounts to buyers and expanding the sales of its vehicles to rental companies, a strategy that Saikawa has blamed for damaging the company’s brand.
But Saikawa, too, has a share of responsibility for Nissan’s problems. Since he assumed the position of chief executive in April 2017, the company has been hit with a series of scandals related to inspections and emissions, shed talent at a fast clip, and struggled to maintain a good relationship with its partner Renault, which has been frustrated by Saikawa’s unwillingness to deepen the links between the two companies.
The linkup is more important than ever as the companies face an industrywide slump. Car sales are slowing across the globe, and automakers are facing increased development costs as new technology threatens the dominance of traditional auto companies that face growing threats from newcomers like Google and Uber, which are pursuing a vision of cars that are autonomous, connected and electric.
Top executives at Nissan and Renault agree that their alliance is critical for facing those challenges. But they have had a difficult time putting aside their differences since the ouster of Ghosn, who was the alliance’s chief architect.
Tensions between the two companies flared after Saikawa refused overtures to merge the two companies, then balked at Renault’s efforts to make a deal with Fiat Chrysler.
Both companies now say that they have put the past behind them, but it is not clear how much longer Saikawa can stay as Nissan’s chief. In June, two proxy advisory firms issued an unusual call for shareholders to vote him off the board during the company’s annual meeting that month. He survived the vote with Renault’s support, but said that he had asked a newly established nomination committee to begin the search for his successor.