Nissan laid off 9,000 employees, cut production by 20%, revenue dropped by 94%, and CEO salary cut by 50%

Nissan Motor Co. announced deep cuts to its workforce, production levels and financial forecasts in response to growing industry challenges and internal weaknesses. The automaker will cut 9,000 jobs and cut production capacity by 20% as net profit plunged 94% in the first half of this fiscal year. Separately, Nissan Motor Co. plans to sell part of its stake in Mitsubishi Motors Corp. after burning through 448.3 billion yen ($2.9 billion) in cash in six months, Bloomberg reported.

According to reports, the company’s shares fell nearly 10% in early trading in Tokyo on Friday, reaching their lowest point since October 2020.

The financial woes have taken a personal cost to Nissan CEO Makoto Uchida, who will lose half his compensation, Bloomberg reported.

According to Bloomberg, Uchida acknowledged the dual challenges of external market pressure and internal missteps, including Nissan setting ambitious sales targets amid fierce competition from Chinese automakers.

“Achieving our sales targets will be a challenge,” Uchida said. “We need to rebuild our strength so that we can move in a more positive direction,” he was quoted as saying in a Bloomberg report.

Nissan has lowered its operating income forecast for the fiscal year ending in March to 150 billion yen, a 70% decrease from its previous forecast. According to Bloomberg, revenue expectations have also been cut by 9%, indicating that future growth will be minimal.

Uchida, who took the helm in 2019 after the departure of former Chairman Carlos Ghosn, has worked to stabilize Nissan while facing competition from Tesla and China’s BYD. “Nissan is the weakest,” said James Hong, an analyst at Macquarie Securities Korea. “The only way for companies to increase sales is to lower prices,” Hong said, according to Bloomberg.

Rating concerns intensify

Nissan’s financial rating could be at risk after these grim results, with Bloomberg Intelligence’s Joel Levington noting that the company’s situation appears to be “extremely difficult.”

The Bloomberg report added that in order to cut costs, Nissan will reduce its stake in Mitsubishi Motors and sell about one-third of its shares, equivalent to about 10% of its total shares, worth about 68.6 billion yen.

Uchida has been pursuing a three-year turnaround plan aimed at reviving the business, but setbacks have mounted. According to Bloomberg, in July, Nissan lowered its profit forecast to 500 billion yen from 600 billion yen due to weak sales in major markets such as China, Japan and North America.

In the latest quarter, Nissan’s profit was 32 billion yen, well below analysts’ forecasts of 65 billion yen, and even further behind the 208 billion yen reported in the same period last year. “The profit decline in the second quarter was not surprising, but the number itself was even lower than expected,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “The main issue is the gap between what the company wants to achieve and what is realistically possible. gap,” he said.

Future plans as demand for electric vehicles drops

Uchida’s vision includes expanding Nissan’s electric vehicle lineup and forging new partnerships, with the goal of selling an additional 1 million vehicles annually by 2027. But analysts believe Nissan lacks enough hybrid models to meet current consumer demand, which is shifting away from electric vehicles. “Demand for hybrids has enabled Toyota and Honda to achieve strong profitability,” Hong noted. As quoted by Bloomberg, “This strategy also needs to be revisited.”

Like other traditional automakers, Nissan is trying to gain market share in China. In June, the company suspended production at its Changzhou factory due to sluggish sales.

Nissan expects to produce about 3.2 million vehicles this fiscal year, down 7% from last year, and lowers its retail sales forecast to 3.4 million vehicles. Forecasts for major markets such as North America, China, Japan and Europe have all been lowered.

(With inputs from Bloomberg)