Nissan Braces for Pain as Weak Profit Forces Restructuring
(Bloomberg) -- Nissan Motor Co. confirmed reports of a 90% drop in quarterly operating profit and a broader restructuring before reporting results Thursday, underscoring the Japanese automaker’s struggle to get back on stable footing.
Operating profit for the fiscal first quarter will be several billion yen, the Nikkei newspaper reported a day earlier, indicating a figure well below analysts’ average prediction for a 66% drop to 37 billion yen ($342 million) in the April-to-June period. In the first three months of the year, profit plummeted 98%. Nissan hasn’t delivered such weak back-to-back earnings since the depths of the 2008-2009 financial crisis.
Separately, Kyodo News earlier reported that Nissan is planning to cut at least 5,200 additional jobs globally to improve its performance, on top of a plan unveiled in May to shed 4,800 positions. In total, the reductions make up more than 7% of the workforce. Nissan board member Motoo Nagai, speaking to reporters on Wednesday, said any restructuring measures to be announced by the carmaker “won’t be simple.”
As part of the planned cost reduction measures, Nissan is considering production cuts in markets including Southeast Asia and Latin America, people familiar with the matter said. Nissan declined to comment.
Nissan has been struggling to get back on stable ground following the arrest in November of Carlos Ghosn, the former chairman and architect of the global alliance between Nissan, Renault SA and Mitsubishi Motors Corp. Profit last year hit a decade low, and Nissan’s shipments are slumping in the U.S., where years of sales incentives eroded margins and expanded volumes through fleet sales. With an out-of-sync product cycle and aging model lineup, Nissan unveiled a plan in May to roll out new models. Such revamps, however, take time.
Nissan appeared to experience some trouble responding to the steady onslaught of media reports. Though the figures reported by the Nikkei were “broadly accurate,” Nissan said in a statement it won’t be able to release results until they’ve been approved by the board. The statement, which was reworded at least once as it was being posted to Nissan’s website, came shortly after the company said it wouldn’t comment on the newspaper’s report.
Fiscal full year forecasts will remain unchanged, the Nikkei reported Thursday. Nissan issued an outlook in May for operating profit of 230 billion yen on sales of 11.3 trillion yen.
“Once chasing nothing but volume under Ghosn, Nissan is now scrapping that strategy and is shifting its focus more on profitability,” said Koji Endo, an analyst at SBI Securities. “In order to achieve this, they are reducing the size of the company — this includes its inflated capacity and number of employees, as well as a bunch of unprofitable cars and trucks.”
Nissan is planning to refresh all core models, introduce 20-plus new products and focus on American retail sales over the next three years. The carmaker recently revamped the Nissan Skyline with design changes and features to make it more appealing to Japanese consumers, and is also betting that passenger cars — especially electric sedans — will help drive future sales in China, Latin America and other markets.
Vehicle sales in the U.S. fell 15% in June, bringing the decline this year to 8.2%. Deliveries in China, Nissan’s biggest market, dipped 0.3% in the first half.
The surprise arrest of Ghosn, who led Nissan and Renault for more than a decade, exposed rifts over control and decision-making between Nissan and Renault. Currently out on bail, Ghosn has denied all charges against him, saying his arrest was due to a “dirty game” played by some Nissan executives. He is now preparing for his trial, which may start later this year or next year.
(Updates with full-year outlook in sixth paragraph.)
--With assistance from Kae Inoue.
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