Do or die - Nissan takes the axe to the house Ghosn built | The Daily Star
12:00 AM, January 30, 2020 / LAST MODIFIED: 12:12 AM, January 30, 2020

Do or die - Nissan takes the axe to the house Ghosn built

Nissan is planning aggressive cost cuts to deal with an unexpected slump in sales as the expansionist strategy it inherited from fugitive former Chairman Carlos Ghosn flounders, four people familiar with the plans said.

Japan’s second biggest carmaker is set to eliminate at least 4,300 white-collar jobs and shut two manufacturing sites as part of broader plans to add at least 480 billion yen ($4.4 billion) to its bottom line by 2023, two of the people told Reuters.

The moves come on top of a turnaround plan unveiled in July and are likely to include cutting Nissan’s range of cars and the array of product options and trims in each line, slashing jobs mostly at head offices in the United States and Europe, and reducing advertising and marketing budgets, they said.

“The situation is dire. It’s do or die,” a person close to Nissan’s senior management and the company’s board told Reuters.

Most of the planned cuts and measures to enhance efficiency were presented to Nissan’s board in November and received its general blessing, two sources said.

A Nissan Motor Co spokeswoman declined to comment on new restructuring measures or the view that weaker-than-expected sales were the catalyst for a global overhaul.

Under Ghosn, Nissan embarked on a global expansion, boosting capacity to add new models, driving more decidedly into markets such as India, Russia, South Africa and southeast Asia and spending heavily on promotions and marketing to hit targets.

Now, many of those models are missing sales goals and executives at Nissan’s Yokohama headquarters estimate up to 40 per cent of its global manufacturing capacity is unused, or under-used.

Some executives are worried Nissan, part of an alliance with Renault and Mitsubishi, could post another loss at its carmaking business in the last quarter of 2019 - and possibly for all its operations in the year ending in March. One source said that would most likely hinge on whether Nissan books big restructuring expenses in its current financial year, or waits until the year ending in March 2021.

Reuters spoke to nine people familiar with Nissan’s plans. All declined to be named due to the sensitivity of the subject.

In July, Nissan said it would cut 12,500 jobs from 14 sites around the world, from the United Kingdom to Spain, Mexico, Japan, India and Indonesia - and reduce its model range by 10 per cent.

At the time, Nissan officials told Reuters that meant shutting one production line at each plant.

Now, Nissan is considering shutting two plants permanently, on top of the reductions at the 14 other sites, people close to Nissan’s management and board with knowledge of the matter told Reuters. They didn’t say which two new sites were at risk.

People familiar with the plans said the axe was also likely to fall at Nissan’s North American head office in Tennessee and its European headquarters in Geneva, as they were bloated with high-spending sales and marketing staff.

One source with direct knowledge of the turnaround plan said Nissan’s marketing teams globally gobble up nearly 1 trillion yen a year, or about 45 per cent of Nissan’s annual fixed costs of 2.1 trillion.

Nissan had been saddled with the excess, “thanks to (Ghosn’s) highly aggressive, expansionist volume goals, which we failed to achieve”, the source said. A spokeswoman for Ghosn said he declined to comment for this story.

Ghosn told a news conference in Beirut on Jan. 8 that Nissan’s poor performance since 2017 was down to Hiroto Saikawa, who formally took over from him as Nissan CEO in April 2017. “He was CEO and he was responsible for it,” Ghosn said.

In addition to cuts in Nissan’s fixed costs, managers are also considering plans to kill off unprofitable models, accelerate the pace of new product development and reduce the average age of its line-up to 2-1/2 years from five now.

The new plans aim to add 480 billion yen to Nissan’s bottom line by the end of March 2023, with 300 billion from cuts in fixed costs and 180 billion from an array of cars to be launched in the next three years, people familiar with the matter said.

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