Nissan Motor Co.’s struggles not only continued in the first half of fiscal year 2024, they worsened. The results forced the automaker to make dramatic moves to shore up losses, including slashing 9,000 jobs worldwide and cutting production by 20%.
Nissan CEO Makoto Uchida announced sweeping changes to bring the company back into the black.
These are just a few of the actions the company is taking to cut costs by $2.6 billion in the wake of massive losses through the first six months of the company’s fiscal year — losses driven by slow sales in China and the U.S.
Nissan’s global sales fell 3.8% to 1.59 million vehicles for the first half of the financial year. The decline came as a result of losses in the company’s two biggest markets. Sales dropped 14.3% in China while U.S. sales fell almost 3% to about 449,000 vehicles. The two markets combined make up nearly half of Nissan’s global sales by volume.
The sales slippage resulted in consolidated net revenue for the first half of the fiscal year decreasing by $516.5 million, or 79.1 billion yen, to $39 billion, or 5.98 trillion yen, with consolidated operating profit decreasing $1.9 billion (303.8 billion yen) to $214.8 million (32.9 billion yen), representing an operating profit margin of 0.5%.
Net income was $125.4 million, or 19.2 billion yen. Down more than $1.5 billion from the year-ago period. The massive declines called for the company to make massive changes — and it is.
Big changes
Nissan’s global sales fell 3.8% to 1.59 million vehicles for the first half of the financial year.
Nissan revised downward its full year outlook for fiscal year 2024. The updated projections anticipate net revenue to be 12,700 billion yen. Operating profit is expected to reach 150 billion yen. Net income is to be determined due to ongoing assessment of costs necessary for the planned turnaround efforts, the company said.
Additionally, the company suspended its interim dividend. The full-year payout will be reconfigured in conjunction with the level of the company’s recovery results. Company CEO Makoto Uchida noted he will take a 50% pay cut starting this month and other top executives will also voluntarily reducing their salaries.
The company plans to sell its stake in Mitsubishi Motors — about 10% — hoping to raise another $450 million or so to offset the losses.
What happened
The short version is that sales dropped in the company’s top two markets. However, that was a result of officials misreading those markets, according to Uchida.
“We didn’t foresee HEVs ramping up this rapidly,” he said during a press conference today. “We did start to understand this trend towards the end of the last fiscal year,” he said, adding that the company’s attempt to shift to meet market demand didn’t go as planned.
The company plans to advance the introduction of new energy vehicles in China, and plug-in hybrids and e-POWER in the US, while simultaneously increasing sales per model to enhance model efficiencies.
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What’s next
Aside from the aforementioned actions, the company plans to accelerate portions of its recovery program, the Arc, that was already in place. The goal is the ensure healthy growth, sustainable profits and cash generation while selling 3.5 million vehicles by fiscal year 2026.
Nissan executives are taking pay cuts as the company continues to try to turn around.
That entails changing the process currently in place for producing vehicles. The company wants to build vehicles faster and cheaper. Nissan aims to reduce vehicle development lead time to 30 months and deepen collaboration with Renault Group, Mitsubishi Motors Corporation (MMC), and Honda Motor Co., Ltd., while exploring more strategic partnerships in the areas of technology and software services.
To facilitate swift decision-making for the turnaround actions, Nissan will appoint a Chief Performance Officer responsible for sales and profit, effective Dec. 1.
“These turnaround measures do not imply that the company is shrinking. Nissan will restructure its business to become leaner and more resilient, while also reorganizing management to respond quickly and flexibly to changes in the business environment,” Uchida said.
“We an aim to enhance the competitiveness of our products, which are fundamental to our success, and set Nissan back on a path of growth. As a cohesive team, we are dedicated to working together to ensure the successful implementation of our plans.”
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