Nissan shares tumble after cutting 9,000 jobs and halving CEO pay
NISSAN Motor’s struggles to cope with tougher car industry conditions and address internal weaknesses have spiralled, leaving the automaker no choice but to slash payroll, production and its forecasts for this fiscal year.
Nissan’s shares fell as much as 10 per cent in early morning trading in Tokyo on Friday, to their lowest since October 2020, after announcing plans to dismiss 9,000 workers and cut a fifth of its manufacturing capacity after net income plummeted 94 per cent in the first half.
Nissan also will sell off some of its stake in Mitsubishi Motors after burning through 448.3 billion yen (S$3.8 billion) in cash the last six months.
“In this new climate and until we have more details on the restructuring plans, it is difficult to gauge whether Nissan will be able to reduce fixed costs as quickly as last time,” Goldman Sachs Japan analyst Kota Yuzawa wrote in a note.
The cost to insure Nissan’s bonds against nonpayment appeared on track to jump on Friday, and was indicated at 180 basis points compared with 165 points earlier this week, according to a credit-default swaps trader.
The calamitous results will prove costly for chief executive officer Makoto Uchida, who’s forfeiting half his compensation starting this month. The CEO told investors Nissan has been affected “not only by external challenges, but also by our specific issues,” alluding both to the breakneck rise of Chinese automakers and Nissan setting overly ambitious sales targets.
“Meeting our sales goals will be a challenge,” Uchida said. “We need to rebuild our strength so that we can pivot toward a more positive direction.”
Nissan now sees its operating income plunging to just 150 billion yen in the fiscal year ending in March, down 70 per cent from its previous forecast. Management also lowered their revenue outlook by more than 9 per cent, meaning they now expect virtually no growth for the year.
Uchida has been at the helm since 2019, when Nissan was facing an existential crisis in the wake of former chairman Carlos Ghosn’s departure. He’s had trouble righting the ship while facing stiff competition from the likes of Tesla and China’s BYD, rendering the company a laggard among major Japanese automakers.
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“Nissan is the weakest one,” said James Hong, an analyst at Macquarie Securities Korea. “The only way for the company to improve sales is through price cuts.”
Nissan will sell almost a third of its shareholding in partner Mitsubishi Motors, paring its current stake of just over 34 per cent. The roughly 10 per cent holding that Nissan will offer up through the Tokyo Stock Exchange was worth about 68.6 billion yen at the close of trading on Thursday.
Uchida is roughly eight months into a three-year turnaround plan to reinvigorate the business, though Nissan already had to backtrack somewhat earlier this year. In July, the company cut its annual operating profit outlook to 500 billion yen from 600 billion yen, due to poor sales in China, Japan and North America.
Profit for the quarter that ended in September was 32 billion yen, falling short of the consensus estimates for 65 billion yen and further still from the 208 billion yen earned a year ago.
“The decline in second quarter profit wasn’t a surprise, but the figure itself was even lower than expected,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “The main problem is the gap between what the company wanted to achieve, and what was realistically possible.”
The plans Uchida has laid out include expanding Nissan’s lineup of electric vehicles, forging new partnerships and selling an additional 1 million cars a year by 2027. But analysts have said the company’s new lineup lacks enough hybrid models — a big problem when consumer demand for EVs is waning.
“The demand for hybrids is what’s allowing Toyota and Honda to enjoy strong profitability,” Macquarie’s Hong said. “That strategy also needs to be revisited.”
Like many international legacy automakers, Nissan is struggling in China, the world’s biggest car market. In June, the company said it would cease production at a plant in Changzhou amid slumping sales.
Nissan is now expecting to produce about 3.2 million vehicles in the year ending in March, almost 7 per cent fewer than the last fiscal year. The company also lowered its retail sales outlook to 3.4 million vehicles, paring forecasts for each of its major markets: North America, China, Japan and Europe.
In March, Nissan agreed with Honda Motor and Mitsubishi Motors to work together on software development, batteries and other EV components. The alliance could pit the trio against Toyota Motor and its tie-ups with Subaru, Suzuki Motor and Mazda Motor.
Uchida said Thursday that strategic partnerships with Renault SA, Mitsubishi Motors and Honda will boost Nissan’s investment efficiency and product. The job cuts he announced amount to about 7 per cent of Nissan’s workforce. AFP
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