This decision follows a challenging financial year for Nissan, largely attributed to disappointing sales in critical markets such as China and the United States. Makoto Uchida, the CEO, has chosen to implement this substantial pay cut voluntarily to demonstrate his dedication to restoring the company's profitability.
Nissan is currently navigating a challenging landscape, as reported by Fox Business. CEO Uchida has characterized the situation as "severe," with the company experiencing a decline in sales and a significant reduction in its operating profit margin, which fell to 0.5% during the first half of the 2024 fiscal year. In response to these challenges, Nissan plans to decrease its global production capacity by 20%, restructure its workforce, and implement cost-saving measures totaling approximately $2.6 billion through both fixed and variable expense reductions.
As part of this strategic overhaul, Nissan aims to reduce its workforce by 9,000 positions, representing 6.7% of its total global workforce of 133,580 employees. The layoffs will be spread across the company's international operations, although specific details regarding locations and timelines remain undisclosed. Uchida emphasized that these actions are crucial for Nissan to attain "healthy growth" and to establish a "leaner, more resilient" business model.
Nissan's decision to reduce its workforce and cut back on production is part of a broader strategy to lower fixed costs by 300 billion yen (over $1.9 billion) and variable costs by 100 billion yen ($649 million), all while striving to maintain a positive cash flow. Additionally, the company intends to divest up to 10% of its stake in Mitsubishi Motors, which could generate approximately $445 million, according to Reuters.
Alongside job reductions, Nissan will modify production line speeds and shift patterns across its global factories. Hideyuki Sakamoto, Nissan's Chief Monozukuri Officer, emphasized that these adjustments are designed to enhance production efficiency and respond to the declining demand in Nissan's primary markets.
Nissan's struggles in China and the United States have significantly contributed to its recent financial difficulties. In China, sales dropped by 14.3% in the first half of the year, largely due to fierce competition from local players such as BYD. Meanwhile, in the U.S., Nissan has faced challenges due to a limited range of hybrid vehicle options, a segment where rivals like Toyota have successfully tapped into the increasing demand for fuel-efficient vehicles.
During a recent press conference, CEO Uchida acknowledged that Nissan underestimated the rapid rise in demand for hybrid electric vehicles (HEVs) in the U.S. "We didn't anticipate HEVs gaining traction this quickly," Uchida stated, highlighting the company's renewed focus on aligning its product offerings with consumer needs. Nissan's commitment to introduce 30 new models by 2026, with half being electric, underscores its dedication to addressing these market trends, as reported by Fox Business.
Nissan has revised its financial projections for the year, significantly reducing its profit forecast by 70% to 150 billion yen (approximately $975 million), according to Reuters. This represents the second downward adjustment this year as the company faces escalating costs related to its manufacturing and sales activities.
In a further indication of the challenges ahead, Nissan has eliminated its net profit forecast for the remainder of the fiscal year. The company's operating profit for the second quarter plummeted by 85% to 31.9 billion yen, falling well short of analysts' predictions. Despite attempts to manage expenses, the rising costs associated with "monozukuri"—the manufacturing process—along with increased selling expenses in the U.S., have continued to exert pressure on Nissan's financial performance.
In a show of solidarity with the ongoing restructuring efforts, CEO Uchida announced a 50% reduction in his monthly salary, with other senior executives also agreeing to lower their pay. Uchida expressed optimism that these measures would reflect the executive team's commitment to the company's turnaround, clarifying that the restructuring aims to enhance efficiency and adaptability rather than downsizing.
"This is not about reducing Nissan; it's about making us more efficient and robust," Uchida stated. "We are dedicated to improving the competitiveness of our products and steering Nissan back towards growth."
The automaker has revealed intentions to designate a Chief Performance Officer tasked with managing sales and profitability, with the position anticipated to be filled by December 1. This appointment is a component of a larger strategy aimed at enhancing Nissan's operational agility and adaptability to market fluctuations.