Nissan Motor Restructures
Nissan Motor Co Ltd’s management has become convinced the struggling automaker needs to be much smaller. A restructuring plan due next month would likely assume a cut of 1 million cars to its annual sales target.
Even before the spread of the pandemic, the automaker’s stocks, sales and profits had been slumping. It was burning through cash, forcing it to row back on an aggressive expansion plan pursued by Carlos Ghosn.
COVID-19 has only piled on urgency and pressure to renewed efforts to downsize. So far, no new sales target has been finalized.
Nissan’s plans for restructuring will be through to March 2023. It should assume that it would only be able to return to annual sales of 5 million cars by then. If added, this would entail a large reduction to manufacturing capacity.
That number compares with a goal of 6 million cars for the same period outlined in July by then CEO Hiroto Saikawa. The former CEO had already stepped back from around 8 million targeted under Ghosn.
The company likely sold about 5 million cars in the past financial year. But this year’s outlook is bleaker also in stock market due to the coronavirus pandemic.
For years, it was looking for annual sales volumes around 7-8 million vehicles. But it has never managed to sell much more than 5 million or so.
The automaker can no longer consider this sort of wishful thinking. The resizing issue is really being taken into account, having a lot of consequences on operations for 2020-2022.
The number could be even lower than 5 million given the impact of the virus. COVID-19 has hammered car demand around the world.
Nissan’s Cutbacks
In July, the company said it was aiming to cut annual global production capacity to around 6.5 million vehicles. Reducing its sales target by 1 million vehicles would equate to closing three to four more assembly plants.
This would mean shedding thousands more jobs on top of already announced plans to cut its workforce by 10%. Nissan’s cutbacks would also ripple through to its suppliers and dealers.
Nissan’s Next Priority
In stock trading news, Nissan’s other top priority will be the preservation of cash.
In December, its automotive operations had negative free cash flow of 670.9 billion yen. It is a more than 6-fold increase from a year ago. One of its people said that’s no longer at an acceptable level.
The auto company has requested a $4.6 billion commitment line from major lenders to cushion the impact of COVID-19. At the same time, it seeks to engineer the desperately needed turnaround.
