In a startling announcement, Japanese car manufacturer Nissan has revealed plans to slash 9,000 jobs from its global workforce as part of “urgent measures” to combat falling profits. The drastic move comes as the company grapples with declining demand for vehicles in key markets and intense competition in the electric vehicle segment.
Nissan’s Struggle with Profitability
The decision to cut jobs and reduce production capacity comes on the heels of a disappointing financial performance. In the three months leading up to the end of September, Nissan reported a loss of 9 billion yen (approximately £45 million), a stark contrast to the 191 billion yen profit posted in the same period last year. The company has also revised its sales and profit forecast downward for the second time this year.
We are facing a severe situation as we battle with higher costs for sales and in our factories, as well as having too many cars with dealers in the US in particular, which can force the company to give steep discounts.
– Makoto Uchida, Nissan’s Chief Executive
Miscalculating Hybrid Demand
One of the key factors contributing to Nissan’s current predicament is the company’s failure to anticipate the surge in demand for hybrid vehicles, particularly in the United States. Hybrid electric vehicles (HEVs) have gained popularity amid high fuel prices, offering consumers a more fuel-efficient alternative to traditional gasoline-powered cars.
According to a close source, Nissan’s CEO admitted, “We didn’t foresee HEVs ramping up this rapidly. We did start to understand this trend towards the end of last fiscal year.” This miscalculation has left the company scrambling to adapt to changing consumer preferences.
Urgent Measures to Boost Profitability
In an effort to turn the tide, Nissan has announced a series of urgent measures aimed at boosting profitability. These include:
- Cutting 9,000 jobs from its global workforce
- Reducing global production capacity by 20%
- Cutting sales budgets
- Targeting profitability at a sales volume of 3.5 million cars per year
Makoto Uchida, Nissan’s Chief Executive, has also pledged to forfeit half his monthly salary starting from November as the company implements these cost-cutting measures.
Uncertainty for Global Workforce
The announcement of job cuts has cast a shadow of uncertainty over Nissan’s 130,000-strong global workforce. While the company has declined to specify which parts of the business will be affected, there is speculation that the UK factory in Sunderland, which employs around 6,000 workers, may be spared from the cuts.
The Sunderland plant, which has the capacity to build up to 600,000 cars a year, only produced 325,000 vehicles in 2023. Despite this, managers in the UK have indicated that they do not believe the factory will be impacted by the job cuts, according to a person briefed on the situation.
Navigating a Challenging Landscape
Nissan’s predicament is not unique in the automotive industry. Carmakers around the world are grappling with falling demand for vehicles in key markets and intense competition in the electric vehicle segment. Chinese competitors, in particular, have emerged as formidable players in the electric vehicle market, putting pressure on established automakers to innovate and adapt.
As Nissan embarks on this painful restructuring journey, it remains to be seen whether these urgent measures will be enough to steer the company back to profitability. The road ahead is likely to be challenging, as the automotive industry undergoes a profound transformation driven by changing consumer preferences, technological advancements, and environmental concerns.
For Nissan, the key to success will lie in its ability to accurately predict and respond to market trends, while simultaneously streamlining operations and reducing costs. Only time will tell if the company’s bold moves will pay off, or if more drastic measures will be necessary to ensure its long-term survival in an increasingly competitive landscape.
