“It’s Do Or Die” As Nissan Circles The Drain
Two different articles on major news sites surprisingly show how Nissan is not only not showing a profit but instead is circling the drain. It’s in much worse shape than we thought. Many say it’s “do or die.” There is dissension among the three top leaders of Nissan, it is eliminating 4,300 white-collar jobs and 12,500 jobs overall. It is closing two assembly plants, cutting its vehicle lineup, and will have fewer options and trim levels. That’s not all.
“The situation is dire,” says a person with knowledge of the situation told Reuters. “It’s now do or die.” By July it will cut regional sales offices in the US from eight to six. It has already reduced advertising and marketing budgets. In addition, Nissan is also looking to add to its available funds whatever these drastic cuts don’t cover. That estimate is $4.4 billion according to Reuters.
As it circles the drain Nissan now says 40% of manufacturing capacity is unused
Many of the vehicles Nissan targeted with heavy promotion and advertising have not sold well. Nissan has already said that 40% of its global manufacturing capacity is unused. With 2019 Q4 financials getting ready to be announced it’s feared Nissan will post another big loss.
Because Nissan’s financial year ends in March it may try to book some or most of its restructuring costs to 2021. So the big losses it is expected to have could be spread out to soften the optics of such a massive shortfall.
Before the announcement it would shut down two plants Nissan’s plan was to drop one production line at every plant it operates. Managers are now looking at killing off unprofitable models, and try to bring out replacements of its aging lines. The average model age is five years old. Nissan would like to reduce that to less than three years old.
If it’s now “do or die” how could Nissan’s pickups be allowed to get so old?
At Motor Biscuit we have griped about the age of its two pickups. The midsize Frontier came out in 1997 as a 1998 model. Its full-size Titan debuted in 2003. As you already know the pickup market in the US is one of the hottest next to SUVs. So, while the average age of its cars is five years, for its pickups it’s 20 years. 20 years!
Nissan’s operating performance has become much worse than first speculated. Most of these moves to slow down the bleeding were proposed in November 2019. So, in reality, these drastic measures may not be enough to stem the tide. It could up the amounts it will have to seek in loans to float the company until new models arrive.
Voluntary buy-outs are part of the 12,500 jobs Nissan wants to cut
The company recently said in a statement, “To adapt to current business needs and improve efficiencies Nissan will offer voluntary separation packages to eligible US-based employees.” It is expected that this is one means for its goal to eliminate 12,500 jobs. Most of the 4,300 white-collar jobs it hopes to eliminate will be in the US and Europe.
Dealers are looking at all of this with alarm. Airton Cousseau, who is a senior vice president, told dealers in a statement, “This reorganization will create office synergies that will enable a leaner organization while still focusing on dealer profitability and your ability to continue providing a quality customer experience. You will continue to receive all of the support that you need.”