Nissan Motor Company, Japan’s third-largest automaker, announced massive layoffs and budget cuts after reporting lagging sales in the U.S. and China, increasing costs, and disappointing profits in 2024.
At the beginning of the fiscal year last March, the company announced its goal to produce 30 new models over the next three years, raise global sales by 1 million vehicles, and provide shareholder returns of 30%.
However, in a report on the first half of the fiscal year, the company said that global sales volumes decreased year-over-year to 1.6 million units. The firm slashed its full-year operating profit forecast by 70%.
“Profitability was affected by higher selling expenses and inventory optimization efforts, particularly in the U.S., along with rising monozukuri [manufacturing] costs,” the report said.
In view of the company’s goal to “create a leaner, more resilient business capable of swiftly adapting to changes in the market,” Nissan announced plans to lay off 9,000 workers and slash manufacturing by 20% in the fiscal year ending in March 2025, saving about $2.6 billion.
“The company is implementing various measures to lower selling, general, and administrative expenses, decrease the cost of goods sold, rationalize its asset portfolio, and prioritize capital expenditures and investments in research and development,” Nissan said in its mid-fiscal-year report.
Nissan does not have a hybrid vehicle line-up in the United States, a type of vehicle that is in strong demand in America. Instead, the company poured its manufacturing dollars into revamped versions of its core vehicles, both traditionally powered and all-electric, which have not sold as well as it had hoped.
Tokai Tokyo Intelligence analyst Seiji Suiura laid the blame for this miscalculation at the feet of management, CNN reported.
“I think their understanding of the situation is completely wrong,” Sugiura said regarding the company’s failure to produce the in-demand hybrid vehicles.
As part of the restructuring process, Nissan President and CEO Makoto Uchida has volunteered to forfeit half of his monthly compensation, and other company executives have also volunteered to take pay cuts, Fox 4 KDFW reported.
“These turnaround measures do not imply that the company is shrinking. Nissan will restructure its business to become leaner and more resilient, while also reorganizing management to respond quickly and flexibly to changes in the business environment,” Uchida said, per Fox 4. “We [can] aim to enhance the competitiveness of our products, which are fundamental to our success, and set Nissan back on a path of growth. As a cohesive team, we are dedicated to working together to ensure the successful implementation of our plans.”