Nissan Motor Co. has declared a substantial reduction in its global workforce and production capacity in response to financial difficulties that have emerged during the first half of fiscal year 2024. Following disappointing earnings reports, the company is taking decisive steps to stabilize its operations and enhance efficiency.
Financial Decline Drives Downsizing
Nissan’s decision to downsize comes after a challenging fiscal period where the company reported a significant decline in both revenue and operating profit. The consolidated net revenue fell by 79.1 billion yen, resulting in a total of 5.98 trillion yen for the period. The operational profit experienced an even sharper decline, dropping by 303.8 billion yen to just 32.9 billion yen, reflecting a slim operating profit margin of 0.5 percent. Net income for the period stood at 19.2 billion yen.
Workforce Reduction and Salary Cuts
To address these financial setbacks, Nissan plans to cut approximately 9,000 jobs globally and reduce production by 20 percent. CEO Makoto Uchida has announced that he will voluntarily forfeit 50 percent of his monthly salary starting in November 2024, and other senior management members are expected to follow suit with similar pay reductions. These measures are part of a broader strategy to cut fixed costs by 300 billion yen and variable costs by 100 billion yen.
Strategic Cost-Cutting Initiatives
Nissan aims to streamline its operations by restructuring its workforce and reducing its global production capacity. The company is also focusing on decreasing selling, general, and administrative expenses, while optimizing the cost of goods sold and managing investments in research and development.
Additionally, Nissan is looking to strengthen partnerships within its existing alliances, including Renault Group, Mitsubishi Motors, and Honda Motor Co., and is exploring new collaborations in technology and software services. To oversee these initiatives, Nissan will appoint a Chief Performance Officer starting December 1, tasked with enhancing sales and profit performance.
Impact on Indian Market
In India, Nissan’s presence has primarily revolved around the Magnite model, with the recent introduction of the X-Trail. The company has faced challenges in maintaining sales momentum, and the global decisions to slash production and reduce workforce will have implications for its Indian operations. The full impact of these changes on Nissan’s market position in India remains to be seen.
