YOKOHAMA -- Nissan Motor Co. CEO Hiroto Saikawa will cut 12,500 jobs worldwide as part of new plan to revive the company after reporting a 99 percent plunge in operating profit in the latest quarter on falling sales in every major market except China.
Saikawa’s emergency overhaul comes as he tries to speed up a recovery plan running through the fiscal year ending March 31, 2023. He said earnings would gradually start to recover in the second half of this fiscal year, after a brutal first quarter he said was worse than expected.
Operating profit was nearly wiped out, tumbling to 1.6 billion ($14.8 million) in fiscal first quarter ended June 30, CFO Hiroshi Karube said, while announcing quarterly results here Thursday.
Operating profit margin shriveled to a 0.1 percent, compared with 4.0 percent a year earlier.
Net income dropped 95 percent to 6.4 billion ($59.3 million) in the April-June period.
Nissan’s revenue slid 13 percent to 2.37 trillion yen ($21.97 billion) in the three months, as global retail volume declined 6.0 percent to 1.23 million vehicles.
The earnings collapse adds to the sense of crisis enveloping Saikawa, who is simultaneously trying to reform corporate governance at Nissan and smooth relations with French partner Renault.
Nissan’s house was thrown into disarray by last year’s arrest of former Chairman Carlos Ghosn for alleged financial misconduct during his time at the helm of the Japanese carmaker.
Saikawa, now presiding over a post-Ghosn era in which Nissan’s U.S. profit engine imploded, wants to rebuild U.S. sales to 1.4 million vehicles in the fiscal year ending March 31, 2023.
In May, he outlined plans to restore parent company operating profit margin to 6 percent in the fiscal year ending March 31, 2023. It finished last year at a meager 2.7 percent.
Saikawa fleshed out the blueprint with more details. Chief among the measures is a plan to cut some 12,500 jobs worldwide by March 31, 2023. That encompasses some 4,800 job cuts Saikawa already announced in May.
Saikawa said July 25 that some 6,400 cuts are already underway at eight locations worldwide through the end of the current fiscal year ending March 31, 2020. They include:
- 1,420 job cuts in the U.S.
- 1,000 in Mexico
- 90 in the United Kingdom
- 470 in Spain through the suspension of a line
- 830 in Indonesia through the suspension of a line
- 880 in Japan
- 1,710 in India
Another 6,100 cuts are being planned through the spring of 2023, Saikawa said.
Nissan declined to give details on those reductions but said they will happen at six locations.
Saikawa said the cutbacks will focus on plants that are working below capacity, plants that make small cars and factories making Datsun products. Most of those will be factory jobs.
The goal is cut Nissan’s global production capacity to 6.6 million vehicles a year, from 7.2 million in the fiscal year ended March 31, 2018, Saikawa said.
Doing so will boost the global utilization rate to 86 percent from 69 percent, he forecast.
Saikawa said that, through these reforms, parent company operating profit will more than double to 870 billion yen ($8.07 billion) in the fiscal year ending March 31, 2023. Improvements in U.S. operations will account for 40 percent of the 480 billion-yen ($4.45 billion) gain.
Global sales by the end should hit 6 million vehicles, from 5.5 million last year.
Looking ahead, Nissan kept unchanged its previously announced earnings outlook.
Operating profit is expected to erode 28 percent to 230.0 billion ($2.13 billion) in the current fiscal year ending March 31, 2020, while net income almost halves, dropping by 47 percent to an expected 170.0 billion ($1.58 billion). Operating profit margin will dwindle to 2.0 percent, from the 2.7 percent to recorded in the previous fiscal year ended March 31.
