New York Times
July 25, 2019
By Ben Dooley
Nissan on Thursday said it had begun cutting more than 12,500 jobs around the world after its profitability essentially evaporated in its most recent quarter.
The surprisingly glum news from the scandal-plagued Japanese company suggests its problems could be even more serious than it has previously acknowledged. That uncertainty extends all the way to the top, as its chief executive, Hiroto Saikawa, hinted that he could step down within the year, saying Nissan is considering changes to its senior leadership.
The results will put more pressure on Nissan to overhaul its operations and fix its fractured partnership with the French automaker Renault. The alliance, which includes Mitsubishi, is the industry’s largest, selling more than 10.7 million cars in 2018. But it was shaken by the arrest late last year of Carlos Ghosn, then Nissan’s chairman and leader of the alliance, which exposed deep operational problems and fissures within the group.
The linkup is more important than ever as the companies face industrywide challenges. Car sales are slowing across the globe, and automakers are facing increased development costs as new technology threatens the dominance of traditional auto companies that face growing threats from newcomers like Google and Uber, which are pursuing a vision of cars that are autonomous, connected and electric.
Nissan made clearer on Thursday the extent of its problems, after it disclosed a dramatic plunge in its financial results.
Nissan said its profit fell to 6.4 billion yen, or $59 million, in the April-to-June period from 115.8 billion yen during the same time last year. Its revenue fell nearly 13%.
Nissan had prepared investors for bad news in May, when Mr. Saikawa said the company’s expected net profit would hit “rock bottom” in 2019, dropping almost 47% by the end of the fiscal year in March. The warning followed a nearly 45% fall in profit last year.
But “the results were really more negative than we expected,” Mr. Saikawa told reporters during a news conference at the company’s headquarters in Yokohama.
The job cuts announced on Thursday were similarly worse than Nissan had signaled just two months ago. At its earnings announcement in May, the company had said it would need to cut back production and shed nearly 4,800 jobs, including in North America, to carry out a turnaround.
“We thought that the situation would be challenging, but the actual retail performance was slightly under what we expected,” Mr. Saikawa said.
Global sales dropped 6%, the company said, with particularly large losses in North America and Europe, where carmakers across the industry are having trouble persuading consumers to splurge on new cars. The difficulties have been compounded by the company’s lack of compelling new products and inability to tap into American consumers’ growing infatuation with trucks and sport utility vehicles.
Putting a brave face on the numbers, Mr. Saikawa said the company expected to make up for lost ground over the rest of the year. The company said it had not changed its forecast for 2019.
Still, Mr. Saikawa hinted at big changes this year, including at the top. In response to questions Thursday about his future at the company, Mr. Saikawa said that the board of directors had already started looking for the company’s next generation of leaders.
“Speed is fast in terms of deliberations at these committees,” he said. “You can expect that things will move, that we will not require a full year to make changes in the leadership.”
Nissan attributed its financial difficulties to Mr. Ghosn, who since 2011 pursued an aggressive strategy of expanding the company’s market share to 8% in the countries where it operated. In the United States, its biggest market, that meant offering large discounts to buyers and expanding sales of its vehicles to rental companies, a strategy that Mr. Saikawa has blamed for damaging the company’s brand.
But Mr. Saikawa, too, has a share of responsibility for Nissan’s problems. Since he became chief executive in April 2017, the company has been hit with a series of scandals related to inspections and emissions, shed talent at a fast clip and struggled to maintain a good relationship with its partner Renault, which has been frustrated by Mr. Saikawa’s unwillingness to deepen the links between the two companies.
Top executives at Nissan and Renault agree that their alliance is critical for facing those challenges. But they have had a difficult time putting aside their differences since the ouster of Mr. Ghosn, who was the alliance’s chief architect.
Tensions between the two companies flared after Mr. Saikawa refused overtures to merge the two companies, then balked at Renault’s efforts to make a deal with Fiat Chrysler.
Both companies now say that they have put the past behind them, but it is unclear how much longer Mr. Saikawa can stay as Nissan’s chief. In June, two proxy advisory firms issued an unusual call for shareholders to vote him off the board during the company’s annual meeting that month. He survived the vote with Renault’s support but said that he had asked a newly established nomination committee to begin the search for his successor.
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