Nissan's CEO has announced he will slash his own salary in half as the company embarks on a major restructuring plan that includes cutting 9,000 jobs globally. The move comes amid a turbulent financial year for Nissan, driven by poor sales performance in key markets like China and the United States. Nissan's CEO, Makoto Uchida, voluntarily proposed the drastic salary reduction to show his commitment to steering the company back to profitability.
According to reports from Fox Business, Nissan is facing what Uchida described as a "severe situation." The automaker has been grappling with declining sales and a shrinking operating profit margin, which dropped to 0.5% in the first half of the 2024 fiscal year. To counter these setbacks, the company plans to reduce global production capacity by 20%, restructure its workforce, and cut costs by approximately $2.6 billion through a combination of fixed and variable expense reductions.
Global Workforce Cuts as Part of Cost-Saving Strategy
As part of its turnaround plan, Nissan intends to reduce its workforce by 9,000 employees, equivalent to 6.7% of its 133,580 global employees. The job cuts will be distributed across Nissan's global operations, although details about specific locations and timings have not yet been disclosed. Uchida stated that these measures are essential for Nissan to achieve "healthy growth" and "a leaner, more resilient" business model.
The decision to cut jobs and scale back production aligns with Nissan's efforts to reduce fixed costs by 300 billion yen (over $1.9 billion) and variable costs by 100 billion yen ($649 million) while aiming to maintain positive cash flow. The company also plans to sell up to 10% of its stake in Mitsubishi Motors, potentially raising up to $445 million, per Reuters.
In addition to job cuts, Nissan plans to adjust its production line speeds and shift patterns at factories around the world. Hideyuki Sakamoto, Nissan's Chief Monozukuri Officer, noted that these changes would help streamline production and meet the reduced demand in Nissan's core markets.
Nissan's Struggle in the Key Markets of China and the United States
Nissan's underperformance in China and the United States has been a significant factor in its recent financial challenges. China, where Nissan's sales fell by 14.3% in the first half of the year, continues to be a tough market due to the intense competition from local manufacturers like BYD. In the U.S., Nissan has struggled with a lack of hybrid vehicle options, a market segment where competitors like Toyota have capitalised on the growing demand for fuel-efficient options.
During a press conference, Uchida acknowledged that Nissan had misjudged the demand for hybrid electric vehicles (HEVs) in the United States. "We didn't foresee HEVs ramping up this rapidly," Uchida admitted, noting that Nissan is now focusing on rectifying this oversight to better align its offerings with consumer preferences. The company's plans to introduce 30 new models, half of which will be electric, by 2026 reflect its commitment to addressing these market demands, as reported by Fox Business.
A 70% Cut in Profit Outlook and an End to Nissan's Net Profit Forecast
Per Reuters, Nissan has also adjusted its financial outlook for the year, slashing its profit forecast by 70% to 150 billion yen (around $975 million). This marks the second downward revision this year as Nissan grapples with rising costs, including those associated with its manufacturing and sales operations.
To underscore the gravity of the situation, Nissan has scrapped its net profit forecast for the rest of the fiscal year. The company's operating profit for the second quarter dropped a staggering 85% to 31.9 billion yen, falling significantly below analysts' expectations. Despite efforts to control expenses, rising "monozukuri" costs—expenses related to the manufacturing process—coupled with increased selling expenses in the U.S. have continued to pressure Nissan's bottom line.
Executive Pay Cuts and Organisational Restructuring
In solidarity with the broader restructuring, Uchida announced he would begin taking a 50% cut in his monthly pay, with other senior executives also volunteering to reduce their compensation. Uchida expressed hope that these actions would demonstrate the executive team's dedication to the turnaround, emphasising that the restructuring does not mean Nissan is downsizing but instead refocusing on efficiency and adaptability.
"This is not about shrinking Nissan; it's about making us leaner and stronger," Uchida said. "We're committed to enhancing the competitiveness of our products and setting Nissan back on a path of growth."
The automaker also announced plans to appoint a Chief Performance Officer responsible for overseeing sales and profit, a role expected to be filled by December 1. The appointment is part of a broader strategy to improve Nissan's operational flexibility and response to market changes.
