Plant closures in Spain and Indonesia, lower capacity in U.S. follow missed sales goals
By Sean McLain
TOKYO -- Nissan Motor Co. said it would slash production capacity and trim its model lineup after reporting a $6.2 billion loss in its latest fiscal year, one of the worst in its history.
The car maker's cuts include plant closures in Spain and Indonesia and capacity reductions in the U.S. It is hoping to save $3 billion in costs a year.
The moves follow a yearlong effort to undo an earlier plan to expand sales around the world. Nissan had built plants that could produce seven million cars a year, but found itself struggling to sell many more than five million.
"It has been difficult to run our business and generate profit under these conditions," said Nissan Chief Executive Makoto Uchida. "We must admit our mistakes and correct course."
While Nissan hopes that the worst of the financial pain is behind it, sales are expected to struggle for at least a few more months. April sales fell 42% globally from the same month of 2019 as plants shut down and shoppers stayed away amid coronavirus lockdowns.
Nissan traditionally reports results from China a quarter later than results for the rest of the world, so its bottom line has yet to reflect performance in China for the January-to-March period, when the country suffered the worst impact from the virus.
The company hopes the auto business will start producing positive cash flow by the end of next year. Mr. Uchida said he and his deputy, Ashwani Gupta, would forgo their performance bonuses, and Mr. Uchida said he would halve his base pay for the first half of the year as well.
Much of Nissan's loss, its worst in 20 years, came from writing down the value of assets affected by the cuts.
The Nissan measures came a day after the Japanese auto maker said it would cooperate more closely with its biggest shareholder, France's Renault SA. Nissan said it would focus on the U.S., Japan and China, while letting Renault take the lead in Europe and Latin America and ceding Southeast Asia to third alliance partner Mitsubishi Motors Corp.
Nissan said it would slash production capacity by one-fifth to around 5.4 million vehicles annually and reduce the number of models it sells by a similar proportion. The company didn't say which vehicles were on the chopping block, but it said it would target older models and vehicles only sold in a single region.
Investors have cheered Nissan's restructuring. Although Thursday's announcement came after Tokyo's market close, many of the details had come out in recent days. Nissan shares rose 8.2% in Tokyo Thursday and are up 20% this week.
The cuts are generating friction in Barcelona, Spain, as Nissan announced the long-expected closure of its plant there. The plant had been built to produce more than 100,000 vans annually, but Nissan sold only around 15,000 vans in Europe last year.
On Thursday, the Spanish government urged Nissan to reconsider, and plant workers blocked traffic and burned tires in protest.
Ultimately, the success of Nissan's plan relies on fixing the U.S. business, where sales have fallen from a peak of around 1.6 million vehicles in 2017 to 1.2 million in the year ended in March. The U.S. was once Nissan's greatest source of profit, but that eroded as its expansion there was padded by low-margin sales to rental agencies. Efforts to trim those fleet sales and rely more on consumers floundered.
At Thursday's announcement, Nissan looked to rebuild its brand image by showing a teaser video of a new version of its Z sports coupe.
Behind the scenes, U.S. production is getting a shuffle to better match supply with demand. Nissan's plant in Smyrna, Tenn., will focus on producing Nissan's popular sport-utility vehicles, and it will yield the Altima sedan to the company's plant in Canton, Miss., said a person involved in the planning. The Canton plant has been producing trucks and vans that fell short of sales targets.
Nissan plans to bring back many of the 10,000 U.S. factory workers who were furloughed during the coronavirus lockdowns in the U.S., according to people close to the company. Nissan is cutting a shift at its U.S. plants and shutting down the production line for vans in Canton, said one of the people.
Alongside cost cuts, Nissan is betting on new vehicles to revive demand. An update of its bestselling Rogue SUV will be unveiled in mid-June.
Fixing the U.S. business "is taking significantly more time than initially expected," said Mr. Uchida. "We are discovering the difficulty of restoring a brand that has been damaged."
Write to Sean McLain at email@example.com