A Peek at Nissan’s Drastic Turnaround Plan
Nissan is two weeks away from announcing its plan to trim capacity and cut costs. Here’s what’s on the agenda.
The uproar followed the arrest in November 2019 of former Chairman Carlos Ghosn on charges of financial wrongdoing. The scandal was accompanied by an abrupt slump in sales and profits, prompting the company to take a deep dive into all aspects of its business.
This year’s coronavirus pandemic threw a new wrinkle into the calculations, which the company’s board reviewed earlier today. Nissan warned last month that it will report operating and net losses for January-March of about $380 million and $840 million, respectively, on May 28.
Analysts point out that the current quarter is bound to be worse for Nissan, since the global health crisis has dried up markets everywhere.
What’s in the latest recovery plan? The Nikkei, Japan’s Tokyo-based daily business newspaper, says the focus is on more product and production sharing between Nissan and its Renault and Mitsubishi alliance partners (Nissan owns a controlling stake in MMC, which joined the alliance in 2017).
The aim is to boost component sharing among the three companies to 70% from the current 40%.
Specifically, The Nikkei says Nissan will:
- Close its assembly plant in Barcelona, Spain, which has been operating at only 30% of capacity
- Add production of unspecified Renault vehicles at its huge—and currently idled—plant in Sunderland, England. The facility, which can make 500,000 vehicles per year, operated at 65% of capacity last year building Nissan Leaf electric sedans and Juke and Qashqai crossover vehicles.
- Begin making Renault vehicles in Brazil, mainly for the export market
The three partners also intend to share facilities more closely in southeast Asia, according to The Nikkei. The newspaper says Mitsubishi will add Nissan models to its plants in Indonesia and elsewhere. In return, Nissan factories will supply major components to the MMC facilities.
The companies also plan to more fully integrate their electric car development programs.
Separately, Nissan is widely expected to phase out Datsun, the brand it relaunched in India six years ago as a line of entry-level models for emerging markets.
Nissan was already facing monumental challenges a year ago as former chairman Ghosn’s sales-at-any-cost strategy collapsed.
Now Nissan is in dire straits similar to those it faced when Ghosn arrived two decades ago to save the company from bankruptcy. But the subsequent creation of the Renault-Nissan-Mitsubishi alliance has vastly complicated the process of mending the same old problems.
Nissan’s new management team and its counterparts at Renault and Mitsubishi know what needs to be done. The challenge now is to effectively execute their plan.
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