Nissan Motor Co. announced that it would be laying off 12,500 workers from its offices worldwide. The decision arose from its poor performance in the first quarter of its fiscal year.
The automaker employs around 147,000 workers worldwide. Most of the job cuts are expected to be in factories in South America and other countries that have low profitability.
The job cuts will happen within the next three years in the hopes that Nissan’s business will be revived. Initially, the company announced that it would only reduce 4,800 jobs due to poor performance turnaround at the start of the year; however, it has now aimed to double the reductions.
Nissan has revealed on Thursday that its profits declined to almost 99% compared to its numbers in the last year.
Similar to other carmakers, Nissan has been facing challenges in sales and production, indirectly related to the US-China trade war and UK’s Brexit.
Ultimately, weak sales in the US and Europe have been a contributing factor to the decline in profits. Nissan’s vehicle sales were down to 4.4%. Meanwhile, Nissan’s stocks plummeted at least 3% in May. In the last six months, price shares decreased from $8.51 (¥920) to $7.09 (¥766).
New Nissan CEO Hiroto Saikawa has described this as the company’s “rock bottom.” Saikawa talked to Renault chairman that this is not the right time to discuss merger matters.
The business’ strategy of providing high incentives to US markets, to entice more consumers to buy their cars, has hurt the brand’s image. Nissan also focused on bringing in more fleet sales in the US, which contributed to losing the brand’s luxury status.
“If you see many Nissan vehicles lining up as rental cars at places such as an airport, people would think that they are cheap cars,” said Takeuchi.
Nissan is looking at reducing production and improving the brand’s image. At least 10% of Nissan’s production will be reduced for the fiscal year of 2022.
In March, Nissan decided to stop production of the Infiniti Q30 and Infiniti QX30 SUV in its plant in Sunderland, England. The decision affects 250 staff working in the plant.
The company decided to move the production of cars in Japan; since the Infiniti brand is not selling in the European market. The company plans to divert the premium brand to its US and Chinese markets.
Before the decision to pull-out the Infiniti brands from the Sunderland plant, the company already decided to pull-out its X-Trail car line.
Saikawa said in a news conference that the job cuts are necessary and would provide significant savings to the company.
The Arrests of Carlos Ghosn
Another factor to Nissan’s poor performance is the issues related to its former CEO, Carlos Ghosn. The ousted CEO was arrested last November 2018 and April 2019. In March, Ghosn was dismissed out of the Renault-Nissan-Mitsubishi partnership due to his arrest on charges of financial misconduct. Before that, Ghosn was forced out of his CEO position at Renault in January.
In November 2018, Ghosn was arrested at a tarmac in Tokyo related to personal use of funds from the Japanese carmaker company. In April 2019, he was again arrested related to making $5 million payments out of Nissan’s funds into a third party for his personal gain.
Ghosn has described his ousting as a plot to take him out of power. In April, Ghosn’s lawyers shared a video message from the former CEO.
Ghosn said, “This is about a plot. This about a conspiracy. This is about backstabbing.”
The former CEO further explains that the plot started from fear within the organization on the next steps of the merger between the three companies: Nissan, Renault, and Mitsubishi.
Allegedly, Ghosn abused his position as the CEO to project losses of personal investments into the company’s financial portfolio.
The alliance of Nissan-Renault-Mitsubishi restructured its management last March and formed a four-member board; composed of the three companies’ CEOs led by Renault’s new chairman Jean-Dominique Senard.
Ghosn is currently out on bail and is now on house arrest. The former CEO was in prison for over 100 days. Bail was allowed after the court ensured that he was no longer holding any management roles in the alliance of the three carmakers.
In June, Nissan announced that they would no longer be paying Ghosn’s retirement and compensation benefits. Ghosn’s retirement benefit amounted to $41 million (¥4.44 billion).
Ghosn has retaliated by filing a suit against Nissan Motor Co. and Mitsubishi Motors Corp. for the improper termination of his contract. He is seeking a total of $16.7 million (¥1.82 billion) in damages.