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Nissan to Slash Jobs, Production After Forecasting $2.9 Billion Loss

February 9, 2009
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Reversing his profit forecast to a loss, Nissan Motor Co. CEO Carlos Ghosn entered crisis mode Monday, February 9.

Ghosn announced plans to slash 20,000 jobs, cut production by 20 percent, scale back model launches and delay new factories. Nissan may also seek government bailout loans, Ghosn said.

The $2.91 billion net loss Ghosn now predicts for the fiscal year ending March 31 would be his first loss since taking charge of Nissan in 1999. The outlook wipes out an earlier forecast for net income of $1.76 billion.

The 20,000 job cuts account for roughly 8.5 percent of the company’s workforce.

They include some 2,000 temporary jobs that have already been eliminated in Japan and another 1,200 early retirement buyouts from the United States. Nissan has also already announced 1,680 cuts in Spain. Nissan did not give details about where the additional reductions will hit.

Ghosn has put on hold the Nissan GT 2012 midterm business plan announced last year and its target of achieving 5 percent revenue growth through 2012. That plan was introduced after the earlier Value-Up initiative missed its unit sales goal.

The top priority now is preserving cash as Nissan and Japanese rivals struggle against collapsing global demand, a surging yen and shrinking access to credit. Of Japan’s six biggest automakers, only Honda Motor Co. and Suzuki Motor Corp. are still predicting profits.

“Nissan is operating in an environment in which we are hit with three challenges at one time: the credit crisis, economic recession and strengthening yen,” Ghosn said in Tokyo while announcing fiscal third-quarter results. “Systematically, the worst scenario happened.”

Ghosn’s new recovery actions include:

• Slashing Nissan’s global workforce to 215,000 from 235,000 by the end of 2009.

• Cutting labor costs by 20 percent to $7.69 billion.

• Limiting launches to 48 new products in the next five years, instead of 60 as planned.

• Slowing the ramp-up of Nissan’s new factory in Chennai, India.

• Suspending Nissan’s involvement in a new Renault factory in Tangiers, Morocco.

• Reducing board member pay by 10 percent and managerial pay by 5 percent.

Nissan, 44 percent owned by Renault SA, will also approach governments worldwide about possible credit lines, Ghosn said. He applauded industry-support measures already implemented in Europe and being considered in Japan and the U.S.

“We need access to financing, that’s all we’re asking,” he said.

“Cash is king,” Ghosn said. “You need to generate cash and be extremely rigorous with cash.”

The company may seek up to $549.5 million in low-interest loans from the government-backed Development Bank of Japan, the Nikkei newspaper reported.

Nissan may also try tapping the $25 million the U.S. government has earmarked to help automakers and suppliers retool factories to make more fuel-efficient vehicles.

For the full year, Nissan expects an operating loss of $1.98 billion. That’s against an earlier outlook for an operating profit of $2.97 billion.

“Earnings are going to be bad at automakers for some time,” said Tomomi Yamashita, senior fund manager at Shinkin Asset Management.

“You’ve got the currency problem and the amount of production adjustment that’s ahead,” he said, adding that automakers could be in the red for a few more quarters.

Nissan will rein in capital expenditure by 21 percent in the current fiscal year and then cut again by 14 percent next year. The reductions will help Nissan save cash, Ghosn said.

Nissan’s U.S. sales fell 29.7 percent in January, while the market dropped 37.1 percent. The company also fared better than the industry last year in posting a 10.9 percent U.S. sales decline.

Filed by Hans Greimel of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Workforce Management’s online news feed is now available via Twitter.

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