News ID: 251637
Published: 0958 GMT April 19, 2019

Nissan to slash global production by 15%

Nissan to slash global production by 15%

Nissan Motor will cut global production by about 15 percent for the year ending March 2020, compared with its early projection for last fiscal year, as the Japanese automaker shifts away from the aggressive expansion campaign promoted by former Chairman Carlos Ghosn.

Nikkei (Japan-based financial newspaper) has learned that the company aims to produce about 4.6 million units in fiscal 2019 — the lowest figure in nine years — according to plans being communicated to its suppliers, reported.

The move is expected to affect earnings, and could cast a pall over its alliance with French automaker Renault.

Under Ghosn, Nissan stretched itself thin in order to meet aggressive sales targets. Now it is seeking a different path forward, with President and CEO Hiroto Saikawa announcing last February a new strategy focused on profitability over sales volume. He pledged to overhaul the company's production and sales structures.

Nissan appears to have sustained sales and output declines in fiscal 2018 after almost a decade of growth, due to a sluggish performance in the US. The figures are expected to fall further this fiscal year, even as many of Nissan's rivals anticipate growth or at least in line with 2018, making Nissan's drop stand out.

The planned production cut would be the steepest since fiscal 2008, when output fell 16 percent in response to the global financial crisis. By region, the automaker plans to keep production in Japan largely flat at over 900,000 units, while slashing it overseas by 20 percent to about 3.7 million vehicles.

A significant hit to earnings could complicate Nissan's push to restructure its alliance with Renault. Currently, the French automaker owns 43 percent of Nissan, while Nissan has a non-voting 15 percent stake in Renault, despite accounting for nearly half of its partner's group net profit.

In North America, Nissan will scale back corporate sales operations that prop up unit sales but are less profitable. It will also reduce its sales incentive funds distributed to retail dealerships to finance discounts.

Still, "we have not been able to fully leverage pure brand power to capture retail customers," Saikawa said. Sales volume will likely suffer for some time.

Meanwhile, an economic slowdown has weighed down new-car sales in China, where the automaker generates about 20 percent of global sales. Nissan will shift its focus there from mass-market sedans to electric vehicles and other high-value products, which will likely further impact unit sales.

Nissan downgraded its earnings forecast for fiscal 2018 in February. It now projects group operating profit to total 450 billion yen ($4.02 billion) — down 22 percent from the previous year and over 40 percent from three years before.


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