Nissan has to ‘admit failure’, CEO says after reporting huge losses
It has unveiled a plan to cut global production by 20%, shut a plant in Barcelona that employs 3,000 people and cut its vehicle line-up
Tokyo — Crisis-hit Japanese carmaker Nissan reported a huge $6.2bn annual net loss on Thursday, announcing that it would shut its Barcelona plant and slash production, as it reels from the effect of the coronavirus pandemic.
Nissan was already battling weak demand as well as the fallout from the arrest of former boss Carlos Ghosn, currently an international fugitive after jumping bail and fleeing Japan.
But it said the global outbreak had hit all aspects of its business, with the car industry as a whole facing an existential crisis as the virus forces people to stay indoors.
The firm said it logged a net loss of ¥671.2bn ($6.2bn) for the year to March, compared with the net profit of ¥319.1bn a year earlier. Operating loss was ¥40.5bn.
It unveiled a four-year plan that will involve cutting global production 20%, shutting a plant in Barcelona that employs 3,000 people and reducing its vehicle line-up.
Nissan also plans to withdraw from South Korea where the firm saw “limited opportunities”, CEO Makoto Uchida said.
The company said the global pandemic had “substantially impacted” production, sales and other business activities in all regions, and declined to issue a forecast for the current fiscal year because of ongoing uncertainty.
The results were even worse than had been projected, and CEO Makoto Uchida said the firm had to “admit failures”.
The effect of the Covid-19 pandemic compounds a series of existing problems for Nissan, including weak demand, the Ghosn scandal and tensions in its alliance with Renault and Mitsubishi Motors.
“Nissan is facing an extremely tough business environment,” said Satoru Takada, vehicle analyst at TIW, a Tokyo-based research and consulting firm.
“The coronavirus shock hit Nissan when it was already struggling to recover,” Takada said before the announcement.
“Nissan has already cut jobs but extra restructuring may be needed,” he said. “Nissan cannot expect a V-shaped recovery. It is at a crucial stage.”
The carmaker's restructuring plan will see its factory in Barcelona shuttered, despite government efforts to keep it open.
Spain's foreign minister, Arancha Gonzalez Laya, said the government would “not throw in the towel” and would “explore all solutions, because our concern is to safeguard employment”.
Uchida said the decision had been difficult but that the firm needed to take action to transform its business. He said he would be taking a 50% cut in his base pay, with other executives also taking cuts.
“Our transformation plan aims to ensure steady growth instead of excessive sales expansion,” he said in a statement.
“We will now concentrate on our core competencies and enhancing the quality of our business, while maintaining financial discipline and focusing on net revenue per unit to achieve profitability.”
On Wednesday, Nissan and its alliance partners announced a joint transformation plan, agreeing that each member would take the lead in a specific market.
The plan will see Nissan take the lead in China, North America and Japan, with Renault in the front in Europe, Russia, South America and North Africa, and Mitsubishi Motors leading in ASEAN and Oceania countries.
But Uchida acknowledged that even in Nissan's core markets, such as the US, the situation was tough.
“We're realising that it takes time to restore a brand that's damaged,” he told reporters.
Nissan's leadership has struggled to right the firm since the 2018 arrest of former boss Carlos Ghosn on financial misconduct charges, which he denies.
His arrest set off a chain reaction that forced a major internal overhaul, prompted the resignation of the firm's CEO and exposed deep tensions within the three-way vehicle alliance.
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