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Production plant closures, staff layoffs and reduced model numbers are a sign of things to come as the ongoing coronavirus pandemic forces the auto industry to come to grips with a new reality.
At Nissan’s Yokohama headquarters yesterday, CEO Makoto Uchida announced that the firm had recorded a $6.2 billion net loss, its biggest in over a decade. To rationalize its global production, he noted that Nissan’s UK plant at Sunderland would stay open while its Barcelona plant in Spain and another in Indonesia would close. The Spanish factory and its supply chain network employ about 3,000 workers, but the closure could indirectly affect up to 22,000 jobs, one labor union said. On hearing the announcement, hundreds of Spanish workers gathered outside the plant and burned tires in protest.
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Nissan is part of a three-way alliance with Renault and Mitsubishi, all of which are restructuring their global operations to share platforms and technology and cut costs. Uchida also stated that Nissan would focus on several "key markets,” including Japan, North America and China, but surprisingly did not mention Europe after singling out its continued UK plant production. Among the three core markets, China currently enjoys global attention by being the first to register positive growth as it learns to cope with the pandemic. According to Nissan, the firm’s sales volume in China rose 1.1 percent to 122,846 vehicles in April, a figure it hopes will expand as more models come online.
During the announcement, Uchida unveiled a 4-year recovery plan to cull costs, slice capacity and reduce the number of vehicle models. As part of the downsizing move, model numbers will be reduced from 69 to less than 55 with production focusing more on electric vehicles like the four-wheel-drive Ariya SUV which is slated for a summer launch. Uchida also said that production would be cut by 20 percent to about 5.4 million vehicles a year in an effort to achieve sustainable growth and profitability by 2023.
The wide-scale reorganization is part of a move by Nissan, Renault and Mitsubishi to focus on costs and profitability in the wake of plummeting car demand due to the coronavirus pandemic. Before the pandemic, the automaker's operating profit had been falling for four consecutive years as it attempted to increase market share, particularly in America, resulting in overcapacity at plants and forcing dealers to offer sizable discounts. The November 2018 arrest of former Chairman Carlos Ghosn, who had rallied for volume growth and an alliance with the FCA Group, only exacerbated the company’s struggling sales record.
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