Nissan to lay off 15% of its employees globally: strategic remedy triggered by huge losses

Japanese automaker Nissan has announced a recovery plan to create a "more resilient business that can quickly adapt to market changes". Previously, the company reported a net loss of 671 billion yuan (4 billion euros) for the fiscal year that ended in March. By comparison, the net profit for the previous fiscal year was 2.6 billion euros. This loss is mainly due to the decline in car sales in China and other countries, as well as significant restructuring costs.

At present, Nissan is facing enormous pressure. In the North American market, consumer preferences have begun to shift towards electric and intelligent models, which has led to a sharp decline in sales of Nissan's traditional fuel vehicles in North America. The lagging layout of hybrid technology has further exacerbated the dilemma. In the Chinese market, the penetration rate of new energy vehicles in China has exceeded 60%. Under the pressure of local brands, Nissan's pure electric vehicle sales in China account for less than 8%, and the sales target of one million vehicles has not been achieved for five consecutive years. The decrease in sales has led to a sustained low utilization rate of Nissan's production capacity, with the average operating rate of factories dropping to 68% (breakeven line of 75%), and local factories in Japan even dropping to 62%, equivalent to daily idle capacity losses of over 10 million yen.

According to the Japanese public broadcaster NHK on Monday, Nissan will lay off over 10000 employees worldwide, including the 9000 announced in November last year. The total number of layoffs this time will reach about 20000, accounting for 15% of its total workforce. And plan to achieve all layoffs by the fiscal year 2027 (ending in March 2028). By laying off 20000 employees globally, it is expected to reduce labor expenses by over 400 billion yen annually, easing the huge loss pressure of the 2024 fiscal year.

According to the latest recovery plan, Nissan announced that it will reduce the number of car factories from 17 to 10 in order to cope with the cash flow difficulties caused by huge losses and debt pressure. It did not disclose which factories were closed, but confirmed that the closed factories will include those in Japan. The closure of 7 factory production lines has reduced annual fixed costs by 120 billion yen, greatly optimizing capacity utilization. At the same time, Nissan also improved its cash flow by selling some equity in Mitsubishi Motors and reducing management salaries, accelerating the adjustment of asset lightweight and freeing up funds for research and development investment.

Although Nissan's layoffs have temporarily eased financial pressure, the pressure on its market competitiveness has further intensified. Layoffs accompanied by the closure of the Changzhou factory have caused a further year-on-year drop in sales of some key car models, which will further weaken the brand's presence. Nissan's layout of hybrid models in the US market is lagging behind, and layoffs may slow down the pace of technological catch-up, exacerbating the gap with Toyota and Tesla. After cutting 17% of R&D personnel at the same time, resources will mainly focus on solid-state batteries and intelligent driving technology. However, the reduction in personnel size may lead to insufficient technological reserves and miss out on competition in the next generation of technology.

Nissan's layoffs reflect the dilemma of traditional car companies' electrification transformation, which may accelerate mergers and reorganizations in the automotive industry. The supply chain of the automotive industry has also been shaken, and the reduction of production capacity has led to a decrease in orders from component suppliers. The automotive industry cluster in Kyushu, Japan may face huge losses. Although this layoff is a key measure for Nissan to stop bleeding and prolong its life, in the white hot stage of competition for automotive electrification, the balance between production capacity contraction and technology investment may lead it into a vicious cycle of "weakening as it cuts".