The Japanese auto maker Nissan has come to a conclusion that to turn around its fortunes it is necessary for the company to become much smaller and the company will likely announce a reduction in its annual sale target of cars by 1 million, said reports quoting sources within the company. Nissan is due to announce its restricting plans next month.
The sale and profits of Nissan had been falling steadily even before the coronavirus pandemic hit the business world, causing the company to burn cash. That had forced the company to scale back its aggressive expansion plans that the company had been following under its former boss Carlos Ghosn. The coronavirus pandemic and its impact on global business have increased the urgency and the pressure on the company to restructure the business.
Reports said that the company has not finalized any new targets and sources said that the company might not ultimately announce any such numbers.
Reports quoting sources however confirmed that any restructuring plans of Nissan by 2023 needs ot be formulate don the basis of the assumption that the company will be able to achieve the target by then only if it is able to return to an annual sale figure of 5 million cars. That meant that the company will need to implement a large cut in its manufacturing capacity.
In comparison, in July last year, the then-CEO Hiroto Saikawa had set an annual target of sale of 6 million cars for the same period. That target was already scaled back from the target of around 8 million cars as announced by the company while under Ghosn. In the past financial year, Nissan sold about 5 million cars. But the outlook for the current fiscal year is much bleaker because of the coronavirus pandemic.
“For years, Nissan was looking for annual sales volumes around 7-8 million vehicles. The company has never managed to sell much more than 5 million or so,” one of the sources told the media. “The company can no longer consider this sort of wishful thinking. The resizing issue is really being taken into account, it has a lot of consequences on operations for 2020-2022.”
However considering the impact of the coronavirus pandemic which has dampened demand for new cars globally, the target figure could even by lower than 5 million, said reports quoting a senior company source.
The annual global production capacity of Nissan was planned to be cut about 6.5 million vehicles, the company had announced in July. According to analysts, by cutting down on the target sale by 1 million vehicles will also mean that the company will likely need to also close down between three to four more assembly plants while laying off thousands more jobs over and above the numbers that the company has already announced – which was 10 per cent of its total workforce. It is expected that such scaling back of targets will also have a major impact on the suppliers and dealers of the company.
(Adapted from Reuters.com)