Nissan plans to slash around JPY300bn ($2.8bn) in yearly fixed costs as part of its restructuring plan to tackle the economic effects from COVID-19.
The carmaker will reveal its detailed cost reduction plans on May 28. They include discontinuing its lower cost Datsun brand, that has struggled in Asia, and closing an auto production line, bringing its global total to 13, according to media reports.
The company attributes its three years of fall revenue and decline in profits to a sales plan intended to boost market share that has failed, per media reports, and consequently is heading toward its lowest profit in 11 years. Sales are expected to continue dropping making it difficult for the company to recover.
The automaker’s cost cutting actions will place its utilization rate at about 80pc over the next three years, according to reports, assuming yearly production capacity of approximately 5.4mn vehicles. In fiscal 2019, Nissan’s utilization rate was around 65pc and per the prior year midterm plan the carmaker would cut capacity to about 6.6mn vehicles annually, from 7.2mn.
Nissan is planning to cut fixed costs in marketing and research, however company board members have yet to review the plans. Plant locations, excluding China, where Nissan’s sales volumes increased 1.1pc in April, may reduce output but there are no plans to close auto factories.
In April, Nissan advised it expects to post a loss for 2019 fiscal year through March 2020 when COVID-19 first took effect, shutting down industry output and demand. The company forecasts a 12pc drop in sales to JPY10.2tn for its recently ended fiscal year. Nissan’s midterm plan stipulates a recovery in profits of JPY11.5tn over a three-year period.
($1 = JPY107.03)