Rescue through shrinking: Nissan cuts 20,000 jobs and closes half of its factories

Nissan's new CEO, Ivan Espinosa, swore the workforce to a radical rescue plan at the annual results media conference on Tuesday after announcing the second-highest loss in the company's history. "To secure our future, we must move forward further and faster," the Mexican said.

The salvation for the CEO, who has been in office since April, lies in a radical downsizing program that is unparalleled in Japan. Last year, the struggling automaker announced plans to cut 9,000 jobs. Now, under the new "Re:Nissan" plan, the number is to rise to 20,000, approximately 17 percent of the global workforce.

He also plans to close seven of 13 car and engine plants, including in his home country of Japan. He intends to reduce production capacity from just under four million to 2.5 million cars by 2027 in order to become permanently profitable again after years of crisis.

And that's not all: Additional cuts and a reduction in suppliers are expected to help reduce the cost base by three billion euros. China plays a particularly important role in this – also as a supplier of know-how.

The group's need for drastic cuts was demonstrated by the consolidated financial statements for the 2024 fiscal year, which ended in March. Other manufacturers, such as Volkswagen, are also suffering from losses in China, US auto tariffs, and the heavy burdens of developing electric cars. But for Nissan, the crisis is threatening its survival.

Group sales shrank by 2.8 percent to 3.3 million vehicles, and revenue fell slightly to 12.6 trillion yen (77 billion euros). Thanks only to the financial division, the operating profit margin was 0.6 percent. The net loss then ruthlessly exposed the plight. At 671 billion yen (4.1 billion euros), the loss was just below the record loss of 1999, when the French automaker Renault took over Nissan and saved it from bankruptcy.

This time, however, the challenge is greater than it was then, Espinosa also indicated. "After the losses we announced today, we have a mountain to climb," he said. "It won't be easy."

One problem is the 25 percent auto tariff imposed by US President Donald Trump. Thanks to the austerity program, Nissan is expected to return to operating profitability. However, the company estimates that the auto tariffs will cause additional costs of 650 billion yen (3.7 billion euros) due to Nissan's high production in Mexico. Of this, at most 30 percent can be offset through cost-cutting and other measures. Due to the high level of uncertainty, the company has therefore refrained from issuing an annual forecast.

In addition, Nissan lacks a financially strong savior this time around. The alliance with Renault will continue only to a limited extent. Nissan intends to primarily share factories with the French company in the future, but will hardly develop cars together. And a merger with its equally struggling local rival Honda fell through at the beginning of the year because Nissan ultimately refused to give up its independence.

The two companies now intend to cooperate primarily in technology development. Interest from other companies, most notably Taiwanese iPhone manufacturer Foxconn, has not yet yielded any results.

Espinosa is therefore planning to restructure the company on his own. Japanese automotive analyst Takaki Nakanishi believes the Mexican and his team, which is full of foreigners, will be able to conduct a more thorough restructuring than under former Japanese CEO Makoto Uchida, who, he argues, protected the Japanese plants for political reasons. "I expect more pragmatic decisions to be made quickly now," Nakanishi says in an online commentary in the Nikkei newspaper.

Espinosa's plan seems to confirm his point. Nissan's former head of product planning not only wants to close factories, but also streamline purchasing and development. Several teams under Espinosa's leadership are to identify potential savings. He intends to allocate a total of 3,000 employees to this effort.

Initial results are already evident. The radical factory closure is being complemented by a flexible expansion strategy. With additional third shifts and production at plants operated by partners Renault and Mitsubishi Motors, Nissan intends to flexibly increase production capacity from the planned 2.5 to 3.4 million vehicles. Espinosa also hinted that cooperation with automaker Honda, with whom Nissan collaborates on technology development, could take place in the USA.

To this end, the plant in Nissan's most important market, the USA, will not be downsized, but expanded to mitigate the impact of auto tariffs. In addition, the Japanese company plans to reduce the number of suppliers and internal component standards to save costs.

Espinosa also has high hopes for the Chinese joint venture Dongfeng Nissan. First, Espinosa plans to make greater use of the factories there for the development of electric cars and exports. The first step will be two electric cars developed for the Chinese market. Second, Nissan aims to leverage the know-how of the Chinese market to reduce costs and increase the pace of development.

"We're looking at our suppliers in China and considering what we can learn from their methods," Espinosa said. He also promised to more closely integrate suppliers there into the global supply chain. This would represent a radical departure from the automotive industry's previously widespread strategy of managing China as a separate business for geopolitical reasons.

With this move, Nissan is sending a signal that could also attract interest from its development partner Honda. Honda is also struggling. The company reported an operating profit of 1.2 trillion yen (7.3 billion euros) on Tuesday thanks to its strong motorcycle division.

This corresponded to a profit margin of 5.6 percent. By comparison, Toyota achieved 10 percent. But the auto division is suffering. Its profit margin was already a meager 1.7 percent before Trump's auto tariffs. According to Honda's forecast, the tariffs are expected to burden the balance sheet by 650 billion yen (4 billion euros). Honda has therefore lowered its profit forecast for the current year by 59 percent to 500 billion yen (3 billion euros).