Nissan plans big cuts to go small after first loss in 11 years

By Naomi Tajitsu

TOKYO (Reuters) - Nissan Motor Co outlined a new plan on Thursday to become a smaller, more efficient carmaker after the coronavirus pandemic exacerbated a slide in profitability that culminated in its first annual loss in 11 years.

Under a new four-year plan, the Japanese manufacturer will slash its production capacity and model range by about a fifth to help cut 300 billion yen ($2.8 billion) off its fixed costs.

It will shut plants in Spain and Indonesia, leave the South Korean market and pull its Datsun brand from Russia as part of a strategy unveiled on Wednesday to share production globally with its partners Renault and Mitsubishi Motors.

"I will make every effort to return Nissan to a growth path," Nissan Chief Executive Makoto Uchida said, adding that the company had learned from its past mistakes of chasing global market share at all costs.

"We must admit failures and take corrective actions," he said, adding that starting with top-level managers, the company had to break its inward-looking culture which has stymied efforts to deepen cooperation with France's Renault.

Uchida said improving cash flow was Nissan's biggest challenge, though the company expects to have positive free cash flow in the second half of its financial year, compared with a negative 641 billion yen in the year to March 31.

With 1.1 trillion yen in net cash in its automotive business, untapped credit lines of up to 1.3 trillion yen and about 700 billion yen in new funding since April, the automaker said it had ample cash to cushion the blow from the coronavirus.

However, Uchida and Chief Financial Officer Stephen Ma acknowledged that more funding might be needed if the pandemic continues to weigh on sales in the coming months.

"We have plenty of liquidity at least for these few months," Ma told reporters. "As things progress we will look at all the possible options, and we are open to pursue other avenues."

Nissan declined to give any forecasts for its current financial year which started in April due to the uncertainty created by the pandemic. It also declined to give details on how many jobs it was cutting as part of its recovery plan.

Nissan's rivals, such as the world's biggest carmakers Toyota and Volkswagen, will not give it much breathing room as use their stronger balance sheets and products to strengthen their positions in China and Europe.

In the United States, consumers are shifting to sports- utility vehicles and large pickups that are speciality of the Detroit automakers, as well as Tesla's high-tech electric vehicles.

For an interactive graphic of Nissan's goals, click on: https://tmsnrt.rs/3gwfvMw

PROFIT SLUMP

In what is Nissan's second recovery plan in less than a year, Uchida, who took over as chief executive in December, pledged a return to profitability with a core operating profit margin above 5% and a sustainable global market share of 6%.

Nissan posted an annual operating loss of 40.5 billion yen for the year to March 31, its worst performance since 2008/09 and the fourth straight year its profit has fallen. It sold 4.9 million vehicles last year, down 11% from last year.

For an interactive graphic on Nissan's performance, click on: https://reut.rs/2USzcFy

Sales in its key North American market fell 15% as Nissan struggles to recover in the United States, where aggressive discounting has clobbered margins and tarnished its brand image.

"I don't want my brand, I don't want Nissan, to be considered cheap," Uchida told Reuters in an interview, adding that he would push to restore the quality of sales, particularly in the United States.

He also said that he was "not giving up" on Infiniti, Nissan's luxury brand whose sales have plummeted in recent years as development and manufacturing costs ballooned.

Rebuilding both the Nissan and Infiniti brands could take time, he said, as the coronavirus situation in the United States was taking "a bit more time than we thought" to improve.

Even before the spread of the novel coronavirus, Nissan's slumping profits had forced it to row back on an aggressive expansion plan pursued by ousted leader Carlos Ghosn. The pandemic has only piled on the urgency to downsize.

Nissan, Renault and Mitsubishi Motors said on Wednesday they would work more closely on developing and producing cars to reduce costs and ensure their alliance's continued existence.

Renault is due to announce its own restructuring plans on Friday which are expected to include job cuts despite resistance from the French government.

Spain said on Thursday that the closure of Nissan's plant in Barcelona could cost the company as much as 1 billion euros ($1.1 billion) and that investing in the factory would be a cheaper alternative.

Protesting workers burned tyres and blocked the entrance to the Barcelona factory following the announcement.

($1 = 107.7800 yen)

($1 = 0.9086 euros)

(Reporting by Naomi Tajitsu; Editing by David Clarke)