Nissan’s plans to reach positive cash flow by March 2022 look unconvincing
Nissan’s plans to reach positive cash flow by March 2022 look unconvincing © Bloomberg

Nissan’s boss is putting his job on the line. Chief executive Makoto Uchida has promised shareholders that he will step down if he fails to achieve a turnround. He may come to regret making such assurances.

The Japanese carmaker does have a plan to get through the crisis. Annual fixed costs of ¥300bn ($2.8bn) will be cut. Managers should expect no pay raises. Hundreds of jobs will be lost at plants, including Sunderland, Barcelona, Brazil and Mexico. Global capacity will fall by a fifth and production in south-east Asia will be consolidated.

Yet none of this is revolutionary. Long-running cost-cutting plans are already in place. Nissan’s Indonesia plants had already started to wind down last year. A failed expansion strategy — the legacy of former chairman Carlos Ghosn — has left some plants running at under a third of capacity. Nissan announced plans to cut 12,500 jobs last year.

It is also not feasible to reach restructuring targets without a steep rise in costs. Nissan’s costs for the fiscal year ending in March, which included restructuring, led to a net loss of ¥671bn — the worst in two decades.

Development and marketing expenses will also rise as it prepares to launch 12 new models. Yet it seems unlikely that the new models alone will change the company’s fortunes. In its biggest markets outside Japan — the US and China — Nissan has become a cheapened and dated brand. Repairing its image cannot be resolved quickly. Global sales have been on a decline since 2018.

Meanwhile, the company’s debt-to-equity ratio has swelled to nearly 180 per cent in the year to March and will rise further as costs force Nissan to tap its ¥2tn in unused credit lines.

Mr Uchida’s plans to reach positive cash flow by March 2022 look unconvincing. As the timeframe is pushed back, dividend payments will be too. Shares have fallen 50 per cent in the past year. Investors, like its car owners, have no reason to stick around.

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