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Nissan cuts jobs, output
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October 18, 1999: 8:09 a.m. ET
Japanese automaker's restructure to ax 21,000 jobs, close 5 plants
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LONDON (CNNfn) - Nissan Motor Co. unveiled a drastic restructuring program Monday that will see it slash 21,000 jobs and close five Japanese manufacturing sites to cut domestic vehicle production by almost one-third.
The long-anticipated recovery plan will see Nissan lay off 14 percent of its work force and shut three car assembly plants by March 2001. The automaker will also close two further manufacturing operations by March 2002.
The closures will help produce annual cost savings of 1 trillion yen ($9 billion) and cut domestic car production by 30 percent to 1.65 million units. The move will go a long way toward addressing overcapacity in the home market, which analysts estimate runs at between 20 to 30 percent.
Nissan is responsible for a large part of the oversupply in Japan -- its plants currently work at just half their capacity. The proposed closures will raise capacity utilization to 82 percent by 2002.
"The plant closures, however painful, will guarantee the future of the remaining plants by allowing them to be industry leaders, both in terms of productivity and cost effectiveness," Carlos Ghosn, Nissan's chief operating officer, said in a statement.
The restructuring program was welcomed by analysts. "It is quite positive. The big thing is the cut in capacity, which for Japanese car makers tends to be a last resort," Jean-Christophe Skiera, investment manager, Japanese equities at Hill Samuel Asset Management in London, told CNNfn.com.
The automaker will make a 200 billion yen provision in the current financial year to cover the restructuring costs.
Nissan also plans to cut purchasing costs, which represents 60 percent of total costs, by a fifth over the next three years.
Nissan will almost halve the number of suppliers to around 600 by 2002 from 1,145 at present. The company will also pressure the remaining suppliers to cut prices. "A significant part of the overall cost savings will come from how Nissan works with its suppliers," the company said in a statement.
Nissan also said it planned to halve its net debt to less than 700 billion yen by 2002 from the current 1.4 trillion yen. The automaker will raise funds by disposing of many of its non-core assets, including shareholdings in 1,394 companies worldwide.
The group has already cut its net borrowing from 2.3 trillion yen since French car maker Renault took a 37 percent stake in Nissan in March. At the time, the group was burdened with total debt of $40 billion.
"Le Cost-Killer"
The restructuring measures were expected to be tough after Renault sent Ghosn to the Japanese company earlier this year.
The French executive is known as "le Cost-Killer" inside Renault after he applied similar drastic measures to help turn the French company around.
At the same time, Nissan outlined a new model line-up and said it would work closely with Renault in future design and production.
Ghosn said Nissan would report an operating profit in the current financial year ending in March, and promised improvements the following year.
"The combination of growth and cost reduction will allow Nissan to achieve a consolidated operating profit of 4.5 percent of sales by 2002," Ghosn said.
Nissan has suffered losses for four of the five last years. In the year ended in March, the company reported net losses of 30 billion yen. Analysts forecast a net loss of 60 billion yen for the current year.
The restructuring measures do not include truck maker Nissan Diesel, in which Renault holds a 23 percent stake.
The announcement came after the Tokyo market closed Monday. In Monday trading, Nissan shares closed 7 percent lower. In Paris midday trading, Renault shares were down 3.5 percent after they were suspended earlier. 
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Nissan
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