Nissan Motor Co., Ltd. (TYO:7201) Stock Slumps

Nissan Motor Co., Ltd. stock fell by 6% during Tokyo trading on Friday, following the announcement of a plan to cut 9,000 jobs and reduce global manufacturing capacity by 20%. This decision aims to save $2.6 billion this fiscal year as Nissan contends with declining sales in key markets like China and the US.

The restructuring emphasizes the challenges facing Japan's third-largest automaker, which has struggled to recover fully since the 2018 departure of former chairman Carlos Ghosn and a reduced partnership with Renault SA (OTC:RNLSY).

Nissan (OTC:NSANY) reduced its annual profit forecast by 70%, anticipating a profit of 150 billion yen ($975 million), marking its second downward revision this year.

Like other international automakers, Nissan is confronting fierce competition in China, where companies such as BYD (SZ:002594) are capturing market share with affordable electric and hybrid vehicles featuring advanced technology.

CEO Makoto Uchida acknowledged that Nissan underestimated the demand for hybrids in the US, stating, "We didn't foresee hybrid EVs ramping up this rapidly." He noted that adjustments to core models did not proceed as smoothly as anticipated.

Approximately 6.7% of Nissan's 133,580 global employees will be affected by the job cuts. The company has retracted its net profit forecast as restructuring progresses, which is expected to yield cost reductions of 400 billion yen ($2.6 billion) this year.

Furthermore, Uchida will forfeit 50% of his monthly salary starting this month, with other executives also agreeing to voluntary pay cuts.

Nissan plans to reduce production capacity by 20%, cut development lead time to 30 months, and strengthen ties with partners Renault (EPA:RENA) and Mitsubishi Motors (OTC:MMTOF). The company intends to sell up to 10% of its stake in Mitsubishi Motors, aiming to generate 68.6 billion yen ($445.45 million).

JPMorgan analysts view Nissan’s turnaround strategies as encouraging but stress that execution will be critical in the coming quarters to enhance the company’s margin profile. They also reiterated an Underweight rating, suggesting a preference for Ford (NYSE:F) over Nissan at current levels.

For the July-September quarter, Nissan reported an 85% decline in operating profit to 31.9 billion yen, significantly below the LSEG forecast of 66.8 billion yen.

In the first half of the fiscal year, global sales fell 3.8% to 1.59 million vehicles, primarily due to a 14.3% decline in sales in China and nearly 3% in the US, which together account for nearly half of Nissan's global sales.

In a post-earnings statement, a Morgan Stanley analyst acknowledged the challenging earnings environment but expressed concerns regarding the substantial guidance cut and the absence of an interim dividend, which were viewed negatively. Analyst Shinji Kakiuchi added that while structural reforms are essential, stronger brand and sales power are needed for genuine improvements in electric vehicles (EVs).