Friday, November 22, 2024

Nissan Shares Tumble After Cutting 9,000 Jobs and Halving CEO Pay

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(Bloomberg) — Nissan Motor Co.’s struggles to cope with tougher car industry conditions and address internal weaknesses have spiraled, leaving the automaker no choice but to slash payroll, production and its forecasts for this fiscal year.

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Nissan’s shares fell 6% Friday to September lows after announcing plans to dismiss 9,000 workers and cut a fifth of its manufacturing capacity after net income plummeted 94% in the first half. Nissan also will sell off some of its stake in Mitsubishi Motors Corp. after burning through ¥448.3 billion ($2.9 billion) in cash the last six months.

“In this new climate and until we have more details on the restructuring plans, it is difficult to gauge whether Nissan will be able to reduce fixed costs as quickly as last time,” Goldman Sachs Japan Co. analyst Kota Yuzawa wrote in a note.

The cost to insure Nissan’s bonds against nonpayment jumped on Friday, and was indicated at 180 basis points compared with 165 points earlier this week, according to a credit-default swaps trader.

The calamitous results will prove costly for Chief Executive Officer Makoto Uchida, who’s forfeiting half his compensation starting this month. The CEO told investors Nissan has been affected “not only by external challenges, but also by our specific issues,” alluding both to the breakneck rise of Chinese automakers and Nissan setting overly ambitious sales targets.

“Meeting our sales goals will be a challenge,” Uchida said. “We need to rebuild our strength so that we can pivot toward a more positive direction.”

On one hand, Nissan’s woes mirror those of Volkswagen AG, Stellantis NV and some US carmakers, which are struggling to contain costs, dealing with shrinking market share and trying to navigate the transition to electrification and autonomous driving. On the other, the health of peers such as Toyota Motor Corp. and rivals in China puts Nissan’s troubles into stark contrast.

Nissan now sees its operating income plunging to just ¥150 billion in the fiscal year ending in March, down 70% from its previous forecast. Management also lowered their revenue outlook by more than 9%, meaning they now expect virtually no growth for the year.

Uchida has been at the helm since 2019, when Nissan was facing an existential crisis in the wake of former chairman Carlos Ghosn’s departure. He’s had trouble righting the ship while facing stiff competition from the likes of Tesla Inc. and China’s BYD Co., rendering the company a laggard among major Japanese automakers.

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