The auto industry has a cyclical business, with boom times – periods of prosperity and growth – and then sliding into decline as sales fall, impacting profits significantly. Then tough decisions are made to trim the workforce, cut spending and all the other fixes to reverse a downturn, and slowly, the company goes on an upswing again.
During the 1990s, Nissan steadily declined with sales dropping globally, losing share and revenues in virtually all markets. By the end of the decade, it was on the edge of a black hole with a debt of US$20 billion. Then along came Renault with the offer of an alliance – not a merger like Daimler and Chrysler – and the French automaker assigned Carlos Ghosn to manage Nissan and bring it back to profitability.
Ghosn took when the company was at the cyclic bottom and formulated the Nissan Revival Plan to turn it around. He worked hard and took tough measures – even closing down factories – but he succeeded. Worldwide sales grew again and doubled, from 2.4 million in 1999 to 4.8 million in 2011. The company could even afford to develop and launch many new products, including the world’s first mass-produced fully electric vehicle – the LEAF – in 2010. During 2016, it launched, on average, a new model every 6 weeks.
Nissan was back on the upswing and Ghosn became a ‘superstar’ in the auto industry. But by the late 2010s, things started to change as market conditions became more competitive and challenging. Perhaps Nissan misread the trends and missed certain opportunities. It started to head downwards again and the COVID-19 pandemic made things worse… and then there was the Ghosn scandal which saw him sneaking out of Japan to escape further house arrest.
Under new management, Nissan has struggled to stop the company slipping again. It doesn’t have $20 billion debt but it still has a significant debt load of $1.6 billion, projected to rise to $5.6 billion in 2026. It’s 1999 again and though not really at risk of closing down, Nissan is facing very tough challenges.
In April this year, Makoto Uchida stepped down as CEO as it seemed that he could not do more to turn things around. In his place is Ivan Espinosa, who has been with Nissan for 22 years. It is the second time that Nissan is having a non-Japanese CEO, perhaps in the hope that a foreigner will be able to act in ways that a Japanese might find difficult – like Ghosn did.
Within a month of taking on his new role (he was already on the board before), 46-year old Espinosa has announced ‘Re:Nissan’ as a recovery plan that implements decisive and bold actions… the same way as the Nissan Revival Plan 25 years ago. It aims to create a leaner, more resilient business that adapts quickly to market changes. With a fresh focus under new management, Nissan is reassessing its targets and has conducted a comprehensive review of key initiatives, introducing further measures to ensure a strong recovery.
“In the face of challenging Fiscal Year 2024 (FY2024) performance and rising variable costs, compounded by an uncertain environment, we must prioritize self-improvement with greater urgency and speed, aiming for profitability that relies less on volume. As new management, we are taking a prudent approach to reassess our targets and actively seek every possible opportunity to implement and ensure a robust recovery. Re:Nissan is an action-based recovery plan clearly outlines what we need to do now. All employees are committed to working together as a team to implement this plan, with the goal of returning to profitability by fiscal year 2026,” explained Espinosa, who also has the position of President.
With Re:Nissan, the company targets total cost savings of 500 billion yen to establish a framework to secure operating profitability and free cashflow in the automotive business by FY2026 (Nissan’s fiscal year runs from April 1 to March 31). To achieve this, the company is accelerating engineering and cost efficiencies while implementing a rigorous governance model
Additionally, Nissan will temporarily pause advanced and post-FY2026 product activities to mobilize 3,000 people to focus on cost-reduction initiatives. This reprioritization was made possible through the company’s swift implementation of a shortened development process that reduces lead time and ensures no delays in product launches.
A key aspect of this transformation involves rethinking the supply chain. Nissan will restructure its supplier panel to secure more volume for fewer suppliers, eliminating inefficiencies and challenging legacy standards.
While maintaining a strong focus on variable costs, Nissan will continue to seek additional opportunities to reduce fixed costs by restructuring its manufacturing base and refine efficiencies. Vehicle production plants will be consolidated from 17 to 10 by FY2027. The Nissan Revival Plan saw 5 plants being shut down.
Additionally, the company will streamline its powertrain plants and accelerate job reformation, work shift adjustments, and capital expenditure reductions, including the cancellation of the planned battery plant in Kyushu.
‘Lifetime employment’, once a feature of the Japanese industries, has long ceased as companies have struggled to meet tougher operating conditions by having leaner workforces. Nissan will reduce its workforce by 20,000 between FY2024 and FY2027, which includes the previously announced reduction of 9,000. Ghosn’s Nissan Revival Plan in 1999 cut 21,000 jobs (14% of total workforce then).
For product development – an area which Espinosa spent much of his career in – the company aims to reduce parts complexity by 70%, while the integration and optimization of platforms will decrease the number of platforms from 13 to 7 by FY2035.
The company will advance its efforts to significantly shorten the development lead time of the first vehicle to 37 months and subsequent family vehicles to 30 months. Models developed under this process include the all-new Nissan Skyline, the all-new global C SUV, and an all-new Infiniti compact SUV.
While Nissan and Honda will continue their collaboration in vehicle intelligence and electrification, a tie-up may not be likely. Nissan will reinforce its existing partnerships. Several projects with its Alliance partners, Renault and Mitsubishi Motors, are underway with platform-sharing as well as model exchanges. For example, Mitsubishi Motors will adapt the next generation of the Nissan LEAF to sell under its own brand in North America.