Nissan cost-cutting, new product plan to save RM11.5 billion, new partner search as Honda merger fails

With its merger plans with Honda now in tatters, Nissan is being forced to tighten its belt as it continues fighting for survival. The company has finally detailed the turnaround plan it announced in November that targets a saving of hundreds of billions of yen through a raft of austerity measures.

As previously reported, Nissan plans to slash 9,000 jobs, including 2,500 global indirect employees, although the firm will add 1,000 positions at shared service centres to reduce unit labour costs. The consolidation of production likes at three plants – Smyrna and Canton in the US, and another facility in Thailand – plus a closure of three more factories (including Thailand Plant 1, currently producing the Almera and Kicks, in the first quarter of the fiscal year 2025) will also cut its headcount by 6,500.

Nissan will also reduce its annual global production capacity by 20% from five million units to four million, all by FY2026. This will be twinned with new engineering and operational efficiencies, including the launch of new models and their associated capital expenditure and cost reductions.

All that is expected to save 100 billion yen (RM2.9 billion), with another 200 billion yen (RM5.8 billion) coming from the reduction of sales and administrative expenses and 30 billion yen (RM871.8 million) from improved development efficiency. The latter will reduce its products’ time-to-market and reduce development costs through a “family development concept,” the benefits of which are set to be reaped from this year onwards. The first model utilising this process is slated for launch also in FY2026.

Meanwhile, design-driven costs are expected to be reduced by around 60 billion yen (RM1.7 billion) through measures such as the simplification of its six major global products by adjusting performance and content. There are also initiatives to cut manufacturing operational costs, including an up to 70% reduction in parts complexity, improving production planning to eliminate supply chain inefficiencies and lower warehouse costs and enhancing efficiency while reducing costs in after-sales parts warehousing.

All in all, the company is targeting a saving of another 100 billion yen in product development and manufacturing costs, leading to a total saving of 400 billion yen (RM11.5 billion). This, Nissan said, will reduce its break-even point and allow for a stable operating margin of four per cent.

These cost savings will be complemented by what Nissan hopes will be a more attractive model lineup to boost revenue. A refreshed model lineup will be joined by new plug-in hybrid models in FY2025 and FY2026, as well as new kei cars and large MPVs.

Its flagging electric vehicle lineup will also be bolstered by the introduction of a new Leaf, an all-new compact EV and a new energy vehicle (NEV) targeted at the Chinese market. Nissan’s e-Power hybrids, on the other hand, will enter a third generation boasting 20% improved fuel efficiency (including a 15% reduction in high-speed fuel consumption compared to the second generation) and 20% lower costs vis-à-vis first-gen models.

Technology-wise, Nissan plans to introduce “unique intelligent cockpits” and driver assistance features in FY2026, as well as commercial door-to-door (Level 4) autonomous driving features and driverless mobility services in Japan by FY2027. Model replacements and expansions into new segments will also help drive volume sales increases, the company said.

All this sounds great, but it won’t be enough to dig Nissan out of the financial black hole it has found itself in, something the company is well aware of. “It will still be difficult to survive without leaning on future partnerships,” CEO Makoto Uchida told reporters, highlighting just how important the search for new collaborators remains following the Honda deal crashing and burning.

Fortunately, a potential suitor that backed off when those merger talks began remains interested. Reuters reports that phone maker Foxconn has expressed renewed interest, with chairman Young Liu saying it is open to buying Renault’s 36% stake in Nissan, although a cooperation is much preferred. “If cooperation requires it [purchasing Nissan shares], we will consider it,” he said. “But purchasing its shares is not our aim; our aim is cooperation.”

Uchida said he hasn’t spoken to anyone from Foxconn management, Bloomberg reported. However, investment firm KKR & Co is apparently in the early stages of evaluating an equity or debt investment to improve Nissan’s financial position, sources familiar with the matter said.

This all comes as Nissan’s latest financial results painted an even bleaker picture, with its annual operating income forecast falling further from 150 billion yen (RM4.4 billion) to 120 billion (RM3.5 billion) – a far cry from the 500 billion yen (RM14.5 billion) it originally projected. This contributes to a net loss forecast of 80 billion yen (RM2.3 billion) for the 2024 fiscal year.

Losing the Honda merger makes the poor results even harder to swallow, although Nissan will continue to pursue an existing strategic partnership with its Japanese rival, with a focus on batteries and EVs.

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