Nissan Has A Big Profitability Problem

Nissan is making significant cuts as it grapples with declining sales and profitability challenges—mainly, that the company isn't.

The automaker announced plans to slash 9,000 jobs, reduce global production capacity by 20%, and sell a third of its stake in Mitsubishi Motors. These measures are part of an effort to save $3 billion and realign the company’s financial strategy. Yikes.

Despite the cuts, Nissan remains committed to launching 30 new or updated models as outlined in its earlier roadmap. However, these plans could face delays as the company prioritizes cost-saving measures. The production capacity reduction—down from its current five million units annually—aims to better align supply with demand.

Nissan's financial struggles are stark. Operating profit dropped 85% in the third quarter, with a net loss of $60.1 million. Global sales fell by 2.8% from July to September, and while U.S. sales were relatively stable with a 0.2% decline, Nissan spent heavily on incentives, costing $167.7 million.

Recent actions underscore the automaker's challenges. Nissan scaled back production of the Rogue and Frontier due to dealer inventory surpluses and even urged dealers to sell vehicles at a loss, further impacting profitability. CEO Makoto Uchida is taking a 50% pay cut to demonstrate accountability for the company’s struggles.

The sale of part of its Mitsubishi stake is expected to raise $448 million, bolstering Nissan’s cash reserves. While Nissan plans to maintain strong ties with its Alliance partners Renault and Mitsubishi, it faces a tough road ahead in navigating rising costs, increasing competition, and shifting market demands.

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