Why is Nissan cutting jobs? Will jobs in Tennessee be affected? What to know

Posted by Admin November 8, 2024 Jobs

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After a challenging year, Nissan Motor will be cutting 9,000 jobs and 20% of its global manufacturing capacity, the automaker announced on Thursday.

According to an earnings report from the company, which has its U.S. headquarters in Franklin, revenue for the first half of fiscal year 2024 was 5.98 trillion yen ($39,169,598,000), 79.1 billion yen ($518,195,965) less than the previous year. Their operating profit also dropped significantly to 32.9 billion yen ($215,532,835), with a very low profit margin of 0.5%.

Company officials did not specify whether its largest manufacturing facility, the Nissan Smyrna Vehicle Assembly Plant, will be affected.

“Tennessee is important to Nissan,” Director of Corporate Communications Kyle Bazemore told the Tennessean. “We just announced a new product that’s going to come out of there, an all new Murano that will go into production later this year.”

Here’s what else to know.

Why is Nissan cutting jobs?

Nissan is implementing layoffs as part of the company’s goal to ” stabilize” and “right-size” the business while “reinforcing product for profitable growth.”

Along with cutting jobs, Nissan also plans to:

Reduce fixed and variable costs: Nissan plans to cut fixed costs by 300 billion yen ($1,964,694,441) and variable costs by 100 billion yen ($654,898,147), compared to fiscal year 2024.
Decrease global production capacity: Nissan will reduce global production capacity by 20%.
Enact pay cuts among executives: According to a company statement, CEO Makoto Uchida will voluntarily forfeit 50% of his monthly compensation starting in November 2024. Other executives will also take pay cuts.
Focus on new energy vehicles and strategic partnerships to enhance product competitiveness: Nissan plans to advance the introduction of new energy vehicles in China, and plug-in hybrids and e-POWER in the US, while simultaneously increasing sales per model to enhance model efficiencies.
Lower expenses and prioritize investments in research and development: Nissan aims to deepen collaboration with Renault Group, Mitsubishi Motors Corporation (MMC), and Honda Motor Co., Ltd.

“These turnaround measures do not imply that the company is shrinking. Nissan will restructure its business to become leaner and more resilient, while also reorganizing management to respond quickly and flexibly to changes in the business environment,” said Uchida.

“We aim to enhance the competitiveness of our products, which are fundamental to our success, and set Nissan back on a path of growth. As a cohesive team, we are dedicated to working together to ensure the successful implementation of our plans.”

Is Nissan struggling financially?

Challenges for the company include higher selling expenses, inventory optimization efforts, and rising production costs, especially in the US.

According to the company’s earnings report, throughout the second quarter (a three month period ending on Sept. 30, 2024) alone, net revenue was 2.99 billion yen ($19,582,672), a decrease of 159.9 billion yen ($1,047,182,137) from the second quarter in 2023.

The operating profit also experienced a 176.2 billion yen (1,153,930,535) decrease.

Why is Nissan struggling in the United States?

According to previous reports, Nissan lacks a credible line-up of hybrid cars, compared to Japanese rival Toyota, which has seen a boom in demand for gasoline-petrol hybrid cars.

Nissan misread demand for hybrids in the United States, Uchida told a press conference.

“We didn’t foresee HEVs ramping up this rapidly,” he said, referring to hybrid EVs.

“We did start to understand this trend towards the end of last fiscal year,” he said, adding that making some changes to core models didn’t go as smoothly as planned.

—The Tennessean staff and wire reports contributed to this story

Diana Leyva covers trending news and service journalism for The Tennessean. Contact her at Dleyva@gannett.com or follow her on X, the platform formerly known as Twitter, at @_leyvadiana