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Nissan (OTCMKTS:NSANY) Woes Look Graver As It Plans a Massive Layoff of 12,500 Employees

It is becoming increasingly clear that Nissan (OTCMKTS:NSANY) is under great pressure as far as sales are concerned. Reports indicate that the Japanese carmaker is working on a plan to cut close to 12,500 jobs across its plants worldwide. The move comes amid ongoing court battle for its former Chairman, Mr. Carlos Ghosn.

Rock bottom profits

Notably, Nissan detailed that the job cuts will be targeted at 14 factories overseas which have been turning up great losses. The process should be completed in 2023 and will affect factories in Spain and Indonesia, the company said.

In May, Nissan had announced that it would let go 4,800 workers worldwide. But it seems the company is in the thick of its problems since the latest number is more than double. Particularly, analysts think that the move could be a reaction to the fact that the profits for the company are at the rock bottom. Interestingly, analysts had predicted a 66% decline in Nissan’s operating profits in the period from April to June. However, official results show that, actually, operating profits dropped by 99%.

The drop in operating profits was so huge that during the release of the earnings results, nobody spoke about the troubles of Carlos Ghosn.

Nissan’s problems are more than just Ghosn

Ghosn’s arrest and subsequent court battles have done enough to tarnish Nissan’s brand globally. Since the drama began, Nissan’s sales have really declined. Compared to the previous fiscal year, Nissan’s revenues for Q1 FY2019 fell by 13%. Sales in the US for the quarter were recorded at 351,000 units, representing a just a 7.9% share of the US auto-market compared to 8.1% the year before. In Europe, the unit sales fell by over 16%.

But Nissan’s problems go beyond Ghosn. The company, just like all other carmakers, is grappling with the effects of a slowing global economy. Further, the car makers are facing tough actions from new emission standards which are stricter on the amount of carbon cars can emit. As such, the companies have to spend more money in research and reducing emissions for every car that comes off the factory floor.

Published by Ruchi Gupta

Swati Goyal has over 6 years of experience in financial research & analysis domain. She has built financial models varying from consumer goods to banks. She has her articles published in leading dailies of the nation

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