Japanese carmaker Nissan is ready to axe 12,500 jobs after reporting a complete wipe-out in its quarterly profit. The company also warned of a quick turnaround in its performance which was not imminent.
The announcement on Thursday shows how a crisis — brought about by the sluggish sales and rising costs — is worsening at Japan's No. 2 automaker even as it tries to recover from a financial misconduct scandal surrounding ousted Chairman Carlos Ghosn.
Nissan also said that it will reduce global production capacity and its product line-up by about 10% by the end of 2022. The company is expected to make the job cuts by 2022 globally. The automaker had 138,000 employees globally as of March 2018.
The operating profit of the company in Q1 plunged 98.5% to 1.6 billion yen ($14.80 million) as it continues to struggle in North America, a key market where it has been stung by mounting costs of vehicle discounts to keep up with rivals.
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Nissan, which flagged a steep drop in profit on Wednesday, is set to widen the job cuts initially announced in May as it struggles to improve weak profit margins in the United States
The company’s costs to offer high discounts have hit its bottom line and has left it with a cheapened brand image and low vehicle resale values even after providing years of heavy discounting to grow sales.
The dismal quarter will add pressure on Nissan's embattled CEO, Hiroto Saikawa, who has been tasked with the shoring up of the company's performance amid the Ghosn scandal whereas Ghosn has completely denied the charges of any financial misconduct.
Nissan, which flagged a steep drop in profit on Wednesday, is set to widen the job cuts initially announced in May as it struggles to improve weak profit margins in the United States, where Ghosn for years had pushed to aggressively grow market share during his time as CEO.
Nissan's operating profit in the April-June quarter compared with the 109.14 billion yen made in the year-ago period and missed the 39.52 billion yen average of eight analyst estimates as compiled by Refinitiv.
The company has maintained its profit forecast of 230 billion yen for the year ending March 2020, reflecting a 28% drop from last year and its weakest in more than a decade.
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