Multinational carmaker, Nissan has said it will carry out a global restructuring after posting its worst performance since 2009 – a $6.2 billion net loss and an operating loss of $376 million for its fiscal year ended March 31. This is compared to an operating profit of $2.9 billion for its previous fiscal year.

Worldwide sales of vehicles between January and April dropped by 31.1 percent in comparison with the same period last year, the company said. This is largely due to the global coronavirus outbreak but even before the pandemic, Nissan was already suffering from slumping sales and profits, forcing the company to backtrack from the ambitious expansion plan devised by former leader Carlos Ghosn.

The “volume first” strategy meant to gain market share under Ghosn worked well in the face of a demand boom during the economic recovery but has in the past few years led to high operating costs, low per-unit profits, excess production capacity, and steep discounts. 

Amid falling sales and rising losses coupled with more pressure from the pandemic, Nissan is now cutting production capacity by 20 percent, a plan that will see it reduce the range of models of cars and trucks available. It plans to slash the number of models from 69 to about 55 over the next few years, focusing instead on electric vehicles and sports cars.

Other cost-cutting measures include the closure of its Barcelona plant, which directly employs about 3,000 workers with some 20,000 other workers indirectly depending on the manufacturing there. Chief executive Makoto Uchida described the closure of the factory in Spain as “a very difficult decision.”

The carmaker is also exiting the South Korean market while its car manufacturing plant in Thailand will become the single production base in Southeast Asia after the company closed its Indonesia plant earlier this year. Meanwhile, its United Kingdom plant in Sunderland, which employs about 7,000 people, will stay open as part of a plan to focus on several “key markets” including Japan, North America, and China. 

Nissan remains committed to Europe and will “sustain” its presence in the continent but plans to leave more room for alliance partners there such as Renault, Uchida said at the presentation of the company’s financial results yesterday. The company is part of a three-group alliance with Renault and Mitsubishi, which is restructuring global operations to enable them to work more closely and reduce costs.

The announcements come one day after all parties said they would deepen their pact, an agreement that includes the companies making fewer models, sharing production facilities, and focusing on the existing geographic and technological strengths of each carmaker as they look to slash costs and ride out the pandemic.

In spite of the comprehensive overhaul plan that is expected to reduce costs by $2.8 billion, the uncertainty surrounding the coronavirus crisis makes it “difficult to reasonably forecast an outlook for the fiscal year 2020 at this time,” Uchida said, adding that the company’s key focus during the pandemic was now to “pursue steady growth”, instead of the massive sales expansion pursued in the past.

The company last year said that it would cut about 12,500 jobs or nine percent of its global workforce but Uchida declined to reveal if more jobs would be cut as part of the overhaul, saying that Nissan still needs to consult with unions and other stakeholders. The CEO added that he will take a 50 percent pay cut for the first half of the year while other executives will see a 30 percent pay cut to “share the pain” caused by the overhaul.

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