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JAPAN: Nissan to Slash Payroll, Pare Japanese Output

by John MurphyWall Street Journal
February 9th, 2009

Nissan Motor Co. Monday announced plans to slash more than 20,000 jobs world-wide, shift production out of Japan and seek government assistance from Japan, the U.S. and elsewhere, part of a broad new effort by the Japanese car maker to weather the economic downturn.

[Nissan CEO Carlos Ghosn] Getty Images

Nissan's cuts are a setback for CEO Carlos Ghosn, shown above last month.

Japan's third-largest car maker by sales also is suspending its goal of 5% annual revenue growth until 2012, which had been a key commitment of its current management plan.

Nissan's broad, new recovery program comes as the car maker -- reeling from falling demand world-wide, a global credit crunch and a soaring yen -- swung to a net loss of 83.2 billion ($904.2 million) in its fiscal third quarter ended Dec. 31, sharply down from 132.22 billion in profit in the same period a year earlier.

For this fiscal year, the car maker forecast a net loss of 265 billion -- its first net loss since President and Chief Executive Carlos Ghosn took the helm in 1999 and led Nissan's revival from the brink of collapse.

The projected profit loss is a serious setback for Mr. Ghosn, who has been considered the industry's top manager, credited with forging a complex alliance between Nissan and Renault SA.

Nissan's dismal outlook caps a string of grim forecasts by Japan's auto makers, which are cutting jobs, slashing production and taking other measures to stem growing losses as the sales downturn deepens.

"The global automotive industry is in turmoil, and Nissan is not an exception. When revenue falls quickly and significantly, it creates a situation that is both unsustainable and potentially dangerous," Mr. Ghosn said.

Like its Japanese rivals, Nissan has been battered by the gathering strength of the yen, which diminishes the value of overseas earnings and drives up the cost of vehicles produced in Japan for consumers abroad.

But Nissan is the first Japanese auto maker to announce major plans to move production -- and jobs -- from Japan to lower-cost markets in order to escape the impact of the strong yen.

The auto maker announced last month that it would move production of the Nissan March, its top selling compact car, to Thailand from Japan. Nissan expects this is just the beginning of a substantial exodus of parts and vehicle production out of Japan to lower-cost markets.

Nissan has no plans to close plants as a result of the changes, said Simon Sproule, a Nissan corporate vice president. But Nissan expects that more than half of the more than 20,000 job cuts, which are expected by March 2010, will be in Japan. The remaining job cuts will be mainly in North America and Europe, Mr. Sproule said.

Nissan had 240,000 employees in March 2008. It has already eliminated about 2,000 temporary jobs in Japan and has announced plans for about 4,000 more job cuts at factories in Spain and the U.S. It has scaled back global production and slowed assembly lines to shrink its inventory as car sales in the U.S. and in other parts of the world have plummeted.

The company also will trim model introductions over the next four years, releasing an average of 10 new vehicles a year instead of its original goal of 12 a year, the person said.

But Nissan isn't making cuts to its program aimed at producing an electric vehicle by next year2010. The auto maker plans to tap a U.S. Department of Energy $25 billion loan program aimed at helping the industry develop more fuel-efficient vehicles, making Nissan the first Japanese auto maker to seek the funds. Nissan also is considering applying for low-interest loans from the Japanese government as part of an effort by the Development Bank of Japan to assist businesses hurt by the global financial crisis.

To oversee its cost-saving efforts, Nissan is appointing Colin Dodge, a member of the company's executive committee, to the new position of chief recovery officer.

Nissan also is streamlining its management structure, slimming its four regional divisions -- Japan, Europe, North America and general overseas markets -- into three regions: Asia; the Americas; and Europe, the Middle East, Africa and India. Mr. Dodge will oversee the Europe, Middle East and Africa division. Carlos Tavares, a Nissan executive vice president, will manage the Americas and Hirohito Saikawa, also a executive vice president, will head up the Asian division. Toshiyuki Shiga, Nissan's chief operating officer, will broaden his responsibilities to oversee all three regions.

Mr. Ghosn, the CEO, will continue to head Nissan and its partner, Renault, dedicating much of his time to encouraging governments world-wide to grant tax breaks, build recharging stations and offer other support needed to expand use of electric vehicles.

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