Japanese automajor Nissan has decided to cut its production amid a slowdown in the car sales and decline in profit, in a move that could result in over 12,000 job losses globally, including 1,700 in India.
During a media conference in Japan on Thursday, Nissan said that it is implementing strategic reforms to build an operational base in order to ensure consistent and sustainable profitability over the medium term.
"The company is moving quickly to optimise cost structures and manufacturing operations, while also enhancing brand value, steadily refreshing its line-up and achieving consistent growth globally, including in the US," the company said.
In order to improve its overall utilisation rate, Nissan said it will reduce global production capacity by 10 per cent by the end of financial year 2022. In line with production optimisation, the company will trim headcount roughly by 12,500. Furthermore, the company will reduce the size of its product line-up by at least 10 per cent by the end of financial year 2022 to improve product competitiveness by focusing investment on global core models and strategic regional models.
The management said that across eight locations, including Indonesia and Spain, the above actions were implemented which led to reduction of around 6,400 heads. Furthermore, in the upcoming two financial years, FY21 and FY22, the company is likely to extend it to additional six sties/ locations and may truncate 6,100 jobs. The company said that it may stop production and reduce capacity.
While Nissan India officials were not available for comment, media reports stated that around 1,700 jobs are at stake in India. However, "the management did not receive any official communication so far related to job cuts," Union representatives at the company's manufacturing facility at Oragadam, near Chennai said.
The facility in Chennai is an alliance plant. Nissan's Datsun and Redi Go are being manufactured in the facility. Production of Renault Triber and the sub-4 meter car is also underway in the alliance plant. It is not sure whether the job cuts would be at the floor level or at the executive level in the likes of sales and marketing or in the alliance factory.
For the past nine months, every Saturday vehicle production would cease as part of process modification, so that the engineers work on the shopfloor, while other services would operate normally. Although the factory did three shifts during 2012-13, it moved to two shifts recently. Last year, there was a Voluntary Separation Scheme, but hardly 50 people opted for it.
Nissan's Indian operation saw the worst drop in retail volume among 16 geographies. Retail volume dropped by 42.2 per cent during the first quarter of fiscal 2019 to 6,221 units from 10,764.
Nissan Motor India has reported a 49.30 per cent year-on-year (YoY) decline in net profit to Rs 61.9 crore in the previous financial year 2018 on account of sinking domestic sales and drop in exports owing to few model launches and poor product recognition. Net profit in the previous financial year stood at Rs 122.1 crore.
Revenue from operations during FY18 (April-March) fell 21.67 per cent YoY to Rs 7,437.3 crore from Rs 9,495.4 crore in the earlier financial year, according to a media report.