Alert Nissan's Emergency Overhaul Potential Impacts - 1 August 2019 - LMC ...
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Alert
Nissan’s Emergency Overhaul
Potential Impacts
1 August 2019Nissan: July 2019 Operational
Restructuring Initiatives – Potential Impact
• Plunging profits and declining sales at Nissan have prompted the
embattled group to announce an emergency cost-cutting overhaul
to its operations. This is in addition to earlier rationalisation plans,
which included the loss of 6,400 jobs during the Financial Year
2018-2019.
• Nissan’s latest announcement has outlined that by spring 2023
(Financial Year 2022):
– A further 6,100 jobs would go worldwide.
– Manufacturing capacity would be cut by 10%.
– The company will reduce the size of its product lineup by at
least 10%.
• While Nissan’s utilisation (globally 69%) is ‘mid-table’ when
compared with other big OEMs, our data below highlights significant
regional disparity.
Nissan Global Capacity Utilisation by Region*
100%
90% Spare Capacity
80%
70%
60%
50%
40%
30%
Used Capacity
20%
10%
0%
*‘Nissan-controlled’ plants.
© 2019 LMC Automotive Limited, All Rights Reserved. 2Nissan: July 2019 Operational
Restructuring Initiatives – Potential Impact
• While the group declined to give details of the new reductions,
Nissan’s CEO, Hiroto Saikawa, provided some clues to where these
cuts might fall:
– Loss-making overseas factories (outside Japan)
– Plants operating below capacity
– Plants that make small cars
– Plants that make Datsun products
• Using this information, it enables us to isolate the potential
incidence of Nissan’s emergency measures. These are highlighted
in the table below:
- Datsun brand weakness
- Low utilisation (JV: 42%)
India Chennai High
- Nissan/Datsun facing high competitive challenge in India
- Datsun brand cull?
- Datsun brand weakness
Indonesia Jawa Barat - Low utilisation High
- Datsun Brand cull/ Rationalisation?
- Datsun brand weakness
Russia Togliatti - Low utilisation (JV: 50%) High
- Datsun brand cull?
- Very low utilisation (29%)
- Weak demand for Navara derived X-Class/Alaskan
Spain Barcelona - Next Navara could be resourced to Thailand or S. Africa? Medium
- NV200 cancelled or imported from Japan
- Plant closure threat (Capacity 200k)
- Very low utilisation (9%)
- Localised Navara derived X-Class/Alaskan cancelled
Argentina Santa Isabel Medium
- But closure would represent significant investment write-off
- Plant closure threat (Capacity: 70K)
- Low utilisation (44%)
South Africa Rosslyn - But could be boosted if wins next Navara from Barcelona. Low/Medium
- Rationalisation/closure? (Plant Capacity 80k)
- Moderate utilisation (55%)
- Some exposure to small subcompacts
Thailand Samut Prakan Low
- But centre of PU production
- Some rationalisation?
- Moderate utilisation (59%)
- High 'car' mix
USA Canton Low
- But focus is on PU's and larger cars
- Should be safe
- Moderate utilisation (52%)
- Successful models in soft local market
Brazil Rensende Low
- New models in pipeline
- Should be safe
- Good utilisation (76%)
UK Sunderland - Fresh models: new launches due in in 2019 and 2020 Low
- Hard Brexit could prompt rationalisation?
© 2019 LMC Automotive Limited, All Rights Reserved. 3Nissan: July 2019 Operational
Restructuring Initiatives – Potential Impact
• Clearly, those plants currently producing Datsun models fall
squarely into the high risk of rationalisation category. While Datsun
was originally revived to provide Nissan with full-segment cover in
‘high-growth’ emerging markets of Russia, India and Indonesia, the
brand has failed to gain traction with consumers and sales have
thus fallen well below target. The wind-down and withdrawal of
Datsun’s 6-model line-up could significantly contribute to Nissan’s
emergency 2023 targets. Beyond this, potential plant closures are
also possible.
• Since the early EOP of Nissan’s European Pulsar in 2018, the
group’s Barcelona plant in Spain has arguably struggled to find
longer-term security. Production of the Navara-derived Mercedes X-
Class and its sibling, the Renault Alaskan, were both intended to
provide a boost to the plant. However, sales of these two models
have been disappointing and rumours suggest that they could be
dropped. Production consolidation of the next Navara and NV200
elsewhere, could easily spell the end of the plant in Spain.
• In the shadow of Brexit, the UK’s Sunderland plant is at risk,
although with a fresh model line-up, closure would seem unlikely
before 2023. However, the ferocity of Brexit is key: our current
assumptions are underpinned by a ‘soft’ Brexit but an enduring
‘hard’ Brexit could be calamitous for the UK plant.
• Despite significant investment in the Santa Isabel plant in Argentina,
this facility may also be at risk. Utilisation only reached 9% in 2018
and the cancellation of localised production of the Alaskan and X-
Class is unlikely to help. However, the required scale of investment
write-off may be sufficient to avoid any near-term closure.
• No doubt Nissan will continue to be reviewing their progress
towards their target in response to the dramatic downturn in
profitability. Further model rationalisation, beyond Datsun, may well
be required. These could be focused in the lower-medium car
sector with the suggestion that the Versa and Sentra could be
replaced by a single model. In addition, less-mainstream luxury
Infiniti coupe and convertibles could also be in the firing line
mirroring other OEM rationalisation plans.
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