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Feb 10, 2009

Nissan to cut 20,000 jobs amid stormy forecasts

Nissan Motor on Monday joined its Japanese carmaking rivals in forecasting a big loss for the current financial year, and said it would eliminate 20,000 jobs, in one of the most aggressive cuts announced by any Japanese company since the start of the global downturn.

The development reflects the growing urgency felt by Japanese manufacturers across the board as it becomes clear that the slowdown, combined with the persistent strength of the yen, is hitting more severely than thought.

"In every planning scenario we built, our worst assumptions on the state of the global economy have been met or exceeded, with the continuing grip on credit and declining consumer confidence being the most damaging factors," the Nissan chief executive, Carlos Ghosn, said in a statement accompanying Nissan's earnings release for the three months ended Dec. 31.

This will be the first annual net loss since Ghosn took the helm at Nissan a decade ago.

The entire industry is in turmoil. Toyota Motor, Mazda Motor and Mitsubishi Motors all recently announced they would post losses.

In the United States, the government is bailing out two of the country's largest automakers, General Motors and Chrysler. France on Monday announced a €6 billion, or $7.8 billion, loan plan to support its car industry.

"In 1999, we were alone. In 2009, everybody is suffering," Ghosn said Monday, according to The Associated Press.

Nissan said it now expected a net loss of ¥265 billion, or $2.9 billion, for the business year ending March 31. It had previously projected a ¥160 billion profit for the year.

The profit warning coincided with data released Monday showing that corporate bankruptcies in Japan rose 16 percent in January to the highest level in six years. Also, Japanese machinery orders declined for a third consecutive month in December.

"There has been a phenomenal decline in output in Japan, and it looks like the first quarter of this year will be even worse than the last quarter of 2008," said Hiroshi Shiraishi, an economist in Tokyo for BNP Paribas.

"Demand for capital goods remains in free fall."

Company financial releases over the past two weeks have shown that the drop-off in demand was much worse than feared, leading nearly all of the best-known Japanese companies - Toyota, Sony, NEC, Hitachi and Panasonic among them - to warn of major losses for the business year ending March 31 and begin a wave of layoffs in an attempt to preserve cash.

Honda Motor and Nintendo, the maker of the popular Wii game console, are among the few major companies to still expect a full-year profit, but they, too, have had to severely scale back their earnings expectations.

Nissan revised its forecast after a grim set of earnings for the last three months of 2008, as the economic slowdown and credit crunch caused its global car sales to slump 18.6 percent, to 731,000 units.

Nissan lost ¥83.2 billion from October through December - a major reversal from the net profit of ¥132.3 billion a year earlier.

With cars piling up unsold around the world, manufacturers have rushed to cut production and costs. Nissan on Monday announced that it would reduce output to 787,000 units by March 31 - down 20 percent from its original production plan. It is also reducing capital spending, scrapping bonuses for directors and eliminating 20,000 jobs in its 235,000-person work force; 12,000 of the job cuts will be in Japan.

Nissan's layoffs are the third major job-cut announcement in Japan since Jan. 30. In that period the electronics makers NEC and Panasonic announced layoffs totaling 35,000.

The downturn in demand for discretionary goods like cars has hurt manufacturers around the world.

Source : IHT
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