Nissan’s turnaround plan takes shape after failed Honda merger

It has been a hectic few days (weeks, months…) for Nissan as the company announced new plans in its turnaround strategy while trying to ease the concerns of its stakeholders now that the potential merger with Honda is officially dead. 

First things first: A letter from Infiniti Global Headquarters sent to Infiniti dealers (obtained by Car Dealership Guy News) details the key points that ultimately led to Nissan terminating the deal and offers an apology for any issues the “speculative media” reports might have caused. 

Here are three of the biggest takeaways from the letter to Infiniti dealers:     

• A Memorandum of Understanding (MOU) was signed on Dec. 23, with an agreement that Nissan and Honda would enter into discussions regarding business integration, management strategies, and organizational structures post-integration.

• According to the letter—the basic agreement “had assumed” that a joint holding company would be established through a joint share transfer, with Nissan and Honda as wholly owned subsidiaries.

• Honda presented a revised proposal that would have made Nissan a subsidiary of Honda, which Nissan’s board of directors declined after evaluating the full scope of the deal.

Yes, but Nissan will continue to collaborate with Honda on intelligent and electrified vehicles as part of the automaker’s electrification strategy, a partnership announced in March last year.    

Between the lines: The dealer letter—while relatively calm in tone—signifies a critical juncture for Nissan as the company tries to end a string of quarterly losses, with the latest including a 78% plunge in its operating profit. The turnaround strategy includes everything from closing factories to cutting executive ranks across its operations.

• In addition to 9,000 job cuts previously announced (that includes 6.500 in manufacturing), Nissan plans to cut another 2,500 jobs in sales and administration globally, amounting to a 20% slash of its executive ranks. 

• Nissan will close three plants as part of its turnaround strategy, with the first being the company’s Thailand facility set to close in Q1 of the new fiscal year that starts on April 1. The company’s assembly plants in Smyrna, Tenn., and Canton, Miss. will see shift reductions.   

• The facility cuts could trim 1 million units from Nissan’s 5 million production capacity over the next two years, increasing Nissan’s plant utilization ratio to 85% (up from 70%), based on Automotive News calculations. 

Nissan might not have to wait long: Foxconn chairman Young Liu told reporters in Taiwan this week that the company may consider acquiring Renault’s 36% stake in Nissan if it strengthens collaboration with the Japanese automaker.

Why it matters: There’s no getting around it—while Nissan certainly seems committed to its latest recovery strategy, it’s hard to ignore the sense of desperation in Uchida’s comments. Any stakeholder in Nissan’s business operations counting on the company to regain its footing in the market will be doing themselves a disservice if they don’t temper those hopes with a lot of caution before making any decisions regarding their business interests.

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