Nissan resorts to cutting down non-essential spending after the company’s profits hit an all-time low

on Dec 28, 2019
Updated: Mar 11, 2020
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  • Nissan aims at reducing non-essential expenditures to boost sales and revive profits.
  • Nissan puts a travel ban on its employees particularly in the U.S.
  • The company's operating profit dropped by 70% in the second quarter.
  • Nissan's profits to reach an 11-year low by the end of the current fiscal year.
  • Nissan dropped by 2.8% following vice COO, Jun Seki's departure.

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After facing a continuous fall in car sales and tripping profits, the Japanese multinational automotive manufacturer, Nissan Motors Co, has instructed its managers to cut down on non-essential spendings, as per the sources. In July, the company had also announced a large cut in jobs worldwide to tackle falling profits.

The policy is likely to remain in practice for the rest of the fiscal year (March 2020) and is also expected to extend further into the upcoming business year as well.

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Nissan Puts A Travel Ban On Its Employees Particularly In The U.S

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In an attempt to reduce unnecessary spending, the Japanese automaker has put a travel ban on its employees in the U.S, where sales have been reported to have taken the greatest blow. In other parts of the world, gatherings and dinners have either been canceled or the company is opting to rely on video-conferencing. Out-of-town meetings will now be attended by only one Nissan representative instead of three or four representatives.

According to sources, Nissan implemented a wide-ranging turnaround plan in April to revive sales and uplift profits. However, the results were the complete opposite. A 70% fall was reported in the operating profit in Q2, as compared to the 57% fall in the first quarter. According to the full-year forecast, the company’s profits will reach an 11-year low by the end of the current financial year.

Nissan Is Not Facing Any Cash Crunch, Sources Say

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While Nissan is not yet confronted with a cash crunch, the company’s extensive spending cut can be credited to the arrest of the scandal-hit executive Carlos Ghosn and the ouster of a number of other top executives. According to sources, the company is also facing a hard time maintaining a good relationship with alliance partner Renault SA without its former CEO.

The cut down on non-essential spending highlights the rise of an imminent crisis that is starting to affect the Japanese car manufacturer. “The house is not on fire, but there’s something smoldering”, a source stated, adding that the freeze has been implemented in all parts of the world where the multinational operates. The sources stressed that the company has sufficient cash resources, owing to its good credit lines and joint-venture operations in China.

Nissan’s share prices also fell by 2.8% and hit an all-time low since September 2011 after its vice chief operating officer, Jun Seki announced his resignation from Nissan to join Nitec Corp. Following Seki’s resignation, executive officer Hideyuki Sakamoto was named as a candidate for the board of directors by the company.

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