Nissan share price up, profit down

NISSAN’s share price jumped 6.1 per cent today after the company announced extensive production cuts and an 8.5 per cent reduction in its workforce in response to a shocking third-quarter financial performance.

Like several companies before it, Japan’s number-three car-maker was caught out by the rapid deterioration in world demand, posting a heavy loss for the third quarter and signalling plans to cull 20,000 workers, about 8.5 per cent of its global workforce, this year.

The company also joined the likes of world industry leader Toyota by sharply increasing the size of its expected loss for the full financial year.

Investors applauded the rapid response by Nissan’s chairman and chief executive, Carlos Ghosn, who built his reputation by saving Renault with a savage cost-reduction program more than a decade ago.

Nissan’s share price defied the bad profit news and rose 16 yen or 6.1 cent to 277 yen by the close of trade on the Tokyo Stock Exchange. By contrast, Toyota’s share price eased more than one per cent after it, too, had forecast a large-than-expected loss for the financial year.

In France, Nissan’s parent company Renault and rival Peugeot group have been offered government loans of €3 billion ($A5.76b) each in a move that threatens to spark a protectionist war within the European Community.

The loans have been advanced on condition that no plants are shut in France, which only leaves plants in other countries, such as the Czech Republic.

Nissan-Renault’s global boss Carlos Ghosn admitted the group had been outflanked by the severity of the downturn.

“In every planning scenario we built, our worst assumptions on the state of the global economy have been met or exceeded,” he said when releasing the third quarter results on Monday.

The most damaging factors were the limited amount of credit available for financing car purchases and the decline in consumer confidence.

Revenue in the three months to December was down 34 per cent and Nissan lost 99.2 billion yen ($A1.58 billion).

Left: Nissan Mixim.

Mr Ghosn said directors now expected Nissan to report a loss of 265 billion yen ($A4.23 billion) for the 12 months.

He said the new priority of Nissan directors was to protect the company’s free cash flow and taking swift decisions to improve business performance.

Primary among these will be the retrenchment of 8.5 per cent of the workforce and the further reduction of working time in order to cut output in the current financial year to March 31 by down 20 per cent or 787,000 units.

Retrenchments will be targeted in high-cost countries, and Mr Ghosn said Nissan planned to reduce total labour costs by 20 per cent in the 12 months to March 2010.

In addition, directors have decided to suspend parts of Nissan’s GT2012 business plan, although commitments on quality and zero-emission vehicles will be maintained.

Nissan directors and senior staff will feel the heat directly, with bonuses to board members being eliminated this financial year and salaries of directors and senior executives to be cut by 10 per cent in the next financial year.

Nissan will also prune its new model program, although there will still be 10 all-new vehicles each year from 2009 to 2012, including the company’s crucial new A platform city car and its all-electric vehicle.

Mr Ghosn said Nissan and Renault would work more closely on new products, technology, purchasing and back-office functions in a bid to strip out 90 billion yen of costs in the next financial year.

The French Government’s package of soft loans for Renault and Peugeot (Renault Trucks will also receive a €500 million advance) threatens to destabilise EC harmony in the same way as Britain’s bank deposit guarantee scheme late last year.

Referring to the stipulation that no plants be shut in France, president Sarkozy said it was “completely normal” for there to be strings attached to state aid for industry.

Last week he told a television audience it “would not be in order” for a new factory to be built in the “Czech Republic or elsewhere” if the car-makers accepted aid from the French government.

Czech prime minister Mirek Topolanek said president Sarkozy’s comments were “unbelievable”.

More than half the cars built by Renault and Peugeot are now produced outside France and president Sarkozy won no friends when he suggested that the French companies should, if possible, move production back to France.

The president is worried about the fallout from the contraction in the car industry as it directly or indirectly employs about 10 per cent of the French workforce.

Acceptance of the loans means that all industrial decisions made by Renault and Peugeot in the next five years will have to pass scrutiny by the government.

As with the new Australian car industry plan, the loans have been earmarked for the development of “green” cars.