Nissan Delays Supplier Payments as Financial Crisis Hits
After reporting a US$4.5bn net annual loss in this recent fiscal year, Nissan is making plans to cut costs over the next two years, targeting 500bn yen (US$3.4bn).
The short-term solutions include plans to reduce the company’s global workforce by 15% – equating to 20,000 jobs.
Nissan is also requesting payment extensions from car part suppliers across Britain and the European Union.
Company cuts
Nissan is restructuring its supply chain throughout its global industry, with plans to cut 20,000 jobs. As part of this reduction, it will be shutting seven out of its 17 plants around the world.
Whilst the UK’s only factory, in Sunderland, is currently not on the list of plants closing, it is facing a cut of 250 jobs.
This 4% loss from a 6,000 people workforce will be decided through a voluntary redundancy scheme.
“In order to support future competitiveness, this week we are beginning discussions with some of our team in Sunderland about the opportunity to voluntarily leave Nissan,” the company reports.
“Our Sunderland plant remains at the forefront of our electrification strategy.”
The car factory is currently Sunderland’s largest employer, and the cuts will have an effect on the city’s community.
Since opening its Sunderland branch in 1986, the company has offered engineering courses and apprenticeships for students through its Nissan Academy. There are also an additional 4,000 jobs in the city indirectly reliant on the car company.
With a planned cut to office staff and shop floor supervisors, many are wondering whether this loss will be enough, or if it's merely paving the way for future cuts.
In April, the company’s senior management faced a renewed leadership in an attempt to achieve long-term growth. It was announced that Ivan Espinosa would take over as CEO.
In May, Ivan commented: “As new management, we are taking a prudent approach to reassess our targets and actively seek every possible opportunity to implement and ensure a robust recovery.”
Supplier relations
In an attempt to free up cash, Nissan has asked some of its suppliers in Britain and the European Union to accept delays in payment.
To conserve short-term cash, Nissan is willing to pay suppliers back with interest, with the expectation of coming out of the major financial loss.
In a company statement, Nissan says: “With their full agreement, we have incentivised some of our valued suppliers to collaborate under more flexible payment terms, at no cost to them, in order to support free cash flow.”
Hope for the future
Although the company is targeting positive free cash flow by the 2026 financial year, Nissan’s global production and global sales have seen a downward trajectory.
In its figures reports for May, Nissan presented a 16.5% decline in global production, in comparison to the year prior. Its global sales showed a 6% decline from the year prior.
Alongside other automakers, Nissan has also been affected by the 25% additional US tariff on car imports that US President Donald Trump imposed. These extra costs have proven a financial burden for many companies around the world.
Despite a persistent downward trend in sales and expectations of heavy restructuring costs, Nissan remains optimistic about a positive future financial performance.
In a post to LinkedIn, Ivan writes: “We are Nissan, we are resilient and proud!! We will come back stronger.”
Whilst the company’s financial performance is not looking promising, Nissan is optimistic that its planned restructuring will create a more efficient business, seeing positive financial results.
