By Norihiko Shirouzu
YOKOHAMA, Japan (Reuters) – Nissan Motor Co Ltd is likely to abandon its Datsun brand, drop some unprofitable products and close several assembly lines around the world as it seeks to boost profits by slowing two sources from company with direct knowledge of the subject said.
Known internally as the "performance recovery plan," the proposed steps mark a sharp break with Nissan's strategy under deposed leader Carlos Ghosn, which pursued ambitious vehicle sales targets in the United States and other major markets.
The plan is Yokohama's latest attempt to get out of the crisis after Ghosn was arrested for financial misconduct – charges he denies. The scandal further put pressure on an already dysfunctional alliance with Renault SA and put Nissan in disarray as it stands in the way of the lowest operating profit in 11 years.
The sources said Nissan is likely to kill deficit variants for the full-size Titan pickup. Non-profit variants include single cab and diesel versions.
A planned closure of underused production lines is likely to hit factories in emerging markets, making Datsun and other small cars more difficult, they added.
"We need to plan for a recovery, but the rot is deep," one source said of the many problems Nissan faces.
The second source said all factory markets except China are being analyzed for possible reductions in production capacity. This source also said, however, that there were no plans to close an entire factory or withdraw completely from any country.
In the United States, one of Nissan's largest markets, the plan calls for further efforts to eliminate the practice of buying market share by selling vehicles to heavily discounted car rental companies and other fleet operators – a practice that has destroyed profitability and undermined the image. Nissan brand name.
"We are trying to clean up what has happened in the past," said one source, adding that under Ghosn, Nissan sought to achieve sales targets at all costs, including "practically delivering cars" to fleet customers.
A team led by Jun Seki, senior vice president and vice president of operations, is expected to release the broad plan this month, although some aspects are still being finalized, sources said, which were not allowed to speak to the media. and refused to be identified.
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Nissan declined to comment.
Seki is part of a new management team that will see Makoto Uchida, Nissan's chief operating officer in China, take over – a commitment due to take effect on January 1.
The new steps follow plans announced in July to reduce headcount by 12,500 worldwide by early 2023, which also signaled cuts in production capacity. At the time, then CEO Hiroto Saikawa said 14 facilities would be affected.
EMERGING MARKET WOES
Overall, the plan's goal is to free up resources to focus more on the United States and China, the sources said.
To that end, it will reverse an aggressive expansionist strategy that Ghosn set in motion under a five-year plan called Power 88, which aimed to increase profit margins and global market share to 8% by fiscal year 2016 – goals never met. have been achieved.
The Datsun brand – revived for emerging markets under Ghosn after being extinguished in the 1980s – is likely to be the main victim of restructuring. The models are made in Indonesia, India and Russia.
Sources said problems arose after Nissan began deploying cheap cars in 2014 in small markets such as Indonesia, India, Russia and South Africa, where it also sells vehicles under its flagship Nissan brand.
In Indonesia, for example, after a relatively good start, Datsun cars soon began to consume Nissan sales.
"We ended up promoting two top brands in a market where you have one or two percent of the market. You can't do that," said one source, adding that there were similar results in India, South Africa and Russia.
In its larger markets, a constant supply of new or significantly redesigned models – starting with the redesigned Altima, launched in the United States late last year – is expected to help Nissan redefine the pricing of its vehicles.
"Still, it takes about a year to get any kind of tangible result," said one source, adding that until then the Japanese automaker would continue to see volume sales fall in the US market.
(Reporting by Norihiko Shirouzu; additional reporting by Aditi Shah in New Delhi, Paul Lienert in Detroit and Naomi Tajitsu in Tokyo; Editing by Edwina Gibbs)