Nissan, Renault to disclose plan to slash production due to Covid shutdowns

The moves are set to undo the growth strategy pushed earlier by Carlos Ghosn, former leader of both companies, to sell around 14 million cars by 2022

Multinational automobile manufacturers Nissan and Renault have planned to disclose billions of dollars in cost cuts this week and slash capacity by an additional million vehicles in view of the coronavirus shutdowns, people familiar with the companies' plans told The WallStreet Journal.

The moves are set to undo the growth strategy pushed earlier by Carlos Ghosn, former leader of both companies, to sell around 14 million cars by 2022.

Now, the target is closer to 10 million, according to the people familiar with the plans. Even before the coronavirus pandemic, the boom in demand the companies anticipated wasn't materialising, leaving plants underused.

"The situation has become untenable," said a person close to Renault.

Ghosn has objected to efforts by Renault and Nissan to blame him for the current predicament. A spokeswoman for Ghosn said executives at Renault and Nissan had supported his growth plans. "He cannot be held responsible for the state of companies that he has not been running for 18 months," she said.

The entire car industry has been challenged by the coronavirus, but some are better equipped to ride out the downturn in demand. Cash-rich Toyota Motor Corp., which unlike Nissan has avoided worker furloughs, said this month it expected a return to normal by the end of the year.

In a series of announcements on Wednesday, Thursday and Friday, Renault and Nissan are set to lay out their planned cuts and describe plans for closer cooperation. Renault owns 43.4 per cent of Nissan.

Nissan is planning to add around $3 billion in cost savings to $3 billion in cuts announced in July 2019 that have been largely carried out, said people familiar with the plans. Since the July 2019 announcement, Nissan has eliminated nearly 15,000 jobs, and further job reductions are planned along with budget cuts in every department from engineering to event planning, they said.

The new plan also calls for cutting capacity by an additional million units beyond the cuts announced last year, bringing Nissan's annual production capacity to around 5.5 million vehicles, they said. That is still well above current demand in a pandemic-hit global market.

For its part, Renault has said it aims to cut structural costs by at least EUR2 billion ($2.2 billion), or 20 per cent, over the next three years.

France's economy ministry is in talks with Renault to keep technologically advanced activities in the country and develop electric batteries in Europe.

"Renault is in serious financial difficulty," said France's economy minister, Bruno Le Maire, on Friday.

"There is an urgent need for action at Renault," Maire was quoted as saying.

Sharing factories and research relies on the alliance of the two companies working smoothly, something Renault and Nissan have struggled to do in the wake of Ghosn's sudden departure after his arrest in Tokyo in November 2018. The executive fled to Lebanon in December to escape financial-misconduct charges in Japan, which he denies.

People on both sides said that although Renault and Nissan would announce plans for closer cooperation this week, negotiations on specifics would continue after that.