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Nissan to brave $4.5 billion annual net loss as pandemic hits restructuring plans

Automakers worldwide are losing billions of dollars with a majority of factories shuttered during the March – June period of lockdown orders and dealers showrooms closed or running on a limited basis.
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Nissan Motor Co. is struggling with slumping new car sales amid the novel coronavirus pandemic. The Japanese automaker announced on Tuesday it expects to make an annual operating loss for a second straight year. It issued a forecast for the full fiscal year ending March 2021, saying it expects revenue of ¥7.8 trillion ($74 billion) – down 21% - and a net loss of ¥670 billion ($6.4 billion).

Nissan’s $6.4 billion loss is the same size as the loss it record in the year ended March 2020, when it took implemented major restructuring and the closure of manufacturing plants in Spain and Indonesia.

Nissan Loss 2020 Annual Operating forecasr 2022

Nissan, under the leadership of new chief Makoto Uchida since last December, has been scaling back expansion plans adopted under former chairman Carlos Ghosn.

Nissan, under the leadership of new chief Makoto Uchida since last December, has been scaling back expansion plans adopted under former chairman Carlos Ghosn.

Weathering the corona storm

The troubled automaker is expected to achieve by the end of this fiscal year a goal of cutting ¥300 billion ($2.85 billion) in fixed costs compared with the year ended March 2019. It also said it didn’t plan to pay dividends this year to conserve cash.

Nissan’s woes highlight the state of the automotive industry which came to a standstill during the pandemic. No one could have prepared for the coronavirus epidemic, including companies like Nissan, Ford Motor Co., and Fiat Chrysler, which have each faced immense losses due to factory shutdowns and shuttered showrooms. It’s appreciable that these automakers are weathering the corona storm without talk of bankruptcies as seen within the airline industry.

Nissan, like major players in the global auto industry, is shedding billions in capital expenditures and structural costs. It seems that their sole mission is to reinforce balance sheets before the next quarter. This would remain an unfulfilled mission unless we are certain about the length of the pandemic.

The Japanese automaker also registered its first corporate bond issue in four years with the Kanto Local Finance Bureau in May. It is also preparing structural reform plans including a steep cut in global production capacity. The automaker has ¥1.4 trillion ($13 billion) on hand at the end of last year but is now planning to fortify its financial foundation. In April, the automaker went credit line shopping at top three Japanese commercial banks and the Development Bank of Japan. It received credit lines totaling ¥500 billion ($4.76 billion).

This isn’t enough. Perhaps, the Japanese auto industry could lobby for a stimulus package to weather the rising debt loads.

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