TOKYO — The Japanese-French alliance of Nissan Motor, Renault and Mitsubishi Motors is being forced into a major reshuffle by the coronavirus pandemic that could include Nissan slashing production capacity by 20% in the fiscal year through March 2023.
The partners, who have been at odds since former Chairman Carlos Ghosn was arrested in Tokyo in November 2018, also plan to redraw their production map in a bid to make more efficient use of their capacity.
They will decide on a joint mid-term business plan later this month, their first since Ghosn’s arrest. Nissan board members discussed the plan on Thursday.
Nissan will close a car assembly factory in Barcelona, Spain, that makes commercial vehicles and exports them overseas. The plant has been running at about 30% of capacity, well below the level needed to turn a profit.
Nissan in fiscal 2019 produced about 55,000 vehicles in Spain, accounting for about 10% of its European output. It will shift its Barcelona production to Renault plants in France and elsewhere.
Nissan and Renault have been involved in each other’s production only on a limited basis. Renault produces 70,000 Nissan vehicles per year at its plant in France, while Nissan undertakes production of the French partner’s commercial vehicles at a plant in Spain.
This represents mere slivers of each automaker’s production.
The alliance has been especially strained since Ghosn’s arrest. But the coronavirus and the sharp plunge in auto sales that it has triggered is bringing the partners closer together.
The automakers are also looking at sharing production facilities elsewhere in Europe as well as in South America and Southeast Asia, determined to boost profitability by making efficient use of the alliance’s resources.
Nissan will take on production of Renault vehicles in the U.K. The British facilities, which can make more than 500,000 vehicles a year, turned out around 320,000 last fiscal year.
Nissan will also start producing Renault vehicles at its facilities in Brazil, an export hub for the Japanese automaker.
In Southeast Asia, Nissan and Mitsubishi will ramp up their collaboration. Mitsubishi will take on production of Nissan vehicles in Indonesia and elsewhere, and Nissan will make key components for its smaller partner.
As part of the cost-cutting drive, Nissan and Renault are shooting for a common parts quota of 70%. These are parts that will go into each automakers’ vehicles. The figure is up from about 40% now. The automakers will also expedite efforts to adopt common vehicle platforms.
These moves should reduce procurement costs while also making it easier to share global production networks.
The automakers will jointly develop electric vehicles as well.
Nissan has yet to hit the bottom of its slump. Hammered by the plunge in demand during the pandemic, the Japanese automaker ended the fiscal year through March with a net loss. It sold 4.79 million vehicles, down 13%. It expects to produce and sell 5 million vehicles — similar to the current level — in the fiscal year through March 2023, the last year for the latest mid-term plan.
The Japanese carmaker’s annual capacity has expanded to over 7 million, more than actual demand, as Ghosn was keen to build up capacity, especially in emerging markets.
As part of its restructuring, Nissan will concentrate its investments in Japan, North America and China, three markets that account for nearly 70% of its global vehicle sales. It is also considering executive pay cuts, including for CEO Makoto Uchida, to clarify responsibility for the sluggish performance.
The coronavirus outbreak sent the global automobile industry into a tailspin. In the U.S., four Japanese auto companies, including Toyota Motor, combined to post a 52% fall in unit sales in April. In Japan, the corresponding figure was 28%. In Europe, unit sales plunged 52% in March. April is likely to mark another steep fall.
The pandemic and the wrecking ball it has taken to the global economy are likely to cause other automakers to also reshuffle their production plans and cut costs as they fight for survival.