As car manufacturer Nissan announces job cuts of up to 12,500, Dr Paul Simmonds from Warwick Business School considers the factors that are driving pressure on the global automotive industry, and those affecting Nissan itself.
Dr Simmonds said: "Today’s announcements by Nissan that it intends to reduce production capacity and the number of models in its range by 10% by 2022 resulting in the loss of 12,500 jobs and possibly some plant closures reflects a number of broad issues being faced by the global automotive industry and specific issues being faced by Nissan. The industry is going through a period of great change and companies from volume manufacturers like Nissan and Ford through to other producers such as Jaguar and Aston Martin are facing challenges on several fronts.
"First, the industry is cyclical and global economic growth has slowed. There are significant uncertainties in the global economy including the US-China trade dispute and Brexit which are impacting demand and also investment. According to the SMMT, demand in the UK has fallen each year since 2016 with Brexit uncertainty being cited as a key reason although the well-publicised issues around false diesel emission data certainly hasn’t helped. In the US, Nissan has struggled to reverse a fall in sales.
"Second, all manufacturers are reappraising their strategies in light of the inevitable shift from petrol and diesel to electric vehicles. The UK has already legislated to ban the sale of petrol and diesel vehicles from 2040 which is only a couple of decades away and many other countries will surely follow. Pressure from environmental groups such as Climate Rebellion may result in sales of petrol and diesel engine vehicles – not only in the UK but globally - being banned sooner. This is certainly concentrating the mind of manufacturers and their vehicle development programmes which will be heavily dependent on the rapid development of battery technology. The costs of battery R&D are substantial and while companies the size of Nissan have the resources others may have to enter collaborations if they are not to be left behind.
"Third, in addition to the industry-wide challenges, Nissan has its own ‘home-grown’ issues. The fallout from the Carlos Ghosn affair continues to rumble on. Mr Ghosn, who had been chairman and had pursued an expansion strategy, was dismissed in 2018 having been arrested in Japan on charges relating to financial misconduct. His departure inevitably resulted in some upheaval and reputational damage and his successor, Mr Saikawa, who is president and CEO, now appears to be seeking to refocus the company by discontinuing less profitable models. Saikawa believes that refocusing will provide a sound base for profitable expansion in an electric future.
"In the UK, there will be speculation on the future of Nissan’s Sunderland plant which is probably safe. It lost two models earlier this year – Nissan cited poor European sales – but the remaining models are popular and it does produce the Leaf electric vehicle. However, there is possibility that a negative Brexit effect could change things.
"Finally, Nissan’s 20 year strategic alliance with Renault of France and, more recently, Mitsubishi of Japan, which focuses on electric vehicles needs to be addressed in light of the industry developments and Nissan’s post-Ghosn strategy."
Dr Paul Simmonds, Warwick Business School
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