The Ax Is About to Fall on Nissan
The automaker was in trouble before the pandemic. Now it faces $2.8 billion in steep cuts to survive.
Good morning and welcome back to Speed Lines, The Drive's morning roundup of business news from the world of cars and transportation. I hope you're still hanging in there. Today we're talking about cuts at Nissan, Tesla's fight in California and when General Motors expects to be back at full speed.
'Drastic Measures' For Nissan
As we've said many times before, Nissan didn't enter 2020 in a very strong position. It's been dogged by slowing sales, a scandal in the executive ranks, unclear brand identity in North America and an aging and uncompetitive car lineup. And that was all before... well, you know. Everything right now. Though some automakers like GM and Tesla managed to squeeze out some Q1 profits and decent sales for the early part of the year, every company is getting hammered as the quarantines and downturns continue.
Nissan is in especially bad shape, so steep cuts are expected to be on the horizon, Bloomberg reports. A source says that a plan to be unveiled at the end of May will cut about $2.8 billion. It means the end of at least one production line, the phase-out of its Datsun brand used in Asia and some emerging markets, the unspecified "revitalizing" of Infiniti and a focus on wealthier markets like China, North America and Japan.
It also sounds like Nissan will rely more on partner Renault for its European presence; I would not be surprised if it exits parts of Europe entirely. From the story:
The plans still need to be reviewed by Nissan’s board and may change, people privy to deliberations around the restructuring plan said. The scale of the restructuring charge is still being determined as well, they said.
Although Nissan is forecasting a 12% decline in sales to 10.2 trillion yen for the just-ended fiscal year, the new mid-term plan calls for a return to revenue of 11.5 trillion yen within three years, with fixed costs kept at reduced levels, the person said.
The shot in the arm for Infiniti is especially interesting to me. Though the margins for a luxury car brand (and expensive trucks and SUVs, too) are proven and obvious, Infiniti has been an also-ran marque since the early 1990s and it too suffers from identity issues. I'm sure more electrification and autonomy will be part of the plan, but I wonder how many chances Infiniti has left.
County May Allow Tesla To Do What It's Already Doing Next Week
The war between Tesla CEO Elon Musk and the government of Alameda County health officials has been a baffling one. Musk is eager to get his factory reopened, though it's not clear why he can't wait a week to do it with the rest of the auto industry (besides perhaps his own confidence in being the smartest person in any room he's in) and, as we noted yesterday, Tesla is already back to making cars.
Still, county officials say they're working with Tesla to get safety measures in place "for a possible reopening next week." Which, again, it's already doing! Bloomberg's Dana Hull says what we're all thinking:
Here's more on the safety measures at Tesla right now:
Two workers who have returned to work at the plant said they were required to watch a safety-training video. One said the company handed out masks and had put up plexiglass stations in the break room. Another said plastic curtains hang from the ceiling as barriers to keep workers separated from one another, and that the carmaker is taking employees’ temperature using thermal scanners.
Meanwhile, despite Musk's spat and threats to move out of California, his other company SpaceX is seeking more than half a million dollars from the state. I wonder how that's gonna play. Probably in Musk's favor, I guess. He never seems to lose, and if he does, it's not for long.
GM Wants To Be At 'Total Production' By Mid-June
On Monday, the rest of the North American auto industry will slowly begin production again. Supplier companies already got started this week. And while Ford and Fiat Chrysler haven't made similar commitments, GM executives think plants will be back to their pre-pandemic operating levels by June 15.
The Detroit Free Press reports that GM thinks it can pull this off in part from how it recovered from the 40-day United Auto Workers strike last year (which, I'll add, feels like 50 years ago now.) And supplier companies seem to have faith as well:
"If anybody can do this ramp-up efficiently and successfully, it's General Motors," said Jose De Nigris, U.S. president of a Mexico-based supplier. "Nobody has been prepared for this up and down, on and off, so quickly. They are so good at it. Their teams haven't stopped working or dealing with the details of what it takes to have the supply chain working. I think they can do it."
De Nigris employs 100 workers in Auburn Hills as part of a global operation that designs, engineers and manufactures exhaust systems and catalytic converters. The supplier, Katcon, has plants in Mexico, India, Poland, China, South Korea and Germany that serve half a dozen automotive customers.
"Everybody has experienced earthquakes and plant fires that shut down lines," De Nigris said. "But nobody has had the experience so recently on the scale of General Motors."
But as CEO Mary Barra said, this all depends on market demand for the new cars GM is making. And avoiding major outbreaks and infections at its plants, I would add. As I've said before, the auto industry restarting will be a very interesting test case for manufacturing as a whole in the new world we find ourselves in.
On Our Radar
Mich. lawmakers ask U.S. for financial assistance for suppliers (Automotive News)
Experts say Tesla has turned the corner on quality (The Detroit News)
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Air Travel Is Going to Be Very Bad, for a Very Long Time (The Atlantic)
What should Nissan do with Infiniti?