Daily Management Review

Nissan Virtually Order Freeze On All Non-Essential Spending To Save Money: Reuters


A continued drop in the sale of cars and sliding profits had already forced Japan’s Nissan Motor Co to chalk out a strategy for cost savings. According to a recent report by the news agency Reuters quoting source information, the company has now asked its managers all across the board to cut down on any form of non-essential spending in order to arrest the losses.
The report claimed that Nissan will have this cost curtailment in place for the rest of the current financial year till March of 2020 and it is likely that the measures will continue well into the next financial year as well.
Unnecessary travel, sales incentives and promotional events are the primary targets of reduction of expenses as directed by the company in order to save each and every yen.
The sources were quoted in the report claiming that it is most likely that meetings that previously saw presence of three or four company officials will now have now probably have just one company representative. Other forms of gatherings and dinners have been canceled altogether. Some meetings could even be asked to be done over video conferencing. This manner of cost curtailment comes at a time when the company has just ordered a two-day furlough for U.S. employees January 2nd and 3rd. The employees of the company in the US have effectively also been banned from travelling for official purposes as the sale of company n the largest auto market of the world have significantly come down in recent years.
These strict cost curtailment measures highlight a sense of crisis within Nissan even though the company is not currently facing any form of cash crunch situation. The company had run into trouble in recent times after the arrest and ouster of the long standing company chairman Carlos Ghosn over financial irregularity charges last who was arrested in Japan in November 2018 and is undergoing trial. Additionally, there has been exit of some of the company’s top executives and its relation with its alliance partner and largest shareholder French automaker Renault has sourced.  
The company initiated a company-wide turnaround plan in April this year with the aim of boosting sales, bringing down costs and expenditure and propping up profit margins. However the global business outlook has also gone from bad to worse since then, claimed the Reuters report. The second quarter operating profit of the company dropped by a staggering 70 per cent, the company announced in November, which forced the company to slash its full-year forecast to an 11-year low.
The report quoted sources saying that the cost curtailment drive – which amounts to a freeze on all non-essential spending is “increasingly a modus operandi at Nissan globally”. The source further added “The house is not on fire, but there’s something smoldering.”
The sources were not identified by Reuters. 
“Given the business and operational situation we face, we’re carrying out moves to cut expenses,” said a Yokohama-based Nissan spokesman.