While some auto companies have had a challenging past few months, few can say that their profits have been completely wiped out. Nissan Motors (OTC: NSANY) recently announced on Thursday morning that the automaker would be cutting 12,500 jobs globally, a 10 percent reduction in its production capacity in an effort to stop hemorrhaging cash.
With profit margins disappearing across all their major markets, the company has shocked investors by reporting that their operating revenue for the first fiscal quarter fell by a whopping 98.5 percent. The news comes as the company continues to recover from its earlier drama surrounding the arrest of their former Chairman Carlos Ghosn.
Nissan Cutting Costs
The company’s CEO Hiroto Saikawa announced that Nissan will be cutting costs in an attempt to overhaul the company’s U.S. business, which has seen a drastic reduction in profits over the past couple of years. Considering the company employees around 140,000 people around the world, this is almost a 10 percent reduction in its workforce.
Nissan went on to say that its net profit for the April-June quarter, the first fiscal quarter for the company, was at $59 million. That figure is 94.5 percent lower from where it was a year ago, with sales in North America, Europe, and even Japan falling.
Revenue also declined by 12.7 percent, falling well short of what the average analyst consensus estimate was for the company. Overall, net profit is expected to fall by 46.7 percent for the year, while operating profits were down by 98.5 percent so far.
Overall, the company is struggling to restore its brand image and see new growth after becoming the target of an international scandal that’s damaged their reputation. Last year, Japanese prosecutors jailed Carlos Ghosn, chairman of Nissan as well as a titan in the auto industry for under reporting his pay.
The internal probe claimed that he had been incorrectly reporting his income for a number of years. The company saw its shares fall around 5 percent when the news first broke, and since then the company’s stock has never recovered to its former levels.
Shares of Nissan fell by 2.8 percent on Wednesday and are expected to fall even more in response to this news. One year ago, the Japanese auto giant was trading around $18 per share, but now trades in the $13 range.
It’s uncertain whether or not the company will see a turnaround in the coming years, but it’s undeniable that investors aren’t looking at the car maker with any sense of optimism right now as a 99 percent reduction in profits is an extremely worrying sign.
