Twenty years ago Nissan squeezed suppliers, now it needs their help

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Tokyo (Reuters) -When Carlos Ghosn arrived at Nissan in 1999, suppliers took the brunt of cost-cutting that helped revive the automaker. Two decades later, his successors are trying for another turnaround without the ability to pressure parts makers.

Nissan Motor Corp, like rivals, has been hit as the pandemic sapped global demand. But Japan’s No.3 automaker has another problem: an ageing line-up out of step with changing tastes, including growing appetite for sport utility vehicles in the United States and luxury brands in China.

Ghosn’s relentless pursuit of chasing volume resulted in a focus on price and incentives, rather than new designs. Under Ghosn, Nissan halved its suppliers to 600 firms. Those that remained had to lower costs, but benefited from more orders as Nissan’s global market share went from 4.9% to 6.6%.

Ghosn, who also ran alliance partner Renault SA, was arrested in Japan two years ago on charges of financial wrongdoing, which he has denied. He has since fled to Lebanon.

In recent years Nissan has lost its way and new management is once again looking to cut costs, but can’t offer increased volume to suppliers. Nissan plans to reduce production capacity and model types by a fifth to trim costs by 300 billion yen ($2.88 billion).

“Cost-cutting is a no-brainer,” Chief Operating Officer Ashwani Gupta told Reuters in an interview, acknowledging that suppliers may take some persuading.

“We need to have a logic to convince both internally and externally that this is why we want the rationalisation.”

Adding to the challenge is the increased “regionalisation” of the auto market, Gupta said. Automakers face a number of different standards and regulations around the world, forcing them to sell cars in different regional versions. Read More

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