(Bloomberg) -- Nissan Motor Co.’s rapid decline has drawn the attention of one of the most influential activist investors in Japan, adding a fresh dose of uncertainty to the automaker’s turnaround plans.
A fund controlled by Effissimo Capital Management Pte, which has a history of pushing for change in Japan, has taken a stake in Nissan days after the manufacturer reported cratering profit. An outdated lineup, elevated spending on sales incentives and a lack of hybrids in North America have led the Japanese carmaker to slash jobs and production.
The big question is whether Chief Executive Officer Makoto Uchida, who pledged to add 27 new electrified vehicles by 2030, can deliver a turnaround or be forced to make more drastic changes by an influential outsider.
“It really could be all over,” said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors, comparing Uchida’s choices to the ones made by former Chairman Carlos Ghosn after he arrived at Nissan following the carmaker’s bailout by Renault SA in 1999.
Ghosn staged a remarkable turnaround in a few short years, delivering Nissan’s biggest-ever profit by cutting inefficient suppliers and introducing a slew of new models.
“Those were easy options in the ’90s, and it will take a miracle to turn this around,” Anvarzadeh said.
The past week’s developments mark a new phase of uncertainty for Nissan. The carmaker has been trying to claw its way back since Ghosn’s ouster, although Uchida has already overseen cost cuts and the dismissal of his chief operating officer, Ashwani Gupta.
Nissan shares rose after Effissimo, a Singapore-based hedge fund that buys into distressed companies, was identified as the buyer of the stake via intermediaries. The fund took on Toshiba Corp. a few years ago, with the conglomerate’s chief executive officer resigning in 2021 after the fund accused him of infringing on shareholders. Toshiba accepted a buyout offer two years later.
John Seagrim, a broker at CLSA in London, said that Effissimo will probably seek to resolve issues around governance and minority shareholders rights at Nissan Shatai Co., which is 50% controlled by Nissan. The fund owns 30% of the subsidiary, a stake that it’s held for more than a decade.
“What is less clear is whether Effissimo intend not just to deal with Nissan Shatai, but with Nissan itself,” Seagrim wrote in a note.
Nissan’s shares were up 1.6% in morning trading Wednesday, following a 13% rally on Tuesday.
Uchida has promised to eliminate 9,000 staff globally and cut a fifth of manufacturing capacity, though he’s given few details on how this will be carried out. Nissan’s goal of selling an additional 1 million cars a year by 2027 now looks like a stretch, considering the lack of compelling new models is at the root of its crisis. Meeting that target would be a challenge, said Uchida, who forfeited half of his salary last week.
“It’s clearly problematic that Nissan has only released one or two models in Japan and North America over the past two years,” said Koji Endo, head of equities and managing director at SBI Securities Co. Developing software and other vehicle components will take years to yield results, he said, so the goal now should be to stop the bleeding.
Over the past few years, Toyota Motor Corp. and Honda Motor Co. have completely revamped their lineups in North America; Nissan’s last significant product change was the Pathfinder and Frontier in 2021. It plans to roll out a new hybrid during the 2025 fiscal year, plus a plug-in hybrid version of the Rogue.
Nissan has trailed behind without a gas-electric vehicle to sell to American consumers eager to buy hybrids, and its EV sales pale in comparison to Tesla Inc. and China’s BYD Co., which are tightening their grip on a rapidly growing global market.
“It’s clearly a misjudgment by management,” said James Hong, an analyst at Macquarie Securities Korea. “Nissan’s response to the growing demand for hybrids was quite slow.”
In China, where Nissan was once a market leader, its presence is dwindling with sales in April through September falling 14% from a year earlier. In June, the carmaker said it would cease production at a plant in Changzhou as local competition and an aggressive price war cost the company sales.
Nissan expects to produce about 3.2 million vehicles in the year ending in March, almost 7% fewer than the last fiscal year. All this has led to a 70% reduction in Nissan’s operating income forecast for the period.
“The problem of its aging model lineup and lack of hybrids is not likely to be solved anytime soon, and it is unclear why Nissan believes it can improve its operations so rapidly,” Julie Boote, an analyst at Pelham Smithers Associates, wrote in a note. “No net profit forecast was provided with the first-half results, which implies Nissan is expecting some large, extraordinary losses related to the restructuring efforts.”
--With assistance from Tsuyoshi Inajima, Yasutaka Tamura and Lisa Du.
(Updates with analyst’s comment.)
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