March 18, 2020 / 11:35 AM / 18 days ago

Nissan to stop producing cars in Indonesia as part of reorganization plan

FILE PHOTO: Nissan Motor chief executive Makoto Uchida speaks during a news conference at Nissan Motor headquarters in Yokohama, Japan, December 2, 2019. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - Nissan Motor Co (7201.T) said on Wednesday it would stop producing vehicles in Indonesia, consolidating its global production in the face of falling sales which have pummeled its profitability.

The decision to stop production at the West Java plant, which made its struggling Datsun compact cars, was part of a plan for “rightsizing, production optimization and reorganizing of business operations,” Japan’s No. 2 automaker said in a statement.

Nissan has warned that production cuts, which would result in plant closures, would be needed to accelerate cost-cutting and rebuild profits. The 86-year-old Japanese giant posted its first quarterly net loss in nearly a decade last month and slashed its annual profit forecast.

Years of heavy discounting on its vehicles to grow market share tarnished the brand’s image and sent sales into a freefall, and pressure is mounting on Nissan and its new CEO Makoto Uchida to deliver a sustainable recovery plan in May.

The automaker has been in turmoil since the arrest and sacking of long-time leader Carlos Ghosn in late 2018, and is trying to rebuild its partnership with France’s Renault REN.PA.

Nissan suggested it could leverage partner Mitsubishi Motor Corp’s (7211.T) plants to maintain a carmaking presence in Indonesia, but the move to end its own production opens the door for rivals Toyota Motor Co (7203.T) and Honda Motor Co (7267.T) to build on their dominance in the country.

Market leader Toyota operates two plants in Indonesia, producing Toyota branded vehicles and Daihatsu compact cars which together have a market share of more than 40% of the country’s auto sales. Honda also produces cars and motorcycles in the country.

Nissan’s exit could also benefit South Korea’s Hyundai, which announced late last year it would build a new factory in Indonesia, its first car plant in Southeast Asia as the South Korean automaker plans to take on its Japanese rivals in the region.

Reporting by Naomi Tajitsu; Editing by Chizu Nomiyama and Mark Potter

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