If Nissan Cuts U.S. Labor Costs, Must Chrysler, GM Match?

Nissan Motor Co. in Japan had a net loss of about $810 billion in the quarter ending Dec. 31, versus net income of $1.28 billion in the year ago quarter, thanks to the nearly worldwide drop in auto sales.

Nissan also announced today it expects a net loss of about $2.6 billion for the fiscal year ended March 31. As a result, Carlos Ghosn, Nissan president and CEO, said the company will take “swift, adequate and impactful actions to improve our business performance.”

Nissan will cut several key measures, including eliminating 20,000 jobs, to a worldwide head count of about 215,000. For remaining employees, Nissan is exploring “job sharing” to minimize additional layoffs.

That development raises an interesting point in the U.S. market for Chrysler and GM. As a condition of getting U.S. government bailout money, Chrysler and GM agreed to match North American compensation paid by Nissan, Honda and Toyota. The two U.S. companies are working on business plans to be submitted to the U.S. Treasury Department by Feb. 17.

If Nissan and the others cut their labor costs even more, will Chrysler and GM have to match the lower number? It was news last fall when Nissan cut 1,200 jobs at its manufacturing operations in Tennessee, but that’s small in comparison with today’s announcement.

At Nissan, inventories of unsold cars and worldwide production volume will also be cut about 20 percent, in the next 15 months. That would drop inventories to about 480,000, and production volume to about 3.1 million units. Capital spending and even future product programs will also be trimmed, Ghosn said.

Nissan’s worldwide sales of about 731,000 units in the latest quarter were about 19 percent below the year-ago period.

“In every planning scenario we built, our worst assumptions on the state of the global economy have been met or exceeded, with the continuing grip on credit and declining consumer confidence being the most damaging factors,” said Ghosn.