Nissan Motor Co., Ltd. (7201) Earnings Call Transcript & Summary

Good evening, everyone. Welcome to Nissan's Fiscal Year '24 Full Year Earnings Session. This press conference is being held in hybrid format, so we have media both in the room and online. Before I begin, let me go through a few hygiene announcements. [Operator Instructions] Emergency exits are marked, and we have people who will guide you through the procedures in case of emergency. Let me start by introducing the speakers for today, Mr. Ivan Espinosa, President and Chief Executive Officer; Mr. Jeremy Papin, Chief Financial Officer. I will now hand over to Ivan for his remarks.

Thanks, Lavanya. Good evening, everyone, and thank you very much for joining us as we announce our results for FY 2024 and our plan to recover and position Nissan for long-term success in a competitive landscape. Thank you for allowing us time to do a deeper dive into the situation and develop a prudent plan. Since taking office and with the support of a strengthened Executive Committee, we have conducted a comprehensive assessment of the situation, including asset review, and made a careful decision to impair production assets in key markets. Today, I will share our new recovery plan, Re:Nissan, in light of the fiscal year results. Before that, Jeremy will cover the FY '24 results and FY '25 outlook. Over to you, Jeremy.

Thank you. Thank you, Ivan. Good evening, everyone. Fiscal year 2024 has been a challenging year for us, and we anticipate that these challenges will continue into fiscal '25 as we focus on rebuilding Nissan. We are taking strategic actions to address performance gaps while navigating market uncertainties. I will take you through our financial results for the 12-month period to March 31, 2025. Nissan's revenue was JPY 12.63 trillion for the period, down 0.4% year-over-year. Although revenue remained flat, operating profit decreased to nearly JPY 70 billion, impacted by lower volume, a weaker mix, pricing pressure and increased costs. As referenced in April, these financial results include impairment charges of over JPY 500 billion and restructuring cost of close to JPY billion. Combined these items, along with the release of deferred tax assets resulted in a net loss of JPY 671 billion. Later in this presentation, we will address the ongoing recovery of Nissan and additional detail on the necessity of these noncash impairments and restructuring costs. First, I will go through our performance for fiscal year 2024. Total global retail sales decreased by 2.8% year-over-year, with China volumes nearly 100,000 units lower than the previous year. Excluding China, unit sales were flat. Driven by new model launches, North American sales rose 3%, which offsets declines in other regions. Europe was down by 3%, Japan by 5% and other markets by 1%. In China, retail sales decreased by 12% as we continue to adjust supply to demand and faced intense competition from domestic brands. For the fourth quarter ending end of March, global retail sales decreased by 5%, with China down by 20%. Excluding China, retail sales in the fourth quarter were down by 0.6%, with nearly 10% decline in Japan, nearly 4% in Europe and 3% in other markets. The decline in consolidated retail sales was offset by a 5.5% increase in quarterly unit sales in North America. This slide highlights our key financial performance indicator on an equity basis for the full year. Net revenue on a consolidated basis was flat at JPY 12.6 trillion. Last month, the financial outlook was revised forecasting an operating profit of JPY 85 billion. However, following the final audit process, the operating profit for the fiscal year totaled JPY 70 billion, resulting in an operating margin of 0.6%. Including the impairments of over JPY 500 billion, restructuring cost of JPY 60 billion and higher taxes, we are reporting a net loss of JPY 671 billion for the fiscal year. Despite the challenges, we continue to invest in new products, services and technologies, which are critical for our future. This led to higher CapEx of JPY 577 billion and maintaining R&D spend above JPY 600 billion. Net revenue for the automotive business was JPY 11.37 trillion and operating loss was JPY 216 billion. Due to the negative operating profit in autos and increased CapEx, free cash flow for the automotive business was a negative JPY 243 billion. Automotive net cash for the period was JPY 1.5 trillion, flat year-over-year. Next, I would like to explain the various factors for operating profit from the prior year to this fiscal. Against the JPY 569 billion operating profit in fiscal 2023, we saw a positive impact from foreign exchange of JPY 36 billion. The U.S. dollar remained strong. However, this was offset by declines in other currencies. Raw material costs had a positive impact of JPY 13.6 billion. The largest negative contribution resulted from the decline in sales performance, which was down by almost JPY 300 billion. This was due to weaker unit sales volume, higher variable marketing expenses and some lower aftersales revenue. Monozukuri cost had a negative impact of JPY 7.9 billion, as increased cost for regulatory and product enrichment items, along with other expenses, offset improvements in manufacturing costs, logistics and in R&D. Inflation had a negative impact of JPY 106 billion, with inflationary pressures affecting cost-cutting efforts and supplier costs. Other costs, including normal leasing, credit losses from sales finance and weaker remarketing results had a negative impact of JPY 135 billion. As a result, our operating profit decreased to JPY 69.8 billion. For the fourth quarter, operating profit decreased to JPY 5.8 billion. This was primarily due to a weaker contribution from sales, along with higher raw material costs. Having reviewed last year, let us look ahead to fiscal year 2025. Overall unit sales for the upcoming fiscal year are expected to decrease by 2.9% to 3.25 million units. This expected decline, which excludes potential impacts from higher tariffs, is mainly from an 18% sales decline we forecasted for China, while we expect retail sales, excluding China, to slightly grow by 1%. Sales in Japan, North America and Europe are expected to be roughly flat year-on-year. However, sales in other markets are forecasted to increase by 6.6% due to expected growth, for example, in Brazil and India. Global production volume is projected at 3 million units, adjusted to our reduced volume outlook to manage inventories. This slide illustrates the operating profit variance analysis for the fiscal year 2025 outlook. Excluding the potential tariff impact, ForEx headwinds are projected at JPY 120 billion with a small positive contribution from raw material. Sales performance is anticipated to improve by JPY 60 billion through better incentive management, supported by an improved cash flow management and new model launches in the second half of the year. Better manufacturing cost management, improved logistics and regional total delivered costs are anticipated to positively contribute to JPY 160 billion from monozukuri, with cost savings building up as our new plant ramps up. However, these gains will be offset by inflationary cost of JPY 145 billion and other expenses of JPY 45 billion, including higher CO2 emission-related costs. Operating profit is expected to be breakeven for fiscal year 2025, excluding the potential impact from tariffs. I will now discuss our assessment of the current situation regarding U.S. tariffs. Our exports from Mexico and Japan account for roughly less than 45% of our total U.S. sales. We estimate that our total negative gross impact before any mitigation is JPY 450 billion. However, we aim to mitigate this impact through various measures. On the upper right-hand side of this slide, you can see a list of the measures we are implementing. In Q1, these actions could enable us to mitigate approximately 30% of the expected tariff impact. For fiscal year 2025, we expect net revenue to decrease to JPY 12.5 trillion. The guidance for FY '25 operating profit, net income and auto free cash flow is still to be determined. This uncertainty comes from the potential impact of tariffs and additional restructuring costs, which are currently being assessed. However, for the first quarter, considering the impact of tariffs, we are forecasting net revenue of JPY 2.75 trillion and an operating loss of JPY 200 billion. Auto free cash flow for the quarter is expected to be a negative JPY 550 billion. Following typical seasonal patterns, the first quarter is expected to be our most challenging period. As the year progresses, we expect to see steady improvement driven by the refreshed product portfolio and effective cost reduction strategies. Nissan has a total available liquidity of JPY 3.5 trillion -- JPY 3.4 trillion. This includes JPY 2.2 trillion of cash and cash equivalents and around JPY 1.3 trillion of auto cash loans outstanding to sales finance companies. Additionally, we have JPY 2.1 trillion in unused committed credit lines that are available, if needed, with approximately JPY 600 billion allocated to the automotive business. At the end of fiscal year 2024, our automotive debt stood at nearly JPY 2 trillion, of which about JPY 700 billion matures in fiscal year 2025. We plan to refinance between JPY 400 million and $600 million of this debt maturing. Therefore, we expect to end the fiscal year 2025 and enter fiscal year '26 with total debt ranging between JPY 1.6 trillion and JPY 1.8 trillion. To sum up, fiscal year 2025 will be a year of transition for us, a year of decisions. We have enough liquidity to cover our funding needs, which will I -- which will support us as we restructure our business. While FY '25 is a year of challenges and uncertainties, the actions we are implementing as part of our new recovery plan are designed to yield positive results in FY '26. Thank you for your continued support and confidence in our journey ahead. I will now hand it back to Ivan.

Thank you, Jeremy. As you can see, our full year financial results are a wake-up call. The reality is very clear. Our variable costs are rising. Our fixed costs are higher than our current revenue can support. And as Jeremy said, FY '25 is a year of transition. So we are taking a prudent approach and keeping our revenue assumptions flat. The reality is clear, we have a very high cost structure. To complicate matters further, the global market environment is volatile and unpredictable, making planning and investment increasingly challenging. Hence, Nissan must prioritize self-improvement with greater urgency and speed, aiming for profitability with less reliance on volume. This is what we're setting out to do with our new recovery plan, Re:Nissan. Our plan outlines 3 key drivers that will help us achieve positive operating profit and positive free cash flow by fiscal year FY '26. These are reducing costs to aim for breakeven, redefine product and market strategy with a sharper focus and reinforcing partnerships to complement our strategies. Let me talk through you in detail. Reduced costs. This is the area where we need to go further and faster. With help of cross-functional teams, we have reassessed and scrutinized all the assumptions on which forecasts were based in the past. Given our structural challenges and market conditions, we need to deliver more cost reductions on a significantly larger scale. Our new target is total savings of JPY 500 billion, which includes JPY 250 billion from variable cost and another JPY 250 billion from fixed cost. We have increased our target variable costs, and we plan to further reduce these costs in FY '27 to achieve a solid and sustainable profitability. Let me now clarify why there are 2 sets of numbers on the screen. We are presenting the targets alongside the most recently announced figures to illustrate the extent of the reductions being implemented. The earlier targets were based on assumptions from The Arc business plan. Now our goal is to establish realistic and measurable targets based on the actual results from FY '24. We will track our progress on these targets and report in a timely manner. To achieve the magnitude of variable cost reduction, we need a dedicated program and task force. We have already established a new variable cost transformation program to realize maximum engineering and cost efficiencies. Another big area is our supply chain. We are rethinking our supply base to ensure more volume for fewer suppliers and increase efficiencies while we do benchmarking. We will also be challenging our internal standards for more practical outcomes. With this, the aim for a 10% reduction is visible. Over 3 years, we will reach 10% with the potential for further significant savings in FY '27. The task at hand is very big and very challenging. We need a strong governance model to ensure we identify, execute and achieve all reductions quickly. Hence, we created a sprint team under our Chief TdC Officer, who will directly report to the Executive Committee. We allocated 300 cross-functional and cross-regional experts to divert their efforts and expertise to achieve this goal. We have already organized 66 commodity groups and identified at least 19 different activities. The team has generated already a total of 2,300 ideas, with more than 800 ready for implementation, amounting to JPY 75 billion in FY '26. Many more ideas will follow, and they will come faster. Additionally, by passing some advance and post FY '26 projects, we will be able to reassign 3,000 employees to work on TdC reduction. This will not delay our production start for new vehicles, thanks to our short-term development process. The resources we are allocating demonstrate the importance we place on this area and our commitment to succeeding in this effort. While we work diligently on variable cost reduction, we will seek further efficiencies to reduce our fixed costs. There are several initiatives, but let me highlight some key measures that demonstrate the scale of the actions. First is to restructure manufacturing. This includes consolidating our vehicle and powertrain plants globally, including Japan. This will require reducing the number of our manufacturing plants from 17 to 10 and increasing our utilization rate to 100% in FY '27. We will reduce our production capacity to 2.5 million by FY '27 with the option to increase it by 0.5 million if demand arises. Additionally, we will utilize our partner plants to support production as needed. We have already taken quick and decisive actions such as consolidating pickup production from Argentina to Mexico, reorganizing operations in India with our partner, Renault, and stopping investment in an LFP battery plant in Japan. As part of Re:Nissan, we need to implement further workforce optimization, primarily driven by our plant consolidation efforts. We are aiming for a revised global target of 20,000 people by FY '27, with roughly 65% coming from manufacturing, 18% from SG&A functions and 17% from R&D and mostly contractual staff. While this decision is essential for enhancing operational efficiency and ensuring long-term sustainability, we will ensure necessary support to affected employees during the transition. In addition to these reductions, we will focus on lowering labor costs and expenses, expanding shared services and achieving greater marketing efficiencies. In the area of development, we will focus on improving efficiency in 3 key areas: cost of engineering, complexity and speed. We aim for a 20% reduction in workforce average cost per hour by rationalizing our global R&D facilities and allocating work to the most competitive location within the Nissan global R&D footprint. In addition, we are targeting complexity reduction in 2 major areas. The first is parts complexity, which we aim to reduce by 70%. The second area is platform reduction. While this takes time, it will help reducing engineering workload in the short term. We plan to cut the number of global vehicle platforms by nearly half from 13% to 7% by FY '35. And regarding speed, we have outlined efforts to shorten development lead times through the family development concept. We have invested significant energy into this initiative. And today, we are excited to announce for the first time 3 vehicles that will emerge from this process: the all-new Nissan Skyline, an all-new global C-segment SUV and an all-new INFINITI compact SUV. Now here is the time line for implementation extending through FY '27. This time line reflects our commitment to executing these tasks and underscores our dedication to transparency in our processes. We believe in open communication with our stakeholders, and this time line will serve as a tracker to demonstrate our progress and the impact of our initiatives. We fully expect to be held accountable for our announcements. Now I would like to explain our second area of focus, our redefined strategy for markets, products and partnerships. As previously stated, we understand that a sustainable recovery cannot rely solely on cost reductions. It must also be supported by strong product offerings. To this end, we will concentrate on developing vehicles in core market segments while collaborating with partners to create vehicles tailored for other markets and needs. Here, you can see the segments in which Nissan will develop vehicles and how we will leverage our partners to support other segments and markets. For instance, we will collaborate with Renault in Europe, Mitsubishi Motors in the U.S. and Dongfeng Nissan in China, not only for the Chinese market, but also for exports. We will leverage models from one of these approaches to cover other markets and explore further business collaboration in the U.S. to adapt to the evolving market environment. We will prioritize markets and products to ensure we have the right models for the right markets at the right price points, aligning supply with demand. This involves establishing distinct strategic positions for each region. In the U.S., our focus will be on crossovers and SUVs, with plans to offer more hybrids and reinvigorate INFINITI's market presence. In Japan, we aim to renew Nissan's distinct brand appeal, while driving up our average price by leveraging larger-sized models and signature technologies. In China, we will more effectively leverage our joint venture to lower costs and optimize the production of new energy vehicles. Additionally, we will begin exporting our NEV models to markets outside China, ensuring speed, cost competitiveness and innovative technologies. In the high-growth Indian market, we will renew our product lineup and maximize synergies within the alliance. We have already taken a step in this direction by transferring control of our plant in India to Renault, allowing our alliance partner to assemble next-generation models for Nissan and enabling us to capture export markets. In Europe, we will strengthen our presence by assembling more electrified models in Sunderland, utilizing also our alliance relationship with Renault to take advantage of their assembly lines and electric vehicle architectures. Finally, in Mexico and the Middle East, we will capitalize on our strong brand position to sustain the profitable business we have established in those regions. In very simple terms, all of our product efforts must be aimed at making the heart of Nissan beat stronger. We will prioritize our portfolio investment around 3 key objectives. First, we must retain our core business and current customers by providing vehicles that they value. Second, we will focus on geographical and segment growth to attract new customers in targeted markets. And third, we will enhance our marketing and sales efforts for our iconic models, which represent the heartbeat of Nissan, to reignite customer passion for our brand. We take pride in our heartbeat models, which reflect the true DNA of Nissan. They are defined not just by sales volume, but by their iconic design, engineering ambition and, most importantly, by how they fully represent Nissan's values. Additionally, partnerships will enable us to cover various segments and regions with optimized investments, allowing us to refocus our resources on core project priorities. Our focus on core models will be supported by complementary vehicle development in collaboration with our partners. With Renault, we will enhance our collaboration in Europe, India and Latin America. We are also working with Mitsubishi Motors and Honda to explore advancements in vehicle intelligence and electrification. Specifically, with Mitsubishi Motors, we are collaborating on pickups and EV battery sharing. We will actively seek business collaboration in the U.S. to adapt to the evolving market conditions. In addition to our partnership projects, we are continuing our strategic review process, and we will provide updates at the appropriate time. We are not only committed to the actions we take, but also to the results they yield. To drive this change, we are establishing a special steering committee to oversee initiatives in all areas. This committee will bring together our best and brightest from both regional and global teams, ensuring comprehensive coverage, visibility and accountability. I will chair this committee with the support of the Executive Committee of Nissan. I extend my gratitude to our senior leaders and the wider executive team for their dedication to the task ahead as well as to our employees for their invaluable support in achieving our goals. In conclusion, let me restate that our fiscal 2024 results have exposed the urgent need for Nissan to recover. To safeguard our future, we must go further and faster. We have a mountain to climb from the losses we are announcing today. As our path forward, the Re:Nissan recovery plan is an action-based grounded in reality and driven plan by determined actions. It will not be easy to deliver. It will require dedication, discipline and hard work in every part of the organization. But I am confident that we have what we need to rebuild our company. We will need the understanding and support from our valued partners and stakeholders as well as collaboration from future partners. With a shared mission, Nissan people have the skills and ability to return Nissan to its rightful position. As I've stated before, I truly believe there is no competition that cannot be won by working together as one team. Starting today, we build the future for Nissan. Thank you.

Thank you, Ivan. We will now open up for the questions. [Operator Instructions] Let me start with the first question in the room. Okay. We start right at the beginning, the person in the center, please, yes.

[Interpreted] [indiscernible] One question only, right? Okay. Re:Nissan is what I would like to ask you about. Why are you going to reduce 20,000 people and decide to close 7 the plants? Why now? Did you decide it because 20% reduction in capacity and 7% headcount reduction was not enough? That was market perception. To start with, the old management, do you think that it wasn't enough that old management didn't make an enough decision, but because the duration in external environment, you are making these new decisions? In 1990s, during Nissan Revival Plan, this is the same order of magnitude or revival that you are implementing. Are you sure that this is enough? How determined are you?

Yes. Thank you for your question. First of all, what we did as a new management team is to relook at everything that has been prepared before. We look at it very coldly. We look at it with challenging eyes, and we define the need to do more. As you saw earlier by the presentation from Jeremy, our fixed cost structure is something that we cannot absorb with the current revenue. And unfortunately, given the volatility in the market, it is hard for us to absorb this cost structure. Then we had to take more actions and accelerate the actions. So this is what's driving the need for us to do more. Are we confident that this is enough? The answer is yes. This will be enough to drive the results that we need, but we need to move fast, and we have to accelerate. And proof of these are some of the recent discussions that we have or decisions that we have made, like what we just announced a few days ago on the LFP battery investment that, unfortunately, we had to give up. Another example is a very quick announcement that we made on the deal with our partner, Renault, for the India manufacturing footprint. And this is a speed and determination that this new management team has. So we will move with speed, determination and discipline to secure the results that we are committing to today. Thank you for your question.

Thank you. Next question, please. Go to the center. Maybe the person on the second row -- middle row second. Yes, go ahead. Go ahead.

[Interpreted] My name is Mukoyama. Seven plants will be closed. Could you elaborate on this? Especially utilization rate in Japan is low, and that's what people indicated. The 7 plants, does this include Oppama, Tochigi and Shonan plant, where the utilization rate is poor? Is this included? Because so far, you were hesitant to do a restructuring within Japan. But this time, are you going to address Japanese operational reform? And why are you doing this now?

Yes. Thank you for the question. Unfortunately, at the moment, we cannot disclose details of which locations we are considering for these rightsizing. But as you rightly said, this is including Japan. It's a global assessment, including Japan. And it includes vehicle, but we are also actively now looking at powertrain plants. So in the end, we will come up with a combination of vehicle assembly plant resizing, but also powertrain resizing will come after. And to give you some examples of what we are already done -- or we have already done, we have already announced Argentina consolidation to Mexico in the pickup manufacturing. We have also announced before the Thai consolidation line plant 1 to plant 2, and what I just mentioned about the India operation with Renault. So these are the things that we have already done, and there's more to come, and we will inform you in due course. Yes. Thank you for the question.

Thank you. Let's go to the gentleman behind, in the middle row, yes.

[Interpreted] Hatanaka, Nippon Broadcasting Company. My question is with regards to the Japanese market. According to recent commercials, rather than EV and autonomous drive, Waku-Waku is being focused, which is understandable. But you said that in the Japanese market, you're going to think about the improvement of average price. Does that mean that average price will go up? Japanese people, many of them cannot afford cars beyond JPY 5 million. Who are the target customers you want to give the Waku-Waku feeling?

Thank you. Thank you for the question. The strategy to increase the average lineup price in Japan is not via pricing. What we're looking to do is to capitalize on other existing vehicles that we have in the lineup, larger cars that we know our Japanese customers are fond of, to bring them to Japan market and expand our coverage. With this, and also the addition of more signature technologies in the vehicles that we have, we expect to increase the average price of our range. This is the approach that we are taking. So it's not a pure pricing up, but rather leveraging on the product offering and the technology offering in the market. Thank you. Thank you for the question.

My team tells me we have allocated enough time. So yes, you can expand to 2 questions. Let me move to the left side, please. Yes, the gentleman over there.

[Interpreted] I am from Nikkei Shimbun. My name is Ochiai. You are going to reduce the number of Japanese plants. You need to collaborate as many stakeholders to make this happen. Inside the company, local municipalities, where are you with the status of discussion? I'm sure you are not ready to disclose. Have you already specified the plant that you are working on, and that is why you calculate it into 7? Have you specified a specific plant and employment of the -- if you close the plant, how are you going to approach the employment who are affected by this closure?

Yes. Thank you for the question. Yes, of course, we have a plan, and we have identified a candidate plants for rightsizing. At the moment, I cannot share more because there's still the engagement with stakeholders that have to take place, but we have a clear plan to reach to these objectives. And your second question was about the approach. Of course, this is very serious, and we do recognize that this is a very painful decision to take. In Nissan, as you know, we have a very strong and firm view about our people. So we will take good care of them. We will manage the communication accordingly and, of course, support any of the employees in the transition as we move forward. Thank you again for the question.

We'll take one question from online. I think Katrina from Reuters is there. Katrina, go ahead. Hello, Katrina? Can you hear us? Yes. Maybe we'll go back to her. Okay, come to the front row, yes.

Hans Greimel from Automotive News. When we look at the plan out to fiscal year '27 and you have the capacity kind of boiled down to 2.5 million, what do you think will be the global sales at that point? Do you imagine that global sales will shrink down to about that same level? What do you imagine the sales will be then? And what do you think the operating profit margin would be around that time, given that you've shrunk down the capacity and improve the capacity utilization?

Okay. Thank you for the question, Hans. As for sales, as I mentioned in the presentation, we are taking a very prudent approach, expecting our revenue to remain flat. So we are basically attacking the fixed and the variable costs. In terms of capacity, as I explained, you can see we're aiming to 2.5 million, but this is under the harbor method, which considers 2 shifts. We -- this means we have upper flexibility of around 0.5 million. And then also we have within our sales plans, OEM in programs with some partners that account roughly for 400,000 cars. So this is how we are looking at the capacity to sales ratio, Hans. As for the OP, as mentioned, in 2026, our goal is to achieve positive auto OP and positive free cash flow. This means that for FY '27, of course, we will be or should be beyond that. We're creating the platform to have a more profitable business in FY '27 and beyond. Thank you.

Jeremy, would you like to add anything? Okay. Good. We move on to the question online now, if they are ready. Katrina, can you hear us?

I can. Can I ask what proportion of your China major vehicles do you intend to export? And to which markets are you planning to export them?

Well, in the short term, we want to accelerate. I don't have a number to give you. But in the long term, we want to have a balanced volume between domestic and exports. So this reference that I give you is in the long term. We want to quickly accelerate the exports of the vehicles that we are preparing there. So far, the 2 first cars that we have unveiled recently in the Shanghai Auto Show, which are the Nissan N7 and our Frontier Pro PHEV, have been welcomed greatly with great expectation and great support, not only in China but also overseas. And these are 2 of the first models that we will accelerate to export, Katrina. Thank you. Thank you for the question.

Thank you. The next question from the middle row person in the white glasses, please, white glasses.

[Interpreted] Freelance, [ Shinya Yamamoto ] speaking. To revive Nissan, you talked about the scenarios. But as a monozukuri company, you need to build good products. Good products are the keys. You are reforming the R&D. It's about reducing costs or increasing the speed of engineering. I'm sure you're taking all the actions. My question is as follows. For CEO, what do you mean by good cars, which will be the key success factor? Lately on the circuit, in the car enthusiast, I am sure you interacted with the car enthusiast. What -- how do you define good car?

This is a very deep question, and I can probably talk with you for hours on this subject. But for me, the important thing, as mentioned in the presentation, is to bring Nissan's heartbeat back. And we're going to do that by leveraging on the core DNA of Nissan, which is exciting cars that make people smile. Nissan is a brand. It has a lot of fans and a lot of lovers, and this is exactly what we have to capitalize on. We need to make more of these cars in order to address the brand globally. Our engineers, our designers, our product planners are very, very capable in doing so. And this is what we will leverage on because this is what redresses the brand, and this is what drives customers to our stores. Then we can have volume and business-oriented cars, right? But we will focus a lot of energy on creating these exciting cars in order to redress and reshape the Nissan brand. Thank you, again, for your question.

Thank you. Let's take the question from the gentleman in the first row, yes.

[Interpreted] TV Tokyo. My name is [ Ave ]. This is a question for CEO. Partnership will be reinforced. This is the policy that you defined. Earlier, you said that Honda's collaboration. How are you going to collaborate with Honda going forward? Earlier, Mibe-san said the collaboration with Nissan, it's about writing -- that you are considering to widen the option of collaboration with Nissan. That's what Mibe-san said earlier. Are you going to deepen the collaboration with Honda? Or with regards to business integration, what do you think about the business integration with Honda and Taiwan, Hon Hai? The possibility of collaborators Hon Hai in Taiwan, what's your thinking about this? These are my questions.

Yes. Thank you for the question. As for partnership, with Honda, as explained in the presentation, we continue to work with them. We never stopped working with them, particularly in the area of vehicle intelligence and electrification. So this is an area that we will keep exploring but not only, as mentioned also in the presentation, we are actively looking opportunities in the U.S. market, particularly because of a current market situation. And of course, Honda is one of the candidates that we are discussing in order to see if we can find a way forward and have a project together. Now as for your question on the broader collaboration and the strategic review, as mentioned, the strategic review process is ongoing. We are discussing actively and considering many partners, including, of course, Honda, but not only. This is a very open review that we are doing, and we are evaluating potential partners that will bring additional corporate value to Nissan. The areas of priority for us are, of course, synergies in the biggest markets in which we are present. You can easily imagine, this includes Japan, the U.S., but also advanced technology development as well as finding ways of having a lighter balance sheet. So these are like the principles we're utilizing in this strategic review. And as we said, we are open to collaborating with multiple partners as long as corporate value is coming. Thank you for the question.

Thank you. Next question, if you go to the gentleman there, yes.

[Interpreted] Yamaguchi of Kyodo News. My question is with regards to Re:Nissan. 20,000 people will be reduced and from 17 to 10 plants. So amongst the restructuring plans, which the number of headcount reduction has been increased from 9,000, and your original plan was 3 plants, but the number of plants to be closed has been increased. But under this new recovery plan, in order for Nissan to truly turn around, do you think this is sufficient and enough? Or do you think further steps will be necessary, like headcount reduction or closure of domestic plants? Beyond Re:Nissan, will you be thinking such possibilities beyond Re:Nissan?

Thank you. As mentioned, we are confident in the plan that we are laying down today. And these 20,000 workforce reduction is a combination of manufacturing, as explained during the presentation. It's a combination of manufacturing, direct and indirect, including also SG&A resource and R&D, mostly contractual workers. So this is the composition of the 20,000. It is not purely coming from the manufacturing side. And as I said, for the moment, the plan, we are confident on, and we will focus on executing the plan. Rather than considering more and more and more scenarios, what Nissan needs to do now is to focus on doing, and this is what we will do. Thank you.

Thank you. We go to the far end, yes.

Harry Dempsey from the Financial Times. Ivan, the question is just around the potential factory closures. Within the factories that you're looking at, are any of the factories sort of sacred cows that you wouldn't touch because of their strategic importance, for example, perhaps the factories in the U.S.? Or what about Sunderland?

Yes. Thank you for the question. The approach that we have, of course, has a strategic view of the footprint that we have, also considering to keep certain flexibility because, as we rightly know, the world is very unstable these days, and you need to keep some flexibility to react. And then the other angle that we are taking, of course, is the competitiveness. So using these variables is the way we are approaching and we approached the selection of candidates for rightsizing, yes. Thank you again for the question.

Thank you. Next question, the gentlemen here, the white shirt, yes.

[Interpreted] Mergermarket. My name is Yoshida. I'm a reporter. Partnership strategy, you are trying to reinforce the partnership strategy. Do you have any concrete progress that you can disclose to us in the presentation, restructuring and the cost reduction? For each project, you focus on partnership in each specific area. That's the top priority. How about the capital tie-up, partnership attaining capital tie-up? Is this possible? Are you thinking about this kind of partnership?

Yes. Thank you. As mentioned earlier, we have no detail to share today on the strategic review, but this doesn't mean that we are not working on it. So we're actively looking at it. And as I said earlier, we're looking at any potential actions or measures that can add value to our company. So we are taking a very open view of the world, of the candidates that we have. And of course, we will keep actively developing this plan and come to you with updates when we are ready. Thank you for the question.

Thank you. Next question. Could you come to the gentleman in the front, please?

[Interpreted] Asahi Shimbun, Matsuoka speaking. I have 2 questions. The first one, 20,000 reduction, does this include the headcount in Japan or not? Just like the plant, could you reevaluate on this? Does it include Japanese population? And this loss is the third largest in the history of Nissan. 25 years ago, when Mr. Ghosn arrived, the company used to have a similar challenge. You are repeating the same mistake. What is the cause here? What's the difference with Nissan Revival Plan. These are my questions.

Thank you for the question. And as I said earlier, unfortunately, this is a measure that is global, and it includes Japan. So the answer to your question is, yes, unfortunately, we have to look into Japan as well. And the reason is not something recent. I think you need to take a step back and understand what was happening around 2015 or 2016. Management back then was expecting our company to be a size of around 8 million cars. And as such, there were heavy investments done, both in terms of manufacturing capacity as well as in human resource. And what's happening today is we are just facing the reality of being much smaller than that. So we have to take the reset action if we want Nissan to survive in the future. This is the reason and what is driving these unfortunate actions that we have to take today, which again are unfortunate, but are necessary. We wouldn't be doing this if it was not necessary for the survival of Nissan. Thank you.

Thank you. Next question in the middle, please.

[Interpreted] [ Mita ] of West Japan Newspaper. Regarding supplier reduction, in your presentation, Ivan, from fewer suppliers, more components will be supplied, you said. In the auto sector, there is a wide range of supplier ships. So we have some concerns regarding impact to supplier ship. So how large will the reduction of suppliers be? What's the plan?

Yes. Thank you. We don't have the specifics to share today on how far we will go with the supplier panel optimization, but there's few actions that I can tell. One, as I said, we intend to reduce the supplier panel, focusing on suppliers that have more competitiveness and giving them more business because these will be a symbiotic relationship that can build positive business for the supplier and also sustainable business for Nissan. The other area that we are starting to put a lot more focus on is looking our -- at our supplier base in China and see what we can learn from their methodologies and why not inviting them into our ecosystem of manufacturing outside of China. So these are some examples that can help us drive performance, that can help us learn new methodologies and also use these learnings to share with other suppliers that can improve their performance as well. We're also going to have a much closer relationship with suppliers. As mentioned during the presentation, we are challenging a lot of our own internal standards because there's cases in which the suppliers have great ideas for cost reductions, but we are not adopting them because of our own standards and our own definition. So this is now under Akashi-san's leadership, our new CTO. This is being looked at, and he's very actively chasing this. So this is how we are approaching the supplier question that you just raised. Thank you, thank you for that.

Thank you. We have a hand raiser online, Shiraki-san from Reuters. Please go ahead. Shiraki-san, can you hear us?

[Interpreted] Do you hear me? I am Shiraki from Reuters. I have 2 questions. The first question -- do you hear me, by the way?

Yes, we can, please.

[Interpreted] In Japan, the production footprint in Japan, Espinosa-san, what's your thinking about the Japanese production footprint? In the past, Nissan in Japan wanted to maintain 1 million units of production at one time. But gradually, the production volume fell. Today, it's around, what, 500,000 units or so or 700,000 units or so, maybe if I understand correctly. It used to -- Japanese plants used to be a mother plant. And ex-EVP Sakamoto-san called it a mother plant. Because of the tariff impact, from 17, you are going to reduce it into 10. Japanese production footprint, what will be the positioning of the production entities in Japan in terms of size and the models that you need to build? Do you have any principles or policy? What kind of production system in Japan will be an ideal? This is my first question.

Thank you. As stressed earlier, we are not in a position to share details today. But you can imagine, Japan will remain one of our core manufacturing footprint, of course. Being a Japanese company is no surprise or should be no surprise. As mentioned before, what we're doing is taking first a strategic view, ensuring that we keep proper flexibility to make front to geopolitical changes that are happening as we speak in the world, but, at the same time, drive competitiveness improvement and extract the best of our manufacturing footprint that we have today. So this is the approach that we will be taking. Yes, thank you for your question.

Thanks, Ivan. We have time for a couple of more questions. Who would like to go the next? Come to the front, please.

[Interpreted] Nikkei Jidosha. My name is Nakamura. There are 2 questions about the financials. Tariffs impact is JPY 450 billion. That's the figure you gave me. What's the breakdown? What's the assumption of this JPY 450 billion? And how are you going to design the mitigation measures? And Re:Nissan program, in order to promote Re:Nissan program, how will it impact the tariffs? And the other one, the full year guidance is to be determined. Going forward, when are we going to disclose the full year guidance? What's the schedule?

Okay. So let me start with the second part of your questions, and then I will ask Jeremy to complement, particularly the tariff. So as for the front, what you're seeing today in the measures, we are considering everything that is happening in the environment today. So the targets that we're laying down for FY '26 are considering what we see today. Now it doesn't mean that you cannot change because, as mentioned, it's very volatile, unfortunately. But with what we see today, these are the commitments that we are making. So this is, to answer your question on the Re:Nissan consideration. As for the second and third question, I will ask Jeremy to elaborate on them.

Yes. Thanks for the question. So regarding tariffs, as mentioned and as you can see on the slide, our main exposure are exports from Mexico and exports from Japan. Our total exposure, as mentioned, is JPY 450 billion. We are working on a number of mitigation measures. Some are fully in play today as regards where we are focusing our retail sales and how we are leveraging the operations that we have in our North American plants. And of course, we're closely working with our suppliers on further mitigation plans as the third area of tariff is imports of parts for our U.S. production. And so we're working on all fronts. In Q1, the expectation is that 30% of our exposure can be mitigated. As regards providing a guidance, we thought with what we're sharing today given the uncertainty that one can have over the overall trade situation and a lot of the work that we are now doing internally, we thought we were providing a good Q1 outlook. I mean, not a good outlook, but a number reference that clearly can be used as regards our first quarter with a view that we know, because it is both the seasonal pattern as well as the forecast that we have based on the plans that we're rolling out that it will be the worst quarter of the year. And so you can see the reference point that we have. Without the tariffs, this company in fiscal year '25 is aiming to be breakeven on the COP level. And of course, when there is more visibility, we will absolutely fully provide an updated guidance on a timely manner.

Thank you. We go for the next question. Could we come to the gentleman here?

[Interpreted] [indiscernible], Mainichi Newspaper. I have a question regarding alliance. Outside Directors, 8 Directors next month, there will be a bill presented to reappoint them. Executives have changed, but the Board members are going to stay on. That's a question that's even spoken by your own employees. Mr. Espinosa, you have been recommended by the Nomination Committee. So you are not qualified to answer. But at the AGM next month, that question will pop up, for sure. Are you going to have another Board member respond to that question? If you can respond on to this question, to the extent possible, can you share with us any comments you can say?

Thank you. Yes, as you rightly said, I am unfortunately not in a position to answer on behalf of the Board, but I believe there's been some statements made by our Chairman of the Board. So I will kindly ask the Comms team to share those with you. And in any case, you can always ask the Board members for their position on the matter, yes. Thank you.

Thank you. I did see a hand raised from the lady in the second row. Could you pass the mic to her?

[Interpreted] I am from Nikkei Asia. My name is Yoneda. In 2024 full year results, one clarification. In April, you made a revision. At that time, net loss was between JPY 700 billion and JPY 750 billion. That was the assumption. But today, it's JPY 671 billion loss. So what's the gap? What was the gap? What was the reason behind this gap between what you have updated back in April?

Thanks for the question. Back in April, we indeed had to provide a net income timely disclosure because our prior guidance had been towards minus JPY 80 billion. And as we were working towards a much larger impairment and restructuring charge, we had to disclose this net income. And at the time we were using, I would say, the best set of assumptions that we had and as we went through the process of finalizing all the numbers, you have what these are today. So it's JPY 671 billion of net income loss -- net loss for fiscal year 2024.

Okay. Please come here, yes.

[Interpreted] I am freelancer. My name is Isao Inoue. I have 2 questions. This announcement, yes, it's similar to that of NRP. At the time of Nissan Revival Plan, Mr. Ghosn said that if he doesn't achieve the plan, he will take responsibility and take a consequence. Espinosa-san, are you including the cost reduction plan? In 2026, if you cannot generate the profit, are you going to take consequence? Are you determined to do so? This is my first question. And talking about the details in U.S. for a collaboration, today, U.S. plant in Nissan, are you going to think of building Honda models in U.S. plant of Nissan? These are the two.

Yes. Thank you for your question. As for the first question, as I mentioned during the presentation, we are going to be very transparent on the activities that we take. That's why we showed the time line because we want not only you, but also investors and other stakeholders to understand what are the actions that we are taking, and we will regularly update the market with this time line that we showed, yes. So this is showing the transparency commitment that we have. And as I said, we are ready to be held accountable for the announcements that we are making, yes. So this answers first question. And then as for collaboration, as I said during the presentation, we are looking actively for collaborations in the U.S. in order to deal with the environment that is happening there. We're already engaged with MMC. We're starting to explore with Honda as well. And we will keep you updated and share information in due course, Inoue-san. Thank you for your question.

Thank you. Do we have any other questions? Over there, the lady in the back.

[Interpreted] Thank you for the presentation. TV Asahi, my name is [indiscernible]. I have 2 questions. Performance is worsening, and you will be reducing headcount by 20,000, which is essential and closure of 7 plants. So as the CEO, it was probably an extremely difficult decision to make. But what is your personal feeling regarding the decision delivered? Second, tariffs. Various measures are being contemplated, that was what you said, but with so much uncertainty regarding the future and this issue could be prolonged. If this issue would be prolonged, do you have any plans to make any new plants? The United States and China and U.S. and U.K. have reached agreement with the Japanese government approaching its third round. What is your expectation towards the Japanese government?

Yes. Thank you very much. So first, the decision, of course, was not easy. It's a very, very painful and sad decision to take. But as I mentioned, we wouldn't be doing this if it was not really, really necessary to do it. Unfortunately, as you have seen the results, the size of the company is just not sustainable. And if we don't do something now, the problem would just get worse. So it was a very difficult decision to take. We did it with utmost responsibility. And as I mentioned before, we will be very diligent on how we approach the people that will be going through this unfortunate situation. We will take care, as I mentioned before. Then as for tariffs, we hope that the solution can be coming soon. And I guess, same as other OEMs, we are expecting that some more reasonable conditions can come and also some stability can come, because part of the problem is, of course, the situation itself. But the other problem is the lack of certainty. So we cannot plan. It's very difficult to plan in current volatility, and we need to get some stability as well. So these are the 2 expectations that I have. Hopefully, some better conditions, but also some stability and clarity. Thank you.

Thanks, Ivan. This will be our last question. Once again, thank you for -- can we take one more question? I think I have one single hand raised. We can.

[Interpreted] Diamond. I am Yamamoto from Diamond, d this is the question for CEO. Auto segment OP in 2026 should turn positive. With the impact of tariffs and the things are uncertain, even if you carry out the restructuring, I'm not sure whether auto segment will turn profitable in 2026. What's the time line? In 2 years, you are going to generate a profit. What kind of discussion take -- took place at EC or Board in coming to this time line, including your feeling and thinking here?

I'm not sure I clearly understood your question, but I think you're asking if we can turn positive with the impact of tariffs. Is that your question? Can you repeat that? I'm sorry, maybe it was a translation. Can you repeat the question? Sorry for that.

[Interpreted] In other words, in just 2 years -- while the things are uncertain, in just 2 years, you are trying -- in such a short period of time, you are trying to generate a positive profit. How did you defy this goal? Because this is so such a short period of time that you are going to generate positive. Are you desperate? So why? Why this time line?

In simple terms, as Jeremy mentioned before, if you remove tariffs, Nissan should be breakeven this year, FY '25. So what's really dragging a lot of the results in '25 is a tariff impact. Now we're trying and running to find countermeasures for the tariffs. And so far, we have found that we can offset around 30% of the yearly impact of tariffs. But we will keep bringing actions and measures to minimize the impact. And then the goals that we laid down are simply the goals that we need to become a healthy company in the future. This is how we went through it. And we set the targets in a realistic fashion by setting these goals and objectives, looking very diligently and into the detail of what can be done and kicking off immediately activities. To give you, again, an example that probably we didn't spoke about a lot, we were just focusing on the fixed cost part of it. But the variable costs, as I said, in just a few weeks of kicking off the program, we have over 2,300 ideas generated by a team of 300 people only. These 300 people have brought up to around JPY 75 billion of impact in variable cost already by FY '26. And as we mentioned during the presentation, we're having a sprint of 3,000 people focused on variable costs only. So you can imagine how serious we are about achieving the goals, the pressure that we are feeling on these goals as management and why we are channeling a lot of our attention and resource into achieving these goals. So we are determined, we are very serious, and we are going to deliver what we're saying today. Thank you for your question.

Thank you. We really need to close now. Once again, thank you for joining us. And if you have any further questions, please direct them to the Nissan communications team. We'll definitely get back to you. Have a good evening. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]