The drastic plan, announced by chief operating officer CarlosGhosn, seconded from alliance partner Renault SA, will entail the shutdown of one of its four Japanese assembly plants and two factories belonging to affiliates by March 2001.

Ghosn said the job cuts would be made by March 2002 and come through spinoffs, natural attrition, an increase in part-time and flexible-time workers and early retirements.

Japan's second-largest automaker, which formed the world's fourth-biggest automaking group through an alliance with Renault in March, aims to return to profit in the year starting in April after posting losses for six of the last seven years.

"The plan is tough, perhaps even severe, but then our situation is severe," Nissan president Yoshikazu Hanawa told a news conference while announcing the plan.

Major credit-rating agency Moody's Investors Service quickly responded to the sweeping restructuring pledge by upgrading the rating outlook for the automaker to positive.

Despite one restructuring effort after another in the past four years, including the closure of its Zama plant in 1995, Nissan remained heavily in debt and continued to chalk up losses when it turned to Renault early this year for help. Renault took a 37 per cent stake in Nissan in return for a $5.4 billion infusion of cash.

"Nissan is in bad shape," Ghosn said, citing the company's slip in global market share since 1991 to 4.9 per cent from 6.6 per cent and a decline in production over that period.

The job cuts are to include 4,000 in manufacturing, 6,500 at Japanese dealers, 6,000 in sales and administrative operations, 5,000 from spinoffs, and about 500 in research and development.

"In fiscal year 2002 we're looking at 127,000 in equivalent full-time jobs. That is a 21,000-job reduction or 14 per cent of total employment," Ghosn said.

Although the plan will pose a challenge, Moody's said it represents an aggressive and constructive approach towards addressing Nissan's high-cost structure, its eroding market share position, and its very high debt levels.

Renault shares were down 2 per cent in early Paris trading after the company said Nissan's plan would have a 1.95 billion franc ($323 million) impact on its second-half 1999 results.

The announcement came after the Tokyo stock market had closed. Shares in Nissan ended the day down 7.14 per cent or 49 yen at 637, retracing after a strong recent rally fuelled by hopes it would come up with a dramatic restructuring plan.

"My impression is that the planned cost cut was larger than I had anticipated," said Masato Ogasawara, an analyst at Daiwa Institute of Research.

Nissan plans to cut purchasing costs by 20 per cent over the next three years, while reducing the number of the group's suppliers to 600 by 2002 from 1,145 currently.

"We have too many suppliers," Ghosn said. "There will be no more than 600 in 2002."

Nissan aims for one trillion yen ($9.5 billion) in cost reductions on a consolidated basis in fiscal year 2002, compared with the business year ended on March 31.

The one trillion yen in cuts will come 60 per cent from purchasing, 23 per cent from sales and administration, 11 per cent from manufacturing, 3 per cent from research and development, and 3 per cent from miscellaneous, Ghosn said.

Nissan also aims to cut its net debt to under 700 billion yen by fiscal 2002 from current 1.4 trillion yen.