AUTONEWS

Rating agencies Fitch and Moody’s put Nissan on the brink

Despite already facing great difficulties in dealing with its precarious financial situation, Nissan took another step towards the abyss. The two main rating agencies announced the downgrade of the Japanese automaker's debt to junk, which limits its access to the market for financing and makes the renewal of the current debt more onerous, despite the automaker having announced the dismissal of 9,000 employees and the 20% cut in vehicle production capacity, to become more profitable.

After ruling out the possibility of a merger with Honda and the end of the marriage with Renault, which desperately wants to get rid of the stake it still holds in the Japanese brand, management saw Fitch lower Nissan's debt rating to negative territory (BB+), motivated by the “low level of profitability of the company” and the “prospect of a long road to recovery”.

Moody’s sided with its colleague Fitch and also downgraded the Japanese construction company’s debt to junk, which brings the world’s two largest financial agencies into line. The analysts' constant (unsuccessful) search for a strategic partner for Nissan, as well as the brand's situation in the North American and Chinese markets, contributed to this conclusion.

In China, sales of the Japanese brand fell 24% in 2023, with no recovery expected in 2024, which will be confirmed at the end of the fiscal year, which in this case occurs at the end of March. Nissan's performance in the world's largest market is particularly worrying, as the Japanese manufacturer sells around a quarter of all vehicles produced there.

In the US, the future is under threat from additional taxes on imports, given that Nissan manufactures a series of models in Mexico that, until now, were exported across the border at zero cost, due to the absence of trade tariffs between the two countries, something that Donald Trump wants to put an end to. During fiscal year 2024 (March to March), around 300,000 vehicles are expected to be exported to the US and the 25% tax that is expected to be imposed will severely limit the manufacturer's profit margins.

S&P Global Ratings has kept the automaker at speculative grade since March 2023. “The downgrade reflects Nissan’s persistently low profitability, with a delayed recovery trajectory against our expectations,” Fitch analysts led by Satoru Aoyama wrote in a report on Wednesday (26/02).

“We expect profitability to remain under pressure over the next one to two years.”

Nissan executives cut revenue and operating profit forecasts earlier this month. The company projects a net loss of 80 billion yen ($535 million) for the fiscal year ending in March.

The negative results increase pressure on management after the collapse of merger talks with Honda.

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