Moody's has downgraded Nissan's credit rating from Baa3 to Ba1, maintaining a negative outlook. The downgrade reflects Nissan's weak product lineup and other challenges. Following the collapse of merger talks with Honda, speculation about Nissan's potential collaborations continues to swirl.
Moody's attributes Nissan's weak profitability to an aging product line, lack of hybrid models, increased incentives in the U.S. market, and weak demand in China. Despite CEO Makoto Uchida's announcement of a new recovery plan aiming to cut $9 billion in costs, reduce 9,000 jobs, and cut global capacity by 20% by March 2027, Moody's sees execution risks and doubts the plan's ability to reverse the company's decline.
Senior Analyst Dean Enjo emphasized the challenges of Nissan's restructuring plan, product updates, and global trade uncertainties, which contribute to the negative outlook. The rating adjustment coincides with the failed merger talks with Honda, leading to speculation that Nissan may seek other partnerships to accelerate its transformation.
Reports suggest Japanese business leaders are pushing for Tesla to invest in Nissan, though Tesla has shown little interest. Meanwhile, Foxconn has proposed forming a four-party alliance with Nissan, Honda, and Mitsubishi to focus on electric vehicle development.
Moody's also predicts that Nissan's negative free cash flow will persist until at least the 2026 fiscal year, with the automotive business unlikely to achieve positive operating margins before 2025. However, Nissan's global brand influence and substantial cash reserves are expected to cover its debt and cash flow pressures for the next 12 months.
