Moody's Downgrades Nissan's Credit Ranking; You Probably Know Why

Matt Posky
by Matt Posky
moodys downgrades nissans credit ranking you probably know why

Save for one article about adorable baby ducks, we’ve dumped on Nissan all week. Circumstances being what they are, there wasn’t much of an alternative.

Between a dismal earnings report showcasing a 45 percent decline in annual operating profit for the year ending in March, a forecasted 28 percent drop in profits for this year, corporate strife between the automaker and top shareholder Renault SA, and the ongoing legal troubles with former chairman Carlos Ghosn, it’s been a bad few months.

Nissan’s share price is also in decline for some strange reason, and, following a negative outlook from S&P, Moody’s downgraded the automaker’s credit rating from an A2 to an A3. That’s right, one entire notch lower. That clinches it. Nissan is officially done forever. If the 2008 financial crisis has taught us anything, it’s that you can absolutely trust rating agencies to be arbiters of the future.

Alright, that’s more than enough sarcasm for one post.

Basically, Nissan’s current situation shows acres of room for improvement, and any major changes it can make are, by its own admission, likely to take some time. Financial service companies, which have to prove their value somehow, have taken this into account and adjusted their outlook for the automaker. Ultimately, an A3 isn’t a bad rating — it’s just not as good as an A2. Either way, Nissan is still technically an investment-grade property.

Reuters had more:

“The downgrade reflects the continuing slide in Nissan’s profitability, driven by weak sales in the U.S., its largest market,” Moody’s Vice President Motoki Yanase said in a statement.

While Nissan’s new strategy focuses on margin over unit sales growth and refreshing old models to improve its brand value, the ratings agency expects the overhaul will take “several years.”

“The negative outlook on Nissan reflects execution risk as Nissan implements its business strategies globally, reforms its corporate governance and stabilises [sic] its alliance with Renault,” it said.

Hopefully, the Japanese automaker can turn the ship around and head back in the right direction. However, it’s not obvious what that will look like at this juncture. All of these forces are adding pressure for Nissan to pull the trigger on a merger with Renault, something Nissan absolutely does not want. Not that that’s a bulletproof gambit, anyway. Moving away from its former volume mindset and focusing on higher-margin vehicles seems a pragmatic approach, but it’s one which will take time and money, meaning more dark days ahead before sunny skies return.

[Image: Memory Stockphoto/Shutterstock]

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  • Smartascii Smartascii on May 26, 2019

    “Nissan’s new strategy focuses on margin over unit sales growth...” I’m not actually sure that this is a good idea. There are a limited number of people who can afford new cars. There is an even more limited number of people who can afford expensive new cars, and unless the nature of global capitalism changes unexpectedly, their number is likely to decrease, rather than increase. And most automakers seem to be competing for these buyers. Mazda is taking this same tack, for example. Brand seems to matter as much as anything in this segment, and Nissan has some baggage there, if these other comments are any indication. Maybe the forces driving the success of Aldi, Family Dollar, Five Below, etc. don’t apply to the automotive market. But I’ll bet they do, especially if credit gets more expensive, which seems likely.

  • Jeff S Jeff S on May 27, 2019

    If credit gets tight and remains tight for a period of time both Nissan and Mitsubishi are in real trouble. Both need to work on their quality which will take time but better quality would help maintain customers and improve their desirability. The question would be even if Nissan and Mitsubishi did those things would they be able to hold out long enough or is it too late.

  • KOKing I car-sat an A32 while its owner was out of the country, and the then whiz-bang VQ motor was great, but the rest of it wasn't any better than a XV10 or XV20. Definitely the start of its downward slide, unfortunately.
  • Norman Stansfield Why are leaf springs still a thing on this truck?
  • Syke The expected opening comments. Have had mine for two years now, the car has done exactly what I want out of it, and a little better. I'm quite happy with the car, haven't had to adjust my driving style or needs in the slightest, and . . . . oh, did a mention that I don't give a damn what today's price at the pump is?Probably going to go for a second one in the coming year, the wife's happy enough with mine that she's ready and willing to trade in the Nissan Kicks. Eventually, the not often used van will end up getting traded on a Chrysler Pacifica Hybrid, basically ensuring that we don't use gas for anything except the occasional long trip.And the motorcycles.
  • Bobbysirhan I've never found the Allegro appealing before, but a few years of EV rollouts make it seem downright desirable.
  • Scoutdude I know that dealership. Way back when my friend's grandfather was that Turner that owned the Chrysler Plymouth International dealer, in MacPherson. Of course the International was dropped when they didn't deem the Scout reason enough to keep the franchise. I moved from there in late 1978 so it is possible I saw this running around town way back when.
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