By on May 24, 2019

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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16 Comments on “Moody’s Downgrades Nissan’s Credit Ranking; You Probably Know Why...”


  • avatar
    Lorenzo

    A 45% drop in PROFITS, and a forecasted 28% drop in PROFITS? That may be trouble for stock speculators, but the company isn’t in trouble until it starts recording LOSSES.

  • avatar
    ToddAtlasF1

    Nissan should have danced with the one that brung them.

    • 0 avatar
      CaddyDaddy

      No no no no…… Profits bad – evil. Losses Good! See: (Tesla, Uber, Lyft etc….)

      • 0 avatar
        thegamper

        I know a certain stable genius who is rather fond of losses. If you dont want to pay taxes, losses are essential for your business, even if they are just paper losses.

        I think Nissan is probably a long way from hurting, they are still three notches left before they lose investment grade. It is not all that great though to see such large profit dips before a recession even hits.

      • 0 avatar

        It is not about profits and losses stupid, it is about growth potential. Tesla and Uber had/have enormous growth potential and that’s why evaluation is so high. Nissan has nowhere to go but down.

  • avatar
    Johnster

    Product! Product! Product!

  • avatar
    bd2

    A big issue for Nissan is the age of its CUV/SUV/pick-up lineup.

    Everything but the new Kicks (not much of a profit margin there) is either old, or getting up there in age.

  • avatar

    Multitude of Chinese companies are coming with cheap and potentially high quality products but there are only that many consumers whose number is only shrinking over time. Some companies are going to starve to death and that may include Nissan. Since Nissan conveniently merged with Mitsubishi I see them both going under together when Chinese finally arrive. Consolidation in Japan is overdue – too many automakers and not enough buyers, it is about time. In Europe it already started – Opel is essentially dead and FIAT, SEAT, Smart and Renault probably following. In America it never stopped.

    • 0 avatar
      Peter Gazis

      Inside looking out

      Some Chinese companies will set up shop in the U.S. Others will go to Europe. Still others will look to South America, SoutbEast Asia, the Middle East. There’s not going to be a flood of Chinese brands hitting any particular market.
      Some will succeed. Some will fail. Some will merge. Some will be bought up by the big multinationals. When the dust settles there will be a few Chinese names on the list of worlds largest car companies, and people will be cross-shopping Chinese brands much like they do everything else.
      The real threat to Nissan comes from the companies that are already here.

      • 0 avatar

        I would say Nissan, Mitsu and HK occupy the niche that rightfully belongs to Chinese automakers. There will be massacre when Chinese invasion finally starts

        • 0 avatar
          bd2

          The Chinese have already “invaded” markets like Australia and H/K have only seen their market share grow during that time (#2 behind Toyota despite not having any pick-ups or BoF SUVs).

          And buying a Chinese vehicle is different from purchasing a German, Korean or Japanese one.

          The latter 3 are all US allies (no matter what the Dotard thinks) and China is the biggest economic/military threat to the US.

          Some buyers may not care about such things, but many will.

  • avatar
    Jeff S

    Agree, when the Chinese auto manufacturers finally arrive in the US market under their own names they will take over the cheaper end of the market. What is happening with the Japanese auto manufacturers is similar to what happened with the US manufacturers with the merger of Nash and Hudson to become American Motors and with Packard merging with Studebaker and then Studebaker going out of business in 1966. Before that many US auto manufacturers went out of business during the Depression. Doesn’t help Nissan that they have had issues with CVTs in their vehicles. I would steer clear of any Nissan with a CVT transmission. Mitsubishi doesn’t bring much to the table for Nissan. I do believe there is a market for affordable vehicles but mostly for those younger who are starting out but then the manufacturer has to have other product lines that those customers can move up to in order to retain them.

  • avatar
    SoCalMikester

    nissan is going to have to be pickier who they write car notes for. GM, Toyota, Honda, and Ford seem to be pickiest and also think what they offer is a notch above the rest. They need to improve the product before the margins can go up. Theres no room for Versa/Sentra and Altima/Maxima. Pick one, make it worth it. I do tend to see more infinitis than acuras, fwiw.

  • avatar
    Jeff S

    Nissan needs to up their quality. Poor quality is a major reason Nissan has to resort to easier credit.

  • avatar
    smartascii

    “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.

  • avatar
    Jeff S

    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.


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