Moody's junks down Nissan's rating as Honda merger scrapped
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Nissan expects a whopping loss of half a billion dollars amid the elimination of the merger plan with rival Honda.
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A wheel on a Nissan automobile on display at the Pittsburgh International Auto Show in Pittsburgh, on February 15, 2024. (AP)
Moody’s downgraded Nissan’s credit rating to junk on Friday, following the Japanese automaker’s decision to abandon merger plans with its rival Honda last week.
The deal reportedly collapsed after Honda proposed making Nissan a subsidiary rather than proceeding with the previously announced plan in December to merge under a new holding company.
Nissan, which had already cut thousands of jobs last year after its first-half net profit plummeted by 93 percent, now anticipates an annual loss exceeding $500 million.
“The rating action reflects Nissan's weak profitability driven by slowing demand for its aging model portfolio,” Moody’s stated, adding that even with successful restructuring, including cost-cutting measures and new model launches, Nissan is unlikely to see positive free cash flow before fiscal 2026.
Moody’s assigned Nissan a “Ba1” rating, a classification considered high-risk and often labeled as junk.
The merger talks between Honda and Nissan were initially viewed as a strategy to compete with US giant Tesla and Chinese electric vehicle manufacturers.
According to the Financial Times, Honda may be open to resuming negotiations under a different Nissan leadership. The report, citing sources familiar with the matter, said Nissan CEO Makoto Uchida had been a key proponent of the merger. However, tensions reportedly grew between Uchida and Honda president Toshihiro Mibe, as Honda became increasingly frustrated with the slow pace of Nissan’s restructuring and the severity of its financial struggles.
A series of unfortunate events
Nissan had been suffering before getting a capital injection from Renault in 1999, which then dispatched Carlos Ghosn to turn around the Japanese carmaker. He then became the CEO of both firms as well as the chairman of the partnership.
Ghosn is a Brazilian-born French businessman of Lebanese descent. The Japanese authorities arrested him in Tokyo in November 2018 and accused him of underreporting income during his time as the chairman of the Renault-Nissan-Mitsubishi alliance.
In a statement made on New Year's Eve in 2019, Ghosn said he was in Lebanon and that he had fled to escape political persecution.
French prosecutors sought international arrest warrants for Ghosn and four individuals alleged to have ties to an auto dealer in Oman, claiming they helped the car titan siphon millions of euros from Renault.
In 2023, Ghosn filed a $1 billion lawsuit against the Japanese carmaker for dismissing him in 2018 and organizing his arrest for suspected financial wrongdoing, alleging "deep damage" to his finances and image.
Ghosn filed his allegations with the public prosecutor in Lebanon's Court of Cassation, where he has lived since his escape from Japan in late 2019 to avoid prosecution.
Ghosn no longer owns a stake in the company and is seeking $588 million in unpaid wages and fees, along with $500 million in damages.
