Credit Agencies Downgrade Nissan's Rating to Junk Status, One After the Other | Carscoops

      Nissan has announced plans to eliminate 9,000 jobs and reduce its overall production by 20%, yet this has not prevented a downgrade in its status.

      Fitch Ratings now believes that Nissan's path to recovery will take longer than previously thought. Potential upcoming tariffs may impose additional strain on the company’s financial stability. A 24% decline in Nissan's sales in China indicates more serious challenges for the brand's future.

      The possible merger between Nissan and Honda could have provided a critical opportunity for Nissan to rebound. However, negotiations between the two manufacturers have fallen through, leaving Nissan to navigate its difficulties alone. The outlook appears increasingly bleak as worries about the firm's financial condition have intensified, including from a prominent credit rating agency that has downgraded Nissan to junk status.

      Recently, Fitch Ratings lowered Nissan’s rating from BBB- to BB+, citing a “negative” outlook and ongoing low profitability with a slow recovery path. The lack of profits is central to concerns regarding the Japanese automaker’s long-term viability.

      Nissan’s Lengthy Recovery Journey

      Fitch anticipates that Nissan’s profitability will continue to be “pressured” over the next year or two and remains skeptical about the company's restructuring initiatives. Nissan has confirmed it will cut 9,000 jobs worldwide and aims to lower its total production by 20% in response to sluggish sales. Analysts believe these actions could aid Nissan in achieving profitability, but the benefits might not be realized until the latter half of the 2026 fiscal year.

      At the same time, potential tariffs in the US add another layer of unpredictability. Nissan produces several models in Mexico, and for the fiscal year ending in 2024, around 300,000 vehicles made in Mexico were set for export to the US. Any tariff increases would elevate costs throughout the supply chain, further squeezing revenue.

      The Challenges in China

      Additionally, Nissan is struggling in one of its key markets—China. Sales in the area fell by 24% in 2023 and are expected to remain flat in 2024. This is especially concerning since China represents nearly a quarter of all of Nissan's new vehicle sales.

      “The downgrade reflects Nissan’s ongoing low profitability, with a delayed recovery trajectory compared to our expectations,” Fitch stated. “We project that auto EBIT and free cash flow (FCF) will remain negative until the fiscal year ending March 2026 (FYE26), below our negative rating thresholds. However, Nissan’s strong liquidity and solid balance sheet provide a buffer against immediate cash outflow.”

      Adding to the difficulties, Moody’s also downgraded Nissan’s debt to junk status last week, assigning it a Ba1 rating. With two major financial agencies expressing concerns, Nissan's future appears increasingly uncertain, despite its robust liquidity and strong balance sheet.