According to foreign media reports, S&P Global Ratings has recently downgraded the long-term issuer credit rating of Nissan and its overseas subsidiaries to the "BB" level, mainly based on the pessimistic expectations that the company's profits will not recover in the short term. Meanwhile, S&P Global Ratings maintains Nissan's short-term issuer credit rating at "B". S&P Global Ratings maintains a "negative" rating on Nissan's outlook, reflecting that Nissan's credibility may deteriorate further in the context of adverse operating environment and continued losses in free cash flow.
S&P Global Ratings believes that it seems that it is very unlikely that Nissan's auto business will quickly recover to a level comparable to that of companies with the same ratings. As risks increase, Nissan's financial resilience has declined in response to sudden changes in the external environment and other stressful situations. S&P Global Ratings expects that it will take about two years for Nissan to fully realize the cost-saving effects of its restructuring measures.
Nissan plans to implement a total cost reduction measure of 400 billion yen from fiscal 2025 to fiscal 2026, including factory closures and layoffs, which are expected to begin in fiscal 2026. However, despite these cost-cutting measures by Nissan, S&P Global Ratings still believe that Nissan will not achieve a 6% profit margin before interest, tax, depreciation and amortization in the next one to two years.
S&P Global Ratings also expects that the competitive environment will be more severe, with inflation leading to higher costs, and Nissan's profitability will continue to be under pressure. In China, one of Nissan's main markets, the company's unit sales are expected to continue to decline in 2025 and beyond. In the United States, another key Nissan market, the company is also facing a challenge that it will be difficult to increase unit sales while reducing incentives.
According to S&P Global Ratings analysis, Nissan's competitiveness and profit base in key markets have declined. According to actual needs of various markets, Nissan plans to launch hybrid models in the United States and electric models in China, and plans to expand its product line. However, the company's downturn in performance may limit its ability to invest enough resources to develop these products.
Nissan's financial endurance under stressful situations has weakened due to rising risks in performance. As of the end of December 2024, the company's net cash in the automotive division had dropped from more than 1.5 trillion yen at the end of March 2024 to more than 1.2 trillion yen. The company's automobile sector's free cash flow has dropped sharply due to a sharp decline in revenue and an increased investment burden.
S&P Global Ratings' "negative" outlook for Nissan shows that S&P Global Ratings believes that the severe business environment will continue to have a negative impact on Nissan's credit profile. During its restructuring process, Nissan will face higher execution risks if it wants to achieve its goal of restoring profitability and free cash flow. In the next six months to one year, if Nissan continues to experience negative free cash flow, worsening financing capabilities and rising financing costs, or its competitiveness and market position in key regions such as North America and China will further decline, S&P Global Ratings may consider further downgrading its rating of Nissan.