Nissan Motor’s credit rating was cut to speculative grade by Moody’s Ratings on Friday, the latest blow to the troubled Japanese carmaker that recently abandoned talks on a tie-up with Honda Motor.
“The rating action reflects Nissan’s weak profitability driven by slowing demand for its aging model portfolio,” the ratings company said in a statement.
Moody’s cut its rating of Nissan’s senior unsecured bonds to Ba1 from an investment grade of Baa3. The manufacturer already has a junk rating of BB+ from S&P Global Ratings.
The Financial Times reported on Friday that high-level Japanese group is planning to seek investment from Tesla in Nissan. The Japanese automaker’s shares rose as much as 12%.
Nissan has been struggling with weak sales and revolving-door leadership for some time with its worsening financial position reflected in a 94% drop in first-half net sales announced in November.
At the time it also unveiled a plan to cut 9,000 jobs and slash production capacity by 20%.
Honda had offered Nissan a lifeline in December by agreeing to negotiate a tie-up that would’ve seen both brands combine under a single holding company but the negotiations collapsed two months later.
Moody’s maintained a negative rating outlook on Nissan, citing “risks associated with the implementation of its new restructuring plan, the renewal of its aging product range and global trade policies.”
“It will be difficult for them to issue corporate bonds or raise funds in other ways, as the cost of doing so will have risen considerably,” said Seiji Sugiura, a senior auto analyst at Tokai Tokyo Intelligence Laboratory.
“The question is whether or not they will be able to get back on their feet as a car company.”
The embattled carmaker is bracing for big losses this year as it looks to restructure its business and get its house in order.
Nissan lowered its annual profit outlook to ¥120 billion (R14.7 billion) this month, a drop from its previous guidance of ¥150 billion (R18.4 billion) and further still from its initial forecast for ¥500 billion (R61.3 billion).
Chief Executive Officer Makoto Uchida said an update will be announced in March regarding its search for partners and plans to adopt a new leadership structure.
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