Nissan has not been in a good state in recent months. While they do have new and updated models scheduled to debut in the coming months, the automaker is currently not doing well financially. In fact, the automaker earlier announced that they will be slimming down in all aspects globally in order to cut costs. To make matters worse, it seems the Japanese automaker’s credit rating has also been downgraded.
Rating and Investment Information, Inc. (R&I) announced that they have downgraded the credit rating of Nissan Motor Co., Ltd from a previous A+ to an A with a Negative Rating Outlook. The reason behind R&I’s lower credit rating is due to the automaker’s reduced performance along with the decrease in demand for automobiles.
Specifically, they mention that Nissan recorded an operating loss of 40.5 billion yen in FY2019 and a net loss of 671.2 billion yen. Though they had restructuring plans in 2020, this was put on hold as the COVID-19 pandemic affected business around the world. Furthermore, R&I says that “the sales finance business has a risk of profit deterioration from an increase in credit losses”.
Despite that, R&I believes that there is “no major concern over the company's overall liquidity, including the sales finance business”. They add that by the end of March 2020, the company still had approximately 1 trillion yen in net cash.
Even though ratings have been downgraded, R&I’s future evaluation for Nissan depends on whether the automaker can rebuild its earning and transform the business amid the pandemic in the latter half of 2020. That said, it is possible for Nissan to receive its A+ rating once again in the future should their business and finances improve.