Moody's downgrades credit rating of Nissan to junk

LONDON

Moody's on Feb. 21 downgraded the credit rating of Nissan to junk after the Japanese automaker and its rival Honda last week said they had scrapped plans to join forces.

The merger talks apparently unravelled after Honda proposed to make Nissan a subsidiary instead of a plan announced in December to integrate under a new holding company.

Nissan had announced thousands of job cuts last year after reporting a 93 percent plunge in first-half net profit, and now expects an annual loss of more than $500 million.

"The rating action reflects Nissan's weak profitability driven by slowing demand for its ageing model portfolio," Moody's said.

"Even if the company successfully executes its restructuring plan with cost reductions and new model releases, we do not expect free cash flow to turn positive until fiscal 2026 at the earliest."

Moody's gave Nissan a rating of "Ba1", a category with high credit risk often described as junk.

Honda and Nissan's merger talks had been seen as a way to catch up with US titan Tesla and Chinese firms in electric vehicles.

The Financial Times reported this week that Honda would be prepared to revive negotiations under a different Nissan boss.

The FT, citing people close to the matter, said CEO Makoto Uchida had been a strong advocate for a deal.

But his relations with Honda president Toshihiro Mibe had "deteriorated as Honda became frustrated with the speed of Nissan's restructuring and the depth of its financial troubles", the paper said.