- The COVID-19 pandemic and resulting sales slump for automakers is hitting Nissan hard.
- As such, the automaker has reportedly asked for a $4.6 billion credit line to help deal with the blow and figure out how to turn its finances around.
- Nissan was suffering financially even before the pandemic.
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With the ongoing COVID-19 pandemic, car sales have plummeted and factories have been idled — leaving many automakers scrambling for cash. Nissan has been hit particularly hard, leading the automaker to reportedly ask for a $4.6 billion credit line.
Nissan is seeking the credit line from “major lenders” to help deal with the blow from the pandemic while it tries to figure out how to turn its financial situation around, Reuters reported on Thursday, citing unnamed sources.
The outlet reports that the Japanese automaker has asked for funding of 500 billion yen “given the possibility the impact of the coronavirus on production and demand could continue for an extended period, one of the people said.” The amount has yet been finalized.
Nissan’s first quarter of 2020 was bleak, according to Reuters:
In February, Nissan posted its first quarterly net loss in nearly a decade, and for the year ended March operating profit is expected to plunge 85% to 49 billion yen ($450 million), according to a Refinitiv Smart Estimate. That would be the lowest amount since a loss posted in the year ended March 2009 during the global financial crisis.
But even before the pandemic, Nissan was struggling.
Last year saw a decline in overall car sales. Nissan’s own sales and profits were slumping. Reuters reports as of December, Nissan’s automotive operations has a “negative free cash flow of 670.9 billion yen, an increase of nearly 7-fold from a year ago. Net cash for its automotive business stood at 847.5 billion yen, with Nissan having burned through nearly 40% of net cash over the year.”
Furthermore, industry executives and analysts blame Carlos Ghosn, Nissan’s ousted former CEO and chairman turned international fugitive, for the company’s poor financial state, The New York Times reported in January.
From the story:
Over his last eight years at the helm, he led an unrelenting push for growth, often at the expense of the bottom line. To satisfy his demands for higher sales and more market share, Nissan executives turned to questionable practices that alienated a critical constituency: the dealers who sell its cars.
“Almost nobody calls now and says, ‘I want to buy a Nissan franchise,'” said Alan Haig, president of Haig Partners, which advises buyers and sellers of auto dealerships. “Carlos pushed too hard. He had very ambitious goals, and he pushed his managers to achieve them. He created a temporary situation that looked good for a while, but it was artificial.”
Nissan isn’t the only automaker struggling right now, however. Toyota, Fiat Chrysler, and others have also requested new credit lines while people continue to stay home and car sales plummet as a result.
An additional report from Reuters claims that Nissan’s management now believes the company needs to downsize. A supposed restructuring plan, scheduled to roll out next month and through March 2023, could slash 1 million cars from annual sales targets.
It would result in an annual sale of 5 million cars, down from the 6 million for the comparable period laid out in July by Hiroto Saikawa, Nissan’s then-CEO.
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A Nissan spokesperson told Reuters details of the supposed plan will be made available in May.
This story has been updated to include Nissan’s potentially upcoming plans.