Nissan Rounds Up $12.2 Billion to Buoy Turnaround
Reviving a struggling company as big as Nissan doesn’t come cheap.
This week the company underscored that truth by selling two groups of bonds in the Asian market worth a combined $10.4 billion. That’s more than twice what Nissan hoped to raise back in May as the COVID-19 pandemic accelerated.
The deals come on top of a separate $660 million note sale conducted by Nissan within Japan three months ago, Bloomberg News points out. The carmaker also confirmed today it will float another €1.5 billion ($1.8 billion) bond offering in Europe.
All this fundraising was prompted by the company’s $4.5 billion operating loss—twice the red ink that analysts had expected—for the fiscal year ended March 31. Global sales in the period shrank 11% to 4.93 million vehicles.
Nissan said in May had access to 2.8 trillion yen ($26.4 billion) in cash and credit. That amount would provide “sufficient liquidity to steer through this challenging business environment,” the company assured investors.
But Nissan is taking no chances.
The company is busy executing a four-year plan announced in May to cut its annual fixed costs by 300 billion yen ($2.8 billion). Highlights include shrinking its production capacity by 20% (shedding some 15,000 employees worldwide in the process) and lowering the number of models in its global product lineup by 20%.
Nissan CEO Makoto Uchida
“These steps,” declared CEO Makoto Uchida (Nissan’s third CEO in 12 months), “need to be taken decisively and without compromise.”
Underpinning Uchida’s plan is the realization that the company’s Carlos Ghosn-era strategy of pushing perpetual sales growth wasn’t working anymore. Nissan predicts its volume in the current fiscal year will drop another 16% to 4.13 million units. That’s 25% below the company’s sales in 2018.
Nissan knows it must update its product lineup with new models, regardless of its slumping sales. The company also needs to keep up with the industry’s costly push to connect, electrify and automate its vehicles.
All of which means massive costs. Nissan certainly isn’t alone in diving into the financial markets to generate funds. It’s just doing so from a weaker starting position that most of its rivals.
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