Honda and Nissan's much-anticipated merger talks have reportedly fallen through, leaving both companies to navigate turbulent waters independently. Honda's proposal to make Nissan a subsidiary rather than integrating under a new holding company did not sit well with the latter. As a result, both companies now face significant challenges, with Nissan particularly feeling the pressure. Moody's recently downgraded Nissan's credit rating to "Ba1," categorizing it as high credit risk, often referred to as junk. This comes after Nissan announced thousands of job cuts last year following a dramatic 93% plunge in first-half net profit and an expected annual loss exceeding $500 million.
A high-level Japanese group has crafted an ambitious plan to invite Tesla to invest in Nissan, potentially offering a lifeline to the struggling automaker. The proposal is spearheaded by former Tesla board member Hiro Mizuno and includes notable figures such as former Japanese Prime Minister Yoshihide Suga and his former aide Hiroto Izumi. Their vision sees Elon Musk's Tesla as a strategic investor in Nissan, with keen interest in acquiring the automaker's plants in the United States.
"The proposal envisions a consortium of investors, with Tesla as the largest backer, but also includes the possibility of a minority investment by Foxconn," – The Financial Times
The Financial Times further reports that Tesla's keen interest could significantly alter Nissan's trajectory. The potential investment comes after previous unsuccessful attempts by Taiwanese electronics giant Foxconn to acquire a majority stake in Nissan or purchase Renault's 35% stake in the company.
Despite these developments, both Nissan and Tesla have remained tight-lipped about the report. Nissan declined to comment, while Tesla did not respond to requests for comment.
Moody's assessment of Nissan paints a grim picture, citing the company's weak profitability driven by slowing demand for its aging model portfolio. The credit rating agency expressed skepticism about Nissan's ability to generate positive free cash flow before fiscal 2026, even if restructuring plans and cost reductions succeed.
"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
Nissan shares, however, saw a 9.6% surge on Friday following the report of potential Tesla involvement, indicating investor optimism about the strategic shift.
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