Nissan credit rating cut by Fitch on US sales, yen

Nissan Motor Co, Japan's third-largest automaker, had its credit rating cut one notch by Fitch Ratings, citing the company's dependence on the weak US auto market and an appreciation of the yen.

The outlook on the BBB+ rating, two levels above the lowest investment grade, remains negative, Fitch said in a report on Friday. Nissan's short-term ratings were affirmed at F2, one level above the lowest investment grade.

Nissan traditionally earns about 60 per cent of its operating profit in the US, where industrywide car sales are headed for the worst year since 1991 as banks cut back on lending and unemployment rises. Chief Executive Officer Carlos Ghosn has predicted the automaker's profit in the second half will go to “zero” because of slumping sales in the world's largest auto market and the yen.

“Nissan cannot remain immune from the turmoil,” Tatsuya Mizuno, a director in Fitch's corporate team, wrote in the report. “The extraordinarily rapid appreciation of the yen, together with its historically smaller focus on compact cars, compared to its Japanese peers, combine to increase the difficulties for Nissan.”

Rising unemployment and tighter consumer lending are reducing demand for new vehicles worldwide, spurring Nissan to cut production. Industrywide US auto sales plummeted to the lowest monthly total in more than 17 years in October.

Nissan on October 31 said it plans to cut global production by more than 200,000 vehicles by March 31. This month it said it will reduce domestic output by an additional 72,000 units by March.

A stronger yen is also eroding the value of the carmakers' overseas sales. Japan's currency headed for a third weekly gain against the dollar, trading at 94.16 yen against the US currency. The yen has gained 18 per cent against the dollar and 37 per cent against the euro this year.

The Tokyo-based carmaker's shares have plunged 72 per cent this year as the outlook for exports to the US, the biggest market for Japanese carmakers, worsens. The shares today gained 6.1 per cent to 347 yen.

“An additional factor” weighing on Nissan's ratings is the “deteriorating credit profile” of its strategic partner and major shareholder Renault SA, Fitch said. Fitch on Thursday downgraded the French automaker's rating to BBB.

Fitch rates Toyota AAA and Honda A+.