TOKYO (Reuters) -Nissan saw its shares rise almost 2% on Friday after it flagged a record loss due to a massive reduction in the value of its assets and hefty restructuring fees – costs that appeared aimed at clearing the decks for a badly needed turnaround.
Japan’s third-largest automaker is fighting to win back market share after declining sales in major markets such as the United States and China. At the same time, it is significantly exposed to U.S. import tariffs on foreign-made cars given that the U.S. is its biggest market and many of the vehicles it sells there are made in Japan or Mexico.
New chief executive Ivan Espinosa, who took command this month following the ouster of Makoto Uchida, plans to slash vehicle development times to boost competitiveness. He has called Nissan “slow” in launching new models, underlining how far the once-mighty automaker has fallen in recent years.
Espinosa has long experience at the product end of the business. He has already announced a number of new cars, including Nissan’s first plug-in hybrid and a third-generation Leaf – the world’s first mass-market electric vehicle originally launched in 2010.
Nissan’s shares were up 1.9% at 0427 GMT, roughly in line with the Nikkei average, reflecting investor approval at its bold moves to proceed with extensive restructuring.
Still, taking off the sheen, Fitch cut its rating of Nissan’s credit further into “junk” territory.
“Although we expect Nissan’s performance to recover in the medium term as restructuring charges reduce and new model launches ramp up, the company has exhausted its rating headroom to absorb related short-term shocks and a potential decline in production volumes,” Fitch said in a statement.
On Thursday, Nissan said it expects to record a net loss of as much as 750 billion yen ($5.3 billion) for the financial year that ended in March, versus a previously estimated loss of 80 billion yen.
As part of restructuring, Nissan is cutting jobs, reducing capacity and closing plants. Its shares have been battered for months, particularly after talks to forge a $60 billion giant with Honda collapsed in February – due to Honda’s proposal to make Nissan a subsidiary, sources have said.
Nissan took a hit of more than 500 billion yen as it wrote down the value of assets in North America, Latin America, Europe and Japan. It also expects additional restructuring costs to exceed 60 billion yen.
“We are taking the prudent step to revise our full-year outlook, reflecting a thorough review of our performance and the carrying value of production assets,” Espinosa said.
Nissan sees full-year operating profit of 85 billion yen, around 30% lower than previously forecast.
The automaker, which will forego an annual dividend, will report earnings on May 13.
(Reporting by David Dolan; Editing by Christopher Cushing)
