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Nissan Secures $7.8B Funding to Fight Coronavirus Woes

Zacks Equity Research

Nissan Motor NSANY has secured $7.8 billion in financing from creditors since April, per the latest annual securities report. The move will help the Japan-based auto giant to bolster its cash position amid the COVID-19 pandemic.

The automaker had been reeling under financial crisis even before the coronavirus outbreak. Strained relationship with Renault SA RNLSY, ebbing sales of vehicles amid economic slowdown in Japan and deteriorating cash position of the firm had already been weighing on Nissan. The virus eruption further added to the woes.

The $7.8-billion funding will help finance its liquidity requirements for countering the rising uncertainties related to the coronavirus crisis. In addition to the secured credit facility, Nissan has 1.1 trillion yen in net cash in the automotive business and credit lines of up to 1.3 trillion yen. Nonetheless, the company pointed out that it may need additional funding to battle coronavirus woes, which will weigh on sales for quite some time.

As the coronavirus further sapped the demand for vehicles, the Japan-based auto biggie posted a net loss of 671.2 billion yen in fiscal 2019. This not only marked the firm’s first annual loss since 2009, but also its biggest loss in two decades. The company, which posted a negative free cash flow of 641 billion in the first three months of 2020, is much concerned about cash flow. Nissan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Per the recovery plan unveiled in May, it commits to slash $300 billion yen from fixed costs over the next four years. The company aims to reduce global production capacity by 20% and close a facility in Barcelona. It intends to retrench 20,000 of its workforce in a bid to preserve cash amid coronavirus-led reduced sales and demand.

The pandemic made it essential for Renault and Nissan to strengthen their alliance, as well as share the massive cost of developing new models and technology. In late May, Renault, Nissan and Mitsubishi announced several initiatives, as part of a new business model of cooperation focused more on efficiency and competitiveness than on volumes. The companies intend to reduce the number of models being sold, use shared platforms for production, and focus on their existing geographic and technological strengths. These actions are aimed at cutting costs and boosting profitability amid the coronavirus pandemic.

The virus outbreak has become a concern for various other global auto biggies, including Honda Motor HMC and Toyota Motor TM. The automakers have been making changes to manufacturing processes and chalking out several cost-containment strategies to sail through the crisis. 

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Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
Nissan Motor Co. (NSANY) : Free Stock Analysis Report
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RENAULT SA (RNLSY) : Free Stock Analysis Report
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