Nissan (NSANY.US) suffers another heavy blow as Fitch Ratings follows in the footsteps of Moody's Corporation and downgrades its rating to junk status.

The credit rating of Nissan Motor Co. (NSANY.US) has been downgraded for the second time in just a few days, with all three major credit rating agencies now rating it as junk. Fitch Ratings lowered the automaker's rating from BBB- to BB+, citing weak profitability and uncertain recovery prospects as the main reasons. Moody's Corporation also downgraded Nissan's rating last week, and Standard & Poor's has rated the manufacturer as speculative (junk) since March 2023. Fitch analyst Satoru Aoyama said in a report released on Wednesday, "This downgrade reflects Nissan's continued weak profitability and a recovery trajectory that lags behind our expectations. We expect Nissan's profitability to face significant pressure in the next one to two years." Earlier this month, Nissan executives revised their revenue and operating income forecasts downwards and warned that the net loss for the fiscal year ending in March is expected to reach 80 billion Japanese yen (approximately $5.35 billion), while analysts' forecast was 278 billion Japanese yen. Nissan also reduced its annual operating income forecast from 150 billion Japanese yen to 120 billion Japanese yen, significantly lower than the initial forecast of 500 billion Japanese yen. The poor performance will force Nissan to seek another lifeline, as talks with Honda on a potential collaboration officially ended earlier this month. Less than three months after announcing plans to merge the two brands into a holding company, Honda and Nissan stated that the deal had fallen through, but they will continue to maintain a strategic partnership focusing on batteries and electric vehicles. Nissan CEO Makoto Uchida told reporters, "Nissan is still struggling to survive without relying on future partnerships." Nissan is actively seeking strategic alliances and will announce the latest developments and details of the new leadership structure in mid-March. The automaker also revealed details of measures previously announced to turn its business around. The company will cut 2,500 jobs globally, while adding 1,000 positions in shared services. By the 2026 fiscal year, the company will reduce its global annual production capacity from 5 million units to 4 million units. Nissan outlined a plan to cut costs by 400 billion Japanese yen, with approximately 200 billion yen coming from reducing sales and administrative expenses and 100 billion yen from restructuring manufacturing bases. The company plans to save 100 billion yen by integrating the production lines of three factories (the US Smyrna and Canton factories, and the Thailand factory) and reducing 6,500 employees. The company will close three global factories, including a plant in Thailand. The cancellation of the deal has been particularly damaging to Nissan, which has been struggling since the departure of Carlos Ghosn in 2018 due to weak sales, overcapacity, outdated unpopular models, and frequent changes in leadership. The automaker's troubles became apparent at the end of last year when the company announced a 94% drop in net income in the first half, and plans to lay off 9,000 employees and reduce production capacity by 20%. However, Nissan's vast manufacturing operations and well-known brand still hold appeal. Foxconn, the Taiwanese iPhone manufacturer, is entering the electric vehicle market and has shown a new interest in Nissan. Chairman Liu Yangwei said on Wednesday that the company is willing to buy Renault's stake in Nissan, but the goal is cooperation rather than acquiring a 36% stake. Uchida stated that he has not yet spoken with anyone from Foxconn management. Furthermore, Bloomberg News reported, citing sources, that KKR & Co. is in the initial stages of evaluating equity or debt investments to improve Nissan's financial situation. Renault said in a statement on Thursday that it had taken note of the end of talks between Nissan and Honda, and described the deal terms, including the omission of any premium, as "unacceptable."