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Nissan Motor Co. shares fell on Tuesday after reports the struggling automaker plans to cut production in the US, and President-elect Donald Trump touted plans to impose tariffs on imports from Mexico, where the carmaker has factories, as well as Canada.
The stock fell as much as 4.9% in early Tokyo trading, then briefly erased the losses in the afternoon session after the Financial Times reported the Japanese automaker is searching for an anchor investor. However, the rebound was shortlived, with Nissan closing down 3.6%.
Nissan plans to build 100,000 fewer vehicles than last year at its plants in Mississippi and Tennessee in the fiscal year ending in March, Automotive News said Monday. The cuts will affect models including the Frontier, Rogue, Pathfinder and Infiniti QX60, the report said.
A Nissan spokesperson declined to comment directly on the report, but said the company will evaluate production forecasts “in response to market dynamics to ensure healthy supply and inventory levels.”
The carmaker, saddled with cratering profit and an outdated lineup, had already announced earlier this month that it was going to eliminate 9,000 jobs and slash production by 20%.
Also Monday, Trump said he would impose a 25% tariff on all goods imported from Mexico and Canada until they clamp down on the flow of migrants and illegal drugs into the US. Nissan builds cars and engines in Mexico and the specter of steep tariffs on US imports adds to its woes. The firm earlier this month lowered its full-year operating income guidance by 70%.
Nissan is now seeking a long-term, steady shareholder such as a bank or insurance group to replace some of Renault SA’s equity holding and help it survive a make-or-break year, the FT reported, citing people familiar with the matter. Nissan hasn’t ruled out the possibility of Honda Motor Co. buying a portion of its shares.
Nissan shares have been on a roller coaster ride this month, plunging when it released its dire profit outlook, before rebounding after activist investor Effissimo Capital Management Pte disclosed it had a stake in the automaker.
Fitch Ratings on Tuesday revised its outlook on Nissan to negative from stable, while affirming its senior unsecured rating at BBB-.
“The negative outlook reflects Nissan’s weaker performance in North America, leading to a drop in profitability and narrower free cash flow margin,” the credit ratings company wrote. It added however that consumer demand in the US should be buoyed by falling interest rates and the fading out of delayed purchasing decisions because of the election.
“In the short term, it’s inevitable that the decrease in production volume — hence lower sales — will be viewed negatively”, said Bloomberg Intelligence senior auto analyst Tatsuo Yoshida. “Yet, the production cuts may appear positive in the long term, given any delay in cutting production also leads to problems including the higher cost of selling inventory vehicles.”
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