Nissan's Recovery Isn't Fast Enough to Stave Off S&P Junk Credit Rating

Nissan press image of the front of an Ariya EV with a Jalopnik "The Morning Shift" banner over top.
Nissan press image of the front of an Ariya EV with a Jalopnik "The Morning Shift" banner over top.

Nissan really didn’t need the S&P’s input on how it’s doing, dealerships are in over their heads working out all this EV charger business, and one self-driving startup is facing questions from the government while another is born. All that and more in The Morning Shift for Tuesday, March 7, 2023.

1st Gear: Junk Status

It’s been a long road to recovery in the post-Carlos Ghosn era, but Nissan seemed to be heading in the right direction. In 2021, the automaker posted its first operating profit — $2.03 billion — since 2019. CEO Makoto Uchida has tamped down volume, which was his predecessor’s calling card, and focused on revitalizing the brand’s lineup with semi-desirable products. Unfortunately, Nissan’s not out of the woods yet, though. S&P just cut its credit rating, pouring cold water on its ability to keep the progress up. From Bloomberg:


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While Nissan recovered from two years of losses and is still targeting an operating profit of ¥360 billion ($2.7 billion) for the fiscal year ending this month, there’s a dearth of new models to appeal to car buyers. A weaker yen in late 2022 also helped boost income brought home, which made up for production snags, but that advantage is fading as the currency strengthens.

“Performance at the company has been sluggish for more than three years,” S&P said in a statement. “We now expect its earnings will remain weaker than we previously assumed given the prospect of another difficult year in 2023.” [...]

A junk rating means Nissan will have to pay higher costs to sell foreign currency bonds abroad. While the Yokohama-based company sold a yen-denominated sustainability bond in January, it last sold dollar and euro bonds in 2020. The price of its dollar-denominated note maturing in 2027 dropped 0.2 cents to 91.1 cents on the dollar on Tuesday. It has fallen about ¥3 since the beginning of February.

Japanese bond issuers with junk ratings include SoftBank Group Corp. and Rakuten Group Inc., which have BB+ and BB from S&P, respectively. The cost to insure Nissan Motor’s debt against default jumped after S&P Global Ratings lowered the carmaker’s credit rating to junk.

Pretty savage of S&P to chalk up Nissan’s success to a weak yen, but I’m sure it’s not personal. Analysts estimate it’ll take the company another year or two before it stops “lagging behind its competitors,” presumably in terms of sales volume. Nissan had targeted sales of 5.4 million vehicles for the forthcoming fiscal year, which kicks off April 1. S&P feels like that’ll be more like 3.6 to 3.7 million.

2nd Gear: Dealers and Chargers

Automakers want to ensure their dealer network has the fastest EV chargers installed on site, but dealerships aren’t have the easiest time getting the job done, according to a new story from Automotive News. The back-and-forth with local bureaucrats, the technical expertise required, and of course, the expense is all getting to be a bit much:

“The more we dig into this whole shift, it’s becoming more and more apparent that it’s not cheap. And it’s complicated. And it’s time-consuming,” said Rinaldi Halim, president of Sierra Automotive Group, which has six stores selling Chrysler, Dodge, Jeep, Ram, Subaru, Honda and Chevrolet vehicles in Los Angeles and Monrovia, Calif.

While dealers have extensive experience with facility upgrades, the technical nature of installing chargers at commercial scale is often beyond their expertise. Depending on the age of the building, the proximity and capacity of their current transformer and other factors, dealers must develop custom solutions to meet their brands’ requirements.

With some exceptions, most automakers have outlined EV plans that require dealers to install various numbers of Level 2 and Level 3 chargers at their stores over the next few years.

Dealers are spending $400,000 to $750,000 to install infrastructure for Level 3 chargers — the fastest type, which takes 15 to 20 minutes to refill most of an EV’s charge. They are adding transformers, switchgears and panels, a process that typically involves drilling through parking lot pavement or even through a public road or alley, consultants and dealers said. Dealers are often learning about construction needs as they go.

“It’s coming down the pike so fast — all these EV requirements. Everybody is on a learning curve,” said Casey Griffin, president at Logan Asset Management, which helps auto retailers plan upgrades.

The tricky part is that each OEM has different requirements about the chargers its products need, so dealership families need to find a common set of hardware that satisfies all the brands they represent, which seems to be almost impossible right now. Additionally, as new models release and older ones phase out, the mix of hardware will likely change.

Many dealers see this coming and have opted for a more future-proof installation based around Level 3 chargers, but parts shortages and installation times are getting in the way. One local power company told a dealer in Tennessee that the hookup they were requesting was basically equal to that required by a small hospital.

3rd Gear: Rivian Will Issue Bonds

Rivian will sell $1.3 billion worth of bonds, the EV startup announced Monday. The bonds will mature in March 2029, at which point investors will have the choice of converting them into cash or shares of the company. It’s all to fund the development of the brand’s next model line — the smaller, more entry-level R2 series. From Reuters:

In an effort to cut costs, the company last month laid off 6% of its workforce.

Late last year, it shelved plans to build delivery vans in Europe with Mercedes and had earlier pushed back by a year to 2026 the planned launch of a smaller R2 vehicle family at the $5 billion plant it is building in Georgia.

Rivian, which has been losing money on every vehicle it builds, forecasts 2023 production well below analysts’ estimates as it grapples with lingering supply chain bottlenecks after narrowly missing its target last year.

Rivian said the bonds would be “green” ones, which typically offer companies the chance to raise debt more cheaply from investors who are willing to take lower returns in exchange for supporting green projects.

These convertible bonds run the risk of potentially diluting the value of outstanding shares, according to Crain’s Chicago Business. Rivian’s announcement precipitated an 8 percent slide in the company’s stock price during late trading on Monday.

4th Gear: NHTSA Is Looking Into Zoox

Crash testing aside, federal regulators have a habit of asking automakers to take all their tests in take-home fashion and show their work with the answers. Imagine officials’ surprise when the numbers don’t add up and cheating seems likely. This is exactly how Dieselgate happened under the EPA’s nose, and it may also explain why the National Highway Traffic Safety Administration suddenly feels compelled to study Zoox’s record of self-certifying its robotaxis. From Automotive News:

NHTSA said in a filing made public Monday that it will examine the process and technical data that Amazon-owned Zoox relied on when certifying that its robotaxi met federal requirements to travel on public roads.

The probe — referred to as an “audit query” — comes after NHTSA told Automotive News in February that the agency was reviewing “self-certification claims” made by Zoox just days after it launched its robotaxi on public roads.

An audit query is a type of administrative investigation used by the agency to determine whether a company has complied with its legal obligation, according to NHTSA.

In a statement Monday, NHTSA spokesperson Veronica Morales said the probe will allow the agency to “further examine the process and technical data on which Zoox relied when certifying that a passenger vehicle it had produced met all applicable Federal Motor Vehicle Safety Standards.”

“In particular,” she added, “NHTSA will consider the extent to which Zoox’s certification basis depended upon unilaterally developed test procedures or determinations that certain standards were inapplicable due to the unique configuration of the vehicle.”

Auto News notes this is the NHTSA’s fourth probe into an autonomous driving company, after investigations into General Motors’ Cruise and concerning

5th Gear: From Argo’s Ashes

Elsewhere in the self-driving startup world, the founders of Ford and Volkswagen’s extinct Argo AI initiative have moved on to create a new company that will specialize in robotaxis and commercial trucks, according to anonymous sources that have spoken to Bloomberg:

The venture by Bryan Salesky and Pete Rander will be backed by an investment from a company that approached them about starting a full-scale [autonomous vehicle] firm, the people said. The identity of the backer wasn’t immediately clear, but the people said it’s not an automaker.

The still-unnamed startup has hired between 40 and 50 workers, according to one of the people, who asked not to be identified because the effort is private. It will be based in Pittsburgh, which was home to Argo and is also the headquarters city for Ford Motor Co.’s new semi-autonomous-driving subsidiary, Latitude AI.

The two autonomy entrepreneurs are starting anew after Ford and Volkswagen AG pulled the plug on Argo, shutting down the startup with more than 2,000 employees worldwide. Inc. nearly rescued Argo last year, but pulled out of negotiations as the economy faltered and the online retail giant began shedding staff and cutting costs. Amazon isn’t an investor in the new firm, said the people familiar with the matter.

I completely missed that Ford started up yet another self-driving subsidiary only in the last week. In Latitude’s defense, it does appear to be more focused on ADAS features for consumer vehicles rather than robotaxis, a thing nobody really wants.

Reverse: Happy Birthday, Janet Guthrie

The first woman to qualify for the Indianapolis 500 was born on this day in 1938; she turns 84 today.

Janet Guthrie | Biography, Indy 500, & Facts

Neutral: I Got Nothing

Interior of the Ford GT90 concept.
Interior of the Ford GT90 concept. here’s a picture of the Ford GT90's interior. Until a production car’s interior looks exactly like this, we’ve failed.

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