TOKYO - Will Nissan Diesel Motor Co. survive? The Tokyo stock market is voting 'no.'
After trading at around ¥200 (about $1.90 at current exchange rates) for most of this year, the truckmaker's stock price tumbled to a 52-week low of ¥91 in trading last week, before settling at ¥100 at the close of trading here Thursday, Nov. 11. The drop, said several stock-market analysts, indicates the market thinks that Nissan Diesel may land in bankruptcy court due to a standoff between the truckmaker's creditors and its owners.
'Both parties have made very clear their positions, and the positions are irreconcilable,' said Stephen Usher, Tokyo-based auto analyst at Jardine Fleming Securities (Asia) Ltd.
Nissan Motor Co. and its parent, Renault SA, each own 22.5 percent of the troubled truckmaker.
`OFF A CLIFF'
Nissan Diesel's woes aren't affecting Nissan Motor itself, however. 'Nissan Diesel is falling off a cliff, and Nissan is down a little bit,' summed up Christopher Richter, auto analyst at HSBC Securities Japan Ltd. The market believes that if the truckmaker went bust, Nissan could go elsewhere for the diesel engines and light trucks it now buys from Nissan Diesel, he said.
Louis Schweitzer, Renault's chairman, recently said that the French carmaker still sees potential synergies between its RVI truck unit and Nissan Diesel's operations in Japan and Asia. But he also insisted Renault will not inject more cash into Nissan Diesel unless some of the latter's debts were written off by creditors.
He is wary of investing more in a company that, he said, 'has not made a profit in 10 years,' and whose net worth, including pension liabilities, is 'not positive.'
In the six months ended Sept. 30, Nissan Diesel's net loss widened to ¥26.8 billion, or $255 million at current exchange rates, from a loss of $86 million a year earlier, even though sales rose 2.4 percent to $1.1 billion.
The outlook is no better. Japan's truck market hit a 30-year low last year and is down another 10 percent through October, according to the Japan Automobile Dealers Association. Even when the market recovers, it will not return to anywhere near the previous peaks, according to a report by Standard & Poor's DRI Global Automotive Group.
$4.8 BILLION IN DEBT
Nissan Diesel's U.S. sales arm, Nissan Diesel America Inc., is a minor player in the U.S. commercial truck market. But the company has announced plans to become a much more significant supplier of medium-duty cab-over trucks. They are marketed under the UD name.
The parent's debts stood at $4.8 billion at the end of March. It aims to trim those to $4.3 billion by next April 1, and to $3.8 billion by April 1, 2001. To do so, Nissan Diesel has said it is willing to sell all of its real estate, including its headquarters and the land under its plants. But Renault wants the debt slashed much lower than those targets.
'No way through asset sales or generation of cash flow will Nissan Diesel ever be able to pay the debt,' said Usher.
The banks have three options. They might try debt-for-equity swaps, but the debt is so huge and Nissan Diesel's equity so low that they would quickly run afoul of Japanese laws forbidding banks' owning more than 15 percent of a manufacturer. They might re-schedule the debt, but that would delay the problem, not solve it.
Or they could write off the debt. But given the large amount of bad debt in Japan, Usher said, 'The minute the banks set a (debt-forgiving) precedent with Nissan Diesel, they'll have a line of penitents around the block.'