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There Goes Nissan's Recovery Plan

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The world falling apart is very inconvenient for Nissan’s recovery plan, the PSA-FCA merger is still on the books, big oil is making big moves, and all that and more in The Morning Shift for Wednesday, April 7, 2020.

1st Gear: Nissan’s Nostalgia For The Problems Of Yesterday

Nissan was just beginning a path to recovery in the wake of the fallout over the alleged financial misconduct scandal that rocked its C-suite over the last couple of years. Now it’s starting at the back of the pack of a world of automakers that will all be battling for scraps for the next few months, which is a really bad place to be.


The focus will be on Nissan’s dealerships, now, from Automotive News:

Profitability has been a challenge for Nissan for a while, Liza Borches, CEO of Carter Myers Automotive in Charlottesville, Va., told Automotive News last month.

“They’re the one brand that’s going to need to be stepping up the most,” Borches said. “We need to get showroom traffic up for Nissan.”

Nissan executives recognize the gravity of the situation and have responded with a relief package that includes guaranteed dealer payouts, relaxed performance objectives and 0 percent interest customer financing

Nissan will cover up to two months of payments and defer payments on an additional three months for some new customers.

For April, Nissan will guarantee dealers a $425 payout per vehicle sold. That’s an increase from a guaranteed $375 offered per vehicle in March. Monthly and quarterly sales objectives are also on hold.

“Sales-based objectives must go away and we just need to get paid a guarantee per car so we can all be competitive,” Slade said. “There’s no way you can set objectives right now because business conditions in each city [are] so different from the next.”

To help control the expense line, finance captive Nissan Motor Acceptance Corp. is deferring floorplan interest payments for 60 days. Dealers can apply for a cash-flow assistance program, which allows six months of interest-only payments on existing mortgages and capital loans.


In that article, business broker Alan Haig claims many Nissan dealers may just eventually run out of money, but that a “smaller Nissan dealer network coming out of the crisis would be healthier for the survivors.” Sure, but what about everybody else?

2nd Gear: FCA, PSA Not Completely SOL

The impending merger between Fiat Chrysler and PSA Group was actually designed, in part, to help both companies in the event the world economy goes to shit. The problem now is it all went to shit a little earlier than the merger, and now both automakers need a ton of cash to make it work.

From Automotive News:

FCA’s share price has fallen around 45 percent since late February when the virus started spreading in northern Italy. PSA’s stock is down 32 percent.

As part of the merger agreement, FCA is set to pay a 5.5 billion-euro ($6 billion) special dividend to its investors. Bankers and analysts have questioned FCA’s ability to pay such a windfall at a time when companies are looking to preserve cash.

A source close to the deal said that while both parties were still committed to the tie-up, they needed to see how the crisis evolved before deciding whether to renegotiate merger terms.


I also need help paying off about $6 billion to investors from a time when I really thought the Furby was going to come back in a big, big way.

3rd Gear: Big Oil Hones In On Big Picture

The successful fracking industry in the U.S. has made it the biggest global oil producer, leading its competitors to try and flood the market with their own oil supplies exceeding demand and bringing oil prices down. That sounds like a good thing, but it’s unsustainable, so the Big Oil boys and girls will need to talk.


From Bloomberg:

Saudi Arabia and Russia are closing in on an agreement to curb output, which could drain some of the oil surplus threatening to overwhelm storage tanks and force a wave of abrupt production shutdowns, according to delegates involved in the talks. The two energy giants, together with others in the OPEC+ alliance, will hold a virtual meeting on Thursday to finalize the accord.

A deal still hinges on some form of co-operation with the U.S. That may be difficult to achieve with President Donald Trump resisting any partnership with the OPEC cartel that he’s vilified for years. But the group is holding out hope for some kind of American involvement, and buy-in by others such as Canada and Brazil, at a gathering of Group of 20 oil ministers scheduled for Friday.


Any potential deal may require the U.S. to publicly commit to cutting some oil production, which President Trump has spoken out against in the past. If that doesn’t happen, Russia may request some sanction relief from the U.S. as a compromise.

Playing with fire. Literally.

4th Gear: Honda Furloughs Workers One Month

Honda has furloughed its U.S. manufacturing workforce until May 1, accounting for about 18,400 workers at plants in Alabama, Indiana and Ohio, in hopes for COVID-19 relief soon, Reuters reports.


The return date is a little later than other automakers, like Toyota and Nissan, which have very optimistic mid-to-late April dates. It’s likely those will have to be pushed back. To be honest, it’s likely Honda’s May 1 plans will need to be pushed, as well.

Honda’s production will restart May 4 if all goes according to plan, though.

5th Gear: People Can’t Pay Rent But Private Jets Get Stimulus

With unemployment skyrocketing, a global pandemic and an economy in tatters, millions of Americans need relief. But the design of the hurried stimulus package put together by U.S. lawmakers is benefiting people who don’t need relief, as private jet companies backdoor into help for commercial air transport.


From Bloomberg:

“PrivateFly flights that fall into this category are now reflecting this exemption in the price paid by the customer,” said PrivateFly Chief Executive Officer Adam Twidell. “On-demand private-jet charter and jet card services will benefit from the move, which will hopefully help to stimulate demand, during what is set to be an exceptionally challenging few months ahead.”

Some private-jet operators were early beneficiaries of the pandemic’s initial disruption, which resulted in a surge in inquiries from wealthy travelers seeking a way around busy airport terminals and crowded jetliners. But after the initial surge, much of that business has declined along with the rest of the aviation industry, Twidell said.


The only respite here is that the companies have to apply for the help, which some have already decided not to do. Private jets are not a vital business. The industry should die and never come back from this.

Reverse: RIP To An Industrial Giant

Henry Ford died on this day at 83 years old in 1947.

Neutral: Might Nissan’s Lineup Be Primed For A Recession?

Over the last few years, Nissan has been increasingly judged for its commitment to making a bevy of similar-sized, similar-looking sedans in a crossover-dominated market, mostly as an anecdote used to shoot down any hope the automaker had of inspiring sympathy during its hardship.


But if oil prices go up, the economy stays bad, and people are ever allowed to move freely again, maybe that lineup of four-cylinder “responsible” and adequately efficient sedans will suddenly have a bigger market?