【Text by Observers Network, Pan Yuchen; Editor by Gao Xin】With its financial situation deteriorating, Nissan has proposed to delay payments to suppliers and pay interest in order to improve free cash flow.

According to a report by Reuters on June 30, emails between procurement and finance department employees and a company document show that Nissan has requested some of its suppliers in the UK and EU to allow delayed payments to release short-term funds, which would enable the company to have more cash at the end of the first quarter of the 2025 fiscal year (April-June 2025).

Nissan's car factory in Sunderland, UK. Visual China

In an email, Nissan discussed two options it offered to suppliers: one was for suppliers to accept delayed payments with interest after a period; the other was for suppliers to receive payments on time as usual, in which case the payments would be made by HSBC, and Nissan would then repay the interest to the bank.

In the 2024 fiscal year (April 2024-March 2025), Nissan had already made similar requests. Nissan estimated that by extending payment terms with dozens of companies in the UK and EU, it could increase free cash flow by 59 million euros (approximately RMB 495 million).

"Suppliers will not be forced to accept"

An employee mentioned in an email that Nissan would delay payments to suppliers in June until August 15, and some even until September, which aligns with the new CEO Ivan Espinosa's "top-down requirement" to strengthen free cash flow.

This April, Espinosa, who had just taken office, announced a cost-cutting plan, including cutting about 15% of Nissan's global workforce, closing seven factories, and aiming to cut costs by 50 billion yen (approximately RMB 2.487 billion) over the next two years.

In other internal emails, a finance department executive said they needed to complete a procurement task of 150 million euros (approximately RMB 126 million). In another email, the executive wrote that delaying supplier payments until July was an option to achieve the procurement task.

Ivan Espinosa, CEO of Nissan. Nikkei News

It is currently unclear whether Nissan has made similar requests to suppliers in other regions, how many suppliers have been contacted, or the length of the extension periods sought. However, in Japan, Nissan was found by regulators to have underpaid several supplier payments and is facing scrutiny over supplier payments.

Nissan stated in a statement that it has encouraged some suppliers to cooperate under more flexible payment conditions to improve its free cash flow, bear the cost of transformation, and redeem maturing bonds.

Nissan also said that suppliers can request immediate payment or choose to delay acceptance of payment and receive interest. It emphasized that Espinosa did not force suppliers in various regions to accept delayed payments. Nissan also stated that it would not comment on internal discussions or specific targets.

Free Cash Flow Crisis

Shoji Makoto, senior analyst at Toho Tokyo Information Lab, said this indicates that Nissan is facing difficulties in financing and wants to delay current expenses as much as possible.

Owing to declining sales and aging product lines, Nissan reported a net loss of $4.5 billion (approximately RMB 32.24 billion) in the 2024 fiscal year and refused to make predictions for profitability in the 2025 fiscal year (April 2025-March 2026).

As of the end of March this year, Nissan had only 2.2 trillion yen (approximately RMB 109.3 billion) in cash and cash equivalents. The company will also face approximately 700 billion yen in debt maturity this fiscal year.

Nissan's debt has been downgraded to "junk grade" by three rating agencies, and in a document this month, Nissan stated that any further rating downgrade could complicate future financing plans.

In June, Nissan held a shareholders' meeting in Yokohama, Japan. Visual China

Nissan's Chief Financial Officer Jeremie Papin said in May that the first quarter of the 2025 fiscal year (April-June) would be the most challenging quarter for Nissan. The company expects its automotive business to have a negative free cash flow of 55 billion yen (approximately RMB 27.32 billion) during this quarter, compared to 30.3 billion yen (approximately RMB 15.05 billion) in the same period last year.

Nissan aims to achieve positive free cash flow in the 2026 fiscal year. Therefore, in February, Papin expressed concerns about achieving the free cash flow target and stated that more suppliers, including those in India, needed to be contacted.

Will Chinese Suppliers Be Affected?

Will Nissan make similar requests to suppliers in China? Observers Network asked Nissan China for confirmation, but the company said there were no new updates from the headquarters.

However, according to the State Council's "Regulations on Ensuring Payment to Small and Medium-sized Enterprises," large enterprises purchasing goods, projects, or services from small and medium-sized enterprises should pay within 60 days of delivery of the goods, projects, or services. If large enterprises use commercial bills or electronic receivables certificates as non-cash payment methods to pay small and medium-sized enterprises, they should make clear and reasonable agreements in the contract, and must not force small and medium-sized enterprises to accept commercial bills or electronic receivables certificates, nor use such non-cash payment methods to extend payment periods by default.

Meanwhile, Nissan's main joint venture partner in China, Dongfeng Motor, pledged on June 10 to unify the payment cycle to within 60 days to respond to the State Council's "Regulations on Ensuring Payment to Small and Medium-sized Enterprises" and fulfill the responsibility of central enterprises.

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Original: https://www.toutiao.com/article/7522020047405990439/

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