Moody's Cuts Fiat's Rating Down Due To Earnings Worries, Outlook
Citing weak results in 2013 and guidance challenges for 2014, investment ratings agency Moody’s has cut Fiat’s rating from B3a to B1, four notches below investment grade.
Automotive News reports that the rating was decided upon by the agency after placing the automaker under review for a possible downgrade back in the opening days of 2014 just after Fiat struck a deal to take full control of Chrysler for $4.35 billion. In turn, the B1 rating for Fiat means the automaker will have a harder time securing much-needed financing in order to right the ship for their loss-making European operations.
Aside from the aforementioned reasons cited for the downgrade, Moody’s lead analyst for Fiat Falk Frey added that
“We have downgraded Fiat’s ratings following its weaker-than-expected performance in fiscal year 2013 and our view that the company faces significant challenges in terms of achieving its outlook guidance for the current fiscal year.”
“We are also concerned that Fiat may not be able to offset any further profitability deterioration in its Latin American operation through anticipated improvements in other regions and in its luxury and performance division,”
Other factors in the downgrade include Fiat’s overreliance on the European market — still weak from the Great Recession — rising price pressures, a lack of major new models coming down the ramp in 2014, and overcapacity in Fiat’s home market.
Although Fiat and Chrysler merged not too long ago, Moody’s will keep the former duo’s ratings separate for the foreseeable future. The agency also said Fiat’s rating’s outlook overall has improved from negative to stable.