February 11, 2014 at 11:23 pm

Moody's downgrades Fiat credit rating

Moody’s Investors Service has downgraded Fiat SpA’s credit rating to “B1” from “Ba3,” citing the growing headwinds facing the company in key markets. Both ratings are considered highly speculative.

“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,” said Moody’s lead analyst Falk Frey in a note released Tuesday.

The money the automaker spent to complete its purchase of Auburn Hills-based Chrysler Group LLC did not help matters, Frey noted.

“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,” he said.

Fiat posted a trading profit of 3.4 billion euros for 2013, which fell short of the company’s own target of between 3.5 billion and 3.8 billion euros. Without Chrysler’s contribution, that figure falls to just 246 million euros.

While the two companies have merged as Fiat Chrysler Automobiles, Chrysler’s loan covenants limit the amount of cash Fiat can access from its accounts. As a result, Moody’s said Tuesday that it will continue to provide separate ratings for Fiat and Chrysler.

“However, it is likely that these would merge over time to the extent that the financing arrangements of the two entities converge,” the firm said.

Bryce.Hoffman@detroitnews.com
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