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Monday, November 17, 2008

Fitch Ratings Ltd.puts Toyota in "Rating Watch Negative"

Famous credit rating agency, Fitch Ratings Ltd.  put Toyota Motor Corporation (TYO:7203) on “Rating Watch Negative” from its previous “AAA” ratings. This drop is obviously the result in sales slump. Toyota Motor Corp. is facing such downgrades for the first time in last ten years. According to Fitch Ratings, Toyota will be kept under continuous review for the next several weeks. Another reputed Japanese automaker, Honda Motor Co., Ltd. (TYO:7267) also observed a downward rating from “positive” to “stable.” During the high priced fuel period, Honda’s small cars sold like hot cake in USA which kept its rating in “A+.”

America is Toyota Motor Corporation’s biggest market but the largest auto maker in the world shocked investors last month by cutting its annual forecast by 63%. Though Toyota Motor Corporation sells small cars and its hybrid model Toyota Prius is very popular, the company mainly focuses on producing large vehicles in USA which has been badly hit. Earlier this month, the company cut down its earning target from 1.25 trillion yen to 550 billion yen. The company has 317 billion yen in debt in 2008. The 15% rise of yen against the dollar and 32% gain against the euro also cut down Toyota’s profit share significantly. Bloomberg.com reports: 

The rating cut would be the company's first since Moody's Investors Service reduced its long-term debt rating from Aaa to Aa1 in 1998. Moody's raised the company back up to Aaa in 2003. Standard & Poor's has rated the carmaker AAA since 1985. Toyota spokesman Hideaki Homma declined to comment on the possible rating change.

Toyota fell 0.3 percent to 3,130 yen today in Tokyo. The stock has dropped 48 percent this year, set for the worst annual performance since at least 1975.

A “lower debt rating” is further going to jeopardize Toyota’s ability to offer “interest-free loans” for increasing its sales. The ongoing financial crisis pushed the overall car sales in USA to the lowest since 1983. Earlier this year, Toyota Motor was leading General Motors Corporation (NYSE:GM) in terms of global auto sales.

Related articles:

Bloomberg.com

guardian.cok.uk

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