9 CARMAKERS DOWNGRADED
Moody’s puts automotive industry on review, sees 20pc drop in light vehicle sales this year
THE Covid-19 pandemic has prompted Moody’s Investors Service to put the entire automotive industry on review for a downgrade.
Moody’s has cut the ratings of nine of the 22 carmakers it rated over the last three months.
Total debt downgraded was about US$130 billion, excluding the debt related to the carmakers’ captive finance businesses.
“The pandemic has made the auto industry even more challenging, spurring downgrades on 40 per cent of carmakers,” it said in a report yesterday.
The automotive industry is among the hardest hit by the Covid-19 pandemic.
“We estimate light vehicle sales will slump at least 20 per cent this year and it will take several years to recapture last year’s levels, with any turnaround slowed by a supply shock coming simultaneously with plunging demand,” said Moody’s.
The firm said those downgraded companies were already facing challenges before the pandemic.
Operating difficulties, the need to make significant investments, or major challenges to their market positions meant those companies were already weakly positioned in their rating categories.
In all cases, Moody’s felt the pandemic and subsequent recession would exacerbate these problems.
The strength of carmakers with confirmed ratings offered chance for speedier recovery, said the firm, but added that most were not downgraded.
These companies generally had track records of operational strength, little need for major restructuring, strong positions in core markets, geographic diversity or a premium brand focus and, enough liquidity to weather even an extended downturn, it said.
Despite limited downgrades, Moody’s said 18 of 22 carmakers had negative or developing outlooks.
This acknowledges the potentially severe damage the recession could do to operating performance and credit.