S&P Downgrades Fiat over Weak Europe Performance
Ratings agency Standard and Poor's on Thursday downgraded Italian automaker Fiat's long-term corporate credit rating from BB to BB-, citing weak demand in Italy and overcapacity in Europe.
The announcement came after the Italian auto giant said its net profit in the first quarter soared ten-fold to 379 million euros ($500 million) thanks to its U.S. partner Chrysler, without which it would be in the red.
S&P highlighted an increase in the Italian auto giant's debt as well as the "difficult period in the European auto market."
"We expect substantial overcapacity among European mass market automakers and weak consumer demand -- both especially in Fiat's home market of Italy -- and strong competition to weaken profitability and cash flow in 2012," it said.
The ratings agency said another downgrade was possible "if an even more severe than expected deterioration in European performance, or significant weakening of Brazilian operations, causes the liquidity position to worsen."
Source: Agence France Presse
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