Moody's downgrades Toyota rating
By Jay Alabaster |
April 23, 2010, Friday
|
Print Edition
Print Edition
MOODY'S Investors Service yesterday lowered its main debt rating for Toyota Motor Corp saying its well-publicized quality problems could hurt profits over the long term.
The rating agency cut its senior unsecured rating on Toyota from Aa1 to Aa2, with a negative outlook. The cuts also apply to a number of the company's subsidiaries.
Such ratings can affect how much it costs for companies to borrow from banks and other lenders.
But the world's largest vehicle maker said the cut was unlikely to affect its business because it still had an A-level rating.
"The ratings downgrade by Moody's is very regrettable, but with the trust of customers as our top priority, management will put in maximum effort so that the rating is raised once again," said a Toyota spokeswoman.
In addition to global recalls on some top brands, Toyota faces at least 100 lawsuits in the United States for injuries or deaths attributed to sudden acceleration and is the subject of a congressional investigation.
Moody's said in a statement that the ratings cut reflected Toyota's low level of profitability, which it expected to continue until at least 2012.
"Its product quality and recall challenges - largely centered in the US - have created significant uncertainty over whether it can maintain the pricing power it has historically achieved over its rivals," Moody's senior analyst Tadashi Usui said in the statement.
In another blow, Toyota's position in the Forbes ranking of the world's leading firms released on Wednesday plummeted to 360th from third last year.
Toyota's sales have increased recently in the US, but it has offered unprecedented incentives to lure customers despite the safety recalls, including discounted financing and free maintenance for return buyers.
Despite safety troubles, Moody's emphasized Toyota's strong balance sheet and large cash reserves.
Toyota would have a lower rating, it said, but was propped up by the assumption that if Toyota were to need outside assistance, it would be readily available from banks and other sources within Japan.
The agency said in February that it was reviewing Toyota.
Toyota next month still expects to post a net profit of 80 billion yen (US$860 million) for the fiscal year ending March 31, a massive turnaround from a net loss the previous year of 437 billion yen.
The rating agency cut its senior unsecured rating on Toyota from Aa1 to Aa2, with a negative outlook. The cuts also apply to a number of the company's subsidiaries.
Such ratings can affect how much it costs for companies to borrow from banks and other lenders.
But the world's largest vehicle maker said the cut was unlikely to affect its business because it still had an A-level rating.
"The ratings downgrade by Moody's is very regrettable, but with the trust of customers as our top priority, management will put in maximum effort so that the rating is raised once again," said a Toyota spokeswoman.
In addition to global recalls on some top brands, Toyota faces at least 100 lawsuits in the United States for injuries or deaths attributed to sudden acceleration and is the subject of a congressional investigation.
Moody's said in a statement that the ratings cut reflected Toyota's low level of profitability, which it expected to continue until at least 2012.
"Its product quality and recall challenges - largely centered in the US - have created significant uncertainty over whether it can maintain the pricing power it has historically achieved over its rivals," Moody's senior analyst Tadashi Usui said in the statement.
In another blow, Toyota's position in the Forbes ranking of the world's leading firms released on Wednesday plummeted to 360th from third last year.
Toyota's sales have increased recently in the US, but it has offered unprecedented incentives to lure customers despite the safety recalls, including discounted financing and free maintenance for return buyers.
Despite safety troubles, Moody's emphasized Toyota's strong balance sheet and large cash reserves.
Toyota would have a lower rating, it said, but was propped up by the assumption that if Toyota were to need outside assistance, it would be readily available from banks and other sources within Japan.
The agency said in February that it was reviewing Toyota.
Toyota next month still expects to post a net profit of 80 billion yen (US$860 million) for the fiscal year ending March 31, a massive turnaround from a net loss the previous year of 437 billion yen.
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