Fitch Ratings service has lowered rating on Toyota amid market decline
Tue Nov 25, 10:52 PM
Yuri Kageyama, The Associated Press
TOKYO - Fitch Ratings has downgraded its top credit rating on Toyota.
It blames the serious market downturn and a surging yen - the latest sign that even Japan's top automaker isn't emerging unscathed by the global slowdown. Fitch also cited high material costs as another challenge Toyota will face in lowering its ratings on Toyota Motor Corp. two notches to "AA" from "AAA."
Tatsuya Mizuno, a Fitch director, says Toyota is suffering severely from the ongoing turmoil in the global automotive sector.
The simultaneous slowdown in the major auto markets and the appreciation of the yen, which erodes the overseas earnings of Japanese exporters, were among the multiple negative developments battering Toyota's earnings.
Mizuno says that in Fitch's view, the negative developments in the industry are so substantial and fundamental, that even Toyota can no longer support a 'AAA' rating.
Compared to their money-losing American counterparts, Japanese automakers are faring better in riding out damage from the global slowdown and the recent jump in gas prices because of their reputation for fuel-efficient models.
Still, Toyota, which makes the Prius gas-electric hybrid and Camry sedan, expects its net profit for this fiscal year to nose-dive to 550 billion yen (US$5.5 billion).
That's less than a third of last year's and its lowest annual earnings in eight years. For the July-September quarter, Toyota's profit plunged 69 per cent from the same period the previous year.
General Motors Corp., Ford Motor Co. and Chrysler LLC, Detroit's "Big Three" automakers, are in far deeper trouble as they struggle to win a bailout from Congress to avoid bankruptcy.
Toyota depends on the U.S. market for about half of its operating profit.
That market's troubles may last two to three years, heralding greater risks for even Toyota, according to Fitch.
The slump in the U.S. market is likely to put the brakes on Toyota's growth because its strategy has focused on grabbing market share from American automakers in pickup trucks and sport utility vehicles.
Also, growth in emerging markets may not be enough to offset the U.S. declines.
On the plus side, Toyota's efficient production methods should produce cost cuts, Fitch said.
Mustangman
