Fiat Downgraded by S&P image

Fiat group was threatened by the Standard & Poor’s ratings agency to be downgraded due to the company’s low sales in Brazil and Europe, and also for its over-reliance on Chrysler, the US partner.

The announcement brought an immediate dramatic stock fall, with shares plunging 3.26% to 4.51 euros in the morning.

“It’s not a surprise. The 2012 guidance on the financial side that Fiat gave last week was disappointing, particularly on its debt,” said a Milan-based analyst.

The company had to face a 10.8% decline in 2011, 6.5% for the European car sales. This will bring a lot of pressure on the company’s shoulders, which forecast a net industrial debt of 5.5 billion to 6 billion euros in 2012, compared to the analysts forecast of 5.7 billion euros.

“We see weakening demand in Europe’s over-supplies mass vehicle market, particularly Italy’s as likely to pressure Italy-based Fiat’s profits and cash flow,” the ratings agency said in a statement.

Fiat already took some measures and sold a part of the 4 million Fiat shares granted by shareholders in 2009. This way the company was able to pay some of the tax liabilities associated with the allotment of the shares.