Fitch Ratings Downgrades Peugeot to B+ from BB- image

PSA Peugeot Citroen was downgraded by Fitch Ratings, to four levels below investment grade.

Fitch Ratings downgraded PSA Peugeot Citroen to B+ from BB- with a negative outlook, which means that the company might cut Peugeot’s credit rating again, according to Tom Chruszcz, an analyst at Fitch in Warsaw. Fitch Ratings also downgraded Fiat by one level from BB to BB-.

“We are concerned by the continuously adverse market environment, notably in Europe, the region that dominates Peugeot’s sales, and its strategy to reverse losses and cash consumption may prove long and difficult,” Chruszcz said. “Fiat’s plan to take its cars upmarket will take time and carries significant execution risk.”

Peugeot, which is Europe’s second-biggest automaker, reported an operating loss of 576 million euro ($761 million) in 2012, as sales in the region fell for the fifth consecutive year. Chief Executive Officer Philippe Varin promised earlier this month that the automaker will breakeven by the end of 2014, due to a new strategy to move Peugeot brand upscale.

Analysts predict European market will fall for the sixth consecutive year in 2013 and Peugeot expects a drop of 3% to 5% in the auto market. Peugeot spokesman Pierre-Olivier Salmon said that the automaker was prepared for this downgrade, as well as for the one made by Standard & Poor’s Ratings Services in mid-February.