Moody’s Plans to Downgrade Peugeot image

Friday, July 13th, Moody’s Investors Service placed Peugeot’s Ba1 credit rating under review for a downgrade, making the company’s shares tumble 8.9% in midday action.

Moody’s Investors Service took the decision to initiate a downgrade review after they concluded that Peugeot is dealing with a deterioration in the already weak capacity utilization of its European facilities in the first half of this year.

The firm also added that “Peugeot faces tremendous operational stress with financial metrics, which are currently positioned below the Ba1 rating category and are likely to deteriorate further in the current year and unsustainably high cash burn from its automotive operations.”

Yesterday, July 12th, Peugeot announced it will cut 8,000 jobs and will close the Aulnay plant to end losses. The Aulnay plant, which employs 3,000 workers, will be closed in 2014 and the Rennes facility, in western France, will have 1,400 employees laid off from the total of 5,600 due to decreased demand for the Citroen C5 and Peugeot 508.

“I am fully aware of the seriousness of today’s announcements. The depth and persistence of the crisis impacting our business in Europe have now made this reorganization project indispensable”, said Philippe Varin, chief executive, in a statement.