Moody’s Investors Service downgraded PSA Peugeot Citroen to four levels below investment grade.
Moody’s downgraded Peugeot’s rating to B1 from Ba3, according to Falk Frey, a Frankfurt-based analyst at Moody’s, saying that debt will not be reduced again any time soon. Peugeot, which is the second largest automaker in Europe, is cutting jobs and closing a plant in France to end losses in the European market, which heads towards its sixth consecutive year of decline.
“Unless western European market demand recovers strongly in 2014 from anticipated 2013 levels, PSA may be forced to undertake further cost-saving measures beyond the announced restructuring plan,” Frey said.
In February, CEO Philippe Varin promised to bring the automaker on a break-even level until the end of 2014 by cutting costs and a new strategy which implies moving the Peugeot brand upscale. The restructuring plan includes cutting 11,200 jobs in France, which is 17% of the company’s workforce in the region, and closing a plant near Paris.
Last year the French government offered guarantees of 7 billion euro to save Peugeot’s banking unit. The proposal is currently reviewed by the European Union, which has already approved a 1.2 billion-euro debt sale for the French banking.