Moody’s Downgrades Peugeot to Ba3 image

Recently Moody’s Investors Service downgraded Peugeot’s ratings from Ba2 to Ba3, concluding the review started on July 26th.

The agency’s negative ratings are the result of the restructuring plan PSA Peugeot Citroen has chosen to reduce costs amid the European crisis. To improve its operating performance and competitive positioning, PSA has chosen several measures such as launching new products, a 1 billion euro reduction plan, and now the automaker plans a capital increase of 1.1 billion euro and asset disposals to improve its balance sheet.

“Today’s rating action reflects the significant challenges facing PSA to successfully restructure and turn around the operating performance of its automotive operations, including achieving the targeted break-even operating cash flow by 2014,’ said Falk Frey, a Moody’s Senior Vice President and lead analyst for PSA.

He added that even if the automaker manages to implement all these measures in time, it will still affect the company’s metrics even more than the existing rating category for the next couple of years. These challenges are increased by the difficult position PSA has to face amid the European markets, affected by a decrease in auto demand and increasing prices. To be able to stabilize its operations PSA will need to make a bigger reduction than the planned 300,000 units at Aulnay and Rennes, according to Moody.