Moody’s downgrades PSA Peugeot Citroen image

Moody’s Investor Services Thursday lowered Peugeot’s rating by one notch to Ba1, the highest so-called “speculative” grade, a day after the French automaker announced a 1 billion euro ($1.34 billion) share issue and an alliance with U.S. peer General Motors.

Peugeot’s performance continues to be highly reliant on several European markets, such as France, Spain and Italy. In these markets PSA is facing considerable challenges due to declining demand leading to intensifying price pressure in its key product segments, such as the A and B segments for small cars like the Peugeot 107 and 207, and with parts of its model range still to be renewed.

Moody’s anticipates this environment to worsen with regard to a declining European light vehicle market in 2012.

“While we expect light vehicle sales in Western Europe to shrink by 6% in 2012, we anticipate two of PSA’s key markets, France and Italy, are to decline more than the overall European demand i.e. by 10% and 7% respectively.
We currently anticipate a recovery in Western European light vehicle sales in 2013 with an annual growth of 3%.”

In a deal announced on Wednesday, GM will take a 7 percent stake in Peugeot, Europe’s second-biggest automaker.

The alliance will include pooled purchasing and research and development, as well as building vehicles on shared platforms to bring down costs, the companies said. GM and Peugeot will continue to separately market and sell their vehicles.