moody’s downgrades peugeot’s debt rating
Last Updated : GMT 06:41:18
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Moody’s downgrades Peugeot’s debt rating

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Arab Today, arab today Moody’s downgrades Peugeot’s debt rating

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PSA Peugeot Citroen had its debt rating cut to junk by Moody’s, which said a proposed alliance with General Motors would not solve the French carmaker’s problems, echoing investor concerns about the deal. Credit rating agency Moody’s Investors Service lowered Peugeot’s debt rating one notch to Ba1, the highest “speculative” grade. The agency said the GM alliance would actually weigh on earnings in the short term -and might not yield the savings expected later. “Mergers and alliances in the automotive industry have often not resulted in the anticipated competitive advantage and improved performance,” it said. Peugeot said the scope of the downgrade had been contained by additional cost-cutting measures announced last month. “We were expecting it,” a spokesman said. Moody’s action put more pressure on Peugeot’s shares, which had opened lower after on Wednesday’s announcement of the GM partnership and a 1 billion euro ($1.34 billion) capital increase. The were down as much as 7.7 per cent immediately after the downgrade and 4.9 per cent lower at 1532 GMT. Analysts too were sceptical about the benefits of Peugeot’s partnership with Detroit-based GM, saying it did nothing to tackle excess European production capacity. “The alliance leaves the main issue for both partners unsolved,” said Thomas Besson, a London-based analyst with Bank of America Merrill Lynch. Peugeot and GM’s Opel division need to address their “imperative need to execute a large restructuring in Europe, in a complicated political context”, Besson said in a note to clients. Under the plan, GM will take a 7 per cent stake in Peugeot as part of a global alliance targeting synergies eventually reaching $2 billion annually. The two automakers will share purchasing and new vehicle platforms, starting with a new generation of subcompacts and mid-sized cars to be introduced from 2016. The companies said the partnership would have “no impact” on European plants -estimated by analysts to be blighted by excess capacity of about 25 per cent. In its own statement on Wednesday, the French government underlined that the GM-Peugeot plan included no joint production.

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