Toyota credit rating cut for the first time in a decade

Posted by: Ian Rowley on November 26, 2008

It’s not then end of the world, but Fitch Ratings decision today to cut Toyota’s AAA credit rating back to AA is yet more bad news for Japan’s number one carmaker. The downgrade, Toyota’s first in a decade, leaves only five companies in the world with triple A ratings (Exxon Mobil and Johnson & Johnson in the U.S. and three French companies).

The move comes after Toyota said earlier this month that it will make hardly any profit during the six months that end in March and that its CEO Katsuaki Watanabe will chair an “Emergency Profit Improvement Committee.” Meanwhile, the Japanese yen, remains stuck at around 95 to the dollar, which is considerably higher than the 100 to the dollar most Japanese automakers are using in their profit projections. In Tokyo trading, Toyota’s stock slipped 4.6%.

Some analysts said the Fitch’s ratings cut was unnecessarily harsh. Other rating agencies have so far spared Toyota a downgrade. Moody’s hasn’t trimmed Toyota since 1998, a decision it reversed in 2003, and Standard & Poor’s, which like BusinessWeek is owned McGraw-Hill, hasn’t cut Toyota since 1985. Of course, it’s difficult to go overboard given the woes surrounding the Detroit Three, but 2008, which should see the Japanese automaker finally usurp GM as the world’s biggest automaker after 77-years, is giving Toyota little to celebrate.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

socrateos

November 26, 2008 02:38 PM

Credit rating systems have completely lost their validity.

They are the ones who blinded American people from seeing the current economic mess by acting as if they had some esoteric knowledge where they had none. And yet we have not heard yet what was wrong with their systems.

I, for one, certainly have more confidence in Toyota than in Fitch Ratings or in any other credit rating system.

Intellexus Institute

November 26, 2008 08:03 PM

Such a down-grading may give Toyota some breathing room in the midst of Detroit Three's survival game, which put Toyota in a hot spot as to potentially assume its rescuer's role, cf. Microsoft vs. Apple.
Be that it may, Toyota would still pursue its Japanese "ninja" like diplomacy by keeping a low key presence in the auto world.

edmund

November 27, 2008 03:38 AM

I completely agree with Socrateos

PB

December 1, 2008 04:05 PM

Read " Hot Flat & Crowded" Develop American power- nuclear, wind, solar, geothermal, tidal. Clean energy alternatives to fossil fuels can lead this nation into a new global economy, lead by the United State of America. If we don't do it as a leader, we will surely be doing it as a follower. Now is the time to seize the opportunity to energy independence from foreign oil. Stop giving money to the nations that are supplying the world with terrorists.

Wealth Builder

December 1, 2008 08:23 PM

It's a shame that the smartest economice minds in the world just realized today we're in a recession. People should really began to recession proof their lives by visiting www.fdirep.com/kboone or dialing 443-226-1248 and asking for Kirk Boone. Mr. Boone is a expert in the field of helping people with little to no money create a tremendous amout of wealth. Mr. boone has the best wealth creation program that I've ever seen. I hope this was helpful.

Post a comment

 

About

Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

BW Mall - Sponsored Links

Buy a link now!