S&P downgrades Toyota’s long-term debt rating to AA-

Article by Christian A., on March 9, 2011

Citing weak profitability, Standard & Poor's Ratings Services cut Toyota Motor Corp.’s long-term debt rating by one step. The ratings agency announced that from "AA," the rating has been reduced to "AA-," the fourth-highest investment grade. S&P said that the outlook on the debt is "stable." Meanwhile, Moody's Investors gives Toyota's debt an "Aa2" rating, the third-highest investment grade.

S&P said that this downgrade was made because the agency thinks that it isn’t likely that Toyota will recover in the next one to two years to a level that could be considered appropriate for the rating. In the quarter ended Dec. 31, Toyota's profit dropped 39% to 93.63 billion yen ($1.1 billion).

Toyota recalled 8 million cars for repairs related to sudden unintended acceleration in the past year, says Autonews. And just last week, it issued the recall of 2.2 million vehicles.

Kayo Miyata, a Tokyo-based spokeswoman for Toyota, said that S&P's downgrade is “very regrettable.” He added that Toyota prioritizes customers' trust and that the management will “make the greatest effort” for this rating to be raised.

In February, Toyota raised its full-year profit forecast by 40%, as it expects net income to more than double to 490 billion yen for the 12 months ending March 31.

And as the global auto industry continues to recover from the economic crisis, Toyota followed Honda Motor Co. in raising its earnings estimates.

In a statement, S&P said that aside from its weak profitability, Toyota’s pace of recovery is slower than those of other Japanese carmakers, and its profitability may continue to be pressured by higher raw material prices, gasoline prices, and the strong yen.

Topics: toyota

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