Vw widens its auto financing advantage in Europe

Article by Andrew Christian, on October 12, 2012

Moody's Investors Service lowered the debt ratings on Fiat and PSA/Peugeot-Citroen to six levels below Volkswagen, enabling the region's biggest carmaker to widen its auto financing advantage in Europe. Moody's reduced both Fiat and PSA one level to Ba3 from Ba2. The ratings service gives VW a rating of A3 and offers a "negative" outlook on the Italian and French companies.

In addition, Moody's said that PSA's financing arm, Banque PSA Finance, is currently being reviewed for a downgrade. Because of VW's financing edge, it can offer better deals to dealers and consumers. The ACEA trade group said that VW’s share in Europe through August increased to 25% from 23.2%. On the other hand, Fiat and PSA's shares narrowed.

Moody's said that its downgrades have an impact on around 14.9 billion euros ($19 billion) of debt, which includes about 9.3 billion euros from Fiat debt and 5.6 billion euros from PSA. Moody's said that PSA's efforts to support its finances would probably not be enough with the demand of vehicles in western Europe poised to drop by 3% next year while pricing pressure rises.

Moody's analyst Falk Frey said that Fiat struggles due to weakening domestic market. It also lacks access to funds held by its Chrysler unit to offset cash drain in Europe. According to Fiat CEO Sergio Marchionne last Wednesday, the downgrade is not a reflection of Fiat's financial conditions globally.

They stress an issue that affects the whole industry, not only Fiat. PSA and Fiat were affected by the debt crisis in Europe. The demand in the region for vehicles is expected to drop to a 17-year low in 2012. PSA and Fiat depend on their home region for majority of sales and they don’t have significant operations in other countries to minimize the impact.

If you liked the article, share on:

Comments

Login or Create new account to add a comment!

You may also be interested

Iti mai recomandam

The process of building a car is a long and tedious task especially for luxury lines. Cars such as Rolls-Royce are known to have been meticulously and painstakingly made compared...
by - July 24, 2016
One of BMW’s most celebrated vehicles is the BMW 3 Series, a compact executive car that has been in the market since 1975. There have been six generations of the...
by - July 22, 2016
This generation of cars have been more like a clash of super powers. Various automakers have been working on developing some of the most powerful cars to compete with the...
by - July 17, 2016
Exactly 50 years after Ford’s first win at the 24 Hours of Le Mans, it has once again bagged the win in this year’s competition. At the 20th hour of...
by - July 15, 2016
Rolls-Royce introduced in London, a vision vehicle that epitomizes the future of bespoke automotive luxury – the new Rolls-Royce Vision Next 100. This new vision vehicle is a personification of...
by - July 12, 2016