Moody's Cuts Toyota Credit Rating as GM Rises from the Ashes

Before you go, we thought you'd like these...
Before you go close icon
Toyota credit rating cut from Aa1 to Aa2Ratings agency Moody's cut Toyota's (TM) credit rating due to concerns about future profits. According toThe Wall Street Journal, the agency said it lowered its rating on the auto maker by one notch to Aa2, its third-highest rating, from Aa1 at the end of a review launched February after Toyota recalled close to nine million autos globally.

For a short while, it looked like Toyota might dodge some of the fallout of its recalls. It was fined only $16.4 million by the Transportation Dept., a pittance for the carmaker. The amount would have been much higher if not for statutory limits.

"Low Level of Profitability"


The Japanese car company gained back in March much of the U.S. market share it lost in February, thanks in part to aggressive incentives. Toyota's image has been damaged, according to several studies, but the damage could be temporary due to the strong reputation for quality that the world's No.1 carmaker has built over more than three decades in the U.S. market.

Moody's, however, sees something different in Toyota's future. "The rating action reflects the ongoing low level of profitability evident at Toyota, and which we expect to continue for an extended period," a Moody's vice-president, Tadashi Usui, said in an interview with the Journal. Toyota faces more than faltering sales. Liability suits could cost the company hundreds of millions of dollars.

As Toyota struggles to regain its footing, General Motors has done the improbable. It has already repaid the U.S. Treasury all of the nearly $7 billion in loans it received as it exited Chapter 11. And according to Reuters, CEO Ed Whitacre told reporters that he believes GM will do well enough to return the government's $50 billion equity stake in the company. In March, GM regained its spot as the No.1 car company in America, edging out Toyota and Ford (F).

Two years ago, Toyota appeared ready to take the crown as the U.S. car market-share leader, and GM was fighting for its life. The tables have quickly turned.
Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners