Standard & Poor, the ratings agency, has downgraded the credit rating of Toyota,
the Japanese auto maker, from ‘AA’ to ‘AA-’. Weak profitability and higher
gasoline and raw material prices have been cited as the reason for the new
rating. In April last year, the ratings agency Moody's downgraded Toyota to Aa2,
the third-highest on a scale of 19, citing similar reasons.
Toyota has faced numerous problems with its vehicles in the last year. Generally
well regarded for the safety of their cars, Toyota had to recall nearly nine million
cars between late 2009 and February 2010 because of brake and accelerator
defects. The defects are purported to have caused dozens of deaths. Toyota has
recalled as many as 16 million vehicle till January 2011, globally. The crisis has
hit Toyota’s reputation.
Toyota became the world’s largest auto maker in 2008 ahead of General Motors.
But its operating income has dropped by 48% year-on-year to 99 billion yen.
Falling sales is the major reason for the drop. A strong yen has also contributed
to increasing cost of exports and eroding profits. Toyota and its peers in Japan
have come out of the economic crisis but the car market may still be in trouble as
the government subsidy for new environment friendly cars ended in September
2010. Toyota, however, has been optimistic about its performance. It has revised
its annual net forecast upwards from 350 billion yen to 490 billion yen.
Despite the rating downgrade, S&P has mentioned that Toyota’s credit outlook is
stable and is expected to recover its profitability. According to S&P, Toyota has
a very low financial risk profile and strong capital structure. S&P also noted that
Toyota had "exceptional liquidity" that gave it a " strong capacity" to meet its
commitments.
the Japanese auto maker, from ‘AA’ to ‘AA-’. Weak profitability and higher
gasoline and raw material prices have been cited as the reason for the new
rating. In April last year, the ratings agency Moody's downgraded Toyota to Aa2,
the third-highest on a scale of 19, citing similar reasons.
Toyota has faced numerous problems with its vehicles in the last year. Generally
well regarded for the safety of their cars, Toyota had to recall nearly nine million
cars between late 2009 and February 2010 because of brake and accelerator
defects. The defects are purported to have caused dozens of deaths. Toyota has
recalled as many as 16 million vehicle till January 2011, globally. The crisis has
hit Toyota’s reputation.
Toyota became the world’s largest auto maker in 2008 ahead of General Motors.
But its operating income has dropped by 48% year-on-year to 99 billion yen.
Falling sales is the major reason for the drop. A strong yen has also contributed
to increasing cost of exports and eroding profits. Toyota and its peers in Japan
have come out of the economic crisis but the car market may still be in trouble as
the government subsidy for new environment friendly cars ended in September
2010. Toyota, however, has been optimistic about its performance. It has revised
its annual net forecast upwards from 350 billion yen to 490 billion yen.
Despite the rating downgrade, S&P has mentioned that Toyota’s credit outlook is
stable and is expected to recover its profitability. According to S&P, Toyota has
a very low financial risk profile and strong capital structure. S&P also noted that
Toyota had "exceptional liquidity" that gave it a " strong capacity" to meet its
commitments.
