At the end of last year we reviewed Moody’s decision to downgrade Ford to ‘junk’ status here , but in the current crisis it is not surprising to hear that the wider industry is coming under increased pressure. With that pressure, naturally, comes to the threat of being downgraded by the leading credit rating agencies. As the downgrade wave turns its attention to the automotive sector, we will review these credit actions and also how the industry is attempting to recover. Although Ford’s downgrade came before the onset of the COVID-19 pandemic, a number of other automotive manufacturers were in a precarious position with regards to their credit status. Like a number of other prospective so-called ‘ fallen angels ’ – a term used to describe the bonds of an entity that were once investment-grade but that have now fallen past that category – there are, and were a number of very recognisable companies that are teetering on the edge of investment grade. Credit analysts have been wa

A number of developments regarding stories that we have been covering for quite a while here in Financial Regulation Matters have taken place recently, so in this post we will look at some updates on each one to see how the issues are developing. Fiat-Chrysler Finally Merge with PSA Peugeot We last looked at developments within the automotive industry in September with the credit downgrade of Ford , but one of the underlying sentiments within the industry has been that companies may, or will need to merge in order to survive their environment. Tougher regulations, increased costs, potentially saturated marketplaces, the need to keep up with technological advancement, and inconsistent and unpredictable economic and social arenas are making the job of manufacturing and selling cars much harder. The three largest automotive players are Toyota, Volkswagen, and the Renault-Nissan alliance. Now, the fourth largest is this new PSA-Fiat Chrysler merged partnership which, according

Earlier this week it was announced that Moody’s had downgraded Ford’s credit rating to Ba1, the highest rating level within Moody’s’ so-called ‘junk’ category, or in other terms its classification of non-investment grade. There are a number of factors to consider, however, in analysing the situation above and beyond the obviously negative headlines that have accompanied this rating action. Moody’s have been the first of the Big Three credit rating agencies to downgrade Ford into this non-investment grade classification, with S&P and Fitch maintaining Ford’s credit rating at two rungs above non-investment grade. In the title to this post, the question is asked of whether there are testing times for the automotive industry currently and, in providing their reasoning for the downgrading of Ford’s credit rating, Moody’s appear to believe that this is not the case: ‘ The erosion in Ford’s performance has occurred during a period in which global automotive conditions have been fai

We have covered the automotive industry on a number of occasions here in Financial Regulation Matters , ranging from posts on emissions-related scandals and issues with the leadership of some of the industry’s largest companies (via Oluwarotimi Adeniyi-Akintola ) to the increased focus on the electrification of the industry . In today’s post however, we shall focus on the current state of the British automotive industry and examine whether the current issues impacting the industry are related to Brexit, as most of the press suggests, or to deeper-rooted issues that may fundamentally affect the future of the industry in the UK. The subject of the auto industry in the post-Brexit era is a complex one. There are materials that are available, and indeed incredibly useful, in order to gain a solid understanding of the issues – see the excellent Keeping the Wheels on the Road: UK Auto Post-Brexit developed by Prof. David Bailey @dgbailey and others as part of the Bite-Sized Brexit