Frankfurt am Main, March 25, 2020 -- Moody's Investors Service, ("Moody's") has
today placed the ratings of 7 European Automotive manufacturers (collectively
"the companies") on review for downgrade. This includes
the following issuers: Daimler AG (Daimler), Jaguar Land Rover
Automotive Plc (JLR), Peugeot S.A. (PSA), Renault
S.A. (Renault), Volkswagen Aktiengesellschaft (VW),
Volvo Car AB (Volvo Car), McLaren Holdings Limited (McLaren).
Moody's placed the ratings of Fiat Chrysler Automobiles N.V.
(FCA) on review with direction uncertain.
Concurrently, Moody's downgraded the long-term issuer
rating of Bayerische Motoren Werke Aktiengesellschaft (BMW) to A2 from
A1. The ratings are on review for further downgrade.
Full details of the rating actions for the affected entities can be found
at the end of this press release.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price
declines are creating a severe and extensive credit shock across many
sectors, regions and markets. The combined credit effects
of these developments are unprecedented. The auto sector (and issuers
within other sectors that relay on the auto sector) has been one of the
sectors most significantly affected by the shock given its sensitivity
to consumer demand and sentiment. More specifically, the
weaknesses in the companies' credit profiles, including their
exposure to final consumer demand for light vehicles have left them vulnerable
to shifts in market sentiment in these unprecedented operating conditions
and the companies remain vulnerable to the outbreak continuing to spread.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Today's action reflects the impact on the companies of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
The review with uncertain direction for FCA balances on the one hand the
challenges the entire auto industry is facing during the current crisis
and which is driving the review for downgrade of the other companies included
in this press release. On the other hand, we still believe
that the proposed merger with PSA will create a larger, more diversified
company and could hence result in a higher rating of the combined entity
compared to the stand alone rating of FCA today.
BMW's downgrade today was driven by its already weakly positioning
in the A1 ratings category ahead of the current market stress with financial
metrics already below our expectation for an A1 rating.
Notably, based on BMW's reported financials 2019 Moody's
estimates that the Moody's adjusted EBITA margin was approximately
5.8%, and Moody's adjusted Free Cash Flow around
€0.6 billion compared with and EBITA margin of 6.6%,
and a Moody's adjusted Free Cash Flow of €-0.5
billion in 2018. Thus both metrics remain well below what we would
consider commensurate for the A1 rating.
Given that the auto sector has been one of the sectors most significantly
affected by the shock as described above BMW's A2 and Prime-1
ratings are on review for downgrade.
WHAT COULD CHANGE THE RATING UP/DOWN.
Given the current market situation we do not anticipate any short term
positive rating pressure. A stabilization of the market situation
leading to a recovery in metrics to pre-outbreak levels could lead
to positive rating pressure. More specifically adjusted Debt/EBITDA
would have to drop back sustainably below 1x with an EBITA margin sustainably
above 8%.
Further negative pressure would build if BMW fails to return to meaningful
operating profit generation in the second half of 2020. A prolonged
and deeper slump in demand than currently anticipated leading to higher
demand in liquidity, a more balance sheet deterioration and a longer
path to restoring credit metrics in line with an A2 credit rating could
also lead to further negative pressure on the rating.
In its review for downgrade, Moody's considers that the demand for
new vehicles will be reduced meaningfully over the coming months,
especially in the EMEA and North American markets. This is likely
to extend through the early summer at least, with a reasonable recovery
from the low points commencing at that point. Moody's current
assumptions are that global demand will shrink by about 14% for
all of 2020, and could be down in the range of 30% for the
second quarter. Accelerating incidence of the coronavirus across
the US and EMEA could lead to even more extended production shutdowns
and a much delayed recovery on unit sales. Production facilities
in Europe and North America are mostly closed, as are the factories
for the extended supply chain. This should enable field inventories
of unsold vehicles to be somewhat restrained, but also leads to
potential for meaningful disruption even once new vehicle production starts
back up unless the OEMs and the extended supply chain cooperate carefully.
Even without production for a couple months, there will be an overhang
of inventory which could lead to considerable manufacturer incentives
before the new model year shipments. For now, Moody's assumes
a reasonable pace of recovery of demand as the third quarter develops,
however the risk to the downside is considerable and further downside
scenarios around the severity and duration of the pandemic are uncertain.
The review for downgrade for all affected issuers will consider (i) the
outbreak's impact on the manufacturing operations of the European
automotive manufacturers listed herein, as these issuers largely
have global operations. Most automotive manufacturers have already
temporarily closed facilities in order to ensure the safety of their employees.
The review will assess the impact from facility closures and global automotive
production declines these issuers are experiencing and will experience
in the coming quarters. The review will also consider (ii) the
lingering impact of diminished consumer demand resulting from consumer
concerns over contracting coronavirus, and regional government policies
restricting consumer movement over coming quarters; (iii) the companie's
liquidity profiles and the resilience in our various stress scenarios
including the inability to refinance debt maturities in the capital markets;
(iv) the impact of governmental action to support corporates and consumers
in the companies' main markets, as well as (v) the impact
of potential self-help measures of the individual issuers.
Moody's expects to solve the review process within the next three
months.
In addition to the disruption from the outbreak of the coronavirus,
Moody's also recognizes a number of longer-term challenges related
to Environmental, Social and Governance factors and megatrends in
the automotive industry, such as (1) increasing environmental standards,
stricter emissions regulation and electrification, (2) autonomous
driving and connectivity, (3) increasing vehicle safety regulations
as well as (4) new market entrants. We expect automakers to require
sizeable investments over the coming years to weather these challenges.
These investments into R&D and capex will make it harder for these
companies to support a turnaround in profit and cash flow generation as
we believe they are required to protect their business in the long-term.
While we believe its roadmap to become compliant with stricter emissions
regulation in Europe is largely achievable, compliance costs have
materially increased and success of the roadmap hinges to some degree
on consumer acceptance and pricing policies of peers that are not in the
control of automakers.
LIST OF AFFECTED RATINGS:
..Issuer: Bayerische Motoren Werke Aktiengesellschaft
Downgrades and Placed On Review for further Downgrade:
.... LT Issuer Rating, Downgraded to
A2 from A1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)A2 from (P)A1
On Review for Downgrade:
....Commercial Paper , currently P-1
....Other Short Term, currently (P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW Australia Finance Ltd.
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Downgraded to (P)A2 from (P)A1
On Review for Downgrade:
....BACKED Other Short Term, currently
(P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW Canada Inc.
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW Finance N.V.
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Downgraded to (P)A2 from (P)A1
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to A3 from A2
Placed On Review for Downgrade:
....BACKED Commercial Paper, currently
P-1
....BACKED Other Short Term, currently
(P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW International Investment B.V.
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Downgraded to (P)A2 from (P)A1
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
Placed On Review for Downgrade:
....BACKED Commercial Paper, currently
P-1
....BACKED Other Short Term, currently
(P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW Japan Finance Corp.
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Downgraded to (P)A2 from (P)A1
Placed On Review for Downgrade:
....BACKED Other Short Term, currently
(P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BMW US Capital, LLC
Downgrades and Placed On Review for further Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, Downgraded to (P)A2 from (P)A1
....BACKED Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
Placed On Review for Downgrade:
....BACKED Commercial Paper, currently
P-1
....BACKED Other Short Term, currently
(P)P-1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Daimler AG
Placed On Review for Downgrade:
.... LT Issuer Rating, currently A3
....Senior Unsecured Medium-Term Note
Program, currently (P)A3
....Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Daimler Canada Finance Inc.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Daimler Finance North America LLC
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
....Senior Unsecured Regular Bond/Debenture,
currently A3
....BACKED Senior Unsecured Shelf, currently
(P)A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Daimler International Finance B.V.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: DaimlerChrysler Company LLC
Placed On Review for Downgrade:
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Mercedes-Benz Australia/Pacific Pty.
Ltd
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Mercedes-Benz Finance Co.,
Ltd.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Mercedes-Benz Japan Co.,
Ltd.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Mercedes-Benz South Africa Limited
Affirmations:
....NSR BACKED Senior Unsecured Medium-Term
Note Program, Affirmed Aaa.za
....NSR BACKED Other Short Term, Affirmed
P-1.za
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Volkswagen Aktiengesellschaft
Placed On Review for Downgrade:
.... LT Issuer Rating, currently A3
....Senior Unsecured Medium-Term Note
Program, currently (P)A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Volkswagen Group of America Finance,
LLC
Placed On Review for Downgrade:
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Volkswagen International Finance N.V.
Placed On Review for Downgrade:
....BACKED Junior Subordinate Regular Bond/Debenture,
currently Baa2
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: VW Credit Canada, Inc.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: VW Credit, Inc.
Placed On Review for Downgrade:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)A3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: GIE PSA Tresorerie
Placed On Review for Downgrade:
....Commercial Paper, currently P-3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently Baa3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Peugeot S.A.
Placed On Review for Downgrade:
.... LT Issuer Rating, currently Baa3
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)Baa3
....BACKED Senior Unsecured Regular Bond/Debenture,
currently Baa3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Volvo Car AB
Placed On Review for Downgrade:
.... LT Corporate Family Rating, currently
Ba1
.... Probability of Default Rating,
currently Ba1-PD
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)Ba1
....BACKED Senior Unsecured Regular Bond/Debenture,
currently Ba1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Renault S.A.
Placed On Review for Downgrade:
.... LT Corporate Family Rating, currently
Ba1
.... Probability of Default Rating,
currently Ba1-PD
....Senior Unsecured Medium-Term Note
Program, currently (P)Ba1
....Senior Unsecured Regular Bond/Debenture,
currently Ba1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Fiat Chrysler Automobiles N.V.
Placed On Review Direction Uncertain:
.... LT Corporate Family Rating, currently
Ba1
.... Probability of Default Rating,
currently Ba1-PD
....Senior Unsecured Shelf, currently
(P)Ba2
....Senior Unsecured Medium-Term Note
Program, currently (P)Ba2
....Senior Unsecured Regular Bond/Debenture,
currently Ba2
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Positive
..Issuer: Fiat Chrysler Finance Europe SA
Placed On Review Direction Uncertain:
....BACKED Senior Unsecured Medium-Term
Note Program, currently (P)Ba2
....BACKED Senior Unsecured Regular Bond/Debenture,
currently Ba2
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Positive
..Issuer: Jaguar Land Rover Automotive Plc
Placed On Review for Downgrade:
.... LT Corporate Family Rating, currently
B1
.... Probability of Default Rating,
currently B1-PD
....Senior Unsecured Regular Bond/Debenture,
currently B1
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: McLaren Finance PLC
Placed On Review for Downgrade:
....BACKED Senior Secured Regular Bond/Debenture,
currently B3
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: McLaren Holdings Limited
Placed On Review for Downgrade:
.... LT Corporate Family Rating, currently
B3
.... Probability of Default Rating,
currently B3-PD
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Automobile Manufacturer
Industry published in June 2017. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1174796.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The person who approved Bayerische Motoren Werke Aktiengesellschaft,
BMW Australia Finance Ltd., BMW Canada Inc.,
BMW Finance N.V., BMW International Investment B.V.,
BMW Japan Finance Corp., BMW US Capital, LLC,
Daimler AG, Daimler Canada Finance Inc., Daimler Finance
North America LLC, Daimler International Finance B.V.,
DaimlerChrysler Company LLC, Mercedes-Benz Australia/Pacific
Pty. Ltd, Mercedes-Benz Finance Co.,
Ltd., Mercedes-Benz Japan Co., Ltd.,
Mercedes-Benz South Africa Limited, Volkswagen Aktiengesellschaft,
Volkswagen Group of America Finance, LLC, Volkswagen International
Finance N.V., VW Credit Canada, Inc.,
VW Credit, Inc., GIE PSA Tresorerie, Peugeot
S.A., Volvo Car AB, Renault S.A.,
Fiat Chrysler Automobiles N.V., Fiat Chrysler Finance
Europe SA credit ratings is Anke Rindermann, Associate Managing
Director, JOURNALISTS : 44 20 7772 5456,Client Service
: 44 20 7772 5454. The person who approved Jaguar Land Rover
Automotive Plc, McLaren Finance PLC, McLaren Holdings Limited
credit ratings is Peter Firth, Associate Managing Director,
JOURNALISTS : 44 20 7772 5456, Client Service: 44 20
7772 5454.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Falk Frey
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Rindermann
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
