Fiat Credit Rating Goes Down Because Of Chrysler Group

Story first appeared in USA TODAY.
Ratings agency Moody's downgraded the credit rating of Fiat today, saying it did it primarily because of risks associated with Fiats closer combination with Chrysler Group.
Fiat holds a 53.5% of Chrysler and has said it will get 5% more by year-end -- a chunk due from the U.S. government when it meets the final bankruptcy deal goal of building a high-mileage small car in the U.S.
Moody's said increased integration of the companies likely means they'd have to prop each other up if things go south, even though Fiat, under the terms of the takeover, is not on the hook for Chrysler's debts. Moody's expects "that the creditworthiness of Fiat and Chrysler will become more closely aligned over time as the strategy and operations of the two groups becomes progressively more intertwined," including sharing vehicle platforms and powertrains, Moody's lead Fiat analyst Falk Frey told the Associated Press.
In the arcane heirarchy of debt ratings, Moody's cut Fiat from Ba2 to Ba1. The real-world impact is that Fiat will have to pay more for loans. Chrysler already is lower, at B2.
While the rating reflects the risks still inherent in Chrysler's comeback, it also seems to reflect caution about Fiat's financial muscle to handle adverse events at one or both operations.
Fiat has lost money in Europe, where the financial mess, especially as it affects Fiat's home market in Italy, has hurt sales. And Moody's says that Fiat's loss in Europe share is due in part to a slower pace of new models than rivals, a pace CEO Sergio Marchionne said at the Frankfurt show last week may slow further because of Europe's woes. Moody's also cites increased competition in Brazil, Fiat's most profitable market.
Marchionne also at Frankfurt that for now, an IPO for Chrysler is not possible because of market conditions.