Cars and Drivers
When Toyota (TM) Has A Rating Cut, The Auto Business Really In Trouble
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Detroit is in real trouble. There has been some hope that the really healthy Japanese and European car companies could hold on to their credit ratings. Toyota (TM) has a bullet proof balance sheet compared with almost any other company in the world, leaving the firms in its own industry aside.
According to Reuters, Fitch Ratings on Wednesday downgraded Toyota’s long-term foreign and local debt ratings to AA from AAA, with a negative outlook, saying the company needed to review its global investments, product mix and speed of expansion to address the challenges it faces.
The news may be worse for Detroit than it seems at first. Toyota has been seen as a possible buyer of divisions or assets from GM (GM), Ford (F), or Chrysler. Raising the money to do that just got a bit more difficult.
Detroit has fewer and fewer options as the cash balances of the US car companies head to zero. A purchase of all of part of an American auto firm would allow a number of jobs to be saved, dealers to stay in business, and warranties to be honored.
The Toyota downgrade is bad for The Big Three.
Douglas A. McIntyre
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