PSA Peugeot Citroen's credit rating was cut one step to four levels below investment grade by Moody's Investors Service, which said a contraction in Europe's car market will put the auto manufacturer's plans to restore cash flow at risk.
The long-term rating on Peugeot's debt was lowered to B1 from Ba3, Falk Frey, Moody's lead analyst for Peugeot, said in a statement today.
The outlook is stable, he said. "Unless Western European market demand recovers strongly in 2014 from anticipated 2013 levels, PSA may be forced to undertake further cost-saving measures beyond the announced restructuring plan," Mr Frey said in the statement.
Fitch Ratings lowered Peugeot to four levels below investment grade in February, while Standard and Poor's Ratings Services has it at three levels lower. Peugeot, Europe's second- largest carmaker is struggling to end losses as the region's auto market sinks for a sixth straight year.
The shares traded up 0.2 percent at €5.87 as of 9.04 am in Paris.
The stock has gained 7.2 per cent this year, valuing the French automaker at €2.1 billion.
Peugeot, which reported a €576 million operating loss for 2012, is predicting a drop of 3 per cent to 5 per cent in Europe's auto market this year.
Chief executive officer Philippe Varin vowed on February 13 to put Paris-based Peugeot on a break-even level by end of 2014 through spending reductions and a new strategy that includes moving its Peugeot brand upscale.
Bloomberg