European automakers face lingering threats to liquidity, particularly through car-loan businesses that consume large amounts of cash, Fitch Ratings Ltd. said.
Refinancing risk for Volkswagen AG, PSA Peugeot Citroen, Renault SA, Fiat SpA and Daimler AG "is expected to remain generally high due to manufacturers' continuous funding needs" and heightened caution among lenders, the credit-rating company said in a report today. The carmakers have adequate cash and credit facilities in place to cover projected losses in the "near term," Fitch said.
The collapse of vehicle sales in Europe has drained carmakers' cash, while the liquidity crisis has compounded the problem by raising financing costs as credit ratings deteriorate. Renault's long-term corporate credit rating was cut to junk by Standard & Poor's on June 19.
The manufacturers recorded combined negative cash flow of 16.8 billion euros in 2008, widening from a gap of 600 million euros a year earlier, Fitch said.
In a sign of improvement, "bond issuance has rebounded significantly for the auto sector since the start of 2009, and virtually all manufacturers have accessed the bond market," Fitch added.
