Global ratings agency Moody’s yesterday downgraded beleaguered automaker Toyota because of uncertainty over “product quality” following mass recalls.
The move follows the recall of around 10 million vehicles worldwide owing to accelerator and brake defects and “reflects the ongoing low level of profitability evident at Toyota,” Moody’s said.
“Its [Toyota’s] product quality and recall challenges — largely centred in the US — have created significant uncertainty over whether it can maintain the pricing power it has historically achieved over its rivals,” said Tadashi Usui, a Moody’s senior analyst.
The agency downgraded Toyota and its subsidiaries to a negative outlook and a rating of Aa2, the third-highest on a scale of 19, meaning that while its capacity to repay debt had weakened it remained very strong.
However, profitability was expected to be hit in coming years by “litigation costs associated with the recall,” Usui said.
Combined with an expected sluggish recovery in auto sales this year, costs associated with the recalls created a risk that Toyota’s operating profit will be below “that appropriate for its rating level until 2012 at the earliest and possibly beyond,” he said.
Moody’s said the downgrade announcement concluded a review that began in February.
It added, however, that it expects Toyota to remain the world’s leading automaker in coming years with a debt-capital ratio of 17 percent and large cash reserves as of the end of last year.
Toyota, meanwhile, tumbled from third to 360th on the annual Forbes list of the world’s leading companies.
The carmaker trailed far behind rivals Ford, Honda and Hyundai in this year’s listing, which ranks 2,000 of the world’s best corporate performers based on an equal weighting of sales, profits, assets and market value.
Toyota ranked third last year and 10th five years ago.
US carmakers General Motors and Chrysler, which are currently turning around their businesses after filing for bankruptcy protection last year, were absent from the list.
Germany’s Daimler was ranked 388th and Volkswagen dropped off the list due to the complexity surrounding last year’s merger with Porsche.
Taiwan’s Lee Chia-hao (李佳豪) on Sunday won a silver medal at the All England Open Badminton Championships in Birmingham, England, a career best. Lee, 25, took silver in the final of the men’s singles against world No. 1 Shi Yuqi (石宇奇) of China, who won 21-17, 21-19 in a tough match that lasted 51 minutes. After the match, the Taiwanese player, who ranks No. 22 in the world, said it felt unreal to be challenging an opponent of Shi’s caliber. “I had to be in peak form, and constantly switch my rhythm and tactics in order to score points effectively,” he said. Lee got
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