S&P Assigns Pi Ratings to Japanese Automakers
1 December 1997
S&P Assigns Pi Ratings to Japanese Automakers
TOKYO, Dec. 1 -- Standard & Poor's today assigned ratings
based on public information, or 'pi' ratings, to Japanese automotive producers
Mitsubishi Motors Corp. and Suzuki Motor Corp. At the same time, Standard &
Poor's affirmed the existing ratings on Toyota Motor Corp., Nissan Motor Co.
Ltd., and Honda Motor Co. Ltd. (see rationales and ratings below).
Standard & Poor's views the credit profile of the Japanese automotive
industry as "slightly above average," reflecting its high productivity,
economies of scale in production, market diversity, and superb technology.
Limiting factors include mature demand in the Japanese market, intensifying
competition in overseas markets, and vulnerability to foreign exchange
fluctuations. Differentiation in the assigned ratings, which range from 'AAA'
to 'BBB', reflects variations in the automakers' competitive positions in
major markets and financial profiles.
The ratings take into account softening demand in the Japanese auto
market, where total sales began to decline from this April. For the fiscal
year ending March 31, 1998, total auto sales, excluding sales of minicars, are
expected to decrease to 4.9 million to 5 million units. Success in the short
term amid this difficult operating environment will hinge on product strategy
and the financial strength to withstand ongoing price pressures. Currency
devaluations in Southeast Asia and the resulting economic turmoil has cast a
shadow on Japanese auto and motorcycle producers, which have a significant
presence in the region. On the other hand, Japanese automakers benefit from
robust export sales thanks to the recent depreciation of the yen. Overall
gains in market share in North America and Europe, however, have been limited.
How each industry participant tackles its problems in these major markets will
be a significant determinant of future credit quality.
Mitsubishi Motors Corp.
New: Corporate credit rating: Local currency BBBpi
The rating reflects Mitsubishi Motor Corp.'s position as one of Japan's
largest automotive manufacturers, its well-diversified product portfolio in
passenger and commercial vehicles, and its affiliation with the Mitsubishi
group. The rating also reflects the company's aggressive debt usage and heavy
planned capital spending. Concerns exist over the company's weakening
competitiveness in the sport-utility segment, which has led to significant
declines in domestic share over the past year. The company's substantial
exposure to the Thai automotive market, where production and sales have
recently declined drastically amid the country's economic turmoil, will hurt
profitability in the near term. The company's already aggressive level of net
debt leverage, at approximately 76.%, is expected to rise by the end of fiscal
1997 (ending March 31, 1998).
Suzuki Motor Corp.
New: Corporate credit rating: Local currency Api
The rating reflects Suzuki Motor Corp.'s conservative financial profile,
with very low debt leverage, its leading market position in Japan's unique
minicar market, and its position as the world's third-largest producer of
motorcycles. Suzuki has maintained a solid position in the Japanese minicar
market for two decades, thanks to a low cost structure and a strong
distributor network, though this position is vulnerable to future changes in
regulatory standards. Capital needs are expected to remain high owing to
investments overseas and the next revision of minicar regulatory
specifications in 1998. Stable and adequate cash flow, however, should
mitigate the impact on capital structure. Suzuki will likely be able to
maintain its very conservative debt leverage, at 28% after netting cash
equivalents, over the near term, Standard & Poor's said. - CreditWire.
RATINGS AFFIRMED
Honda Motor Co., Ltd.
Corporate credit rating A-/Positive/A-2
Commercial Paper A-2
American Honda Finance Corp.
Corporate credit rating A-/Positive/A-2
Commercial Paper A-2
Senior unsecured A-
American Honda Motor Co. Inc.
Corporate credit rating --/--/A-2
Commercial Paper A-2
Honda Finance Europe PLC
Corporate credit rating A-2
Commercial Paper A-2
Nissan Motor Co. Ltd.
Corporate credit rating BBB/Negtive/A-2
Commercial Paper A-2
Senior unsecured BBB
Nissan Motor Acceptance Corp.
Corporate credit rating BBB/Negative/--
Senior unsecured BBB
Nissan International Finance (Netherlands) B.V.
Corporate credit rating BBB/Negative/A-2
Commercial Paper A-2
Senior unsecured BBB
Nissan Motor Corp. of USA
Corporate credit rating BBB/Negative/A-2
Commercial Paper A-2
Senior unsecured BBB
Nissan Capital of America Inc.
Corporate credit rating BBB/Negative/A-2
Commercial Paper A-2
Senior unsecured BBB
Toyota Motor Corp.
Corporate credit rating AAA/Stable/A-1+
Commercial Paper A-1+
Senior unsecured AAA
Toyota Motor Sales USA Inc.
Corporate credit rating AAA/Stable/A-1+
Commercial Paper A-1+
Senior unsecured AAA
Toyota Motor Credit Corp.
Corporate credit rating AAA/Stable/A-1+
Commercial Paper A-1+
Senior unsecured AAA
Toyota Motor Finance (Netherlands) B.V.
Corporate credit rating AAA/Stable/A-1+
Commercial Paper A-1+
Senior unsecured AAA
Toyota Deutschland GmbH
Commercial Paper A-1+
SOURCE Standard & Poor's CreditWire