MILAN Jan 7 Moody's placed the Ba3 rating of
Fiat under review for a possible downgrade on Tuesday
to reflect the impact on the Italian car maker's cash position
of its plans to take full control of Chrysler Group LLC.
"The announced acquisition will materially weaken Fiat's
liquidity position at a time when the company is still free cash
flow negative," credit ratings agency Moody's senior vice
president and lead Fiat analyst Falk Frey said in a statement.
On Jan. 1 Fiat struck a $4.35 billion deal to buy the 41.46
percent stake in Chrysler it does not already own from a retiree
healthcare trust affiliated with the United Auto Workers union.
The deal, which is expected to close on or before Jan. 20,
will facilitate further integration of the financial and
operating strategies of the two car groups, Moody's said.
With European car sales suffering, Chrysler is a source of
profit for Fiat but the two companies currently are forced to
manage their finances separately.
But Moody's said Fiat's remaining cash, its unused credit
facilities and its operating cash flow should be enough to meet
its cash needs this year.
Fiat issued a statement saying Moody's had put its rating
under review for a possible downgrade. When called by Reuters, a
Fiat spokesman declined to comment further.
Moody's also said it would be looking at the impact of
rising challenges in Latin America on the Italian carmaker's
ability to generate cash.
Fiat's performance in Brazil, its most profitable foreign
market, has worsened considerably since 2011 due to increased
competition. "Fiat's ability to compensate for the sluggish
demand in Italy has diminished further," it said.
On Thursday Fitch Ratings said the deal to buy the Chrysler
stake had no immediate impact on Fiat's ratings, adding that a
full rating review would be conducted in early 2014.