Fitch Ratings on Wednesday downgraded Toyota Motor Corp. by two notches, warning that in the current slump even the strongest carmaker no longer deserved its top rating.
Fitch lowered its long-term debt rating on Toyota to AA from AAA.
“Toyota is suffering severely from the ongoing turmoil in the global automotive sector,” said Fitch director Tatsuya Mizuno.
“Multiple negative developments, including the rapid and significant appreciation of the yen, the concurrent downturn in all major auto markets and high raw material costs, have occurred simultaneously and are impacting earnings and cash flow, even for the strongest players in the sector.
“The negative developments in the industry are so substantial and fundamental, that even the strongest player — Toyota — can no longer support a 'AAA' rating,” he added.
Toyota had enjoyed record sales and profits in recent years, helped by a weak yen and brisk demand for its vehicles, particularly in the United States.
But analysts said its rapid expansion left it vulnerable during the financial crisis, which is putting people off buying cars.
Earlier this month Toyota said it expects annual profits to plunge more than two-thirds in the current financial year to hit the lowest level in nine years.
Toyota, however, is still in better shape than its US rivals such as General Motors and Ford, which are fighting to avoid bankruptcy.
Japan's biggest automaker would need “to review its strategic focus in areas such as its geographic spread of investments, its product mix and its speed of expansion,” Mizuno said.
“This will prove to be a challenging process and will take a relatively long period of time,” he said.
