LONDON -- Credit rating agency Moody's Investors Service said on Wednesday that European automakers face a tough year, with sales in Europe and North America, their key markets, forecast to be lower than in 2002.
It warned that, in the event of a prolonged military conflict with Iraq, this forecast may undergo a significant downward revision. "The expected continued downtrend in new car registrations in 2003 will be driven mainly by marginal GDP growth rates and weak consumer confidence," said Moody's analyst Falk Frey, author of a new report on the sector.
Moody's assigns several European automakers a negative outlook, among them Fiat, DaimlerChrysler and Volvo, based on expectations that European and North American markets will not see any growth before 2004.
Overall, Moody's said it expects European carmakers to experience only marginal internal growth and to face difficulties in remaining free-cash-flow-positive.
Moody's average rating for Europe's automotive industry is currently a weakly positioned A3, compared with a strong A3 24 months ago. This is due to Fiat's downgrade to "junk" in December and DaimlerChrysler's cut to to A3 with a negative outlook in September 2001.