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06 Sep 2022
New York, September 06, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 30 August 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for this review was Automobile Manufacturers published in May 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Business Profile: The business profile of an automobile manufacturer is considered because it can influence the ability to generate operating cash flows and the stability and sustainability of those flows. Core aspects of an automaker's business profile include changes in its market share, its competitive position within each market, the breadth and strength of its product offering, and its capacity to adapt to consumer, political and regulatory trends. Scoring for this factor is based on Trend in Global Unit Share Over Three Years, Market Position and Product Breadth/Strength.
Profitability and efficiency: Profits matter because they are needed to maintain a competitive position, which includes making sufficient reinvestments in marketing, research, facilities, and human capital. The ability to sustain high profitability is generally a strong indicator of operating efficiency and of substantial competitive advantages, particularly if combined with evidence of stable or rising market share. The EBITA margin is one indicator of profitability.
Leverage and Coverage: Leverage and coverage measures are indicators of the financial flexibility and long-term viability of a company, including its ability to adapt to changes in the economic and business environments in the segments in which it operates. Automakers typically require a strong cash position to mitigate the volatility that can occur in their cash flows. Economic downturns as well as company-specific circumstances that consume cash, such as the potential for high product development costs, product defects or recalls, or capital calls from a captive finance subsidiary, make financial flexibility important. Among others, ratios such as Debt/ EBITDA, Cash plus Marketable Securities/ Debt, Free Cash Flow/ Debt, and EBITA/ Interest Expense are indicators of leverage and coverage.
Financial Policy: Management and board tolerance for financial risk is considered because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is also considered as an aspect of overall risk management and can provide insight into risk tolerance.
Other Factors: Other factors may include, but are not limited to, financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on https://ratings.moodys.com for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
List of Issuers/Rated Entities
• Aston Martin Lagonda Global Holdings plc
• Bayerische Motoren Werke Aktiengesellschaft
• Jaguar Land Rover Automotive Plc
• McLaren Holdings Limited
• Mercedes-Benz Group AG
• Renault S.A.
• Stellantis N.V.
• Volkswagen Aktiengesellschaft
• Volvo Car AB
This publication does not announce a credit rating action.
For any credit ratings referenced in this publication, please see the issuer/deal page on Ratings.Moodys.com
for the most updated credit rating action information and rating history.
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