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TEXT-S&P: M'bishi Mtrs Fuso sale not to affect rating

(The following was provided by the ratings agency)

TOKYO, Jan 16 --Standard & Poor's Ratings Services said today that the announcement by Mitsubishi Motors Corp. (B+/Negative/--) that it will sell a 22% stake in truck and bus subsidiary Mitsubishi Fuso Truck and Bus Corp. (MFTBC) to DaimlerChrysler AG (BBB/Negative/A-2) would not immediately affect the ratings on the company, given the severe challenges facing Mitsubishi Motors, including a weak financial profile and difficult earnings prospects.

Mitsubishi Motors currently holds a 42% equity stake in MFTBC. By selling about half its shareholdings in the subsidiary, Mitsubishi Motors will receive JPY52 billion, which is likely to be used for development of new models.

Weak earnings prospects for Mitsubishi Motors in North America remain a major concern as the region, which used to account for a disproportionate share of the company's profitability, experiences an ongoing deterioration in auto sales.

Concern also remains over the company's financial flexibility, considering its weakened access to the ABS market and weaker business results by DaimlerChrysler, the largest shareholder in Mitsubishi Motors.

Reflecting these factors, Standard & Poor's lowered its long-term issuer ratings on Mitsubishi Motors to 'B+' from 'BB-' in October 2003. The rating could be lowered further if credit-loss or profitability conditions deteriorate.