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Fitch Ratings Downgrades Toyota's Credit, Cites Downturn in Sales and Strong Yen

December 1, 2008

Fitch Ratings downgraded Toyota Motor Corp.'s long-term foreign and local currency issuer default ratings and senior unsecured debt ratings to 'AA' from 'AAA' on Nov. 25, citing a downturn in global sales, rising raw material costs and the strengthening value of the Japanese yen. Fitch has a negative outlook on the rating.

"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," said Tatsuya Mizuno, a director on the agency's corporate team.

"In order to address these unprecedented challenges, Toyota needs to review its strategic focus in areas such as its geographic spread of investments, its product mix and its speed of expansion. Fitch believes that this will prove to be a challenging process and will take a relatively long period of time."

Earlier this month Toyota reported a 69 percent drop in fiscal second-quarter profit and cut its full-year forecast by more than half. The Japanese automaker recently announced production cuts in the U.S. in response to a steep decline in sales in its largest and most profitable market. The company's shares are down about 45 percent from their high for the year.

"In these times, no company is immune," Toyota spokeswoman Mira Sleilati said in response to news of the downgrade.

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