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Toyota debt rating cut, Suzuki holds out hope for GM

Toyota Motor Corp had its top-notch credit ratings cut for the first time in a decade, hitting its shares and raising borrowing costs as an unprecedented slowdown reshapes the global auto industry.

Fitch Ratings on Wednesday downgraded Toyota's long-term foreign and local debt ratings to AA from AAA, with a negative outlook, saying the company needed to review its global investments, product mix and speed of expansion to address the challenges it faces.

“The negative developments in the industry are so substantial and fundamental that even the strongest player – Toyota - can no longer support an 'AAA' rating,” said Fitch Director Tatsuya Mizuno.

Tightening credit has dried up car sales in the United States and Europe, and the impact soon spread to China, India, Russia and other markets on which automakers had placed their last hopes for near-term growth.

The yen's strength against the dollar and most other currencies is dealing a double blow to Japanese carmakers, which have slashed their profit forecasts in the past month.

Toyota had consolidated debt of ¥12.2 trillion ($128 billion) as of March, according to Fitch.

Moody's, which last cut Toyota's rating in 1998, and Standard and Poor's both have a Triple-A rating on the world's top automaker.

Shares in Toyota fell 4.6% in Tokyo, underperforming the transport equipment index and weighing on the broader market.

While the lower rating will boost borrowing costs at Toyota, US rivals General Motors Corp, Ford Motor Co and Chrysler LLC are in far worse positions.

The Big Three, long reliant on gas-guzzling light trucks for most of their profits, are falling deeper into junk status as they seek a government bailout to ride out the worst US car market in a generation.

GM Chief Executive Rick Wagoner has warned the US economy could face a “catastrophic collapse” without a rescue plan in a bid to convince lawmakers that bankruptcy was not an option.

Congressional leaders have given the Detroit automakers until next month to make their case for a rescue to show that they have business plans that can keep them out of bankruptcy.

The head of Suzuki Motor Corp, a former GM affiliate whose partnership with the US automaker spans 27 years, said he was convinced GM would avoid a Chapter 11 bankruptcy filing.

“I believe it's 100% outside the realm of possibility,” Chief Executive Osamu Suzuki told reporters at a news conference to launch the new Alto Lapin minicar in Tokyo.

“I believe in him (Wagoner) and I think he'll pull through.”

GM last week sold its remaining 3% stake in Suzuki back to the Japanese small-car maker as it scraped around for non-essential assets to sell.

Suzuki said his company would continue to work with GM on the development of future safety and environmental technologies. They have more than 10 ongoing projects including Suzuki's production of Opel brand cars and joint ownership of several factories in the Americas.

Suzuki repeated, however, that he was open to working with any number of carmakers in future, stressing a capital alliance was not a pre-requisite for cooperation.

Suzuki co-develops diesel engines with Italy's Fiat SpA and builds cars for Nissan Motor Co and Mazda Motor Corp, among others.

Suzuki acknowledged that the auto industry faced an uncertain future dragged down by deep troubles in the US economy.

“It's impossible to tell where demand will go next year and beyond,” he said. “If there's a market that's not being affected by the United States, it's not on this planet.”

In the latest indication of slowing demand in emerging markets, Toyota is expecting next year's vehicle sales in Russia to fall below this year's level, Japan's Kyodo news agency reported, citing Tadashi Arashima, the head of Toyota's European operations.

Mazda, meanwhile, said it would suspend production at a Japanese factory that builds the Mazda3 and Mazda6 models, for two days next month, in line with a decision to reduce domestic production by 73,000 units between October and March. (Reuters)