Defaulting banks - where will it stop?

[Jan Klimkowski]

Another car company splutters to a grinding halt.

I suppose the Chrysler-Fiat tie-up is rather unlikely now too...

S&P cuts Fiat to junk status, may cut again
Tue Mar 31, 2009 6:21pm BST

NEW YORK, March 31 (Reuters) - Standard & Poor's on Tuesday cut its ratings on Fiat SpA (FIA.MI) to junk status and said it may cut them again, citing the auto maker's weak liquidity and upcoming debt maturities.

The downgrade came on the same day that Fiat was set for talks with Chrysler LLC labor unions and creditors after U.S. authorities gave the carmakers 30 days to set up a partnership to save Chrysler.

S&P cut Fiat's rating by one notch BB-plus, the highest junk rating, from BBB-minus. The rating remains on review for another downgrade.

Fiat first announced its plans for a partnership with Chrysler in January. The Italian group would give technology for small cars and access to foreign markets in exchange for a stake in Chrysler and entry into the U.S. market.

"We do not expect Fiat to commit any significant funds to support Chrysler LLC following the U.S. government's most recent analysis of Chrysler's financial needs to survive," S&P said. "Still, we expect more details in the coming weeks on the proposed Chrysler-Fiat alliance."

S&P said it considers Fiat's liquidity weak.

"The large 2008 cash burn in Fiat's industrial activity and the need to support CNH's finance operation in North America have dented the group's financial position," S&P said. CNH is Fiat's U.S. farming equipment maker.

Lower demand for autos and trucks could also hurt Fiat's operating performance and increase the risk it will burn more cash this year, S&P said in a statement.

(Reporting by Dena Aubin, Editing by Chizu Nomiyama)

http://uk.reuters.com/article/privateEqu...8420090331