Mercedes 2008 Annual Report Download - page 75

Management Report |Liquidity and Capital Resources |71
Credit ratings
The development of our credit ratings with the rating agencies
Standard & Poor’s (S&P), Moody’s Investors Service (Moody’s),
Fitch Ratings (Fitch) and DBRS reflect the changing business
prospects for the automotive industry and for Daimler in the con-
text of the global economic situation during the year 2008.
This development is particularly apparent from the three rating
adjustments carried out by S&P. The first half of the year feat-
ured a positive business development accompanied by a significant
improvement in the Group’s profitability. The rating agencies
honored this development by upgrading our long-term rating (S&P)
or by adjusting the outlook to positive (Fitch). In the second half
of the year, when the negative effects of the financial crisis on the
real economy became increasingly clear from Daimler’s weaker
unit sales, especially at Mercedes-Benz, and the Group’s business
prospects deteriorated, the rating agencies retracted their
positive rating outlooks (S&P, Moody’s und Fitch). Only DBRS did
not adjust its rating; however, it had not previously altered the
assessment of a stable outlook that it had already issued in the
year 2007.
On February 14, 2008, S&P placed its BBB+ long-term corporate
credit ratings on Daimler AG and related entities on credit
watch with positive implications following a strong operating per-
formance. On April 14, 2008, our long-term rating was raised
to A- with positive outlook. The upgrade followed S&P’s reassess-
ment of Daimler’s business and financial risk profiles and the
strong operating performance and progress made since the sepa-
ration of its Chrysler unit in August 2007. In view of the rapidly
weakening state of most global automotive markets, S&P revised
its outlook on October 8, 2008, from positive to stable.
On October 15, 2008, Moody’s affirmed the A3 long-term rating
of Daimler AG and its subsidiaries and changed the outlook to
stable, which had been positive since October 1, 2007. The outlook
change reflected the increasingly worsening global car and
truck markets and Moody’s expectation of negative impacts on
the operating performance of the company.
On June 13, 2008, Fitch changed the outlook for Daimler AG’s
A- long-term issuer default rating to positive from stable reflecting
the improvements in Daimler’s financial profile in 2007 and the
first quarter of 2008. On November 20, 2008, Fitch changed the
outlook for Daimler AG’s long-term issuer default rating back to
stable as the rating agency expected new car and truck sales to
continue to fall, which according to Fitch would put pressure
on Daimler’s profitability and cash generation. As a result of a
reassessment of the business prospects of the automotive
industry in general, and, as a result, the profit and cash flow expec-
tations for Daimler, Fitch lowered Daimler AG’s long-term rating
to BBB+ with a stable outlook on January 29, 2009.
DBRS confirmed the long-term ratings of Daimler AG and its
related companies at A (low), all with a stable trend on September
10, 2008, reflecting the company’s strong business and financial
profiles.
The short-term ratings of all four rating agencies remained
unchanged during 2008.
A-2
P-2
F2
R1 (low)
BBB+
A3
A-
A (low)
A-2
P-2
F2
R1 (low)
A-
A3
A-
A (low)
End of 2007
Long-term credit ratings
Standard & Poor’s
Moody’s
Fitch
DBRS
Short-term credit ratings
Standard & Poor’s
Moody’s
Fitch
DBRS
End of 2008