Fitch Lowers Credit Rating on Toyota

By Yuri Kageyama

TOKYO -- Fitch Ratings cut Toyota's(TM Quote) top-notch credit rating, blaming the world's auto market slump and surging yen -- the latest sign that even Japan's top automaker is suffering from the global slowdown.

Fitch also cited high material costs as another challenge as it lowered its rating on Toyota two notches to "AA" from "AAA," with a negative outlook, meaning the rating could be lowered in the next year or two.

"Toyota is suffering severely from the ongoing turmoil in the global automotive sector," said Tatsuya Mizuno, a Fitch director.

The move could raise borrowing costs for Toyota as investors and lenders typically want to be compensated more as credit ratings decline.

But Toyota spokesman Paul Nolasco said Fitch's downgrade won't hurt the company's business.

"We believe investors abroad and here fully understand our business strength and solid capital footing," he said.

The simultaneous slowdown in the major auto markets and the appreciation of the yen, which erodes the overseas earnings of Japanese exporters, were among the "multiple negative developments" battering Toyota's earnings, said Mizuno.

"In Fitch's view, the negative developments in the industry are so substantial and fundamental, that even the strongest player -- Toyota -- can no longer support a 'AAA' rating," he said.

Toyota still has a top credit rating from other international services Moody's and Standard & Poor's. "AAA" shows exceptional strong capacity for payment of financial commitments, while "AA" shows very high credit quality.