Volkswagen’s run of bad news continues in the first quarter of 2004. Against the backdrop of the new Golf’s underwhelming reception, being put on negative watch by Standard & Poor’s last month (joining Moody’s one-notch downgrade to A2 in December 2003), dollar weakness and an ongoing difficult market environment, the company’s management stated that it expected a “lousy” first quarter and not much joy throughout the rest of the year either.
Georg Grodzki, global head of credit research at Royal Bank of Canada, says: “The slow initial sales performance of its all-new Golf, coupled with heavy balance sheet charges, has alarmed the agencies and the company’s credit ratings are drifting towards the lower end of the single-A range. Credit spreads have underperformed its European peers in the car sector, despite the traditionally strong retail following for the name. Further widening on negative rating actions and poor first-quarter results are likely.”
