Moody's cuts Renault

Moody's Investors Service said it downgraded Renault SA's long-term ratings to Ba1 from Baa2 and its short-term ratings to Not Prime from P-2.

The outlook is stable.

At the same time Moody's said it assigned a Ba1 corporate family rating, concluding its review for downgrade initiated on Jan. 13.

Falk Frey, senior vice president and the lead analyst at Moody's for the European automotive sector, said: "The downgrade reflects the significantly worse operating performance and negative free cash flow in FY2008 leading to a material deterioration in Renault's financial flexibility with reported net industrial debt deterioration of €5.9 billion to €7.9 billion."

In Moody's view, the markets will remain challenging in 2009 with significant drops in volume expected with limited prospect of a meaningful recovery in 2010 though the scrapping bonuses may cushion the shock in some European countries.

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