Moody's downgrades Valeo

Moody's Investors Service said it downgraded Valeo SA's long-term rating to Ba1 from Baa3 and short-term rating to Not Prime from Prime-3. The agency assigned a Ba1 corporate family rating.

The outlook is negative. This action concludes the review for downgrade that began on Dec. 22.

"The rating change reflects the sharp acceleration of deteriorating market conditions in most automotive markets and the expected decline in worldwide automotive production volumes adding to the pressure on profitability," Falk Frey, a senior vice president at Moody's for Valeo, said in a statement. "The company's financial flexibility is therefore significantly weakened and a possible turnaround not expected before 2010."

The Ba1 rating reflects the company's size, its broad product range and leading market positions in the automotive supplier industry as well as a prudent financial policy, the agency noted.

the negative outlook reflects the risk of a further significant weakening of Valeo's profitability and cash generation in 2009 due to the rapid and severe deterioration of automotive production in most markets and its expected continuation in the current fiscal year, the agency said.

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