S&P lowers Volkswagen

Standard & Poor’s said it lowered the long-term corporate credit rating of Volkswagen AG to A- from A, along with its short-term rating to A-2 from A-1.

The agency also said it lowered the long- and short-term ratings on the company’s debt instruments.

The long-term ratings on Volkswagen Financial Services AG and its subsidiary Volkswagen Bank GmbH also were lowered to A- from A and its short-term rating was lowered to A-2 from A-1.

The agency also lowered to A- from A the long-term issuer credit and financial strength ratings on captive insurer Volkswagen Insurance Co. Ltd.

The ratings also remain on CreditWatch with negative implications, where they were placed in September.

All of the short-term ratings were removed from CreditWatch negative, with the exception of Volkswagen Canada Inc.’s and VW Credit Canada Inc.’s Canada national scale short-term ratings of A-1 (low), which remain on negative watch.

The downgrades reflect a view that the company continues to face wide-ranging negative credit consequences following its admission that it installed software designed to manipulate diesel engine exhaust emissions in 11 million passenger cars and commercial vehicles, S&P said, and the related global recall of these vehicles.

The downgrades also consider that the company has demonstrated material deficiencies in its management and governance and general risk management framework, the agency said.

Its internal controls have been shown to be inadequate in preventing or identifying alleged illegal behavior in the United States and misconduct in other regions, S&P said.

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