Bangkok--8 Dec--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed the National Long-term rating of 'AA(tha)' on DaimlerChrysler (Thailand) Limited's ("DCT") THB2.0 billion guaranteed debentures due 2007. The Outlook on the ratings is Stable.
The ratings are based entirely on the full, irrevocable and unconditional guarantee on the debentures by DaimlerChrysler AG ("DCX", rated 'BBB+'/Stable). The International 'BBB+' rating for DCX is currently two notches below Thailand's Long-term local currency IDR of 'A' with a Stable Outlook. Therefore, the guaranteed debentures are rated two notches below Thailand's National 'AAA(tha)' rating. Fitch notes that any changes in the International rating differential between DCX and the Thai sovereign will affect the debentures' National rating. Investors should note that a one notch change in DCX's International rating could result in greater than one notch change in the debentures' National rating.
The rating of the guarantor, DCX, reflects the group's leading position in the automotive and trucks industries, its sound business and geographic diversification, as well as its strengthening financial profile. Fitch believes that the group has strengthened its overall credit profile in 2005 and expects it to improve further in 2006 and 2007. The group has made substantial progress on the quality issues that hit the Mercedes Car Group ("MCG") division two years ago, and has managed to improve the margins of the Truck Group ("TG") division due to favourable market conditions and ongoing efficiency improvements. Chrysler ("CG") division has made significant achievements in cutting costs and enhancing revenues and market share thanks to the strong demand for recently launched models.
However, the rating also reflects substantial challenges that the group will need to address to maintain the positive momentum. Automotive markets remain extremely challenging with fierce competition and low growth prospects in the US and Western Europe. Fitch is concerned about the high incentives being offered in the US, the relentless competitive pressure from Asian brands and the possible shift in demand away from CG's cash-generating light truck vehicles, which would put margins at risk. In addition, a significant decline is expected in the heavy truck industry in 2007 due to the introduction of more stringent emission regulations, putting earnings under pressure, but TG's margins should rebound in FY08 thanks to a more efficient cost structure and higher synergies.
DCT is 99.99%-owned by DCX. DCT is responsible for the import and wholesale functions for Mercedes-Benz vehicles and Chrysler automobiles for distribution in Thailand. Mercedes-Benz is well-recognised in the premium segment in Thailand, with its relatively low after-sales service costs and the high value of its products in the second-hand market. Mercedes-Benz has maintained its leading position in the premium car segment for several decades. In addition, DCT provides hire purchase and leasing services through its 99.99% leasing subsidiary, DaimlerChrysler Leasing (Thailand) Company Limited.
Contacts: Lertchai Kochareonrattanakul, Soamsiri Chadavadh, Vincent Milton, Bangkok, Tel: + 662 655 4755; Emmanuel Bulle, London, Tel: +33 1 44 29 91 84
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301; Sylvia McKaige, Singapore, Tel: +65 6336 0095.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.