Research Update: Automaker Daimler Downgraded To 'BBB+' On Weaker Prospects Due To COVID-19; Outlook Negative

We expect the effects of the COVID-19 pandemic to result in lower-than-expected unit sales for Daimler, and that production cuts will hurt the group's revenue and cash flow in 2020. In our revised base case, we forecast negative free cash flow of possibly €4 billion-€6 billion, owing to the significant drop in demand, assuming that Daimler would need to absorb €3 billion of cash outflows related to ongoing diesel proceedings, warranty issues, and cost restructuring efforts. We expect Daimler's suspension of most of its European production facilities for two weeks will only partly offset the decline, but its available liquidity sources offer headroom to cope with a potential production standstill in Europe of at least three months, even without additional

...- We expect the effects of the COVID-19 pandemic to result in lower-than-expected unit sales for Daimler, and that production cuts will hurt the group's revenue and cash flow in 2020. - In our revised base case, we forecast negative free cash flow of possibly 4 billion-6 billion, owing to the significant drop in demand, assuming that Daimler would need to absorb 3 billion of cash outflows related to ongoing diesel proceedings, warranty issues, and cost restructuring efforts. - We expect Daimler's suspension of most of its European production facilities for two weeks will only partly offset the decline, but its available liquidity sources offer headroom to cope with a potential production standstill in Europe of at least three months, even without additional measures or government support. - We are lowering our long-term ratings on Daimler and its senior unsecured debt to '###+' from 'A-' and affirming our 'A-2' short-term ratings. - The negative outlook primarily reflects the high degree...

Research Update