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Milan - Standard & Poor's ratings agency threatened to downgrade Italian auto giant Fiat on Monday due to sagging sales in Europe and Brazil, as well as the company's over-reliance on US partner Chrysler.
Fiat stock fell sharply after the announcement, with shares plunging 3.26% to €4.51 in morning trading, while the benchmark FTSE Mib index on the Milan stock exchange was down just 0.94%.
Fiat auto is an important component of overall Italian industry.
"We see weakening demand in Europe's over-supplies mass vehicle market, particularly Italy's as likely to pressure Italy-based Fiat's profits and cash flow," the ratings agency said in a statement.
"Concurrently, Brazil, Fiat's strongest market, is the site of increasing competition that has eroded the company's leading market share," it said.
"Standard & Poor's believes this environment will cause Fiat's European operating performance to deteriorate in 2012," it added.
S&P said it was placing Fiat's BB long-term corporate credit rating and BB issuer ratings on the company's senior unsecured notes "on credit watch with negative implications."
