Domestic rating agency India Ratings today said the scandal at Volkswagen is unlikely to affect its rating on the German carmaker’s local finance arm, saying the parent will continue extending support.
“Volkswagen Financial Services AG’s (VWFSAG) ability to extend support to Volkswagen Finance Private Limited (VWFPL) is unlikely to be deteriorated because of the recent crisis,” it said in a note.
At present, it has a AAA ratings with a stable outlook for VWFPL.
“VWFSAG has no financing exposure to the US (to which the events mainly pertain) and its Indian operations, VWFPL forms less than 1 per cent of its global operations, are unlikely to be impacted,” it said.
VWFPL’s parent continues to provide unconditional and irrevocable guarantees to banks in India for its rupee-based loans facilities and is committed to inject capital as and when necessary, it added.
In the note, the agency cited its parent Fitch Ratings assessment on the impact of the crisis.
“The agency (Fitch) does not expect the US Environmental Protection Agencyu2019s fine to amount to the maximum amount of USD18 billion reported in the press. Volkswagen’s financial structure is sound and its free cash flow generation is robust,” it said.
Volkswagen’s brand image and reputation with regulators and consumers worldwide to be seriously undermined by this crisis, although the magnitude and length of the operational and financial effect are difficult to assess, it added.