Standard & Poor’s has become the second credit rating agency - following Fitch Ratings' lead a week ago - to mark down Fiat Group's debt to junk status, lowering its rating on Fiat’s long-term debt from "BBB-" to "BB+". The short-term rating was also lowered from "A-3" to "B". The long-term rating remains on CreditWatch with negative implications, while the short-term rating was removed from CreditWatch.

"Carmaker Fiat SpA becomes a fallen angel on downgrade," read a statement issued by Standard & Poor's which went on to say that it had "lowered to 'BB+' from 'BBB-' its long-term ratings on the senior unsecured debt issues of wholly owned subsidiaries Fiat Finance & Trade Ltd. and Fiat Finance North America Inc. These ratings remain on CreditWatch with negative implications. Still, we expect more details in the coming weeks on the proposed Chrysler-Fiat alliance. Fiat reported sound operating performance in 2008, increasing its trading margin to 5.7 percent, from 5.5 percent in 2007."

"The downgrade reflects our opinion of Fiat's weak liquidity position considering 2009 and 2010 debt maturities," commented Barbara Castellano, a Standard & Poor's credit analyst. The rating's agency is concerned that after Fiat's unexpected cash burn last year that a similar scenario might play out this year especially due to the economic downturn which has impacted on new car sales. Standard & Poor's is also cautious as to how the proposed alliance with Chrysler LLC might work out.

This latest downgrade comes exactly a week after another leading international credit ratings agency, this time Fitch Ratings, communicated that it has also lowered its rating on Fiat’s long-term debt liabilities from "BBB-" to "BB+". The short-term rating was also lowered from "F3" to "B" by Fitch Rating's who added that in their opinion the outlook was negative.