Dropping Fiat's debt ratings further below investment grade status into the infamous "junk" category could have repercussions for Fiat in terms of banking institutions being prevented from holding its financial instruments as well as the carmaker having to pay higher interest charges.

Both Moody's and Fitch became jittery after Fiat announced that it would raise its stake in Chrysler Group, promoting concerns about the Italian carmaker's liquidity. Fitch said on April 21 it had placed Fiat on its "rating watch negative" and its long term debt, currently rated at BB+ (already a non investment grade status), under review for possible downgrade. Gradings below BBB/Baa are more commonly known as "junk bonds". Fiat's short-term debut was however unchanged at "B" (also no investment grade).

Moody’s Investors Service, on the same day, announced that it had also placed its own rating on Fiat's long term debt, currently at Ba1 (the equivalent to BB+), under review for a possible downgrade. A Moody's analyst explained in a briefing note that Fiat is "vulnerable to a drop-off in demand" in its two key markets, Italy and Brazil, as well as highlighting the lack of new models debuting in Europe. Fiat is the worst performing major carmaker in Europe this year in year-on-year terms and its market share has tumbled. The note also emphasised Fiat's overreliance on certain markets, adding that its "very limited geographic diversification" is one of its "key weaknesses." However the note did point out that the Chrysler Group alliance will help to address this deficiency.

Standard & Poor's, which in February set the Fiat downgrade ball rolling by dropping its rating out of investment grade status to "BB+" level (the highest category of the non investment 'junk' grade rating), said at the time in a statement: "We lowered the rating due mainly to our assessment of its liquidity situation." Standard & Poor's credit analyst Barbara Castellano, said: "This limits Fiat's financial flexibility and leaves it more exposed to a weaker than expected performance in 2011." She added that there are "very substantial operating and financial risks related to Fiat's increased exposure to Chrysler." Standard & Poor's however left the ratings position unchanged on the recent announcement that Fiat would pay US1.27 billion for an additional 16 percent cash stake to take its holding in Chrysler by the summer to 46 percent.