Toyota may face credit ratings downgrade

Toyota Motor Corp, the carmaker with the best credit, may have its AAA rating cut by Fitch Ratings, the first such downgrade in 10 years, as the auto industry faces "unprecedented challenges".

The carmaker was placed on "Rating Watch Negative" by Fitch, which will undertake a review over the next several weeks, the ratings company said in a statement yesterday. Honda Motor Co's outlook was also cut to "stable" from "positive". Fitch reiterated its A+ rating for the smaller carmaker.

A lower debt rating would raise borrowing costs for Toyota, potentially hindering its ability to offer interest-free loans to boost sales in the US. The automaker slashed its profit forecast 56 percent earlier this month after higher fuel costs and the credit crunch pushed industrywide October US sales to the lowest level since 1983.