Only two things are infinite, the universe and human stupidity, and I'm not sure about the first - Einstein
JAPANESE ELECTRONICS GIANTS Panasonic and Sony have seen their debt ratings cut to 'junk' status by Fitch.
Earlier this week Panasonic's credit rating was cut to one level above junk status by ratings agency Moody's. Now agency Fitch has cut Panasonic's and rival Sony's debt ratings to junk status, citing concerns about competition and a strong Yen and putting both firms on a negative outlook.
Both Panasonic and Sony are suffering due to their reliance on products like television sets that require considerable capital investment and have in the past few years brought low profit margins. Now Fitch believes that, in the case of Sony, it will face a slow recovery due to the firm's "loss of technology leadership in key products", and that Panasonic has "weakened competitiveness in its core businesses, particularly in televisions and panels".
Panasonic is expected to reveal a $10bn loss for its fiscal year and, while Sony is not expecting anything so bad, it has cut jobs and its profits forecast. Both firms are in the midst of restructuring in order to cut costs, trying to compete with Chinese and Korean competitors.
Fitch's debt ratings cuts will mean the firms cannot expect help from certain parts of the financial industry, such as pension funds that are forbidden to invest in anything with junk status. µ
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