Fiat, PSA Ratings Sink Deeper into Junk-Bond Territory

Fitch Ratings has lowered its rating for Fiat SpA debt by one notch to BB-, three steps below investment grade.

Fitch also downgraded PSA Peugeot Citroen's rating by one rung to B+, four levels below investment grade.

The credit agency notes that Europe's expected sixth straight year of lower auto sales in 2013 will hurt both companies. PSA's efforts to stem operating losses and cash outflow may be delayed by the company's heavy reliance on that region, Fitch says.

The agency believes Fiat currently has ample liquidity. But Fitch expects the company's purchase of Chrysler Group LLC shares to weaken its cash position.

The ratings agency also opines that plans by Fiat and PSA to move their brands upscale face "substantial" risks.