On September 30, Shinhan Investment Corporation, one of South Korea's leading investment and brokerage firms, released a report, titled ‘Possible Credit Rating Changes following Volkswagen’s Emissions-Cheating Scandal,’ in which the firm raised the possibility of a downgrade in Volkswagen Financial Services Korea (FSK)’s credit rating.
Volkswagen FSK, a subsidiary of Volkswagen Financial Services AG, provides finance and insurance products to retailers that represent their automotive brands, as well as to the Volkswagen Group
Saying that “Volkswagen’s reputation and finances have been exposed to risks since its emissions-rigging scandal erupted,” Kim Sang-hun, a researcher at Shinhan Investment Corp., underlined the possibility of cuts in Volkswagen’s global credit rating and Volkswagen FSK.
According to researcher Kim, Volkswagen FSK could sustain a credit rating cut if Volkswagen Financial Services AG’s global credit rating was revised down. He also pointed out that a possible slowdown in Volkswagen FSK’s asset growth following the emissions-cheating scandal could negatively affect its credit rating.
Given that Volkswagen FSK’s share of the Volkswagen Group is so small and Volkswagen is the world’s largest carmaker, cutting Volkswagen’s credit rating by one notch may have a marginal impact on Volkswagen FSK’s credit rating, researcher Kim added.
“Once Korean consumers’ trust in Volkswagen’s diesel-powered vehicles has been broken in the wake of the emissions-cheating scandal, Volkswagen FSK will see a drop in the number of people buying a diesel-powered VW car on an installment payment plan. Given that 68.4 percent of the imported cars are diesel-powered in S. Korea, it is highly likely,” Kim explained.
“Its credit rating is unlikely to change for the time being. However, since Volkswagen Financial Services opened its Korean branch in 2011, Volkswagen FSK has seen its assets grow rapidly. If its asset growth decelerated sharply, there could be a possibility of an adjustment in its credit rating in the midterm,” Kim mentioned.
