Moody's Cuts Stellantis Credit Rating Amid Profitability Concerns, Keeps Outlook Stable

Moody's Ratings recently lowered the long-term issuer rating of Stellantis N.V. (NYSE:STLA) from Baa2 down to Baa3. This move reflects a reevaluation of the automaker's profitability and cash flow, both of which took a noticeable hit in the preliminary 2025 financial results.

The downgrade extended to the company's senior unsecured debt and short-term ratings, slipping from (P)P-2 to (P)P-3. Despite the change, Moody's flipped the outlook from negative to stable, signaling hopes for a turnaround but acknowledging current issues.

Underlying this reassessment are Stellantis' expanded charges tallying about €22.2 billion. These stem from shifts in product development plans, battery supply chain adjustments, and increased warranty provisions-of which roughly €6.5 billion will directly impact cash flow, with €2 billion expected to hit the books in 2026 alone.

Cash flow troubles have been piling up, with Stellantis reporting a hefty -€9.2 billion free cash flow in 2024 and forecasts showing a nearly comparable -€8 billion deficit for 2025. Moody's predicts continued negative adjusted free cash flow at approximately -€2.5 billion in 2026, marking three years of red ink on that front.

The automaker's net debt picture has deteriorated swiftly. From a net cash position close to €13 billion at the end of 2023, Stellantis now faces an industrial net debt exceeding €6 billion on Moody's adjusted basis. Profit margins haven't fared any better; the adjusted EBIT margin is expected to hover near 1%, dragged down by about €1.6 billion in tariff costs coupled with mounting warranty expenses.

To cope with ongoing cash demands, Stellantis has secured board approval to issue up to €5 billion in hybrid notes and signaled its intention to suspend dividend payments in 2026. This financial maneuvering comes as the company holds a sizeable liquidity buffer-approximately €29 billion in cash and equivalents, €4 billion in marketable securities, plus access to €16.6 billion in credit lines.

Despite the struggles, Moody's still acknowledges Stellantis as one of the globally dominant players in the automotive sector, bolstered by a diverse brand lineup and its substantial footprint in both North America and Europe. The healthy liquidity position also factors into the agency's rationale for a stable outlook.

The rating agency's forward view hinges on Stellantis improving its operational performance in the coming year and returning to positive cash flow within 12 to 18 months. This recovery is expected to be driven by stronger unit sales tied to newly launched products, although the profit catch-up is anticipated mainly in the latter half of 2026.