Citing the COVID-19 pandemic and “an already-challenging situation,” Moody’s Investors Service on Tuesday downgraded $130 billion in global automakers’ debt. Over the past three months, the agency has reviewed virtually all automakers and lowered the ratings of nine of the 22 global carmakers it rates.

Senior unsecured notes of General Motors Co. (NYSE: GM) have a Baa3 rating, Moody’s lowest investment grade rating, and a negative outlook. Ford Motor Co.’s (NYSE: F) senior unsecured debt is rated Ba2, two notches below investment grade, and also carries a negative outlook.

The fact that 13 of the carmakers that Moody’s tracks were not downgraded is due to their better operating profiles and liquidity compared with their positions prior to the Great Recession. Still, more than 75% have a negative or developing outlook, “reflecting the potentially severe damage the [current] recession could do to operating performance and credit metrics.”

Moody’s senior vice-president Bruce Clark noted that the coronavirus pandemic will continue to weigh on demand for light vehicles (cars, pickups and sport utility vehicles) through 2022. Sales forecasts call for a global demand decline of 20% this year. Demand is expected to fall even more in North America and in Europe, the Middle East and Africa. It is expected to take “several years” for demand to return 2019 levels.

Clark commented, “While auto demand cycles are common, what is so unusual about the coronavirus-induced downturn is the combination of a drop in demand and a shock to both the extended auto supply chain and auto distribution channels, which together make the timing and speed of recovery unclear.”

Auto industry researchers at Edmunds.com have estimated that new vehicle sales for June will be down by 28.7% year over year in the United States and down by 3.6% from May sales. Nissan, Fiat Chrysler Automobiles N.V. (NYSE: FCAU), Ford and GM are expected to take the biggest annual hits, down by 45.8%, 38.6%, 34.5% and 34.0%, respectively.

Edmunds estimates a retail seasonally adjusted annual sales rate of 11.1 million vehicles, well below last year’s sales of around 17 million new vehicles.

Analysts at Cox Automotive expect fleet sales to decline by 56% year over year to 1.3 million new vehicles. Fleet sales declined by 77% in April and 83% in May. The recent bankruptcy filing by rental car giant Hertz underscores the uncertain future of fleet sales. Last year, rental car companies accounted for about 62% of all fleet sales.

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