Moody’s Ratings downgraded Stellantis NV’s credit rating, citing the carmaker’s warning that a recovery in profitability will take longer than expected due to the costs of scaling back its electric vehicle plans.

The ratings company moved Stellantis down one notch to Baa3 from Baa2, according to a statement. Baa3 is the lowest level indicating an investment grade rating.

Shares in the maker of Jeep sport utility vehicles and Fiat cars slumped by a record last week when the company outlined a major reset of its EV strategy. The adjustment involved reimbursing suppliers, canceling several models and lower-than-expected returns. It triggered around €22 billion ($26.2 billion) in writedowns.

Moody’s said Tuesday its downgrade was also prompted by an expectation of continued negative free cash flow this year. Uncertainty about the timing for a return to positive cash flow and improved profitability means the new rating “is currently weakly positioned.”

The company’s shares pared earlier gains of as much as 6.7% and traded up 2.5% as of 2:09 p.m. in Milan. The stock has shed roughly half of its value over the past year.

Chief Executive Officer Antonio Filosa has been working on a turnaround for the struggling automaker, after cost cuts by his predecessor Carlos Tavares hurt quality and sales.

The manufacturer is forecasting a mid-single-digit increase in revenue, and a low-single-digit adjusted operating income margin for this year.

Analysts haven’t been impressed. Stellantis’ preliminary earnings for the second half were worse than expected, Evercore ISI analyst Chris McNally said in a note last week, while the company’s outlook for 2026 is “vague.”

(With assistance from Libby Cherry.)

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