UPDATE 1-Moody's cuts Fiat's rating on earnings worry, outlook
* Moody's cuts Fiat to B1 from Ba3
* Cites weak 2013 results, challenges to meet 2014 outlook
MILAN Feb 11 (Reuters) - Moody's cut Fiat's rating to 'B1' from 'Ba3' on Tuesday, citing weak 2013 results and challenges it sees for the Italian carmaker in achieving its guidance this year, given eroding profitability in its Latin American market.
A 'B1' rating is four notches below investment grade, making it more expensive for Fiat to raise much-needed financing to turn around its loss-making European operations.
The ratings agency placed Fiat's rating under review for a possible downgrade in early January, just days after the company struck a $4.35 billion deal to take full control of its U.S. unit Chrysler.
"We have downgraded Fiat's ratings following its weaker-than-expected performance in fiscal year 2013 and our view that the company faces significant challenges in terms of achieving its outlook guidance for the current fiscal year," Falk Frey, Moody's lead analyst for Fiat, said in a statement.
"We are also concerned that Fiat may not be able to offset any further profitability deterioration in its Latin American operation through anticipated improvements in other regions and in its luxury and performance division," Frey added.
Despite the tie-up between Fiat and Chrysler already being completed, Moody's said it would keep its ratings on the two companies separate for the time being. The outlook on all Fiat's ratings has improved to stable from negative, it said.
Fiat has cut its 2014 profit forecast after an 80-percent slump in Latin American core earnings in the final quarter of last year. Besides Chrysler, the Latin American region - and in particular Brazil - was one of the group's main profit centres that helped offset continuous losses in Europe. Continuación...