TEXT-S&P on U.S. auto supplier ratings in downside scenario

Fri Jan 11, 2013 12:41pm EST

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Jan 11 - Most U.S. auto suppliers will face continued uncertainty in some
major markets in 2013, but the U.S. market should remain a relative bright spot.
A majority of suppliers we rate have significant exposure to the U.S. market.
Accordingly, we think most will avoid any significant deterioration in their
credit quality, Standard & Poor's Ratings Services said today in an article
titled "U.S. Auto Supplier Ratings Will Likely Hold Firm Even In Our Downside
Scenario," published on RatingsDirect. 

The steps U.S. auto suppliers have taken to strengthen their businesses have 
given most companies some cushion in the ratings under our current base-case 
scenario. We believe certain U.S. auto component companies could face 
downgrades or negative outlook revisions if an unexpected marked and 
widespread downturn were to occur in 2013. One possible catalyst would be 
European uncertainty washing over other regions. Companies that would be most 
at risk for downgrades are suppliers of commodity parts with limited 
geographic or customer diversity, those with specific operational challenges, 
or companies that have large refinancing needs over the next year or so. Some 
of those companies already have negative outlooks. 

We expect our ratings and outlooks on auto suppliers to hold up under our 
baseline economic scenario, which calls for continued improvement in North 
American auto sales and production, flat to down sales and production in 
Europe following a decrease in new-vehicle registrations of about 8% in 2012, 
and some industry growth in South America and Asia. 

If an unexpected marked and widespread downturn were to occur in 2013, certain 
U.S. auto component companies could face downgrades or negative outlook 
revisions, but perhaps not to the extent that we did in 2009--assuming 
light-vehicle demand in the U.S. and elsewhere (if not Europe) showed signs of 
bouncing back in 2014. Although we assume a recovery in 2014 in our current 
theoretical downside scenario, downgrades might also result if liquidity 
tightens or if the downturn seemed likely to last longer than the last one. 

The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to research_request@standardandpoors.com. Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at www.standardandpoors.com.
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