TEXT-S&P on U.S. auto supplier ratings in downside scenario
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 firstname.lastname@example.org. 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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