PARIS, March 26 A recovery in domestic demand
coupled with continued emerging market growth should boost
European automotive parts suppliers' prospects, although there
is unlikely to be a return to positive cash flow this year,
credit rating agency Moody's said in a report on Wednesday.
Outlining its "stable" outlook for the industry over the
next 12-18 months and citing a rebound in light vehicle demand
and an improved geographic spread, the agency nevertheless said
the free cash flow issue "remains a concern".
Moody's said it would consider changing the outlook to
"positive" if the European auto market returns to a stable
growth path, with organic growth - which usually excludes
external factors such as acquisitions - consistently exceeding 5
percent, translating into solid free cash flow generation for
the automotive suppliers.
It would lower the outlook to "negative" if the
stabilisation of the European market proves unsustainable or if
the Asian growth engine weakens.
Moody's noted that increased light vehicle demand is
important for supplier growth and profitability.
It said companies with a broad international footprint
should be able to achieve organic growth well above 5 percent in
2014. It said these include Autoliv ASP, Inc, Compagnie Generale
des Etablissements Michelin and SKF AB.
(Reporting by Andrew Callus; Editing by Mark Potter)