U.S. auto supplier outlook stabilizes: Moody's

NEW YORK (Reuters) - Moody's Investors Service on Tuesday changed its outlook on the U.S. auto parts industry to stable from negative, saying demand will likely improve next year.

Production cuts by North American auto makers have outpaced a decline in sales this year, and car companies will likely have to ramp up production in 2010, Moody's said in a report.

"Improving vehicle demand and inventory replenishment by auto makers support our growth expectations for North American vehicle production in 2010," Moody's senior analyst Timothy Harrod said in the report.

While vehicle demand will likely improve in the United States next year, conditions will probably weaken in Europe, the report said. Demand in Europe got a boost from government auto scrapping programs, most of which will end this year, Moody's said.

The stable outlook indicates Moody's does not expect business conditions for the parts industry to materially improve or worsen over the next 12 to 18 months. The change in the industry's outlook does not affect rating outlooks for individual companies, Moody's said.

Parts suppliers will continue to face challenges, including high unemployment, tight credit for consumers and commercial vehicle buyers, and rising commodity prices, the rating agency said.

(Reporting by Dena Aubin; Editing by Andrew Hay)