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.
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