Fitch Ratings expects U.S. auto suppliers to see a modest recovery next year based on higher projected light-vehicle production, which has helped stabilize the struggling industry.
The ratings firm also noted the benefits of cost-cutting actions and improved access to the capital market. Those factors could lead to credit-rating upgrades, Fitch said. Several auto-parts suppliers have already been boosted of late.
Still, Fitch warned the outlook is tempered by weak macroeconomic conditions, especially in the U.S., and lower sales in Europe. Fitch also has long-term concerns about overcapacity and the structure of the supplier industry.
U.S. auto suppliers should have adequate liquidity in 2010, Fitch said. None of the suppliers Fitch covers have maturing revolvers, although American Axle & Manufacturing Holdings Inc. will see its secured revolving credit facility reduced in April. Some suppliers took credit-enhancing actions this year to improve their capital structure and Fitch expects to see only minimal amounts of capital required for additional restructuring this year.
Within Fitch's coverage of the industry, TRW Automotive Holdings Corp. has the most exposure to Europe, where light vehicle and commercial truck sales are expected to slow. Tenneco Inc., ArvinMeritor Inc. and Goodyear Tire & Rubber Co. are also exposed, although at a lesser degree.
Fitch also expects to see credit quality improve for an industry that saw frequent downgrades during the first three quarters of this year. Gross margins are expected to improve in the fourth quarter and improved capital markets access resulted in recent upgrades for TRW and Tenneco.
(Source: http://irco.biz)
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