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U.S. Automakers Well Positioned for 2012, Fitch Says

January 05, 2012

CHICAGO — Fitch Ratings said it expects the financial profiles of U.S. automakers and parts suppliers to remain strong in 2012 despite sluggish global economic growth and weaker-than-expected North American light-vehicle demand.

Fitch reported that it believes the Detroit Three and the largest U.S. parts makers are well positioned from both a cost and liquidity standpoint to withstand significant demand pressure this year. As U.S. light vehicle sales continue to grow modestly to approximately 13.2 million units in 2012, credit profiles are likely to remain relatively stable if a slowdown in unit sales and softer pricing undercuts margins this year.

Fitch estimates that the break-even industry sales level for the Detroit Three and major parts suppliers is currently about 10.5 million light vehicles, corresponding to 2009 recessionary sales volumes. Although U.S. light vehicle sales are expected to grow this year, the forecasted size of the market will remain well below the 17 million-unit levels seen from 1999 through 2006.

The company anticipates the U.S. industry will struggle to exceed annual sales of approximately 15 million light vehicles. With auto sales in Western Europe likely to fall this year and sales growth rates declining in key emerging markets, U.S. automakers' operating results in 2012 will depend more directly on volume growth and pricing traction in the U.S. market, Fitch said.

Although a global downturn would impede the progress of U.S. automakers in their efforts to strengthen their balance sheets, most Fitch-rated issuers have sufficient cushioning in their credit metrics to withstand a significant demand shock without driving negative changes in outlooks or ratings, according to the company. This improvement in the U.S. auto industry's resilience forms the primary foundation of Fitch’s positive outlook for the industry in 2012.

For more information, visit www.fitchratings.com

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