UK S&P say investment grade European auto suppliers growing stronger

By SupplierBusiness.com | 8 June 2005

Standard and Poor's (S&P) "Industry report card: European automotive suppliers" published in mid-May 2005 says that the majority of rated European automotive suppliers have shown resilience in the face of industry pressure in the first quarter of the year.

"Many were able to strengthen their positions in 2004 and should be up to perform in line with expectations in 2005" say analysts Bob Ukiah and Maria Bissinger.

"Outlooks of the investment grade companies in the sector remained generally stable" and the S&P analysts say there are growing signs of renewed corporate activities - interest in acquisitions - among the stronger players.

The distribution of European supplier ratings has not changed since mid-2004 and the number of suppliers with a negative outlook or on a negative credit watch has actually fallen.

S&P say that the trends that plagued European automotive suppliers in the final quarter 2004 have continued into 2005 - but that that was expected and has not resulted in rating actions in the first quarter.

Suppliers with strong market positions have been able to pass on some of the raw material cost increases to their customers. S&P cite Autoliv, Continental and Michelin as companies have been able to push through price increases.

S&P do not expect raw material shortages to affect suppliers in 2005, and most of the major automotive suppliers have significant natural hedges against currency swings from the global spread in their production capacities.

However the tougher environment has been difficult for companies "with more modest pride pipelines, relatively low margins and weak financial measures".

S&P analyst Bob Ukiah says that he expects "the performance of stronger and weaker players to continue to diverge"