US auto supplier outlook stabilises, Moody's says

Automotive News staff report

New York (Reuters) - Demand for US auto parts makers' business will likely improve next year, Moody's Investors Service said today, changing its outlook rating from “negative” to “stable.”

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 automakers support our growth expectations for North American vehicle production in 2010," senior analyst Timothy Harrod said in the report.

North American light-vehicle production had declined 40 percent through last week from 2008 levels, while US sales through September had declined 27 percent.

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 programmes, 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 improve or worsen materially 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, the rating agency said, including high unemployment, tight credit for consumers and commercial vehicle buyers and rising commodity prices.

From Automotive News (A Crain publication)

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