Fitch Ratings says it expects the trends seen in the global auto industry in 2010 to generally continue in 2011 and has a Stable Outlook for the sector.
“Overall global auto demand this year will be up over last year’s level, but sales growth rates in 2011 will be uneven across regions, with growth in the US and Asia offsetting flat to declining sales in Europe,” says Jeong Min Pak, Senior Director in Fitch’s Asia Pacific Corporates team.
The increase in global demand, combined with improved cost structures, will result in increased free cash flow and stable to improved credit profiles for most of the world’s auto manufacturers.
In the US, ongoing improvement in industry conditions will give the Detroit Three the opportunity to continue strengthening their weakened balance sheets.
At the same time, Asian and European manufacturers, who emerged from the global recession in relatively better shape than their US peers, will also have opportunities for some credit profile improvement, albeit of a lesser magnitude.
However, Fitch believes that many industry risks remain. Global overcapacity will continue to restrain industry pricing power, while heavy employee unionisation will put pressure on costs. Increasingly stringent regulations tied to fuel economy, emissions and safety will also increase costs and force manufacturers to quickly implement changes to vehicle designs and engineering, often incorporating new technologies.