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Global auto suppliers on credit watch, bankruptcies in Europe

Bertel Schmitt From Gasgoo.com| December 15 , 2008 10:04 BJT

Wall Street credit ratings firm Fitch Ratings placed six multinational auto suppliers on review for a possible ratings downgrade on fears of a potential bankruptcy at General Motors, Associated Press reports. Fitch said a GM bankruptcy would likely be followed by a bankruptcy at Ford, impacting suppliers even more. According to the rating agency, a bankruptcy of Chrysler would be unlikely to have the same impact. However, Chrysler LLC's suppliers have begun asking for cash on delivery for auto parts, the Associated Press reported last week.

Auto parts suppliers are already facing a steep global downturn in auto production. A bankruptcy by GM could result further contraction that would cause widespread shutdowns and bankruptcies throughout the supply chain, Fitch said.

Wall Street credit ratings firm Fitch Ratings placed the suppliers' issuer default ratings, which grade a company's ability to meet financial obligations, on watch. All but one company have extensive business interests in China and give business to many Chinese suppliers. The six companies put on the watch list are:

TRW Automotive Holdings Corp., one of the world's top suppliers of automotive systems, modules and components to global vehicle manufacturers and related aftermarkets. TRW has 17 facilities in China.

American Axle & Manufacturing Holdings Inc.. a world leader in the manufacture and engineering of driveline systems, chassis systems and forged products. They have several facilities in China and supply Chinese automakers such as Chery and Brilliance.

ArvinMeritor, Inc., a $8 billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. They have several joint ventures in China.

Visteon Corporation, a leading full-service supplier to automotive manufacturers and to the global automotive aftermarket. With 24 manufacturing sites, Visteon is deeply engaged in China.

Johnson Controls Inc, a global market leader in automotive systems, a major supplier of integrated seating and interior systems, and batteries.  Johnson Controls operates more than 10 plants in China and is engaged in several Chinese JVs.

Hayes Lemmerz International, Inc., one of the world's leading suppliers of wheels, brakes, power train, suspension, structural and other lightweight components. Hayes Lemmerz  is the only company out of the seven being monitored by Fitch for a possible default risk that does not have a presence in China, and does not even sell in that market.

In Europe, UK supplier Wagon Automotive, Germany's TMD Friction and Tedrive have already said they would file for insolvency for parts of their companies. TMD Friction was one of the first foreign friction companies to come to China. It operates two manufacturing plants, one in the northern part of China (Shijiazhuang) and one in the south (Hangzhou).

Some 80 automotive suppliers around the world could be facing insolvency in the near future, German industry weekly Automobilwoche cites consultancy Roland Berger's industry expert Marcus Berret as saying.  In the article to be published today , the magazine also quotes German supplier ZF Friedrichshafen's Chief Executive Hans-Georg Haerter, who said that particularly companies that were bought by private equity firms could face trouble ahead. 'It will be very sobering for many suppliers when the bills for October, November and especially December are paid in coming weeks,' Haerter said.

About the author: Bertel Schmitt is CEO of Hong Kong based parts sourcing company Sinamotive. Before founding Sinamotive, with the assictance of U.S. venture capital, Mr. Schmitt was a marketing consultant to Volkswagen AG.

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