Auto parts outlook stabilizes, Moody's says

New York, June 12 - The outlook for the leveraged auto parts industry has stabilized from the "extremely pessimistic" prospects last fall, Moody's Investors Service said Wednesday.

Indeed the rating agency said occasional upgrades in the sector are now a possibility.

"Our current view of the auto supply parts industry contrasts sharply with the extremely pessimistic outlook we held last fall, which was based upon the still highly recessionary economic indicators of the time," said Moody's vice president and senior analyst Lisa Matalon in a news release.

Matalon expects the number of downgrades in the automotive sector will "normalize" during the latter part of 2002 and that "occasional rating upgrades may be possible."

Low dealer inventory levels, confirmed OEM production schedules, rising consumer confidence, and substantially lower supplier breakeven levels contributed to Matalon's view.

In addition, capital markets activity on both debt and equity sides during 2002 had increased the sector's overall liquidity, she said.

Although May showed an "unexpected and precipitous" drop in the Seasonally Adjusted Average Sales Rate to 15.7 million units from 17.3 million, she said it is probably not a reason to question that there will be sustained increases in demand over the long run.

But she added: "We do agree, however, that near-term setbacks are indeed still possible, especially should North America experience a double-dip recession."

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