Fitch: Slower Growth Leads to a Stable Outlook for U.S. Autos in 2016
OREANDA-NEWS. Fitch Ratings' rating and sector outlooks for U.S. auto manufacturers and suppliers in 2016 are both stable. This reflects Fitch's expectation for modest global industry sales growth in 2016, as well as the industry's post-recession efforts to improve operational flexibility and strengthen balance sheets. However, with the substantial improvement already seen in industry credit profiles since the last recession, Fitch expects the pace of credit profile improvement to slow in the near term, especially as some issuers have shifted their focus from further credit profile improvement to other priorities, such as acquisitions or cash returns to shareholders.
Fitch expects U.S. light vehicle sales to rise to 17.5 million units in 2016, representing a 1.7% increase vs. Fitch's light vehicle sales forecast of 17.2 million in 2015. Fitch expects global light vehicle sales to rise between 1% and 3% in 2016. U.S. growth will be driven by modest economic improvement, low fuel prices, favorable consumer credit conditions, and lingering pent-up demand. Outside the U.S., sales growth will be led by modest to moderate growth in Western Europe and China, offset by weakness in Brazil and Russia.
Downside credit risks in the near term include a likely increase in U.S. interest rates, economic weakness in key global markets, heightened industry consolidation activity, and an increased focus on shareholder-friendly activities. Longer term risks include slow and uneven growth in global auto demand and tightening emissions and safety requirements. The potential for new industry entrants and business models to disrupt the traditional global auto industry also poses a longer-term risk.
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