Bad as 2008 Was for Autos, Fitch Expects 2009 To Be Worse

(MoneyWatch)  As bad as 2008 was for the global auto industry, the outlook for 2009 is even worse, according a gloomy Fitch Ratings report this week.

The Fitch report underscores that the auto industry downturn has spread from mature markets like the United States, Japan and Western Europe to previously fast-growing developing markets like India and China.

"Weak GDP growth and the effects of the international financial crisis will continue to have a significant impact on the global auto industry, creating downwards pressure on carmakers' credit profiles in the short to medium term," said Emmanuel Bulle, senior director in Fitch's automotive team.

"In addition, the length and severity of the current crisis are still unknown, whilst manufacturers' responses to the crisis are still evolving," Bulle said in the Feb. 10 report.

Fitch said that a year ago, it entered 2008 with a negative outlook solely on the U.S. auto industry. India was on an upswing. Japan, Europe, South Korea and China were all expected to remain at least stable in 2008. This year, it has a negative outlook for every major market.

"This follows years of rapid and substantial growth in these (developing) regions, which mitigated poor growth or sale declines in mature markets," the ratings agency said.

Another substantial risk is the interaction among volatile fuel prices; fickle consumer demand for innovative, fuel-saving powertrains; and the limited ability of the automakers to shift their product mix fast enough to respond to changes in demand.

Fitch did note a couple of positive trends: widespread government support in the form of loans, loan guarantees and more general economic stimulus; plus improving raw-material prices.

Chart: Fitch Ratings