In This Issue: For Global Automakers, The World Is Flat-Except In Asia: A tour of today's global auto market is hardly the stuff of a sunny afternoon cruise with the top down. Instead, carmakers find themselves forced to contend with a host of hazardous road conditions, ranging from uncertain economic prospects in major markets to fuel prices that look like they want to go only upward.A Summary Of Ratings And Risk Fundamentals For The Global Auto Industry: The world auto business is becoming increasingly competitive, as established carmakers and suppliers, plus a variety of newcomers, try to increase their share of essentially stagnant car markets. Standard & Poor's outlook for the global auto industry remains negative; even though some rated automakers are prospering, others are struggling. Are GM And Ford Making The Right Turns In Their Turnaround Plans?: GM and Ford have ambitious, multiyear turnaround plans for their respective North American operations that are far from completed. GM announced most of its plan in November 2005 and subsequently added further job cuts. Ford announced its comprehensive restructuring plan in late January 2006 and nine months later accelerated the timetable. Profits For U.S. Full-Size Pickup Makers May Be Harder To Haul In: The U.S. full-size pickup truck market is at an historical crossroads, as new-product introductions are increasing competition and demand remains below the peaks of recent years. Standard & Poor's believes these companies' sales of full-size pickups will remain highly profitable. The Steady-But Slow-Rise Of Hybrids And Diesels In The U.S. Auto Market: One of these days, the purveyors of conventional wisdom say, rising fuel prices plus a relentless push for higher corporate average fuel economy standards are going to jump-start U.S. demand for more fuel-efficient vehicles, such as gas-electric hybrids, for instance, or new, lower-polluting diesels. U.S. Auto ABS Market Remains Attractive For Ford And GM, But Bankruptcy Risk Leads To Changes: When Ford and GM lost the investment-grade ratings on their corporate debt in 2005, making traditional borrowing more costly, they found refuge in the asset-backed securities (ABS) market. Their combined auto ABS volume hit a record $43.6 billion that year, and it wasn't an anomaly. Congestion In Europe's Auto Market Will Make Higher Profits Elusive: European automakers' uphill struggle for profitability is getting much steeper in 2007. Saturated demand for new cars and production overcapacities have already resulted in average profitability levels of just 1% to 3%. Proposed EU Clampdown On CO2 Emissions Threatens Profitability Of Europe's Automakers: Europe's automakers, some of which are already under pressure from razor-thin margins, now face a further threat to their financial performance: Punitive EU legislation designed to curb carbon dioxide (CO2) emissions from passenger cars. Asian Automakers' Global Growth Should Continue In 2007 Despite Stagnant Local Market: The credit outlook for the Japanese auto sector in 2007 should remain generally stable. Top automakers Toyota and Honda should maintain their strong growth trend globally. Toyota projects 8.47 million unit sales globally for its fiscal year ending in March 2007. On The Road To Big Profits In China And India, Global Automakers May Hit Some Bumps: India and China, with populations of more than a billion each, fewer than 20 in 1,000 driving-age inhabitants owned a car in 2006. Compare this with 900 car owners per 1,000 inhabitants in the U.S. Not Much Added Shine For Auto Stocks This Year: Automakers' stock prices are slightly underperforming the broad S&P 1,500 stock index so far in 2007 and Standard & Poor's Equity Research Services' fundamental outlook for this subindustry is negative, although prospects differ from company to company. Most Trends Remain Negative In North American Auto Supplier Industry, Less Severe Elsewhere: Despite a recent surge in interest from private equity firms and other investors, the North American auto supplier industry is facing steep challenges. There has been no meaningful letup in now-familiar risks such as intense competition, pricing pressure, and production cuts by the large U.S.-based automakers. Competition, Complexity Put Global Automakers To The Test: The complex, cyclical, and competitive nature of the global auto industry makes credit analysis particularly challenging. Changing consumer tastes; large, established, but also stagnant markets; and for some, legacy cost burdens work to the advantage of some automakers and against others. | 
