Fitch Places Seven U.S. Auto Suppliers on Rating Watch Negative

Fitch Ratings has placed the Issuer Default Ratings (IDR) of the U.S. auto suppliers listed below on Rating Watch Negative, based on the impact of a potential bankruptcy filing by General Motors (and Fitch's view that this would be followed by a bankruptcy at Ford). Given its smaller profile, it is unlikely that a bankruptcy filing by Chrysler would have the same impact. Industry bankruptcies could result from either the failure of the auto legislation currently under consideration in the U.S. Congress, or the failure of the Detroit Three to develop viable restructuring plans in the several months prior to the expiration of the bridge loans included in the current legislation.

In 2009, auto suppliers are already facing a steep global downturn in auto production, including a deeply depressed production forecast in the U.S. and Europe (Please see Fitch's report: 'Fitch Sees Grim 2009 Outlook for U.S. Auto Companies', dated Dec. 9, 2008, at www.fitchratings.com). In the event of a General Motors bankruptcy, Fitch believes that the resulting contraction in auto production, the supply chain, trade credit and capital-access would cause widespread shutdowns and bankruptcies throughout the supply chain. Given the cliff-risk nature of the risks involved, Fitch has tried to detail below the extent of the potential rating actions that would be taken in the event of a GM bankruptcy. In any event, Fitch will continue to take individual rating actions in the sector as events unfold over the next several weeks and months. Fitch notes that even if the OEMs avoid bankruptcy, major restructurings of their operations will occur, causing material changes in the operations of their Tier I suppliers. These restructurings could also lead to ratings actions, providing further rationale for placing these suppliers on Rating Watch Negative.

The following table shows the auto suppliers placed or remain on Rating Watch Negative and the ratings most likely to result in the event of a GM bankruptcy:

Companies Current IDR/Prospective IDR

American Axle 'B'/'CC';

ArvinMeritor 'B'/CCC';

Hayes-Lemmerz 'B'/CCC';

Johnson Controls 'A-'/'BBB+';

Tenneco 'BB-/B-';

TRW 'BB'/'B-';

Visteon 'CCC'/'CC'

Companies not included in the rating actions:

Cummins 'BBB+';

Goodyear 'BB-';

Navistar 'BB-'.

Despite improved diversification by most Tier 1 suppliers -- across manufacturers, geographies and product lines -- the decline in supplier revenues and operating cash flow through 2009 resulting from a GM bankruptcy would likely produce covenant violations across the vast majority of suppliers. Of equal concern, Tier 2 and three suppliers are likely to experience widespread bankruptcies through loss of volume, lack of receivables financing, and restricted financial and trade credit. Fitch expects that a collapse of trade credit throughout the supply chain would put at risk the domestic operations of these suppliers, as well as their financial viability. TRW and Tenneco remain better positioned given their global operations, but Fitch expects that these two companies, at a minimum, would require renegotiations with their bank group. For more details, please see Fitch's report: 'Liquidity Focus: U.S. Auto Suppliers, dated Oct. 27, 2008'.

Ratings on Rating Watch Negative are as follows:

American Axle & Manufacturing Holdings, Inc.

--IDR 'B';

American Axle & Manufacturing, Inc

--IDR 'B';

ArvinMeritor

--IDR 'B';

--Secured 'BB';

--Senior unsecured 'B/RR4'.

Hayes-Lemmerz International, Inc

--IDR 'B'.

Hayes-Lemmerz Finance Luxembourg S.A

--IDR 'B';

--Senior unsecured 'B-/RR5';

--Senior secured 'BB/RR1'.

HLI Operating Company Inc.

--IDR 'B';

--Senior secured 'BB/RR1'.

Johnson Controls

--IDR 'A-'.

York International

--IDR 'A-'.

Tenneco

--IDR 'BB-';

--Senior unsecured 'BB-';

--Subordinated 'B';

--Senior secured notes 'BB';

--Senior secured credit facilities 'BB+'.

TRW Automotive Holdings Corp

--IDR 'BB'.

TRW Automotive, Inc

--IDR 'BB';

--Secured 'BB+';

--Senior unsecured 'BB-'.

Visteon Corp

--IDR 'CCC';

--Senior secured 'B/RR1';

--senior unsecured 'CC/RR6'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.