Posted: March 24, 2008

From AFX News Limited

MUMBAI -- Fitch Ratings said leading German automotive suppliers are in a comparably good position to deal with the tough trading conditions of the auto supply industry thanks to technological strengths, enlarged global reach and robust profitability.

However, credit profiles will continue to diverge between issuers with strong technology and those that are highly dependent on specific regions, original equipment manufacturers and products not commanding the necessary resources to compete globally, the rating agency said.

While considerable challenges continue to pressure the auto supply sector, German top Tier-1 suppliers have improved their competitive position versus other European and U.S. suppliers, Fitch said.

But this has to be put into perspective, Fitch said. The present market environment is very demanding, with unabated price pressure, high raw material costs, exchange rate headwinds, mature western markets and rising ecological standards weighing on the sector's credit quality.

Two of the world's top five auto suppliers, Bosch (the largest global supplier) and Continental AG, are based in Germany.

Also, about a quarter of the biggest 100 global auto suppliers are of German origin. These include sizable private companies like ZF Friedrichshafen AG, Benteler AG and Mahle GmbH, and medium-sized companies like Leoni AG, Europe's leading producer of car wiring systems, complemented by specialized niche suppliers like Elring Klinger AG, a successful producer of cylinder-head gaskets.

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