Fewer cars bought. Fewer miles driven. Less travel. Reduced or eliminated paychecks and massive spikes in unemployment. The problems are legion for the US auto sector. Even with some initial estimates of the difficulties proving to be overstated, credit challenges could remain with the US auto sector for some time.
The UK auto sector, where production has been reduced drastically and jobs are being cut, finds itself in a similar situation.
Last Two Months Have Brought Default Risk Increase of More Than 20% for US Auto Companies
US Auto and Auto Parts Industry
Credit quality continues to plummet for the US auto sector, deteriorating 10% from the prior month and 20.4% over the last two months, compared to a decline of 22.2% versus the same point last year. The average probability of default for the sector is 43.4 basis points, compared to 39.5 basis points in the prior month, 36 basis points two months prior, and 35.5 basis points at the same point last year. While the Credit Benchmark Consensus (CBC) rating for this sector has remained bbb- over the last 12 months, it is now fewer than 5 basis points away from a downgrade to the high yield bb+ category. More than 80% firms with a rating are at bbb or lower.
UK Auto and Auto Parts Industry
Credit quality is also worsening for the UK auto sector, deteriorating 6% over the last month and 7% over the last two months. Year-over-year, the drop is 9%. Average probability of default for this sector is now 61.6 basis points, compared to 58.1 basis points the prior month, 57.5 basis points two months prior, and 56.3 basis points at the same point last year. The current CBC rating for this sector is bb+, unchanged over the last year, and more than 80% of the firms with a rating are at bbb or lower.
To learn more about the data behind this article and what Credit Benchmark has to offer, visit https://www.creditbenchmark.com/.
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