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Fitch: Auto Market to Grow Further in US, China; Bottom Out in Europe

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2014 Outlook: Global Automotive Manufacturers http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726364 SEOUL, December 13 (Fitch) Fitch Ratings expects the Rating Outlook for global auto manufacturers to remain broadly Stable in 2014, assuming modest global auto demand growth, which should enable companies to generate stable free cash flow, strengthen liquidity and slightly improve their credit metrics. Fitch says in a new report that it expects the US market to grow modestly in 2014 on the back of slowly improving economic conditions, increasing consumer confidence, strong consumer credit access, low financing rates, and replacement demand. The Chinese market is also expected to grow steadily in the short to medium term despite slightly lower GDP growth assumptions in 2014. Fitch expects auto sales in Europe to bottom out in 2014 and rebound moderately throughout the year after six years of decline. Foreign exchange remains a key issue for the auto industry given the difficulty in matching production capacity to local demand. In 2013, a stronger euro had a negative impact on European automakers' profitability, while Korean manufacturers were hurt by the won's strength. In contrast, Japanese automakers benefited, to varying degrees, from a weaker yen. Continued sales growth in key markets, including the US and China, the expected sales recovery in Europe, and the positive effects from various cost saving measures should support operating margins in 2014. This should offset the potential increase in raw material prices, pricing pressure from competition in several markets and unfavourable currency developments. The wider margins will support cash generation in spite of continuous investment. Automakers' liquidity positions are likely to remain robust. Most European automakers' financial strategies now include a higher liquidity cushion through the year and through the cycle. Fitch expects US automakers to maintain strong liquidity positions, although there could be an increase in shareholder-friendly activities. Fitch expects Asian automakers to also maintain robust liquidity, although they will likely increase their investments. Fitch could revise the Sector Outlook to Positive if stronger economic conditions lead to higher-than-expected global demand, and sustained profitability and cash flow improvement. Deterioration in economic conditions that results in a sharp fall in global auto demand and lower margins could lead to a Negative outlook. The full report, "2014 Outlook: Global Automotive Manufacturers" is available at www.fitchratings.com or by clicking on the link above. Contact: Jeong Min Pak Senior Director +82 2 3278 8360 Fitch Ratings Limited, Korea Branch 9F Kyobo Securities Building 26-4 Youido-Dong, Youngdeungpo-Gu Seoul Stephen Brown Senior Director +1 312 368 3139 Emmanuel Bulle Senior Director +34 93 323 84 11 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: [email protected]. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.