(The following statement was released by the rating agency) Link to Fitch Ratings' Report: European Auto Manufacturers’ Peer Comparison - Volume Manufacturers Accelerate https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866849 BARCELONA/LONDON, June 18 (Fitch) Fitch Ratings has published a detailed peer comparison on European automotive manufacturers. The report reviews the different factors assessed in the Rating Navigators for European car manufacturers and compares how each company is positioned against its peers on all characteristics exposed in its Rating Navigator. Fitch also highlights the factors for which each manufacturer is relatively better positioned than its Issuer Default Rating (IDR) and those for which the group is weakly positioned and hence that constrain its ratings. Fitch considers that credit profiles have strengthened across the European car sector in the past two to three years and expects further improvement. This is illustrated by the upgrades of Peugeot SA (PSA) to 'BB-' with a Positive Outlook in March 2015, Renault SA to 'BBB-' in November 2014, and Volkswagen AG to 'A' in May 2014. Fiat Chrysler Automotive NV (FCA) continues to face challenges, notably in terms of free cash flow (FCF) generation, but the group has flexibility compared to its positive rating guidelines. BMW AG, Daimler AG and Volkswagen continue to demonstrate robust credit profiles in line with the 'A' category. The German manufacturers' business and financial profiles remain stronger than those of their European peers, despite the recent rating actions on Renault and PSA. However, we believe that the gap with volume manufacturers has narrowed and that the latter will gradually move back to the high end of the non-investment grade category, with Renault already investment grade. The operating margins of most manufacturers have increased since the weak results posted in 2012. The improvement is particularly noticeable at Renault and PSA, whose automotive operations' margins turned positive again and which we expect to increase to 3.0%-3.5% through 2016. We also expect BMW's, Daimler's and Volkswagen's EBIT margins to remain above 9%, 8% and 6%, respectively, which is commensurate with the 'A' category. Stronger underlying earnings and streamlined working capital are bolstering cash generation. However, we expect the improvement in cash from operations to be partially absorbed by aggressive investments, earmarked for growth and new technology developments, and more generous dividends as net income grows. This should limit the extent of FCF growth, although we expect FCF margins to remain largely positive. Leverage has fallen across the sector, especially at the lower end of the rating scale. We expect German manufacturers to maintain a net cash position in the next two to three years and project Renault's and PSA's net adjusted leverage to fall towards breakeven by end-2017. We expect FCA's leverage to decrease, but to remain above peers. We believe that business profiles have also improved. Geographic and product diversification has increased across the sector and most groups are less reliant on Europe and on a couple of models. However, the industry's fundamental issues have not disappeared, despite a material improvement in credit profiles. Production overcapacity, intense competition and price pressure, heavy regulatory burdens and weak long-term average cash generation, return on sales and on capital will continue to burden manufacturers and constrain upgrades. The report, entitled 'European Auto Manufacturers' Peer Comparison - Volume Manufacturers Accelerate' is available at www.fitchratings.com or by clicking the link above. Contact: Emmanuel Bulle Senior Director +34 93 323 84 11 Fitch Ratings Espana S.A.U. 85 Paseo de Gracia 08008 Barcelona Tom Corcoran Associate Director +44 20 3530 1231 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: [email protected]. Additional information is available on www.fitchratings.com