Meridian Automotive Systems Inc. Downgraded; Outlook Negative
NEW YORK (Standard & Poor's) Feb. 14, 2005--Standard & Poor's Ratings Services
said today that it lowered its corporate credit rating on Dearborn,
Mich.-based Meridian Automotive Systems Inc. to 'CCC+' from 'B+'. Meridian has
total debt of about $600 million. The ratings outlook is negative.
"The action reflected increased concerns about the company's operating
performance, cash flow generation, and liquidity amid very challenging
industry conditions, including reduced vehicle production, pricing pressure,
and higher raw material costs," said Standard & Poor's credit analyst Martin
King. "Operating results are expected to remain under pressure during the next
year. Ratings could be lowered should financial performance remain weak,
liquidity tighten, or debt leverage escalate, which may require the company to
pursue a financial restructuring."
Industry conditions for automotive suppliers have deteriorated in recent
months. Vehicle production levels of Meridian's two largest customers, Ford
Motor Co. (BBB-/Stable/A-3) and General Motors Corp. (GM) (BBB-/Stable/A-3),
declined 8% in the fourth quarter of 2004 as both companies attempted to
reduce bloated inventory levels, especially for sport utility vehicles and
light trucks. Ford and GM together make up more than 65% of Meridian's
revenue, and SUVs and light truck make up about 70% of revenue.
Production cuts have continued into the current quarter, with each
company expecting to reduce production by 9% from year-ago levels. Additional
cuts may be necessary later in the year if the lackluster sales pace does not
improve and inventories remain high. The weak financial performance of some
auto manufacturers has led to very aggressive pricing demands of their
supplier base as the automakers attempt to reduce their costs and improve
their own financial performance.
Auto suppliers have also had to absorb large increases in raw material
costs. Meridian, which makes bumper systems, composite plastic modules,
structural components, and interior components, is a large user of steel,
plastic resin, and other commodities. Although some of the company's raw
materials are purchased through customer resale programs that insulate it from
cost increases, Meridian is exposed to market price fluctuations for a
significant portion of its total material purchases.
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings
Search.
| Primary Credit Analyst: | Martin King, New York (1) 212-438-7800; martin_king@standardandpoors.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.