Fitch Teleconference: Muni Implications of U.S. Auto Industry Decline 11/16 11AM ET

Business Wire, Nov 16, 2006

NEW YORK -- The decline of the U.S. auto industry has had negative consequences for regional, state, and local economies that will likely continue, according to Fitch Ratings, who will hold a teleconference tomorrow morning at 11:00 a.m. EST in conjunction with the release of a special report titled 'Downshifting: Public Finance Implications of the Domestic Auto Industry Decline'.

Fitch public finance analysts John Ceffalio, Melanie Shaker, Ken Weinstein, along with Fitch corporate analysts Mark Oline and Nathan Spunt will participate in the call to discuss the report, which is jointly authored by Fitch's public finance and corporate analysts and it examines the effects of the troubles at General Motors, Ford Motor, DaimlerChrysler, and their suppliers on state and local governments. Further details on the teleconference are below.

Other key findings include:

--Ford, GM, and DaimlerChrysler have reduced their combined North American workforce by nearly 100,000 employees (or 18.6%) between 2000 and 2005. Fitch estimates that GM and Ford will further reduce their workforce by 85,000 between 2006 and 2008;

--Suppliers of these two companies have also drastically reduced the size of their workforce. While Delphi and Visteon are most prominent, smaller suppliers may be less visible and particularly vulnerable to failure. Total U.S parts employment was down 161,500 or more than 19% from 2000-2005.

--Four states -- Kentucky, Indiana, Michigan, and Ohio -- have the largest concentration of auto and auto parts manufacturing. The economy in each of these four states has underperformed the nation since 2000;

--The effect of these cuts is most dramatic in Michigan, which bears the brunt of the white collar cuts and lacks better-performing foreign auto plants. Michigan ranked 50th among the states in job growth from 2000-2005 and 49th in income growth. Michigan, especially the Detroit region, still has a sizeable vulnerability to additional job cuts, with 5.1% of the state's jobs and 9.2% of income coming from the auto and auto parts sectors in 2005. The poor economy contributed to a downgrade of the state's general obligation credit rating in 2004 from AA to AA, and the placement of a Negative Rating Outlook earlier this year.

--Economic growth in Indiana and Ohio has been also been stunted by the auto sector during this decade. However, some foreign investment, especially in Indiana, is stabilizing the sector, and in Ohio the overall size of the economy has muted impacts. Vulnerabilities to additional cuts remain in several regions of Ohio and Indiana. Ohio's general obligation rating has remained at AA throughout the decade and the rating outlook is stable. Indiana's lease rating has remained at AA throughout the decade;

--Kentucky, while still vulnerable to additional domestic cuts, has seen few jobs cuts to date, in large part due to large and growing presence of Toyota in Georgetown. However, the state does retain some vulnerability to future cuts, particularly at Ford, which maintains two assembly plants in Louisville. Kentucky's lease rating has remained AA- throughout the decade.

--At the local level, auto restructuring can have a negative impact on credit quality because of economic weakness, revenue deterioration, and even increased need for services;

--In large part, local credit ratings in communities that have suffered job losses have held firm, with credit quality maintained through prior planning and use of timely steps to maintain fiscal stability. Notable exceptions include the cities of Detroit (rated 'BBB') and Pontiac, Michigan (rated 'BB-'). Both are on Rating Watch Negative;

--State and local governments in the region are likely to continue to contend with economic pressures brought on by the declining auto industry.

To participate in the teleconference, interested parties should call 1-877-241-2557 five minutes prior to the 11 a.m. start time and give the title of the call 'Public Finance Implications of Domestic Auto Industry Decline' or the call leader name 'John Ceffalio'. To ensure there are sufficient telephone lines available, use internal conferencing capabilities, if possible, for multiple listeners at a single location.

A replay of the teleconference will be available starting Thursday, Nov. 16 at 2:00 p.m. EST until Nov. 23 at 11:59 p.m. EST. To listen to the teleconference replay, participants should call 1-800- 642-1687. The conference ID number for the replay is ' 2233210'.

Additionally, the teleconference will be archived on the Fitch Ratings web site. Interested parties can find the appropriate link at the 'Teleconferences and Online Events' link, which is located under the 'Resource Library' at www.fitchratings.com.

The report is now available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.