Standard & Poors is monitoring Magna International Inc.s bid for a stake in General Motors Opel European brand to see whether the purchase drains Magnas liquidity, S&P ratings analyst Greg Pau said today.
Magna is one of three North American suppliers that still has an investment-grade rating from S&P -- BBB, two steps above junk. But if purchasing the 20 percent stake in Opel drains Magnas liquidity, S&P may lower that rating, Pau said during an S&P conference call with journalists.
Last week, a consortium led by Magna reached a deal to buy Opel. But the group wont sign a contract for four weeks, Magna co-CEO Siegfried Wolf has said.
Magna already is on S&Ps CreditWatch list, meaning analysts are considering lowering its rating. When Chrysler LLC declared bankruptcy April 30, S&P put Magna on the list to review how Chryslers restructuring would affect the parts maker. Magna, of Aurora, Ontario, is the largest supplier in North America, based on 2008 sales to automakers.
European suppliers tend to be in better shape than their North American peers, the S&P analysts said today. S&P rates 11 European suppliers, and five have investment-grade ratings. But European markets are currently volatile, analyst Barbara Castellano said.
Light-vehicle sales in countries such as Germany and France benefit from scrappage incentives, while sales in Great Britain and Spain are down sharply. That volatility, combined with the global recession, could hurt European suppliers in coming months, she said.
In addition to Magna, the other investment-grade North American suppliers are Johnson Controls Inc. and BorgWarner Inc.
Magna ranks No. 4 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $23.30 billion in 2008.