Adient PLC Ratings Placed On CreditWatch Negative Due To Pandemic Risks

  • Adient is suspending its fiscal 2020 outlook due to the unprecedented global economic uncertainty caused by the COVID-19 pandemic.
  • As a result of the pandemic and the resulting economic pressure, we have lowered our regional light-vehicle sales forecast. We project sales to fall 15%-20% in the U.S. and Europe and 8%-10% in China.
  • Consequently, we are placing all of our ratings on Adient on CreditWatch with negative implications.
  • We expect to resolve the CreditWatch when we receive additional information about the effect of the coronavirus on the company's earnings and cash flow.
NEW YORK (S&P Global Ratings) March 27, 2020—S&P Global Ratings today took the rating actions listed above.
Adient announced that it is suspending its FY2020 outlook due to the unprecedented global economic uncertainty caused by the COVID-19 pandemic. The spread of the coronavirus has triggered unprecedented containment actions, including the shutdown of many businesses. Major automakers have also announced they are halting production in order to protect workers and boost containment efforts. S&P Global Ratings' U.S. economic team has said that, due to the severity of the coronavirus, the U.S. is entering recession--if it is not already in one. Also, U.S. GDP growth in the second quarter has been revised down to negative 12% from a negative 6%.

The CreditWatch negative placement reflects our view that there is at least a 50% chance we will lower our ratings on Adient by one notch if its plants remain idle for longer than we expect, causing its cash flow generation to turn negative, eroding its liquidity, and increasing its debt leverage with no signs of an imminent improvement. The length of the shutdown will depend on how soon the coronavirus curve flattens, how soon governments relax restriction on movements, and how soon consumers regain confidence to purchase big-ticket items such as vehicles after the pandemic ends.
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