Fitch: Stable November Paves Way for Smooth 2012 for US Auto ABS

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NEW YORK--(BUSINESS WIRE)-- With small declines in both delinquencies and losses in November, stable asset performance for U.S. auto ABS will likely stay the course in 2012, according to the latest index results from Fitch Ratings.

U.S. prime and subprime auto loan ABS continued to show performance stability in November posting marginal improvements in both delinquencies and losses month-over-month (MOM).

Asset performance will likely stay on track in 2012, with continued low prime annualized net losses (ANL) next year. Fitch expects the auto ABS Rating Outlook to stay Positive, following a similar 2011. Year-to-date, Fitch has issued 75 rating upgrades in 2011 through November, versus 61 for the same period in 2010.

Key areas of focus next year for auto ABS performance will be the state of the U.S. job market and the health of the wholesale vehicle market. Fitch will also be closely watching ongoing volatility in the global geopolitical climate to determine if there are any inlays on auto ABS asset performance.

Fitch's prime 60+ days delinquency index dropped 4.2% to 0.46% in November over October. November's delinquency rate was well within levels recorded in 2005-2007, and 14.8% improved over November 2010.

ANL dropped by 7% in November versus October, to 0.53%. Year-over-year (YOY), losses were 36% lower in last month compared to 0.83% recorded in November 2010.

In the subprime sector, 60+ day delinquencies dropped to 3% in November. This represents a 2.6% improvement over October and a 3.9% improvement from a year earlier. ANL dropped 3.7% to 6.69% in November MOM, and were 5% lower YOY versus a year earlier.

As per its Dec. 14 report '2012 Outlook: U.S. Auto Manufacturers and Suppliers', Fitch's Corporate rating group expects the credit profiles of the U.S. original equipment manufacturers to strengthen further in 2012. This assumes global economic conditions do not weaken materially from current trends. Stronger manufacturers with stronger captive finance units would imply strong brand/vehicle values and support disciplined servicing practices in auto ABS transactions. Fitch expects U.S. auto sales of approximately 13.2 million units in 2012.

Further, Fitch stated that the auto industry will continue to be exposed to the risks of rising fuel prices in 2012. In the auto ABS sector, higher fuel prices typically dampen demand for larger vehicles such as trucks and SUVs. This in turn ultimately impacts used vehicle values and can drive loss rates higher. However, recent fuel efficiency improvements in these larger vehicle segments could offset this risk to an extent and lessen the drop in demand for these vehicles, if fuel prices were to rise again in 2012.

Fitch's indices track the performance of $52.89 billion of prime auto ABS issued from 110 transactions. Of this amount, $43.46 billion is prime auto ABS (from 88 transactions) and the remaining $9.42 billion subprime auto ABS (from 22 transactions).

Additional information is available at 'www.fitchratings.com'

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