The Indian auto ancillary industry is sitting on a double-edged sword that has presented a bleak prospect for the industry in the near term. On one hand, Chrysler and General Motors bankruptcies have adversely affected the revenue visibility of the industry, the depreciation of the rupee against the dollar is likely to further grim the picture on the other hand, according to a report by Fitch Ratings.
After the bankruptcies episode, the high degree of consolidation in the US auto market is likely to come in the way for early revival of the industry which is dependent on the US automobile industry. The export-dependent auto ancillary industry has suffered a sharp decline in sales and profitability in the face of the slowdown in the global markets. Chrysler has escaped bankruptcy, but the GM is likely to come out with bankruptcy in the coming weeks.
Fitch Ratings has said that given the lower export revenues and depreciation of the rupee against the dollar is a cause of concern, leaving some auto suppliers to restructure their borrowings into longer maturities.
Fitch Ratings has also pointed out that such a situation, if prolongs, could delay the payment from these automakers accordingly.