Fitch: Stable 2016 Outlook for Japanese, Korean Auto Manufacturers

Fitch Ratings says the outlooks for Japanese and Korean automotive manufacturers in 2016 are stable for the sector and issuer ratings. A modest rise in global new vehicle sales will support credit profiles, despite challenging conditions in some markets and a weakening global economic outlook.

We expect Toyota Motor Corporation (Toyota, A/Stable), Honda Motor Co., Ltd (Honda, A/Stable) and Nissan Motor Co., Ltd. (Nissan, BBB+/Stable) to maintain stable profitability and cash flows - stemming from cost reductions, solid product pipelines and a continued weak yen to the US dollar. We see profitability and cash flows at Hyundai Motor Company (HMC, BBB+/Stable) and Kia Motors Corporation (Kia, BBB+/Stable) improving in 2016, boosted by new product launches and a more favourable FX environment.

We expect Japanese and Korean automakers to maintain strong credit metrics and robust liquidity. Positive free cash flow generation will increase net cash positions at Toyota and Honda, and reduce Nissan's net debt. We also expect net cash positions at Hyundai and Kia to resume growth following a large, one-off land acquisition completed in 2015.