Bangkok--6 Dec--Moody's Investors Service In a new report, Moody's Investors Service maintains a stable rating outlook for Asia's auto parts producers, although the sector faces challenges arising from the rapid pace of recent growth and higher commodity prices, particularly for energy and rubber. Authored by Moody's Vice President and Senior Analyst Chris Park and Analyst Wonnie Chu, the report examines recent trends affecting Asian auto parts manufacturers, including companies rated by Moody's in China, Korea and Indonesia. "Sustained high energy prices have squeezed margins at some of Asia's auto parts companies, particularly tire manufacturers that face exposure to high rubber prices, although competitive cost structures have helped cushion the impact somewhat," says Park. "At the same time, companies in the sector have increased capacity in response to growing demand and better economic conditions; this expansion introduces a degree of execution risk and can lead to negative free cash flow," he adds. Park notes that companies in the sector have a degree of capex flexibility that helps them respond to adverse market conditions, and some companies have had some success in passing on raw material price increases to customers, improving operating performance. "As such, capex is expected to pick up in 2008, in line with continued strong demand," he says. "While competitive positions provide a measure of ratings support for market leaders, qualitative measures, including financial management practices and the pace of technological innovation, also play a large role in determining the companies' ratings," Chu adds. "Solid economic growth across the region should continue to support current ratings, and while the sector's tire manufacturers do not have strong liquidity profiles, they do not face refinancing risks in the near term," she says. The report -- Rapid Growth and Rising Costs Pose Credit Challenges -- is part of Moody's Industry Snapshot series, which offer succinct and incisive looks at particular sectors, and can be found at www.moodys.com.