BANGKOK--JAN 24--TRIS
THAI RATING AND INFORMATION SERVICES (TRIS) AFFIRMED 24 JANUARY
1997 A "BB+" RATING FOR THE 720 MILLION BAHT SENIOR DEBENTURES DUE IN 1999
OF SWEDISH MOTOR CORPORATION PLC (SMC). TRIS BASED ITS RATING ON THE
INCREASINGLY COMPETITIVE AUTOMOTIVE INDUSTRY AND THE COMPANY'S STILL WEAK
BUT IMPROVING FINANCIAL PROFILE. SMC'S VULNERABILITY TO PROTRACTED
RECESSION IN ITS KEY MARKET RAISES SOME CONCERN. MOREOVER, SMC'S
FINANCIAL PERFORMANCE COULD WEAKEN SHOULD DEMAND FOR VOLVO AND CHRYSLER
SOFTEN.
SMC IS THE SOLE DISTRIBUTOR OF VOLVO IN THAILAND, HOLDING A 3.3%
SHARE IN THE PASSENGER CAR MARKET IN 1995. THE COMPANY HAS A BROAD BASE
OF CAR-RELATED OPERATIONS TO PROVIDE A ONE-STOP SHOPPING SERVICE TO ITS
CUSTOMERS. SMC HAS ALSO EXPANDED ITS PRESENCE IN FINANCIAL SERVICES
THROUGH SCANDINAVIAN LEASING PLC (SCAN) TO LESSEN THE IMPACT OF AUTO
INDUSTRY CYCLICALITY. SLOWER GROWTH IN DEMAND FOR PASSENGER CARS AND
FIERCER COMPETITION FROM FREE MARKET LIBERALIZATION HAS CAUSED VOLVO SOME
DIFFICULTIES. SMC HAS BEEN HURT BY A CONTINUED SALES DROP AND HIGHER
OPERATING COST, THUS, REDUCING ITS PROFIT MARGINS. SMC'S ABILITY TO
SUSTAIN ITS MARKET POSITION REMAINS TO BE SEEN. MUCH DEPENDS UPON THE
SUCCESSFUL ACCEPTANCE OF THE S40/V40 SERIES AND FUTURE LAUNCHES OF OTHER
NEW MODELS. REALIZING THAT COMPETITION WOULD INTENSIFY IN THE LUXURY CAR
SECTOR, SMC HAS DIVERSIFIED INTO THE OFF-ROAD VEHICLE SEGMENT WITH
CHRYSLER PRODUCT TO INCREASE ITS REVENUE STREAM AND MITIGATE RISKS. THE
CHRYSLER CHEROKEE FAMILY WAS WARMLY RECEIVED EVIDENCED BY SIGNIFICANT
INCREASES IN SALES FROM 470 UNITS IN 1994 TO 2,080 UNITS BY OCTOBER 1996.
IN ADDITION, THE COMPANY HAS ENTERED ANOTHER NICHE MARKET WITH CHRYSLER
NEON, A MEDIUM-SIZED PASSENGER CAR, AND WILL INTRODUCE CHRYSLER'S MINIVAN
IN 1997. CHRYSLER CAR OPERATIONS COULD BECOME SMC'S MAIN INCOME BASE
REPLACING VOLVO, WHICH HAS EXPERIENCED CYCLICALLY DECLINING DEMAND AS
RESULT OF THE DOWNTURN IN THE LUXURY CAR MARKET.
EARNINGS ARE EXPECTED TO INCREASE IN THE FUTURE FROM MAJOR NEW
MODEL LAUNCHES. CONSEQUENTLY, CASHFLOW ADEQUACY AND INTEREST COVERAGE
MEASURES SHOULD IMPROVE. TOTAL DEBT AS A PERCENTAGE OF CAPITALIZATION
SHOULD DROP TO A MODERATE LEVEL IN THE 50% RANGE FROM 77% LAST YEAR SINCE
ITS CAPTIVE FINANCE IS NO LONGER CONSOLIDATED. CAPITAL SPENDING NEEDS
PEAKED IN 1996 AND ARE NOT EXPECTED TO INCREASE IN THE SHORT TERM. TRIS
IS CONCERNED ABOUT RISING EXPENDITURES FROM INCREASED COMPETITION AS A
THREAT TO SMC'S PROFITABILITY.
NOTE: SWEDISH MOTOR CORPORATION PLC (SMC) TRIS'S RATING
SMC#1:720 MB DEBS DUE 1999 BB+
END.
THAI RATING AND INFORMATION SERVICES (TRIS) AFFIRMED 24 JANUARY
1997 A "BB+" RATING FOR THE 720 MILLION BAHT SENIOR DEBENTURES DUE IN 1999
OF SWEDISH MOTOR CORPORATION PLC (SMC). TRIS BASED ITS RATING ON THE
INCREASINGLY COMPETITIVE AUTOMOTIVE INDUSTRY AND THE COMPANY'S STILL WEAK
BUT IMPROVING FINANCIAL PROFILE. SMC'S VULNERABILITY TO PROTRACTED
RECESSION IN ITS KEY MARKET RAISES SOME CONCERN. MOREOVER, SMC'S
FINANCIAL PERFORMANCE COULD WEAKEN SHOULD DEMAND FOR VOLVO AND CHRYSLER
SOFTEN.
SMC IS THE SOLE DISTRIBUTOR OF VOLVO IN THAILAND, HOLDING A 3.3%
SHARE IN THE PASSENGER CAR MARKET IN 1995. THE COMPANY HAS A BROAD BASE
OF CAR-RELATED OPERATIONS TO PROVIDE A ONE-STOP SHOPPING SERVICE TO ITS
CUSTOMERS. SMC HAS ALSO EXPANDED ITS PRESENCE IN FINANCIAL SERVICES
THROUGH SCANDINAVIAN LEASING PLC (SCAN) TO LESSEN THE IMPACT OF AUTO
INDUSTRY CYCLICALITY. SLOWER GROWTH IN DEMAND FOR PASSENGER CARS AND
FIERCER COMPETITION FROM FREE MARKET LIBERALIZATION HAS CAUSED VOLVO SOME
DIFFICULTIES. SMC HAS BEEN HURT BY A CONTINUED SALES DROP AND HIGHER
OPERATING COST, THUS, REDUCING ITS PROFIT MARGINS. SMC'S ABILITY TO
SUSTAIN ITS MARKET POSITION REMAINS TO BE SEEN. MUCH DEPENDS UPON THE
SUCCESSFUL ACCEPTANCE OF THE S40/V40 SERIES AND FUTURE LAUNCHES OF OTHER
NEW MODELS. REALIZING THAT COMPETITION WOULD INTENSIFY IN THE LUXURY CAR
SECTOR, SMC HAS DIVERSIFIED INTO THE OFF-ROAD VEHICLE SEGMENT WITH
CHRYSLER PRODUCT TO INCREASE ITS REVENUE STREAM AND MITIGATE RISKS. THE
CHRYSLER CHEROKEE FAMILY WAS WARMLY RECEIVED EVIDENCED BY SIGNIFICANT
INCREASES IN SALES FROM 470 UNITS IN 1994 TO 2,080 UNITS BY OCTOBER 1996.
IN ADDITION, THE COMPANY HAS ENTERED ANOTHER NICHE MARKET WITH CHRYSLER
NEON, A MEDIUM-SIZED PASSENGER CAR, AND WILL INTRODUCE CHRYSLER'S MINIVAN
IN 1997. CHRYSLER CAR OPERATIONS COULD BECOME SMC'S MAIN INCOME BASE
REPLACING VOLVO, WHICH HAS EXPERIENCED CYCLICALLY DECLINING DEMAND AS
RESULT OF THE DOWNTURN IN THE LUXURY CAR MARKET.
EARNINGS ARE EXPECTED TO INCREASE IN THE FUTURE FROM MAJOR NEW
MODEL LAUNCHES. CONSEQUENTLY, CASHFLOW ADEQUACY AND INTEREST COVERAGE
MEASURES SHOULD IMPROVE. TOTAL DEBT AS A PERCENTAGE OF CAPITALIZATION
SHOULD DROP TO A MODERATE LEVEL IN THE 50% RANGE FROM 77% LAST YEAR SINCE
ITS CAPTIVE FINANCE IS NO LONGER CONSOLIDATED. CAPITAL SPENDING NEEDS
PEAKED IN 1996 AND ARE NOT EXPECTED TO INCREASE IN THE SHORT TERM. TRIS
IS CONCERNED ABOUT RISING EXPENDITURES FROM INCREASED COMPETITION AS A
THREAT TO SMC'S PROFITABILITY.
NOTE: SWEDISH MOTOR CORPORATION PLC (SMC) TRIS'S RATING
SMC#1:720 MB DEBS DUE 1999 BB+
END.