S&P Global Ratings - German Autoparts Supplier MAHLE GmbH Rated 'BB'; Outlook Stable

Germany-based MAHLE is a global tier-one auto supplier with leading market positions in engine components, filtration systems, and thermal modules, with a diversified customer base and strong liquidity.

MAHLE is adapting its business model to address the transition to e-mobility and the commoditization of conventional products by shifting its investments towardthe development of new electric vehicle (EV)-related components and by optimizing its cost base.

MAHLE's strategy relies on the successful transfer of its production and research and development (R&D) personnel to best-cost countries, the turnaround of underperformingplants, and on its ability to launch profitable products in a highly competitive market.

We assigned our 'BB' long-term issuer credit rating to MAHLE. The stable outlook indicates our expectations that the company's S&P Global Ratings-adjusted EBITDAmargin will improve toward at least 8%-9% over 2024-2025, from 6.8% in 2023, and that MAHLE will reduce its debt further through free operating cash flow (FOCF) generation and asset disposals. We therefore expect a substantial improvement in credit metricsin 2024, with adjusted funds from operations (FFO) to debt of about 25% and FOCF to debt of about 5% in 2024, with incremental improvements thereafter.

Press release from S&P