Fitch Affirms SANLUIS Corp at 'B-/CCC+'.

NEW YORK -- Fitch Ratings has affirmed the foreign currency and local currency issuer default ratings of SANLUIS Corporacion, S.A.B. de C.V. (SANLUIS) at 'B-'. In addition, Fitch has affirmed its 'B-' issue rating and 'RR4' recovery rating (RR) on SANLUIS' senior secured bank loans held by SANLUIS' operating subsidiaries and its 'CCC+' issue rating and 'RR5' recovery rating on the 8% senior unsecured notes due 2010 and on the $75 million 7% mandatory convertible debentures due 2011 issued by SANLUIS Co-Inter S.A. (SISA), an intermediary holding company. The Rating Outlook is Stable.

The ratings are based on SANLUIS' business position as leading producer of leaf springs suspension components in the North American Free Trade Agreement (NAFTA) market (United States, Canada and Mexico combined) and Brazil, cost competitive advantages and hard currency generation. The ratings are constrained by high financial leverage, industry cyclicality, cost pressures and the company's history of financial default. SANLUIS' business is critically dependent on North America's automobile market and the performance of the Big Three (General Motors Corp. [GM], Ford Motors Co. and DaimlerChrysler) original equipment manufacturers (OEMs), although in recent years it has sought to diversify its client base and expand sales to Asian and European OEMs. The company targets primarily the light truck market, which over the past 15 years has experienced robust growth and market share gains in North America and at present accounts for approximately 54% of the total automobile market.

During 2006, the company was affected by challenging conditions at the North America auto industry. SANLUIS' revenues remained flat from 2005 as higher sales of suspension components were off-set by lower sales of brake components. A 12% growth in revenues from suspension components was driven primarily by the Brazilian suspension division and increased average prices. During the second half the year, volume sales of both suspension and brake components declined due to lower production and sales of automobiles in North America. Sales of brake components also declined during the year driven by the end-of-cycle of an old GM platform. EBITDA reached US$61 million, 4% down from 2005. Despite higher prices and operating efficiencies, since 2004 operating profit margins have remained below the levels of 2002-2003 due to high energy and steel costs as well as discounts to OEMs on mature platforms. During the first three months of 2007, revenues grew by 1.3% driven by the suspension business while sales of brake components remained flat. Sales of suspension components grew by 1.8% driven by higher average prices. Lower fixed manufacturing expenses and higher productivity in the suspension business was, however, offset by lower profitability at the brake division.

Consolidated leverage remains high, with a ratio of total debt (including off-balance-sheet debt) to last-twelve months (LTM) EBITDA of 5.5 times (x) at March 31, 2007. At March 31, 2007, total consolidated debt was

US$341 million, a reduction of $24 million from Dec. 31, 2005. The debt was composed of US$171 million of secured bank loans at the suspension subsidiary level, US$68 million of senior notes (including capitalized interest) at the SISA intermediary holding company level due 2010, US$12 million in bank loans due 2009 at the brake subsidiary level, US$12 million of non-restructured debt at the holding company level and US$78 million of convertible debentures issued by SISA (which are off-balance sheet under Mexican GAAP but adjusted as debt by Fitch). The company only pays cash interest on its bank subsidiary debt and the remaining is capitalized. The amortization schedule is manageable over the next three years, with major maturities concentrated in 2010 and 2011 (US$177 million and US$106 million respectively). Short term debt accounts for only 14% of the debt or US$36 million.

SANLUIS expects EBITDA to grow during 2007, driven by the launch of new platforms that were obtained last year at both the suspension and brake divisions. Annual capital expenditures will remain moderate (in the US$10 million-20 million range) due to restrictions under restructured debt agreements. The company should continue to generate positive free cash flow and pay-off debt commitments as due. This should translate into an improvement in credit protection measures by the end of the year.

Notwithstanding, in the near to medium term the company will continue to confront challenging industry conditions due to the negative outlook for the U.S. auto industry and particularly for North American OEMs, which face weakening economic conditions, market share erosion in their home market and restructuring costs. Additionally, sales of light trucks remain affected by high fuel prices. Production cutbacks and lower demand would continue to stress volumes. As OEMs struggle to improve their cost structures, this could also result in further pressures on the supplier base (including the company) for lower prices.

SANLUIS manufactures suspension components (leaf springs, coil springs, torsion bars, bushings and stabilizer bars) and brake components (drums and rotors) for pickup trucks, SUVs, minivans and automobiles (light vehicles). The company is the largest manufacturer of leaf springs (used in the suspension of light trucks) in the world and the leader in the NAFTA market, where it holds a 92% market share. Sales to Ford, GM and Chrysler accounted for 74% of SANLUIS' total revenues in 2006. In 2006, SANLUIS earned $615 million of revenues and $61 million of EBITDA. More than 75% of revenues derived from exports, almost all to the United States.

Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery.

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