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S&P Rates Unik S.A. de C.V. BBB

6 April 1998

S&P Assigns Unik S.A. de C.V. BBB Local and BB Foreign Ratings

    NEW YORK, April 6 -- Standard & Poor's today assigned its
triple-'B' local currency corporate credit rating to Unik S.A. de C.V. and its
double-'B' foreign currency corporate credit rating to the company.  Unik's
foreign currency outlook is positive and mirrors the United Mexican States'
foreign currency rating and outlook (double-'B').  The local currency outlook
is stable.
    Unik's ratings reflect the company's strong market share position in the
growing Mexican auto parts industry, which is enhanced by:

    -- Broad value-added product lines,
    -- Significant export abilities,
    -- Modern technology,
    -- Associations with leading international producers, and
    -- A moderate financial profile, guided by its holding company,
       Desc S.A. de C.V. (triple-'B'-minus local currency rating).

    The ratings also consider the cyclical competitive nature of the global
automotive industry.
    Unik is one of the largest independent auto parts producer in Mexico.  The
company has strong positions in the domestic market in both the original
equipment and after-market segments.  Benefiting from Mexico's proximity to
the U.S. market, above average operating efficiency, and good product quality,
Unik's exports are significant at 58% of 1997's sales.  Unik is a subholding
company fully owned by Desc.  Unik's operations are conducted through several
operating subsidiaries, including:

    -- Spicer S.A. de C.V., a 51%-49% joint venture with Dana Corp. (rated
       single-'A'-minus);
    -- Moresa S.A. de C.V., a 60%-40% joint venture with TRW Inc. (rated
       single-'A'); and
    -- Velcon S.A. de C.V., a joint venture between Unik (43%),
       GKN PLC. (39%) and Dana Corp. (18%).

    Together, these companies account for approximately 85% of Unik's sales.
During the last few years, Unik has made several key acquisitions including,
Tremec in 1994, 49%-owned Robert Bosch, and Borg-Warner's manual transmission
lines in 1996, and Dana's heavy transmission operations in 1997.  Unik
(through Spicer) has strengthened its position in the transmission systems
segment.  Further, Unik has become a leading producer of transmissions, rear
axles, motor valves, tappets and pistons, pick-up bodies, stamped products,
and constant velocity joints in the North American market.  Together, these
product lines accounted for approximately 75% of Unik's sales and operating
income in 1996 and 1997.
    Despite the challenging economic conditions in Mexico in 1995, which
caused Unik's sales to decrease about 30%, the company was able to sustain its
operating margin at 11.6%.  Exports led to a partial recovery of sales during
1996, when its operating margin increased to 16.7%.  Excluding the
transmission businesses Unik acquired from Borg-Warner and Dana Corp., higher
domestic sales and exports allowed Unik to exceed 1994 sales figures by 8% in
1997, earning US$835 million.
    In addition, higher capacity utilization and efficiency improvements
increased operating margins improvement by 18%.  Going forward, sales and
margins are expected to improve gradually, aided by operating improvements in
acquired businesses and more purchase orders from U.S.-based firms.
    Unik's cash flow protection measures are strong, as reflected by earnings
before interest, taxes, depreciation, and amortization (EBITDA) interest
coverage of 9.7 times (x) in 1997 and 7.5x in 1996.  This compares with a
stressed 1995, when EBITDA decreased to 3.4x. Likewise, debt to EBITDA remains
low at 1.7x in 1997.  Unik's financial leverage, measured by
debt-to-capitalization, increased to 32% at year end 1997, up from 24% a year
in year-end 1996 due to debt-financed acquisitions.  As the company repays
debt and builds up retained earnings, this ratio is expected to declined
gradually to the 25% area over the next few years.

    OUTLOOK (LOCAL CURRENCY): STABLE
    Competitive and cyclical market conditions, and ongoing acquisition
activities limit upgrade potential.  However moderate financial policies and
strong businesses positions should limit downside risk.

    OUTLOOK (FOREIGN CURRENCY): POSITIVE
    The outlook reflects that of the United Mexican States, Standard & Poor's
said. -- CreditWire

SOURCE  Standard & Poor's CreditWire