#Fitch

Seeing delinquencies and credit losses going up while used car sales and lending standards deteriorate, rating agency Fitch warned today that “U.S. auto lenders will likely report further weakening in asset quality metrics this year.” Translated into English, lenders will become increasingly dependent on sub-prime loans and exposed to their perils.

While there is renewed chatter about a renewed GM bankruptcy, ratings agency Fitch thinks otherwise. The agency that assesses the chances of defaults by companies and countries raised GM’s default rating from BB to BB+, which is once notch below investment grade.

As GM’s IPO draws closer, GM (and the government) is doing everything they can to make GM as attractive as possible to the market. The Freep reports that GM is promoting the Volt as much as they can to highlight how much GM has changed. Unfortunately, all it takes is one pesky credit rating agency to undo all that hard work.

Think everything will be hunky-dory by, well, 2012? (Watch the movie.) Fitch Ratings thinks the U.S. auto industry won’t get back on its feet anytime soon. Worse, the industry may be caught in an “airline-style” cycle of repetitive bankruptcies because of weak sales and a glut of production capacity. It is unusual for a U.S. airline (and many elsewhere) to not be in bankruptcy or not have been at some point.

Amongst the rating agencies, Fitch is the only halfway good one. They were the lone voice that had warned against the dangers of the collateralized debt obligations that brought the world to the brink of disaster.

In a report cited by Reuters, Fitch says that high fixed costs, the lengthy periods required to develop new products and chronic overcapacity will leave the industry “littered with failures—plants, product lines, brands and companies.”