Auto Suppliers Face More Pain As Automakers Predict Cuts in Production After Disappointing Sales

DETROIT March 2, 2005; Dee-Ann Durbin writing for the AP reported that Wall Street analysts lowered their earnings estimates for several auto suppliers Wednesday, a day after General Motors Corp. and Ford Motor Co. said they'll produce thousands fewer vehicles in the coming months because of disappointing sales.

Deutsche Bank's Rod Lache reduced his forecast for nine suppliers, predicting Lear Corp. would take the biggest tumble, from 60 cents a share to break-even. He also lowered his estimate for American Axle & Manufacturing Inc. from 40 cents a share to 25 cents.

At Credit Suisse First Boston, analyst Chris Ceraso lowered earnings estimates for Delphi Corp., the world's largest automotive supplier, as well as Lear, American Axle, Magna International Inc. and Superior Industries International Inc.

"The production cuts, particularly at GM, will cripple earnings in the first and second quarters for both the automaker and a number of its major suppliers," Ceraso wrote in a research report.

Lear shares fell $5.76, or 11 percent, to close at $47 on the New York Stock Exchange, while American Axle shares dropped $1.33, or 5 percent, to finish at $25.50 and Delphi slipped 43 cents, or 6.2 percent, to end at $6.46.

Suppliers, already pinched by the high cost of steel and automakers' demands to cut costs, learned Tuesday they'll get no relief on the production side in the first half of the year.

GM, which announced on Tuesday a 12.7 percent drop in February sales, said it will slash production by 45,000 additional vehicles in the first quarter and roughly 10 percent, or 139,000 vehicles, in the second quarter to control inventories.

The cuts were less drastic at Ford, which plans to cut production by an additional 10,000 vehicles in the first quarter and 1.2 percent, or 11,000 vehicles, in the second quarter. Ford announced a 3 percent decline in February sales.

"Ford did some trimming to its production schedules, but a decent selling month helped it avoid getting out the shears," Merrill Lynch analyst John Casesa said in a report.

GM shares fell 68 cents, or 1.9 percent, to close at $35.30 Wednesday on the NYSE, while Ford shares fell 20 cents, or 1.6 percent, to finish at $12.47.

The Motor and Equipment Manufacturers Association, which represents auto suppliers, turned to the federal government this week for intervention, saying rising steel prices are causing unprecedented bankruptcies and job losses. Tower Automotive Inc., which declared bankruptcy Feb. 2, was the latest casualty.

Motor and Equipment Manufacturers Association, http://www.mema.org