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Weekly UpdatesU.S. auto parts makers reported poor second quarter results, but there were slight signs of recovery in demand from light vehicle production and the impact of the manufacturers' cost-cutting measures.
The auto replacement market has suffered in the past year because of falling light vehicle production, the strong U.S. dollar and lower demand as cars are becoming better made. Some of the companies, however, said they see improved production and profits stabilizing as they realize the benefits of work force reductions and other cost-cutting measures put into place since the slowdown began.
TRW, the Cleveland-based diversified aerospace and auto products maker, said slower North American auto production and a charge related to a recall of its seat belt buckles contributed to a 50 percent slide in its second-quarter earnings. TRW said its second-quarter net income plummeted 99 percent to $3 million, or two cents a diluted share, from $200 million, or $1.59 a share, a year earlier.
ArvinMeritor, which makes shock absorbers, springs, filters and exhaust systems, posted a 65 percent slide in third-quarter earnings because of a fading North American truck market and the weak light vehicle replacement market. The Troy, Michigan-based company also said it sees its fourth-quarter earnings per share down by as much as 40 percent from a year ago.
Cooper Tire and Rubber Co., which has completed half of its plan to close or downsize 23 facilities and make 1,100 job cuts, said its second-quarter profits slumped by nearly half because of a slackening tire replacement market. The Findlay, Ohio-based company also said it sees third-quarter earnings falling slightly from a year ago.
Delphi said its earnings fell 61 percent to $164 million, or 29 cents a share, from $424 million, or 75 cents a share, a year earlier. Dana Corp. posted a sharp drop in its second-quarter. The Toledo, Ohio-based company said its net income slumped 83 percent and it was "less optimistic" about recovery in North American auto equipment markets, as it continues to suffer from high new vehicle inventory levels and production shutdowns by several of its major customers.
On a positive note in an otherwise dismal reporting period, Johnson Controls, Inc. said it had record sales and earnings for its third quarter of fiscal 2001. Sales for the three months ended June 30, 2001 increased 8 percent to $4.7 billion from $4.4 billion for the same quarter of fiscal 2000. The effect of currency translation rates reduced Johnson Controls sales in the current quarter by $140 million or 3 percent. Operating income was $270 million versus the prior year's $267 million. Net income was a record $136 million, up 2 percent over the $133 million for the third quarter of fiscal 2000.
Automotive Systems Group Sales by the company's Automotive Systems Group increased 7 percent to $3.5 billion versus $3.3 billion a year ago. The acquisition of a Japanese seat manufacturer accounted for the largest portion of the group's sales increase. Sales growth of seating and interior systems in North America was 2 percent, which compared favorably with the 9 percent decrease in domestic industry vehicle production.
Visteon Corp. lost $40 million in the second quarter, including a hefty $100 million cost for restructuring, though the results still beat Wall Street's expectations. For the three months ended June 30, Visteon lost 31 cents per share. In the second quarter of 2000, the Dearborn, Mich.-based company earned $162 million or $1.25 a share. Excluding the restructuring charge, Visteon turned a profit of $60 million, or 46 cents a share, surpassing Wall Street expectations.
Visteon said its restructuring included the loss of more than 2,000 salaried jobs during the quarter, exceeding a previously announced plan to cut 1,800 positions. For the six months ended June 30, Visteon lost $9 million, or seven cents per share, on revenue of $9.63 billion. In the year-ago period, Visteon earned $309 million, or $2.38 per share, on revenue of $10.53 billion.
Continued losses at DaimlerChrysler AG's Chrysler Group dragged down the company's bottom line in the second quarter. But the division still performed better than financial analysts expected and executives predicted the company would meet 2001 turnaround targets laid out at earlier this year. Even so, in the short term, the world's No. 5 auto company warned results would take a hit in the third quarter as a weak auto market undermines U.S. car sales and its fragile commercial truck unit.
In the April-June period, DaimlerChrysler saw a 58 percent decline in net profit to 731 million euros ($619 million), from 1.7 billion euros ($1.49 billion) a year ago -- but still managed to beat forecasts. The Chrysler division lost $125 million in the second quarter, less than the $252 million to $504 million analysts predicted. Net profit plunged to 535 million euros ($453 million) from 1.75 billion euros last year. However, analysts had expected net profit of only 216 million euros ($181 million).
Superior Industries International Inc. reported that second-quarter profits fell 39 percent due to soft demand.
Federal-Mogul Corp. said its second quarter 2001 sales fell to $1,425 million compared to $1,593 million in 2000. Federal-Mogul reported a second quarter loss of $0.44 per share from operations versus earnings of $.65 per share from operations in 2000. Excluded from earnings from operations were charges for restructuring, impairment, gains/losses on sales of businesses and gains on debt to equity swaps. Including these items, Federal-Mogul reported a second quarter loss of $(.25) per share compared to net earnings of $.65 in 2000.
Tower Automotive Inc. said its second-quarter earnings slumped 56 percent, due to lower volumes and slowing vehicle production by its customers. The company said its net income was $17 million, or 35 cents a share, down from $39 million, or 68 cents a share in the year-earlier period. The company, which sells to automobile manufactures such as Ford Motor Co., DaimlerChrysler AG and General Motors Corp., said it expects volumes for the rest of the year to be soft relative to 2000 and initial 2001 expectations. Its revenues fell 6 percent to $642 million, from $681 a year ago.
BorgWarner Inc. said its quarterly earnings dropped about 38 percent due partly to problems faced by its largest customer, and said it sees full-year earnings near analysts' estimates. The Chicago-based auto supplier reported second-quarter net earnings of $24.7 million, or 93 cents per share, compared with $40.1 million, or $1.51 per share, a year earlier. Analysts had said production cuts at Ford Motor Co. would dampen BorgWarner's sales and profits.
BorgWarner, which has a large degree of exposure to Ford., said it expects to earn $3.50 to $3.70 per share in 2001. Wall Street estimates call for $3.55 per share. Sales fell more than 14 percent to $602.0 million from $700.9 million.
American Axle & Manufacturing Holdings Inc. reported a 15 percent decline in second-quarter earnings that still handily beat Wall Street's raised estimates, due in part to strong sales of its higher-technology products. The automotive axle-maker had said in late June it would beat Wall Street's earnings estimates -- then averaging 55 cents a share -- by 20 percent. While net income of $34 million, or 72 cents per share, came in below the $40 million, or 80 cents per share, of a year earlier, it was nearly 31 percent higher than the 55-cent estimate.
American Axle Chief Financial Officer Robin Adams said in a conference call he was comfortable with analysts' third-quarter earnings estimates, which range from 41 cents to 50 cents per share, with an average of 46 cents, according to First Call.
Lear Corp. said its second-quarter earnings fell in half, saddled by production cuts at Ford Motor Co. and weaker demand in general, and said it expects third-quarter earnings and revenues will also slip slightly from year-ago levels. Southfield, Michigan-based Lear, which builds auto interiors, said it earned $44.9 million, or 69 cents a share, compared with $101.7 million, or $1.53 a share, a year ago. Excluding nonrecurring items, Lear had a net income of $48.5 million, or 74 cents a share.
"Our second-quarter results were driven by challenging market conditions that only slightly improved from last quarter," said Lear Chief Executive Bob Rossiter in a statement. Cost-cutting and a smaller number of shares outstanding partially offset the drop in earnings per share, Lear said. The company forecast a drop in its third-quarter sales of about 4 percent to 6 percent compared with a year ago, while operating earnings were expected to come in between $0.50 and $0.60 per share. Lear expected net sales for the full year to slide about 4 to 6 percent compared with 2000, and saw operating earnings between $2.97 and $3.27 per share. Lear reported $14.1 billion in sales in 2000.
Donnelly Corp. reported second quarter net income of $5.2 million, or $0.50 per share, on second quarter revenues of $227 million. In the comparable 2000 quarter, the company reported net income of $7.1 million, or $0.70 cents per share, on revenues of $227 million. For the first six months of 2001, net income was $6.4 million, or $0.62 per share, on revenues of $447 million. For the comparable 2000 period, Donnelly reported net income of $13.9 million, or $1.37 per share, on revenues of $465 million.
"We are pleased that Donnelly maintained level sales despite an environment in which second-quarter domestic automotive industry production volumes were down 10 percent from last year," said Chairman and Chief Executive Officer Dwane Baumgardner. "While sales were stable, year-over-year profits were lower primarily due to industry factors. This was partially offset, however, by our continued focus on cost control. In fact, total overhead costs would actually have been down on a comparable basis if not for the addition of Donnelly Electronics, which was purchased earlier this year."
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