BorgWarner latest auto parts maker to cut jobs
Posted: Saturday, September 23, 2006
DETROIT (AP) -- U.S. automakers' production cuts are rippling through the supplier industry, with BorgWarner Inc. saying Friday that it is eliminating 13 percent of its North American work force and Lear Corp. earlier this week cutting its sales forecast by $300 million.
The U.S. Big Three are losing market share to Asian automakers at the same time that the U.S. economy is softening and domestic car sales are slowing.
Suppliers that do a heavy business with General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's U.S.-based Chrysler Group are sharing their customers' pain, an analyst says.
The domestic automakers "have a smaller piece of a shrinking pie," said Erich Merkle, an analyst with Grand Rapids-based auto consulting company IRN Inc. "That's going to create a serious issue for suppliers that are tied to the Big Three."
No. 1 U.S. auto parts maker Delphi Corp. filed for Chapter 11 bankruptcy protection last October. The former GM division says it expects to announce Monday how many of its about 12,500 United Auto Workers members accepted buyout offers.
Ford had to bail out its former parts unit Visteon Corp. last year. And Toledo, Ohio-based Dana Corp. is among a number of smaller suppliers now under bankruptcy protection.
Softening U.S. car sales stretching into next year will make things worse, Merkle said.
"We think we're going to see more bankruptcies," he said.
Other suppliers are in better shape, particularly those with sales spread among U.S., European and Asia-based automakers, he said.
BorgWarner, for example, has said it expects to get about 42 percent of its estimated $4.5 billion in sales this year from North America, with about 22 percent from the U.S. Big Three. About 40 percent will come from Europe and 18 percent from Asia, it says.
"We continue to grow fast outside the U.S.," BorgWarner financial chief Robin J. Adams said in a conference call Friday. He predicted an increase topping 10 percent in overseas sales in the second half of 2006.
BorgWarner's 850 North American job cuts will be spread across its 19 facilities in the U.S., Canada and Mexico and will be mostly completed by the end of October, the company said. It reduced its 2006 earnings forecast by 40 cents a share but said it should rebound in 2007.
BorgWarner makes vehicle powertrain components and systems and operates in 62 locations in 17 countries.
"What's going on right now in North America is probably not temporary," said Chief Executive Tom Manganello. "The Detroit Three ... continue to lose market share to the Europeans and Asians. We will continue to work on adjusting."
BorgWarner shares fell 73 cents to close at $53.76 on the New York Stock Exchange.
Southfield-based Lear said Thursday that slowing American auto production would cut 2006 sales by about $300 million from its earlier estimate of about $18 billion.
Some of the strongest companies in the auto parts sector have been lowering earnings expectations as well. Livonia-based TRW Automotive Holdings Corp. issued a lowered earnings forecast Sept. 7.
"As one client mentioned to us after TRW discussed a weaker-than-expected environment, `When the most sober guys in the bar are admitting to a drinking problem, you know there are issues with the rest of them,"' wrote Morgan Stanley analyst Jonathan Steinmetz.
The U.S. Big Three are losing market share to Asian automakers at the same time that the U.S. economy is softening and domestic car sales are slowing.
Suppliers that do a heavy business with General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's U.S.-based Chrysler Group are sharing their customers' pain, an analyst says.
The domestic automakers "have a smaller piece of a shrinking pie," said Erich Merkle, an analyst with Grand Rapids-based auto consulting company IRN Inc. "That's going to create a serious issue for suppliers that are tied to the Big Three."
No. 1 U.S. auto parts maker Delphi Corp. filed for Chapter 11 bankruptcy protection last October. The former GM division says it expects to announce Monday how many of its about 12,500 United Auto Workers members accepted buyout offers.
Ford had to bail out its former parts unit Visteon Corp. last year. And Toledo, Ohio-based Dana Corp. is among a number of smaller suppliers now under bankruptcy protection.
Softening U.S. car sales stretching into next year will make things worse, Merkle said.
"We think we're going to see more bankruptcies," he said.
Other suppliers are in better shape, particularly those with sales spread among U.S., European and Asia-based automakers, he said.
BorgWarner, for example, has said it expects to get about 42 percent of its estimated $4.5 billion in sales this year from North America, with about 22 percent from the U.S. Big Three. About 40 percent will come from Europe and 18 percent from Asia, it says.
"We continue to grow fast outside the U.S.," BorgWarner financial chief Robin J. Adams said in a conference call Friday. He predicted an increase topping 10 percent in overseas sales in the second half of 2006.
BorgWarner's 850 North American job cuts will be spread across its 19 facilities in the U.S., Canada and Mexico and will be mostly completed by the end of October, the company said. It reduced its 2006 earnings forecast by 40 cents a share but said it should rebound in 2007.
BorgWarner makes vehicle powertrain components and systems and operates in 62 locations in 17 countries.
"What's going on right now in North America is probably not temporary," said Chief Executive Tom Manganello. "The Detroit Three ... continue to lose market share to the Europeans and Asians. We will continue to work on adjusting."
BorgWarner shares fell 73 cents to close at $53.76 on the New York Stock Exchange.
Southfield-based Lear said Thursday that slowing American auto production would cut 2006 sales by about $300 million from its earlier estimate of about $18 billion.
Some of the strongest companies in the auto parts sector have been lowering earnings expectations as well. Livonia-based TRW Automotive Holdings Corp. issued a lowered earnings forecast Sept. 7.
"As one client mentioned to us after TRW discussed a weaker-than-expected environment, `When the most sober guys in the bar are admitting to a drinking problem, you know there are issues with the rest of them,"' wrote Morgan Stanley analyst Jonathan Steinmetz.
Story Comments
Read More and Post Comments 0 comment(s)
Please note: The following are comments from readers. In no way do they represent the views of The Sioux City Journal or Lee Enterprises. We will not edit or alter your comments, but we do reserve the right to not post or to remove comments that violate our code of conduct. No comment may contain potentially libelous statements; obscene, explicit or racist language; personal attacks, insults or threats. Terms of Service
