Auto Suppliers with Links to Ford See Shares Fall on Monday

From AFX News Limited

NEW YORK — Shares of auto suppliers with ties to Ford Motor Co. continued to fall Monday on the automaker’s announcement of plans to significantly cut production for the remainder of the year.

On Friday, the nation’s No. 2 automaker said fourth-quarter production would be down 21 percent, or 168,000 units, from last year. Third-quarter production will be 20,000 units below what was previously announced.

Credit Suisse’s Christopher Ceraso cut his rating for the automotive sector as a whole to "Marketweight" from "Overweight."

"While many suppliers were taking a cautionary outlook at the back half of 2006, we don’t think any were telegraphing such a sharp drop in Ford’s fourth quarter production," Ceraso wrote in a note to investors.

"We think this translates to a wave of earnings warnings and shortfalls over the next two quarters. In addition, many tier two and three suppliers will see additional pressure on their already fragile businesses, potentially resulting in more bankruptcy filings."

Merrill Lynch’s John Murphy said he expects Visteon Corp., Ford’s former parts division, to be the supplier hardest hit by the news, since about 24 percent of its sales still come from Ford’s North American operations.

In heavy afternoon trading, shares of the Van Buren Township, MI-based company were down 94 cents, or 10 percent, to $8.12 on the New York Stock Exchange — near the low for the day.

On Friday, Visteon shares closed down 19 cents, or 2.1 percent, on news of the cuts.

Shares of TRW Automotive Holdings Corp. also fell Monday, dropping $1.31, or 4.8 percent, to $25.73 on the NYSE, after falling to $25.68 earlier in the day. On Friday, the Livonia, MI-based company’s shares closed down 87 cents, or 3.1 percent, at $27.04.

Lear Corp., which attributed about 25 percent of its 2005 sales to Ford, also saw its shares fall Monday.

Shares of the Southfield, MI-based company were down 69 cents, or 3.3 percent, to $20.32 on the NYSE. On Friday, Lear shares closed down $1.47, or 6.5 percent, at $21.01.

And shares of Detroit-based American Axle & Manufacturing Holdings Inc. fell 74 cents, or 4.4 percent, to $15.91 on the Big Board, after closing down 30 cents at $16.65 on Friday.

Murphy said that although less than 20 percent of the sales of BorgWarner Inc. and Magna International Inc. are attributed to Ford, the companies could be hurt by their heavy exposure to Ford’s F-150 line of trucks.

BorgWarner Inc. fell $1.62, or 2.8 percent, to $57.03, while Magna shares fell 42 cents to $70.59, both on the NYSE.

Elsewhere in the sector on the Big Board, shares of Johnson Controls Inc. lost $1.53, or 2 percent, at $73.37; and Tenneco Inc. dropped 86 cents, or 3.6 percent, to $23.21.

Ford shares fell 47 cents, or 5.9 percent, to $7.53 on the NYSE, after dropping as low as $7.47 earlier in the day.