Aftermarket Escapes Stock Downgrade

There was some good new and some bad news in the reported automotive parts suppliers’ stock declines resulting from an analyst report. The bad news is obvious, the good news for the aftermarket was that it escaped largely unscathed.
Shares of auto-parts makers tumbled in Monday trading after a Robert W. Baird & Co. analyst cut investment ratings on four companies and forecast lower results this year on plans from the nation’s largest auto manufacturers to produce fewer vehicles in early 2005.
All companies were hit largely as a result of their dependence on automotive and truck manufacturing.
Gentex Corp., a maker of auto-dimming mirrors, led the decline after analyst David Leiker downgraded the stock to “Neutral” from “Outperform,” saying a continued weakness in sales is expected through the first half of 2005 and potentially into 2006.
“Despite one of the best business models in the group, near-term results will be negatively impacted by weak volume on the company’s largest program (General Motors Corp.’s GMT-800 truck),” Leiker wrote in a research note.
He forecast a 10% decline in GMT-800 production this year and another 7% decrease in 2006. He said, however, that Gentex’s “swing factor” will be GM’s incentives on current-year vehicles as the automaker gears up to release its 2006 and 2007 models of trucks and sport-utility vehicles.
Shares of Gentex slumped 4.7%, or $1.74, to $35.28 on average volume in afternoon Nasdaq activity.
Leiker also downgraded American Axle & Manufacturing Holdings Inc. to “Neutral” from “Outperform” and Superior Industries International Inc. to “Underperform” from “Neutral,” citing expected weakness in the companies’ results because of a similar dependance on GM’s truck production volume.
In afternoon trading on the New York Stock Exchange, shares of American Axle dropped 2.2%, or 68 cents, to $29.98 on light volume, while Superior Industries slipped 2.9%, or 83 cents, to $28.22 on average trading.
Although Ford spin-off Visteon Corp. is making an effort to grow its non-Ford business, Leiker said the company’s near-term results will likely be impacted by less vehicle production and cut the company to “Underperform” from “Neutral.”
The analyst also said Ford’s attempt a year earlier to buoy Visteon by agreeing to assume some post-retirement liabilities and support working-capital and capital-spending needs fell short.
“We do not believe this has gone far enough and expect additional actions to assist Visteon in reaching a stable business model,” Leiker wrote. “This could include additional assumption of liabilities, further support in working capital and capital spending needs or even a ‘buy-in’ of Visteon’s assets by Ford.”
Visteon tumbled 3.4%, or 33 cents, to $9.44 on below-average NYSE volume. Elsewhere in the sector, Dana Corp. fell 1.4%, or 24 cents, to $17.09 and Borg Warner Inc. dropped 1.8%, or 95 cents, to $53.22. Tower Automotive Inc. rose less than 1%, or 2 cents, to $2.41 on the NYSE.
Leiker’s reports echoed concerns from Delphi Corp., the world’s largest automotive supplier, which last month announced more job cuts in 2005 and projected a hefty full-year loss just days after GM and Ford Motor Co. posted weak November vehicle sales and reduced their production goals for this year.
Delphi said it would eliminate 8,500 positions — about 4.6% of its work force — as it faces a potential $350 million loss in 2005. The company slashed between 9,100 and 9,200 jobs in the first nine months of 2004.
Its shares fell 1.9%, or 17 cents, to $8.85 during afternoon activity on the NYSE.