For North America's top auto suppliers, bad got worse in '09

By Robert Sherefkin ERJ staff (AN)

Detroit, Michigan -- Sales at North America's largest suppliers turned sour early last year. Then they really got bad.

The annual Automotive News survey of the top 150 North American suppliers found that their total sales fell 28 percent last year -- worse than the 21 percent decline in US light-vehicle sales. The list ranks suppliers on parts sales to automakers in North America.

Sales collapsed as consumer spending plunged, automakers and dealers ran down inventories and General Motors and Chrysler Group filed for bankruptcy, idling plants for weeks.

"Production volume declines were the sharpest in a generation," CEO Tim Manganello told BorgWarner Inc. shareholders in the company's annual report. Sales at the supplier tumbled 33 percent to $1.09 billion. BorgWarner, of suburban Detroit, slid in the ranking to No. 32 from No. 29.

For other suppliers, though, plunging sales didn't hurt their ranking much because so few rivals were in a position to gain on them.

Off 28%, still No. 1

Magna International Inc.'s sales to automakers in North America skidded 28 percent last year to $8.16 billion. Yet the Aurora, Ontario, supplier retained its No. 1 ranking. Chairman Frank Stronach called the automotive recession "one of the sharpest downturns in history."

Delphi Corp.'s sales collapsed by half to $3.76 billion, and it slipped to No. 3 from No. 2.

To put the sales plunge into historical perspective, consider this: Last year the top 10 suppliers in North America had combined sales of $38.15 billion. That's less than half the total of $80.65 billion for the top 10 suppliers just four years before, in 2005.

Suppliers provided most of the data for the ranking. Some companies' sales were estimated. The numbers do not include nonautomotive or aftermarket sales. Sales are in dollars, translated when necessary from other currencies.

Those currency conversions gave some suppliers a lift this year because of the dollar's weakness. For example, a Japanese supplier that reported exactly the same sales in yen for North America in 2009 as in 2008 would have shown a 7 percent sales gain in dollar terms. A German supplier with unchanged sales in euros would have shown a 1 percent sales gain in dollar terms.

The numbers of several Japanese suppliers also got a boost from the difference in Japanese and Western fiscal years. Most Japanese companies' accounting periods run from April 1 through March 31 of the following year.

Why does that matter? Japanese suppliers' tallies for the latest fiscal year included the January-March 2010 quarter, which was significantly stronger than the January-March 2009 quarter.

Those tailwinds helped Denso International America Inc. post a 3 percent sales gain to an estimated $3.45 billion for the fiscal year. The gain lifted Denso to No. 4 in this year's ranking from No. 10 last year.

Denso, a unit of Denso Corp., of Kariya City, Japan, was the only supplier in the top 10 to post a sales gain in 2009.

Sales rose at just eight of the top 50 and 18 of the top 150.

Strategic cuts

At some companies, falling sales resulted not just from the lousy market but from a strategic decision to abandon certain product lines.

Lear Corp., for example, sold assets as it abandoned its systems integrator business model when automakers decided not to outsource interiors. Lear sales fell 41 percent to $2.91 billion, dropping the suburban Detroit company in the ranking to No. 8 from No. 4.

Gary Walther, a managing director at the Chicago investment bank Lincoln International, cited Alcoa Inc.'s sale of its automotive wire harness business as an example of divesting a commodity business line.

Sales at Alcoa -- a supplier of automotive hoods, doors, trunks, bumpers and crash management systems -- plummeted 74 percent. That tied Alcoa with LG Chem Ltd. for the largest percentage drop of any company on the list. Alcoa slid to No. 91 from No. 39. LG Chem debuted on the list at No. 144.

Of course, some suppliers posted even more devastating falls. More than 50 suppliers filed for bankruptcy last year, according to the Original Equipment Suppliers Association.

But if the harsh climate winnowed some suppliers, it left others better positioned for a rising market.

Automotive industry adviser John Casesa says that after 18 months of "near panic to survive the downturn," suppliers have cut operations and sales aggressively to focus on profitable businesses.

He cites Delphi Corp., Visteon Corp. and Dana Holding Corp. -- all of which entered Chapter 11 at some point over the past decade -- as three of the largest to have repositioned themselves. All three posted double-digit sales declines last year and fell in the rankings. In October, Delphi emerged from Chapter 11.

From Automotive News (A Crain publication)