European suppliers outpace U.S. competitors

Europe's largest automotive suppliers are generally doing better in North America than domestic competitors, but it has still been a rough year.

All have faced lower volumes, fluctuating production schedules, heavy-handed price-cut pressures and increasing responsibility for design, engineering and warranty expenses.

Sales are dropping from last year's record 17.4 million vehicles in the United States, and volume isn't expected to rebound to that level for a few years.

But Europe's top players have a more diverse roster of customers in the U.S. market and less overall reliance on their fortunes here. While most count on the Big 3 for the majority of North American business, parts makers such as Robert Bosch Corp., Siemens Automotive Corp. and Autoliv Inc. have significant business with European manufacturers and are gaining influence with the Japanese automakers. Those transplant automakers are maintaining their North American sales or gaining market share at the expense of General Motors, Ford Motor Co. and the Chrysler group.

"I don't think (European suppliers) are completely insulated from the North American downturn, but they're less affected than a North American supplier like American Axle or TRW," said Scott Upham, president of Providata Automotive consultants in Ann Arbor, Mich.

Here's a look at how the largest European suppliers are performing in North America.

Robert Bosch Corp. battled DaimlerChrysler on its 5 percent price cut demand early in the year and saw Big 3 volume drop significantly, but Bosch still has high hopes for North America. Bosch sold an estimated $5.87 billion of original equipment auto parts in North America last year, according to the Automotive News Europe list of top parts suppliers there.

ThyssenKrupp Automotive AG cites the North American downturn and the global economic slowdown as reasons for its falling profits in this fiscal year. As of June 30, global automotive earnings dropped to $98.5 million from $225.6 million in the year-ago period. That reduction was attributed almost entirely to the North American body and chassis business, hurt by declining production and start-up problems with a new product at a Canadian plant. The company sold $3.07 billion in North American original equipment parts in 2000.

Valeo Inc. may be the most troubled of the European players in North America. Following financial losses and a management shake-up this year, Valeo is looking to cut costs in the United States and overhaul its troubled Rochester, N.Y., plant.

Valeo management says the plant accounted for nearly 75 percent of its $157 million first-half loss and 1,200 jobs must be cut. But Rochester's union has a new eight-year labor pact that guarantees wages and job security.

North America was a big reason for Autoliv's earnings decline in the first half of the year. Operating margin dropped to 6 percent during that period, from a typical 10 percent. Demand fell for high-margin products such as side-curtain airbags, Jarboe said.

Autoliv has fared better than the market. During the second quarter, North American production was down 10 percent, but Autoliv's revenue for the region fell only 6 percent because of acquisitions and a more diverse portfolio, he said. Autoliv sold $1.67 billion in North American original equipment in 2000.

Continental AG's North American business has been troubled in 2001 because of declines in its tire business. But Continental has secured significant tire contracts with Ford for 2002 and expects to be that automaker's largest tire supplier next year. The company also is winning corner module and electronic braking system business. Continental's strategy to supply electronically integrated chassis systems will drive growth, consultant Upham said. Continental sold $1.65 billion in North American original equipment in 2000.

ZF Group anticipates better performance than the industry average largely because its business is focused on the more stable medium and upper segments of the market. Still, the German company forecasts a weaker market position in North America for 2001, even though overall company sales for the year were expected to grow 10 percent. ZF sold $1.51 billion in original equipment in North America in 2000.

Siemens' merger with VDO takes effect in North America this autumn, creating a $1.4 billion company there. The consolidated organization expects to maintain double-digit revenue growth, though perhaps less than the average 15 percent to 18 percent recorded by Siemens alone in recent years, an executive has said.

Interiors supplier Faurecia SA, which recently acquired Sommer-Allibert, is pursuing the North American market, winning new contracts with GM and other automakers. The effect of much of the new revenue won't be felt for another couple of years, but Faurecia's North American sales will ramp up quickly, Upham said.

Faurecia sold $809 million in North American original equipment in 2000.

You can reach Amy Wilson at awilson@crain.com

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