Canadian auto-parts shares drop after U.S. attacks

TORONTO - Shares of Canada's top auto-parts makers have fallen dramatically since the attack on the United States, reflecting fears that the industry will be hit hard if skittish consumers back away from big ticket items such as buying a new car.

The five companies that make up the Toronto Stock Exchange's auto and autoparts group, a subgroup of the industrial products sector, have fallen an average of 9.4 percent in the two-week period since the attacks on the World Trade Center and the Pentagon.

This includes Magna International Inc. , a diversified parts maker, which has slipped 9.9 percent, Linamar Corp., off 13.7 percent, Wescast Industries Inc., a maker of iron and steel exhaust manifolds, 14 percent, Tesma International Inc., 2.5 percent and Decoma International Inc., 7 percent.

David Tyerman, an automotive analyst at Scotia Capital, sees a decline in auto sales over the next year as consumers back away from making big ticket purchases such as automobiles as the uncertainty over North America's economic stability grows.

Tyerman estimates that U.S. light vehicle sales, traditionally used as an industry gauge, will fall to 15.6 million units in 2002, from an estimated 16.3 million in 2001 and an actual 17.4 million in 2000.

"The trend is obviously down and a lot of the drivers were there before the World Trade Center -- we had begun to see a deterioration in consumer confidence -- but now the World Trade Center events would likely exacerbate that situation," Tyerman said.

Analysts say this will inevitably lead to more cutbacks in production in the auto industry and very quickly to the autoparts industry.

Ford Motor Co.'s Canadian division said last week it planned to shut down three engine plants for a week and lay off 4,300 workers beginning on Monday due to the U.S. attacks. Earlier this month it closed its St.Thomas, Ontario plant for two weeks because of slowing demand.

Almost all of the North American producers were also forced to temporarily halt production two weeks ago when tighter border checks slowed the flow of parts.

Tyerman said much of the impact on the industry will be felt in the fourth quarter and beyond.

"The real burning question is how deep will the sales decline be and how long will it go on for," he said. "Right now everybody is just throwing darts at a dart board and trying to figure that out."

The parts makers are also struggling to assess the situation, knowing that their fate is in the hands of the big car makers.

"Right now it's a wait and see situation. The car companies are really assessing what's going to happen to the consumer and then they are going to have to make some decisions about vehicle production," said Ray Finnie, president and chief executive at Wescast Industries.

"It's no secret that to anybody that follows the industry, when the volumes go down it depends on how fast and to what extent."

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