You might not guess it from some of the stock market reports, but the U.S. auto supplier industry is three months into another big year.
The quarterly earnings reports filed in recent weeks show big gains in sales and profits for many parts makers. Double-digit earnings gains were the norm, and declines had more to do with restructurings and accounting changes than business conditions. Several firms are forecasting that 1999 will top their 1998 results.
Yet even with the chipper performance, some companies complain that the boon times simply are not reflected in their stock prices. At Arvin Industries Inc. of Columbus, Ind., which last month reported another record first-quarter high for sales and earnings, executives were flummoxed by the company's sagging stock price. In March, Arvin's stock was selling in the $42-a-share range. Last week, it was posted at just above $37.
At Intermet Corp. in Troy, Mich., CEO John Doddridge called his stock prices 'very disappointing' and said the company is repurchasing 10 percent of its stock from the market. At the same time, Intermet reported record first-quarter earnings and sales, and said the company's biggest problem at the moment is keeping its factories up with surging light-truck demand.
Superior Industries International Inc. of Van Nuys, Calif., turned in a 21 percent profit gain for the quarter, thanks to a global push for its aluminum wheels. The company picked up a new $50 million contract that starts this fall and added General Motors trucks, Ford Motor Co. minivans and Rover Group Ltd. sport-utilities to its customer base. But last week its stock was still about 25 percent down from its 52-week high.
'A lot of supplier companies' prices are still pretty depressed,' observed Efraim Levy, an analyst with Standard & Poor's Rating Group in New York. 'Why would an investor go for a 15 percent return from an automotive company when you can double your money in a few days on Internet stocks?'
Still, while the stock market may not be listening, the U.S. auto industry continues to roar. The strong January-March supplier performance corresponds to a 7.7 percent increase in North American vehicle production for the period. Production of GM cars rose about 15 percent for the quarter, while Ford's light-truck output shot up 25 percent.
'If you had exposure to those customers, then you had a really good quarter,' said Eric Goldstein, automotive analyst at New York's Bear Stearns. 'Most suppliers continue to beat the expectations of the experts.'
The uptick translated to record earnings for some suppliers, including Donnelly Corp., Meritor Automotive Inc. and Detroit Diesel Corp. It also translated into hot-running parts factories and the associated costs of overtime labor.
Intermet reported that it has been running heavy overtime staying abreast of new light-truck production at GM, Ford and DaimlerChrysler. 'We're doing everything we can just to keep product moving out the door,' said Intermet spokeswoman Blytha Mills.
North America's robust activity appeared to have overshadowed most problems around the industry for the quarter. Economic problems in Brazil stung several suppliers - but not too hard.
The newly public Delphi Automotive Systems Corp. temporarily closed four Brazilian factories in response to the soft market there. Despite that, the company delivered a 12 percent gain in net income, to $284 million.
Mostly, the supplier sector was humming in the quarter. Gentex Corp., a Zeeland, Mich., producer of vehicle mirrors, turned in a first-quarter profit increase of 34 percent, with sales increasing 15 percent to $65.6 million.
Surging vehicle sales have meant not just shipping more parts, but shipping more profitable parts. The company's new mirror technologies feature integrated electronics, lights, compasses and global positioning systems. The company last week reported that 91 percent of its shipments now consist of automatic-dimming mirrors.
'It has helped us that the vehicles that are selling well right now are the higher-end light trucks and sport-utilities,' said Kenneth La Grand, Gentex executive vice president. 'They tend to feature the mirrors that contain higher content.' La Grand said another new contract, the Canadian-made Toyota Solara, had been running at a higher production rate than originally forecast.
Expecting big sales to continue, Gentex has launched a $25 million plant expansion in Zeeland that will boost current production of about 6 million mirrors a year up to 7 million in 2000. La Grand acknowledged that such spending is the flip side of increased sales. 'We're plowing all of our profits back into the business,' he said. 'Bigger r&d spending, plant investments - we have to reinvest in new technology. We don't pay any dividends on our stock.'