DETROIT - Federal-Mogul Corp. is a consolidator in a consolidating industry.
It's the business plan it has emphasized loud and clear since CEO Richard Snell took over the Southfield, Mich., auto supplier in 1996.
Federal-Mogul acquired 10 companies last year, and investors embraced that plan. The stock jumped 45 percent by the end of the year, peaking at $67.50.
But 1999 has been different. Federal-Mogul has continued to pursue acquisitions, snapping up Alcan Aluminum Ltd.'s German piston unit and making a strong - although unsuccessful - push for LucasVarity PLC. But the stock has plunged.
For the year, Federal-Mogul's stock is down almost 26 percent. Why the adverse reaction from Wall Street, especially since Federal-Mogul is expected to top 1998's per-share earnings of $2.67 by $2 or more? Analysts blame investors' continued lack of interest in auto supplier stocks, but admit that doesn't wholly explain Federal-Mogul's drop.
'That whole sector is disappointing. In general, investor interest is rotating out of that group,' said Mary Anne Sudol, senior director at Fitch IBCA Inc., a New York City ratings firm.
Other suppliers have seen their stocks slide, but nowhere near as much as Federal-Mogul, which specializes in gaskets, valves and engine seals.
Earlier this year, Bear, Stearns & Co. auto analyst Eric Goldstein wrote that Federal-Mogul was hurt by rumors about problems integrating last year's acquisitions. He also said some investors feared the prospect of a $6 billion deal to buy LucasVarity. That deal fell through in February, but the stock has not bounced back.
'We've had no change in our strategy. Our results have hit or exceeded expectations for 10 straight quarters,' said Kimberly Welch, Federal-Mogul's vice president of corporate communications. 'I'm at a loss to see what changed for our stock to drop like that.'
Federal-Mogul shows no signs of changing its consolidation plans. The company confirmed that it is a final bidder on TRW Inc.'s automobile engine valve business, which Welch said records annual sales of about $500 million.