Suppliers' efforts to cut costs and boost earnings in the quarter that ended June 30 weren't enough to overcome depressed market conditions - and the next quarter is expected to be worse.
Tier 1 suppliers continue to downsize manufacturing capacity, reduce head count and seek customers. As the Big 3 keep a lid on production, suppliers are directing efforts toward winning more business with Japanese and European transplants.
Johnson Controls Inc. of Milwaukee saw its auto sales group post a 7 percent increase in sales to $3.5 billion in the quarter, driven largely by the acquisition of Japanese seat maker Ikeda Bussan Co. The company estimates that 20 percent to 30 percent of its North American seating and interiors sales in the quarter were to transplants. Overall, quarterly earnings hit a record $136.5 million, up 2 percent from year-ago levels.
Delphi Automotive Systems Corp. of Troy, Mich., posted an 11 percent drop in sales to $6.9 billion and a 61 percent decrease in earnings to $164 million during the quarter. Delphi's earnings were hurt by cutbacks in vehicle production, notably that of its largest customer, General Motors, and the weak euro and Brazilian real.
Delphi is trying to win more transplant business as well as working to get more nonautomotive business.
Delphi plans to eliminate about 6,000 workers by year end and about 5,000 more in the first quarter of 2002.
Excluding special items, Dana Corp.'s quarterly earnings dropped 83 percent compared with the same quarter a year earlier, to $26 million. Dana's special items, which resulted from the sale of its Marion, Ohio, plant and a restructuring charge, cut $12 million from quarterly earnings.
The continuing downturn in the Class 8 truck market and light-vehicle aftermarket also took a toll on suppliers. ArvinMeritor Inc. of Troy, Mich., was hurt in both markets.
Its commercial vehicle sales for the quarter were down 26 percent. That market is not expected to improve until mid- to late-2002, says Lin Cummins, company spokeswoman.
In contrast, ArvinMeritor's light-vehicle sales were down 3 percent. The company's quarterly earnings, excluding special items, were $29 million.
Suppliers' third-quarter earnings typically are lower than second-quarter earnings, partly due to industry shutdowns in July.