CHICAGO -- Major U.S. auto suppliers have posted mixed results in the latest quarter as the specter of excess vehicle inventories on dealer floors hangs over the industry.
Key for the auto parts sector in the future will be how much automakers trim production of new vehicles in the second half of the year to allow the marketplace to absorb the glut of cars and trucks already out there.
"There is some concern about the second half of the year in terms of production levels. There is more concern now because the inventories are so overloaded," said Martin King, credit analyst at Standard and Poor's Ratings Services.
On Tuesday, Johnson Controls Inc. said fiscal third-quarter profit rose 17 percent on better-than-expected sales, but its shares slipped less than 1 percent on concern over higher costs in the quarter.
Tenneco Automotive Inc., a maker of shock absorbers and mufflers, saw its stock leap 15 percent after it beat Wall Street expectations on rising sales and good cost controls.
Both companies are gaining market share in a difficult industry environment characterized by intense pressure from automakers to reduce prices on parts, analysts said.
Also on Tuesday, Gentex Corp., which makes rearview mirrors that dim automatically to cut headlight glare, posted a per-share profit that was a penny below analysts' consensus forecast. Its stock ended down almost 2 percent.
Lower production of light trucks and sport utility vehicles at major customer General Motors caused Gentex's earnings to disappoint, analysts said.
"Gentex missed (the consensus forecast) because of its concentration at GM. Johnson Controls has more customer diversity, so they are not leveraged to any one customer," said UBS analyst Robert Hinchliffe.
Ford Motor Co., which also reported earnings on Tuesday, and GM have indicated third-quarter production will be down from a year ago. Ford's stock fell 2.5 percent after the automaker said its financing arm, rather than auto sales, drove profit growth.
Last week, Delphi Corp., GM's former unit and its biggest supplier, warned of a third-quarter net loss due to Detroit automakers' production cuts.
Auto supplier stocks have been pressured since the start of the year amid worry that the consumers' appetite for buying vehicles, whetted by huge rebates and zero-percent financing, will finally sputter.
The hefty incentives that automakers have used to move vehicles off showroom floors have also added to the already stiff pressure on automotive suppliers to cut prices.
"There's no question that there are some intense pressures. We continue to look for ways to offset them. It's a challenging environment," John Barth, Johnson Controls' chief executive, said Tuesday on a conference call with analysts and investors.
Johnson Controls said overall vehicle production in Europe and North America in the quarter was little changed from a year earlier.
Company officials said they were closely watching automakers' production outlooks given the excess vehicle inventories.
Gentex said its operating margins were stable in the quarter, despite continued price reductions to customers, as it improved production efficiency.