CHICAGO -- U.S. auto parts makers may feel a sting from deeper-than-expected first-quarter North American production cuts announced by Ford Motor Co. and General Motors on Wednesday, analysts said.
"It is going to continue to be a struggle for folks tied in to the Big Three. It isn't a story that is going to go away soon," Fitch analyst Chris Struve said. "Likely those that are heavily concentrated on one partner will struggle the most."
The pressure likely will be felt deepest by parts suppliers such as Visteon Corp. and Delphi Corp., which still rely on former respective parents Ford and GM for a large percentage of revenue, analysts said.
Visteon, the No. 2 U.S. auto parts supplier, derived about two-thirds of its third-quarter revenue from Ford, while GM accounted for more than half of third-quarter revenue for Delphi, the No. 1 U.S. auto parts supplier.
This will mark the third consecutive quarter of production cuts, but it may already have been absorbed by the market, Standard & Poor's credit analyst Daniel DiSenso said.
Shares of most large U.S. auto parts suppliers rose on Wednesday and were little changed after the announcements.
Ford said it expects to cut first-quarter 2005 North American production by nearly 8 percent, while GM, the world's largest automaker, expects to cut production by 7.1 percent.
Analysts expected GM to cut production around 6 percent and Ford by about 5 percent to 6 percent to trim excess inventory.
But the cuts must be compared by platform and model to a supplier's contract to determine the impact, DiSenso said.
Suppliers that have a more diverse customer base or strong cost controls may cope better with the cuts, though it could be a challenge for everyone, Struve said. Johnson Controls Inc. does a good job controlling its own costs, he noted.
A few suppliers that are more diversified or make growth niche-products can withstand adverse conditions and are rated more highly from a debt perspective than others, DiSenso said.