CHICAGO (Reuters) -- U.S. auto parts suppliers on Thursday posted lower earnings because of automaker production cuts in North America, rising raw materials prices, restructuring costs and charges to settle lawsuits.
Most U.S. auto parts suppliers have been pressured in recent quarters by General Motors and Ford Motor Co. cutting North American light vehicle production, particularly in larger, gas-thirsty sport utility vehicles, which had been very profitable models.
Those production cuts hit the bottom line at American Axle & Manufacturing Holdings Inc., Dura Automotive Inc. and ArvinMeritor Inc., among others.
"This was not a stellar quarter for the group, given the weak production levels by the majors (Ford and GM)," said Tim Ghriskey, chief investment officer at Solaris Asset Management, who does not own shares in the suppliers but follows them.
"But the group is reacting positively to the aggressive discounting by Ford and GM ... which is favorable for suppliers, probably more than for (automakers)," he said.
American Axle, which derived nearly 80 percent of its revenue from GM in the quarter, posted a 66 percent decline in net income to $18.9 million, or 37 cents per share.
Excluding a 12 cent per share charge for severance, American Axle earned 49 cents per share, 4 cents per share ahead of expectations.
American Axle's sales fell 6.7 percent, reflecting an estimated 10 percent decline in production volumes for the major North American light truck lines it supports.
"This continues to be a tough and challenging year for the domestic automotive industry," American Axle Chief Executive Richard Dauch told analysts on a conference call.
American Axle expects a two-year rough patch in 2005 and 2006, with 2005 being the rougher of the two and the first half of 2005 being the roughest part of this year, he said.
"We feel that things are stabilizing and are starting to have a slight upside," Dauch said. "You know as well as I do the (sales) blowout (GM) had in June and July."
The axle maker is preparing for GM's launch of a new vehicle platform that will start to unfold in the latter part of 2005 and through 2006, updating SUVs and pickups.
Dura, which makes driver controls such as pedal systems, said net earnings fell 6 percent to $3 million, or 16 cents per share. Sales fell more than 5 percent from last year to $623.8 million, Rochester Hills, Michigan-based Dura said.
Dura cut its 2005 sales forecast range to $2.3 billion to $2.4 billion, from $2.4 billion to $2.5 billion. It also cut its forecast for adjusted earnings to a range of $170 million to $180 million, from $185 million to $195 million.
ArvinMeritor net income fell 10 percent to $46 million, or 66 cents per share, in the fiscal third quarter ended June 30, mainly from North American production cuts on light vehicles and high steel costs.
However, ArvinMeritor earned 70 cents per share excluding restructuring costs, while analysts had expected 67 cents per share.
Sales rose 15 percent to $2.41 billion, mainly on increased truck parts volume, truck joint ventures in Europe and favorable currency rates, the Troy, Michigan, company said.
ArvinMeritor plans job cuts and plant closings into 2007, including the sale of its replacement auto parts unit, which it said Thursday it now expects to take place in fiscal 2006. The company said it has started to see results from restructuring.
ArvinMeritor backed its prior forecast for fiscal 2005 earnings per share before items at the high end of its expected range of $1.40 to $1.60. Analysts look for $1.57.
Environmental costs weighed on BorgWarner Inc. results, but earnings met expectations and it backed full-year earnings forecasts.
"It was a decent quarter, especially given industry conditions," Morningstar analyst John Novak said. "They continue to benefit from their product mix and diverse customer base and should continue to outperform the rest of the industry."
BorgWarner, which makes turbochargers and emissions and timing equipment, said second-quarter earnings fell 34 percent to $35.9 million, or 63 cents per share. Sales rose 24 percent to $1.11 billion.
BorgWarner shows some signs of strain from North American sport utility vehicle sale declines, Novak said.
"Drivetrain sales were essentially flat on slow SUV sales," Novak said. "That they were flat, and not down, was a credit to BorgWarner. They have replaced some of that business with products for crossover vehicles and all-wheel-drive cars."