Dura CEO Larry Denton is generating cost savings to offset price concessions.
Declining sales and lower profits are slowing down the CEO of Dura Automotive Systems Inc. And now Dura has lost future GM seat-track business to Lear Corp., one of his biggest customers.
"This is a worrisome trend for a company like Dura," analyst Shelly Lombard told Automotive News. "They cannot afford to lose any more business."
Lear plans in-house production of the power seat tracks for General Motors' new GMT900-platform full-sized pickups and SUVs. SUV production begins in the first quarter of 2006. GM is expected to produce 1.3 million to 1.5 million units a year off the platform. That's bad news for Dura, since it now sells seat tracks for the GMT800 platform that is being phased out. It's North America's largest-selling platform, and the contract is worth an estimated $120 million in annual sales. More than half of that business is for power seat tracks.
Denton discounted the impact of the loss of the new GMT900 business: "The loss of a couple of platforms will not make or break this company."
$250 million at stake
Most of Dura's sales to Lear are seat tracks, Lombard says.
Between 10 and 11 percent, or about $250 million, of Dura's sales last year came from Lear, says Lombard, a credit analyst with Gimme Credit Publications Inc. of New York.
But a key question for Dura is whether it can make up that loss with other new business.
Dura acknowledges that business from seat tracks on the GMT800 will decline gradually though 2007. But at the same time, Denton says, sales of other Dura parts on the GMT900 -- such as parking brake systems and cables -- will grow as the full-sized trucks ramp up.
The Rochester Hills, Mich., company is forecasting up to $2.4 billion in sales next year -- roughly flat with this year. Dura has secured a $251 million revolving line of credit. So it has sufficient access to cash.
Running in place
Denton has been an avid marathon runner, and in 1987 ran in the Boston Marathon. But in many respects, Denton's company is running in place. With lower revenue, Dura must generate substantial cost savings each year just to offset price concessions to the automakers.
At some point Denton will have wrung all of the possible cost savings out of the company and there will be nothing to offset the volume and price declines, Lombard says.
Dura's two largest customers are Ford Motor Co. (26 percent of sales) and GM (14 percent).
The supplier is one of the largest manufacturers of automotive cables, parking brake mechanisms, transmission shifter mechanisms and glass systems.
Dura posted third-quarter sales of $536 million, down 13 percent from the year-ago period. Year-to-date sales fell 6.8 percent to $1.78 billion. It posted a third-quarter net loss of $6.6 million. It has reported losses in three of the last five quarters.
Dura shares have been in a downward spiral for a year. The stock traded late Friday, Nov. 11, at $2.34, after hitting a 52-week low of $2.19 the previous day.
Standard & Poor's gives the company a high-risk "B" credit rating. S&P says Dura's outlook is negative because its balance sheet is highly leveraged and credit-protection measures are weak.
You may e-mail Robert Sherefkin at [email protected]