A New York investment fund is playing its own version of "Wheel of Fortune" with an auto parts maker.
Third Avenue Management LLC has quietly taken a 21 percent position - about 5.6 million shares - in wheel maker Superior Industries International Inc., according to filings with the U.S. Securities and Exchange Commission.
Third Avenue is a making an ambitious play for an undervalued asset in an industry it perceives to be at the bottom of the cycle, says Rajesh Kothari, managing director of the investment banking firm Seneca Partners in Birmingham, Mich.
Superior is one of the gems amid the ruins of the automotive parts sector. It is an industry leader in cast and forged aluminum wheels and has enjoyed years of uninterrupted profits, with $100 million in cash and a debt-free balance sheet.
Shares in Superior, of Van Nuys, Calif., have been in a slide since the middle of 2002.
After hitting a high of more than $50 a share in September 2002, the price went as low as $17.40 in May. It was trading just above $18 last week.
Credit Suisse analyst Christopher Ceraso said in a recent report that the company suffers from lower volumes and price erosion. These chronic issues have squeezed Superior to the point where it has no profit margin to absorb future industry problems.
Superior has suffered from falling volume on major Big 3 truck programs such as the Ford Explorer, Expedition and the F-150, as well as the GMT800 platform and Jeep Grand Cherokee. The launch of the GMT900 platform has helped offset some of the decline in Ford volume, Ceraso says.
This could be a tough year for Superior. Not until the end of the year will it begin to show the benefits of a new plant in Mexico or some of the restructuring that it began at the end of 2005.
Kothari says he thinks Third Avenue is looking at a longer-term play at Superior - 12 to 24 months or longer.
Third Avenue executives were not available for comment last week, said spokeswoman Jessica Perry. But the mutual fund has wider automotive industry investment plans, according to its SEC filings.
The fund has a 4.2 percent equity stake in American Axle & Manufacturing Holdings Inc. It has $75.2 million in debt notes of interior-trim supplier Collins & Aikman Corp. And it has $2 million in General Motors senior unsecured debt.
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