More stable new-vehicle production means higher Q1 sales for suppliers

More stable vehicle assembly schedules meant higher first-quarter revenue numbers for many publicly traded suppliers in North America — a welcome sign for parts companies hurt by automaker production problems in recent quarters.

But some suppliers continue to flag their customers' uncertain electric vehicle plans as an ongoing concern for future results and continue to waver on making new investments in technology and capacity.

Below are four takeaways from suppliers' first-quarter earnings reports.

Most publicly traded suppliers in the region that reported quarterly earnings saw sales rise from a year earlier, with many companies pinning the increase on greater market stability. It's a clear sign that post-pandemic headwinds suppliers face, ranging from parts shortages to higher costs, are easing.

"We're definitely seeing an improvement in the stability of production globally," Lear CFO Jason Cardew told analysts and investors on a quarterly call. Lear reported $6 billion in sales in the quarter ended March 31, up 3 percent from a year earlier and a quarterly revenue record for the U.S. supplier.

The first-quarter results follow a general trend from the back half of last year, when headwinds including the microchip shortage and logistics issues posed less of a threat to vehicle production.

"So far this year, we have experienced more stable production schedules relative to what we experienced in recent years," Magna CEO Swamy Kotagiri said of his company's results.

But higher revenue did not necessarily translate into higher profits, often due to other lingering issues.

Magna said its net income fell to $9 million from $209 million a year earlier. As a result, Kotagiri said the supplier, North America's largest, is cutting expenses and considering restructuring certain businesses.

"We are looking at every engineering program and its relevance now," Kotagiri said. "I think it's all encompassing."

Despite Lear's record revenue, it saw net income fall by 24 percent from a year earlier amid operational challenges and higher labor costs, which CEO Ray Scott said the company is addressing by investing heavily in automation.

Dana Inc. posted a 3.4 percent rise in revenue but saw net income decline to $3 million in the first quarter of this year from $28 million a year earlier. However, the company said that reflected a loss related to a sale of one of its businesses.

Other suppliers saw net income rise.

American Axle & Manufacturing net income stood at $20.5 million, up from a loss of $5.1 million a year earlier, while Visteon net income rose despite a dip in sales revenue.

Cooper-Standard's net loss improved to $31.7 million, compared with a loss of $130.4 million a year earlier.

Suppliers continued to signal to investors that they are taking the transition to electric vehicles seriously, even as EV sales growth declined in the U.S.

BorgWarner highlighted a pair of business wins in China and in Europe. The company said it will deliver e-motors to Chinese EV manufacturer XPeng for use on two SUV models beginning in 2025. It also said it signed onto deals with Polestar and another unnamed European automaker supply torque vectoring disconnect systems for upcoming EV models.

Awards such as those "demonstrate our focus on taking the leading-edge technology [and] working closely with our customers to help support them as they transition toward electrification," BorgWarner CEO Frederic Lissalde said on a call with analysts.

But some suppliers appear to be moving away from major investments in fully automated vehicles. Aptiv said it would reduce its equity interest in Motional, its self-driving joint venture with Hyundai. Hyundai will acquire 11 percent of the Motional common equity held by Aptiv for $448 million, Aptiv CFO Joseph Massaro said.

While suppliers agree that EVs are the industry's future, they continue to adapt to slowing EV sales growth domestically.

Magna said it expects revenue to dip by $400 million this year as production of EV maker Fisker's Ocean electric crossover stopped in March amid the startup's financial woes. Magna was under contract to build the Ocean for Fisker at its Steyr contract assembly plant in Graz, Austria.

Magna will lay off about 500 people in Graz as production of the Ocean and other models, including the BMW 5 Series and Jaguar I-Pace, ends this year.

Magna joins many of its European competitors, including Continental, in cutting jobs in Europe. Continental, which lost €53 million ($57 million) in the first quarter, plans more than 7,000 job cuts as it attempts to turn around its automotive unit.