LEA,AXL,DAN,this is why!!! Auto Suppliers Climb As New Chrysler Prepares To Emerge
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By David Benoit
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)-- Shares of auto supply companies climbed Wednesday as the industry released its collective breath after the Supreme Court removed a potentially disastrous bump in the bankruptcy road for Chrysler LLC, preparing the way for a new Chrysler to begin.
Leading the industry ahead were American Axle & Manufacturing Holdings (AXL) and Lear Corp. (LEA), whose shares have tossed and turned on the uncertainty about Chrysler's and General Motors Corp.'s (GMGMQ) bankruptcies.
American Axle, which last year got 74% of its sales from GM, rose 22.4% to $4.38 in recent trading, with the volume of trades above the 30-day average. Lear, a maker of seats and electronics that has been trying to restructure debt agreements, jumped 32.1% to $2.10.
Also rising were TRW Automotive Holdings Corp. (TRW), which climbed 7.8% to $10.82, and ArvinMeritor Inc. (ARM), which gained 10.4% to $4.14.
Late Tuesday, the Supreme Court cleared the way for Chrysler to emerge from its bankruptcy by lifting a stay it had imposed on the proposed sale of the company to a group of investors, including Italy's Fiat SpA (FIATY). When the high court imposed the delay, warning bells rang that Chrysler wouldn't be allowed to be sold and would have to liquidate, which would be disastrous for the auto suppliers.
And if the court interfered with Chrysler, the plan for GM, involving more complications, would have been considered at risk as well.
Wednesday, Chrysler and Fiat said they have finalized their partnership and that the new Chrysler Group LLC will begin operations immediately.
"You've taken away one potential risk," Soleil analyst Michael Ward said, though he cautioned there were still concerns ahead. "In general, there is still a tremendous amount of risk of liquidity."
Some of that liquidity could also be coming into focus later Wednesday, as the auto suppliers meet with the Obama administration's auto task force and request $10 billion in aid.
Trade groups will meet Wednesday with the auto task force at the Treasury Department and warn that hundreds of parts companies could collapse without the aid. They are requesting that the government guarantee $8 billion to $10 billion in loans so banks will lend to the suppliers.
The suppliers argue that if Chrysler and GM are to come back from bankruptcy and attempt to ramp up the currently slashed production levels, the suppliers will be pushed to increase production also and won't have the working capital to meet the demand, thereby starting the whole bankruptcy train again.
The government hasn't signaled whether the request will be granted, but there is hope among some.
"Why not,? They are giving aid to everybody else," Ward said. "You would hate to have the restructuring of Chrysler and GM be stalled by lack of capital at the supplier end."
-By David Benoit, Dow Jones Newswires; 201-938-2472; david.benoit@dowjones.com
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