Auto-Parts Makers On A Roll
Ruthie Ackerman, 03.16.09, 07:40 PM EDT
Encouraging words from Washington aid troubled sector.
Stocks of auto suppliers got a much-needed jolt on Monday after an adviser to President Barack Obama's autos task force said he recognizes the need for aid to the ailing firms.
On Monday, Steve Rattner said the task force, which is headed by Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers, will try to avoid bankruptcy for General Motors (nyse: GM - news - people ) and Chrysler. In an interview with the Detroit Free Press, Rattner said that the panel also recognizes that auto suppliers have been left to fend for themselves and the financial stress is a “very, very urgent” issue.
Government aid has been focused on General Motors (nyse: GM - news - people ) and Chrysler, while their parts suppliers have been left in the dust. To head off an expected wave of bankruptcies, suppliers are seeking their own $18.0 billion in federal assistance through a variety of measures designed to boost short-term liquidity. (See “Detroit’s Other Crisis.”)
Last week a report by corporate and restructuring services firm Grant Thornton announced that hundreds of auto-parts suppliers may be at “high risk” for bankruptcy in the next three months because of volume declines. Meanwhile, on Monday, auto parts supplier Dana Holding reported a wider-than-expected sales lossin the fourth quarter, although the industrial products company said it expects its earnings before interest, taxes, depreciation, and amortization to be slightly higher than its 2008 EBITDA of $255.0 million.
Dana Holding (nyse: DAN - news - people ) shares shot up 22.6%, or 7 cents, to 38 cents in afternoon trading. Its shares, however are still down 48.6% this year.ArvinMeritor (nyse: ARM - news - people )'s shares soared 57.4%, or 31 cents, to 85 cents, while American Axle & Manufacturing Holdings (nyse: AXL - news - people ) added 40.5%, or 32 cents, to $1.11.
Dana posted a loss of $256.0 million, or $2.64 per share, in the fourth quarter ended Dec. 31, compared with a loss of $257.0 million, or $1.71 per share, for the same quarter last year. The latest quarter had fewer common shares outstanding, accounting for the difference in the per-share calculation.
Sales tumbled 30.0%, to $1.5 billion, down from $2.2 billion in the prior year, as automakers slashed orders in response to plummeting consumer demand. There is only one analyst that covers Dana, according to Thomson Reuters, and the analyst was looking for sales of $1.7 billion.
The company refused to issue a formal guidance for 2009, but said itexpects 2009 to be more challenging than 2008. “These are unprecedented times that make any projections uncertain,” said Chief Executive John Devine. “We believe we are taking the difficult actions necessary to survive in the current environment and compete over the long term. There can be no assurances, however, if the global economy deteriorates substantially beyond our planning assumptions.”
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