|Demand Drives Rebound For Auto Part Manufacturers
|Increased demand and profits are strengthening recovery in the auto parts manufacturing sector.
Jennifer LeClaire (June/July 10)
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Truck and auto parts manufacturers are seeing the light at the end of the economic crisis, as stronger demand and rising profits signal a sustainable recovery.
Companies like Illinois Tool Works, Federal-Mogul, Gentex, Eaton, BorgWarner, and Johnson Controls are posting growth - and even beating Wall Street estimates - after industrial woes and the resulting cost-cutting measures stymied the industry for years.
Illinois Tool Works, a Glenview, Illinois-based auto parts manufacturer, posted $3.6 billion in revenues in the first quarter, nearly a 15 percent increase over the previous year's period. The company reported a 1.2 million year-over-year unit increase in the first quarter of 2010.
"We are encouraged by the ongoing improvement in macro-data across many of our worldwide end markets and we have a growing sense of optimism that the business environment will continue to improve as the year progresses," says Illinois Tool Works Chairman and CEO David Speer.
Michigan Makers Recovering
Meanwhile, Federal-Mogul, a Southfield, Michigan-based auto parts manufacturer, reported first quarter sales of $1.5 billion, a 20 percent increase over the previous year's period. José Maria Alapont, president and CEO of Federal-Mogul, says the company's strong first quarter results "demonstrate the benefit of an improving industry."
Zeeland, Michigan-based auto parts manufacturer Gentex reported record results in the first quarter. Net sales increased 98 percent to $185.8 million. Fred Bauer, Gentex chairman and CEO, said improved global automotive industry light vehicle production, as well as new business and increased penetration of its products, drove growth. The company expects second quarter results to increase 55 percent to 65 percent compared with the second quarter of 2009.
In Auburn Hills, Michigan, BorgWarner reported a 57 percent sales increase in the first quarter as growing demand for its fuel-efficient technologies, along with strengthening global production volumes, bolstered the global powertrain system supplier's strong results.
"The pace of recovery in North American production volumes continues to accelerate, we see a favorable shift in Europe toward vehicles with higher BorgWarner content, including diesels, and our sales growth in Asia continues to gain momentum," says Timothy Manganello, chairman and CEO of BorgWarner.
Recovery Beyond the Heartland
Auto parts manufacturers in other parts of the country are also seeing growth. Eaton, a diversified industrial manufacturer in Cleveland, posted sales of $453 million in its truck division. That's up 55 percent year-over-year. And Eaton's automotive segment posted first quarter sales of $374 million, up 39 percent from the year-ago period. The segment posted operating profits of $42 million compared to a loss of $45 million in the first quarter of 2009. Global automotive markets were up 46 percent.
"For the year as a whole, we now anticipate global automotive markets will grow by 15 percent, with U.S. production up 31 percent and non-U.S. production up 6 percent," said Alexander M. Cutler, Eaton chairman and CEO. "End market demand is recovering around the world and production is being buoyed by inventory rebuilding as well."
Finally, Johnson Controls saw a 70 percent year-over-year increase in its Automotive Experience sales, with $4.2 billion in the first quarter. Johnson Controls also increased its forecasts for North American and European auto production in the 2010 fiscal year to 10.9 million units and 16.7 million units, respectively. Stephen Roell, Johnson Controls chairman and CEO, says, "We continue to be encouraged by the steady improvement in the automotive industry."