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Ford warning is more bad news for U.S. parts makers

Reuters

CHICAGO -- Ford Motor Co.'s profit warning spells further pain for already battered large U.S. auto parts makers that face vehicle output cuts and rising health care and commodities costs, analysts said.

Ford slashed its 2005 earnings outlook on Friday and warned it no longer expected to meet its 2006 profit goal. The warning follows General Motors' March warning that it expected sharply lower earnings in 2005.

"It's a perfect storm," Morningstar analyst John Novak said of the struggles at GM and Ford, and the rising raw material costs. "Those trends aren't letting up yet.

"It's a broad group," he said of the auto suppliers. "They're all going to be affected to some extent."

Analysts expect Ford, the No. 2 U.S. automaker, to cut its North American light vehicle production plans for the second quarter. That would further pressure suppliers such as former Ford unit Visteon Corp., which gets about 70 percent of its revenue from the automaker.

Others with heavy exposure to Ford include Superior Industries International Inc., Tower Automotive Inc., Hayes Lemmerz International Inc., Collins & Aikman Corp. and Dana Corp., according to regulatory filings.

Ford's struggles could also affect Lear Corp., BorgWarner Inc., Johnson Controls Inc., Tenneco Automotive Inc. and ArvinMeritor Inc., according to regulatory filings.

Ford's current plans call for second-quarter production at about 1 percent below the year earlier level, an outlook analysts see as conservative given GM's forecast for a drop of about 10 percent in production.

The magnitude of the changes Ford could make are unclear, though Friday's warning is likely to be followed by production cuts, said David Siino, an auto and truck parts analyst for Gabelli & Co., the research arm of Gabelli Asset Management.

Ghriskey said Ford's warning was not surprising, given tough competition from foreign automakers, which has left Ford and GM unable to pass rising commodity costs and escalating health care costs through to consumers.

Many of the pressures Ford cited -- high steel prices, crude oil prices and rising employee health care costs -- are the same forces hurting suppliers, who also have been unable to pass through those costs to automaker customers.

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Stacy94PGT
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....