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Auto Supplier Comeback Well Underway

Cost cutting and massive firings mean bigger profits from incremental production or sales increases.

by on Aug.04, 2010

BorgWarner supplies its DualTronic transmission and controls for Fiat's Alfa Romeo MiTo.

Early returns from some key automotive suppliers such as Federal Mogul, American Axle, BorgWarner and Tenneco indicate the sector continues to benefit from the modest increase in production and from huge restructuring and cost cutting as results surpassed the expectations of securities analysts.

Federal-Mogul Corp. of Southfield, Michigan has reported a 23% increase in sales and 17.1% increase in net income for the second quarter, beating estimates of analysts by a substantial margin by posting sales of $1.6 billion and earnings of $49 million.

“Federal-Mogul’s results in the second quarter of 2010 show our ability to deliver strong financial performance by converting incremental revenue to profitability due to our continued focus on efficiently managing our cost base established during 2009,” said Jose Maria Alapont, president and chief executive officer.

Federal hit $1.6 billion versus $1.3 billion recorded during the same period one year ago. Net income was $49 million or 49 cents per share.  Analysts’ consensus earnings expectation was 32 cents per share, according to the company’s second quarter financial statement.

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Results!

Federal Mogul’s stronger sales performance stemmed from share gains in all regions and markets, on top of a significant improvement in global automotive demand, Alapont said.

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