Auto Suppliers Rally on ArvinMeritor

This matters to metal stampers because so many have at least partial tie-ins to the automotive industry

AP via Yahoo

Shares of auto parts makers rallied on Wednesday, a day after car and truck parts supplier ArvinMeritor Inc. issued a positive earnings forecast, citing better operational performance and strength in the commercial vehicle market.

Its bullish outlook sent shares of other auto parts suppliers higher, with American Axle & Manufacturing Holdings Inc. rising 7 percent, and Dana Corp. 8.9 percent. Both were also among the NYSE’s top percentage gainers in afternoon trading.

“We believe ArvinMeritor has the potential to see one of the greatest shifts in investor sentiment within the supplier group,” securities firm Robert W. Baird & Co. wrote in a client note on Wednesday. Among other things, the brokerage cited new management at the company, and recent moves to exit non-core businesses and improve its capital structure.

Shares of auto parts suppliers have slumped since the start of this year, as the nation’s top two car makers General Motors Corp. and Ford Motor Co. have grappled with rising costs, losing market share, and bonds recently reduced to “junk” status.

Several suppliers have declared bankruptcy in recent months, underscoring the dire financial situation facing those companies that are heavily exposed to the beleaguered domestic automaking industry. Collins & Aikman Holdings Corp. was the latest to file for Chapter 11 bankruptcy protection in May.

However, some analysts are starting to take a slightly more positive view of the auto parts sector. In a note to clients on Tuesday, Merrill Lynch predicted suppliers’ earnings “should stabilize” after the third quarter, due to recent production cuts at both GM and Ford.

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