DETROIT (Jan. 18, 4:50 p.m. ET) — Increased vehicle production in North America, led by U.S. automaker output, will boost most suppliers' fourth-quarter profits, analysts say.
Fourth-quarter vehicle production reached 3.42 million units, up 15 percent from 2010's fourth quarter, according to the Automotive News Data Center.
Neil De Koker, CEO of the Original Equipment Suppliers Association, said the entire automotive industry did well in 2011, particularly in the fourth quarter. Most major North American suppliers will be reporting their latest financial results over the next month.
The fourth-quarter rally follows numerous global production challenges caused by the March 11 earthquake in Japan and this fall's floods in Thailand.
“We've recovered from the floods in Thailand in October and November, the Japan crisis in the first quarter is well behind us, and the year ended strong in December,” De Koker said. “I think we'll be very pleased with the financial performance of the industry, including suppliers, for the year.”
Suppliers with close ties to the Detroit 3 probably fared better in the fourth quarter than those with more exposure to Asian or European manufacturers.
All indications point to suppliers finishing on a strong note, with earnings up 10 to15 percent for the fourth quarter, said analyst David Leiker of Baird Equity Research.
“I think when you look at where the production rates ended up, we would expect most companies to have good fourth-quarter earnings,” Leiker said in an interview.
Leiker said 2012 vehicle production is expected to hit 13.5 million to 14 million units in North America, but he cautioned about sales declines in Europe.
“As we look to 2012, it is important to keep in perspective that European auto demand has fallen four straight years and is 15 to 20 percent the level seen from 2005-2008,” said Leiker.
Goldman Sachs analyst Patrick Archambault said suppliers will do well on the margin side in the fourth quarter because of recovery of Japanese production, lower commodity costs and healthy production schedules.
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