As tough as business conditions are for U.S. automakers, they've been even tougher, longer, for their suppliers, because supplier margins are one of the first things to go, when sales start to turn down.
Based largely on lower forecasts for U.S. auto production, Barclays Capital Inc. recently cut earnings estimates for all the suppliers it follows, said analyst Brian Johnson.
"Macro conditions continue to soften, leading us to lower sales and production estimates for North America and Europe, with likely weakness spreading to Asia," Johnson said in an Oct. 17 note to shareholders.
The chart (above) with the note shows the seasonally adjusted annual sales rate (SAAR) for the last three years, with 2009 appropriately in black.
Commodity and energy prices have eased somewhat, and sales have rebounded a bit in the U.S. market for pickups and SUVs. Those factors offset at least some of the downturn in production, he said.
Separately, Fitch Ratings on Oct. 17 downgraded a big auto supplier, American Axle & Manufacturing, from "B+" to "B," with a negative outlook, due to tight credit, an increasing debt load, and lower production for the company's key customer, General Motors.
From 2001 to 2006, at least seven major suppliers went bankrupt, according to Standard & Poor's. Five have since emerged from bankruptcy, but the biggest, Delphi Corp., which filed for bankruptcy in October 2005, is still trying to reorganize. GM spun off Delphi in 1999.