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Auto suppliers rebound, hire after years of industry slump

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Auto suppliers rebound, hire after years of industry slump

At least 5 firms' third-quarter profits meet or exceed Wall Street expectations



At least five major auto suppliers reported third-quarter profits this week that met or exceeded Wall Street expectations, and several said they are even hiring again after years of industry restructuring.

Among them: Southfield-based Federal-Mogul, Detroit-based American Axle & Manufacturing, Auburn Hills-based BorgWarner, Southfield-based Lear, and Milwaukee-based Johnson Controls, with an automotive division in Plymouth.

Of those, at least two started hiring earlier this year, Federal Mogul and American Axle.

"We haven't seen across--the-board profit increases like this for a very long time," said Jim Gillette, an analyst for IHS Global Automotive. "Enjoy it while it lasts."

Gillette said suppliers will be challenged by rising raw material costs for commodities such as steel. He also is concerned that automakers will start seeing the larger profit margins and will begin asking for price reductions.

"What we really need to see right now is the suppliers using their earnings and cash flow to bolster their balance sheets and pay down debt," Gillette said.

Despite concerns about whether suppliers' success is sustainable, American Axle Chief Financial Officer Michael Simonte said he believes the industry has changed for the better.

"I think there is a greater awareness of the importance of suppliers being profitable," Simonte said. "The key is we need to be market competitive."

Adding jobs

On Thursday, Federal-Mogul on Thursday reported a third-quarter profit that was four times larger than last year and the company's global employment has increased from 39,000 at the depth of the recession to 43,000.

About 2,000 of those workers were added in North America, said Jose Maria Alapont, president and CEO of Federal Mogul.

"Now that the volumes are coming back, we are adding people in an efficient way," he said.

Federal-Mogul, which spent five years in bankruptcy in the 2000s as it worked to shed asbestos obligations, has reported five consecutive profitable quarters.

The company reported a third-quarter profit of $53 million, or 53 cents a share, compared with $10 million, or 10 cents a share, for the three-month period ending Sept. 30

What's more, the company's revenue in the fastest-growing countries, including Brazil, India and China, has nearly doubled so far this year.

American Axle's third-quarter profit nearly doubled, and it also is adding employees, Simonte said. This year, American Axle has increased its work force by 2,000 people worldwide, he said.

Simonte acknowledged that the bulk of those increases are outside of the U.S. in fast growing markets such as India and China.

"We operate our business where our customers are located," Simonte said, adding that some of the automakers' plants the company used to provide parts to in the Midwest "simply do not operate anymore."

Still, more than 200 of the new or recalled workers the company has added this year are in Michigan at the company's Rochester Hills technical center and at Michigan plants.

American Axle said Friday it is on track to hit a pre-tax profit margin of more than 14%, the largest profit margin in company history.



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