By Deepa SeetharamanSome major U.S. auto parts makers projected disappointing full-year outlooks on Friday and said the rebound in the auto industry could be more tempered than previously expected.
Still, auto suppliers said they expected the sector to rebound faster than the broader economy as the average age of vehicles on U.S. roads climbs higher.
"We still think that this is a growth industry and that we are going to see a recovery, albeit maybe a little bit more gradual than we originally anticipated," Lear Corp <LEA.N> Chief Executive Matt Simoncini said during a conference call.
Shares of Lear, BorgWarner Inc <BWA.N>, Tenneco Inc <TEN.N> and American Axle and Manufacturing <AXL.N> all dropped after reporting third-quarter results.
Meanwhile, Goodyear Tire & Rubber Co's <GT.N> stock shot up on a higher-than-expected profit.
Lear's quarterly earnings and 2011 profit outlook fell short of estimates. BorgWarner reported a better-than-expected quarter, but its 2011 outlook implied fourth quarter earnings would fall short of Wall Street estimates, analysts said.
Tenneco reported third-quarter results that were a penny lower than estimates and its operating margins in North America were weaker-than-expected, analysts said.
Lear shares fell more than 5 percent on the New York Stock Exchange, while Tenneco's stock tumbled more than 11 percent.
BorgWarner, which makes turbochargers and other engine technologies, said it expects 2011 earnings between $4.31 and $4.45 per share, tipping its outlook to the high end of its previous range.
Citigroup analyst Italy Michaeli said the outlook suggested fourth quarter per-share earnings between $1.09 and $1.19, falling short of the average estimate of $1.21 per share.
BorgWarner shares fell a little more than 1 percent, while the broader S&P 500 index <.SPX> edged lower. American Axle shares dropped more than 6 percent.
COMMODITY COSTS A CHALLENGE
During a conference call, BorgWarner CEO Tim Manganello noted that global economic uncertainty had stepped up since July when the company last issued its full-year outlook.
"In our view there are no clear signs of a downturn," he said. "However we are prepared to execute cost control plans quickly if needed, and we feel very good about our ability to perform well under any market conditions."
Executives said the deep cost cuts the industry made during the financial crisis, when nearly 50 U.S. auto parts suppliers went bankrupt, would help them ride out economic uncertainty.
"We are certainly increasing our cost structure to support our growth, but we know how to retrace those steps," American Axle Chief Financial Officer Michael Simonte told Reuters.
American Axle reported third quarter earnings of 47 cents per share, beating estimates of 43 cents per share, according to Thomson Reuters I/B/E/S.
Lear's adjusted earnings of $1.08 per share missed estimates of $1.12. Lear said it expects earnings of $5.05 to $5.35 a share in 2011. Analysts were looking for $5.43.
The average vehicle on U.S. roads is almost 11 years old, two years older today than the average in 2007, and at some point those cars will break down and spur new car sales.
Lear, which makes seating and electrical power management systems, said it faced pressure from the cost of commodities such as steel and petroleum-based chemicals.
(Reporting by Deepa Seetharaman and Bernie Woodall in Detroit and A. Ananthalakshmi in Bangalore; Editing by Phil Berlowitz)