Sunday, May 2, 2010

Auto parts suppliers see profits return

DETROIT — Companies that crank out gears, hoses, gauges and other parts for U.S. automakers are making a comeback.
Many are profitable again, and some are cautiously hiring after months of layoffs. They've also accomplished something that two of their biggest customers, General Motors and Chrysler, haven't: They've repaid everything they borrowed from the government.

In the past two weeks, large suppliers such as Gentex Corp., BorgWarner Inc. and Federal-Mogul Corp. have reported millions in profits for the first quarter, reversing huge losses from early last year, when the auto industry nearly collapsed. The revival is driven by rising auto sales and the suppliers' own painful cuts during the recession.

The companies are among more than 2,000 in the U.S. that make just about all the 10,000 parts in a single car or truck, components that are bolted into vehicles by the Detroit Three or Asian and European automakers. You name it and the suppliers make it: transmissions, belts, speedometers, wires — even plastic bags that keep seats clean in the factory.

Many are concentrated around the Great Lakes, but thousands have set up in Southern states like Kentucky, Tennessee, Georgia and Alabama. They're also in Texas and California. Together they employ more than 420,000 people and form links in a complex supply chain that turns sheet metal and plastic into Chevys and Corollas.

The suppliers' profits stand in contrast to 2009, when at least 54 went into bankruptcy protection and the government approved loans to help them buy raw materials and meet payrolls. Many couldn't borrow elsewhere because of a frozen credit market and doubts that they would be paid by General Motors Co. and Chrysler Group LLC as the pair headed into Chapter 11.

"There is no doubt whatsoever that there is a recovery both in the global economy and the auto industry," said Federal-Mogul CEO Jose Maria Alapont, whose company saw revenue rise 20 percent in the first quarter while results swung from a $101 million loss to a $15 million profit.

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