Truck gains offset car concerns, supplier execs say

on Aug10

Delphi CEO Kevin Clark: “Net-net, although was have seen some incremental softening in North America, we see opportunities, green sprouts, in Europe and in China,”

The shift to more-lucrative light trucks, plus strong sales in other global markets — especially China — offset worries about the drop in U.S. car volume, major suppliers told Wall Street analysts at a conference in New York.

“Net-net, although was have seen some incremental softening in North America, we see opportunities, green sprouts, in Europe and in China,” Kevin Clark, CEO of Delphi Automotive, said Wednesday at the J.P. Morgan Auto Conference.

Clark said he expects North American light-vehicle production to decline about 2 percent points this year, down from an earlier forecast of virtually flat production. “What’s changed?” he asked. “Softer production on passenger cars with the North American OEs.”

Total North American light-vehicle production was virtually flat in the first half, at 9,085,691, according to the Automotive News Data Center. Within that total, passenger-car production was 3,245,468, down 7 percent from a year ago. Light-truck production was up 4 percent to 5,840,223.

“That’s 20 percent of global production,” Clark said of the North American total. “So we get obsessed with North America when the fact is, China is the largest auto market in the world today,” he said. Delphi, headquartered in Gillingham, England, provides electrical and electronic systems, plus powertrain and active safety technology.

Conference moderator Ryan Brinkman, an auto analyst for J.P. Morgan, told Clark analysts had “some concern” about the drop in U.S. auto sales overall. He jokingly added, “OK, they’ve completely wet the bed,” worrying about it.

On Tuesday, Sachin Lawande, CEO of Visteon Corp., said most economic indicators are fundamentally strong, even though U.S. auto sales are down. Visteon, based in suburban Detroit, makes electronic products such as instrument clusters, information displays, infotainment, audio systems and telematics.

“Our expectation is, we will probably see a dip in sales from the prior year, but it is going to be a modest dip,” he said. “We do not subscribe to the view that the economy is going to drive off a cliff.”

Year-to-date through July, U.S. light-vehicle sales were down 2.9 percent to about 9.9 million. Within that total, car sales were down 12.3 percent to about 3.6 million. Light-truck sales were up 3.6 percent to about 6.2 million.

In the case of longtime supplier Dana Inc., which is strongly oriented toward light trucks, the drop in car sales doesn’t hurt that badly, said company CFO Jonathan Collins. Dana, based near Toledo, Ohio, makes driveline, sealing and thermal-management products.

“We do think that based on a number of factors you could see some softness in the SAAR, largely on the passenger-car side. We think light trucks are going to hold up quite well,” he said. “Passenger-car makes up a very small percent of our business.”

American Axle CEO David Dauch said his company only gets about 10 percent of its business from passenger cars. He pointed out that in July, 80 percent of GM’s U.S. light-vehicle sales were light trucks. ​

Besides axles, Detroit-based American Axle makes components such as drive shafts and transmission gears, plus suspension components, connecting rods and turbocharger housings. Dauch said, “We’re not feeling the major impact on some of the passenger car applications.”

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