SOURCE: Rothman Research

Rothman Research

June 17, 2010 08:35 ET

Survival of the Fittest

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 17, 2010) - www.rothmanresearch.com -- The U.S. automobile industry went through what could be the worst turmoil of its history and has experienced some of the most dramatic restructuring imaginable. Nonetheless, recovery in this industry has been remarkable with auto makers seeing sales improvement in the few months of 2010. With auto makers on the go once again, the natural trend followers have been auto part suppliers. U.S. auto part suppliers have felt first hand all the blows and kicks inflicted on the auto producers during the long battle the recession had been. The industry to which they belong shed a number of its players. Now that the economy is starting to fizzle positively and gradually the auto parts industry is facing a new set of challenges. The recession has somehow created a handicap for U.S. auto parts suppliers. Whilst a majority of companies had been focused on fighting for survival, bruising Chapter 11 of the bankruptcy code up close, the auto mobile industry shifted powerhouse and settled into the Far East -- China to be exact.

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So waking from the recessionary nightmare, the U.S. auto makers are not only adjusting to the new auto industry landscape but they are also digesting a whole new level of competition. Whilst international competition is yet to enter the local arena, it is the well too famous 'big fish, small fish in one pond' type of competitive environment which is impacting the industry. However, competition on this scale can be regarded as positive as it promotes consolidation. The one major problem, nonetheless, is that smaller players are still struggling to have access to much needed credit for working capital. Regardless, last week, Moody's raised its outlook for the U.S. auto parts suppliers to positive citing surging demand for auto parts as vehicles sales go up. Morgan Stanley took the same initiative this week, lifting the industry's outlook to 'Attractive' and in the process the analyst upgraded two of the industry's players, Johnson Controls and TRW Automotive Holdings Corp. (NYSE: TRW).  

*Free downloadable research reports on TRW Automotive Holdings Corp. and Tenneco Inc. are available by signing up now at http://www.rothmanresearch.com/article/trw/23594/Jun-17-2010.html or http://www.rothmanresearch.com/article/ten/23595/Jun-17-2010.html

2008-2009 will forever be marked in black for survivors of the worst automobile industry downfall in U.S. history. Tenneco Inc. (NYSE: TEN) is one formidable example of how one year can have two extremely different scenarios, one of near-death experience in a climate of utter uncertainty and the other more recent talks about a return towards profits. 

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