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Auto suppliers aim to offset European woes

Keywords: Tags  Tier I automotive suppliers, Europe, Magna International, Delphi Automotive, Dana Holdings, Tenneco, Volkswagen, General Motors Ford

CHICAGO — Although a recessionary climate in Europe will offset expected overall gains in the automotive sector this year, Tier I suppliers to the industry are relocating some capacity to meet growth opportunities in other regions, with North America continuing to be a bright spot for automotive demand.

Magna International Inc. recently projected 2013 North American light vehicle production at 15.8 million units, up from its January estimate of 15.3 million vehicles.

"The vast majority of the increased volume comes from Asian-based (original equipment manufacturers)," Magna investor relations vice president Louis Tonelli said during an earnings conference call.

Aurora, Ontario-based Magna, which revised its projection for western European light vehicle production downward by 100,000 vehicles to 11.9 million, is restructuring its European operations over the next two years.

"We will have some plant consolidations. (This) depends on the amount of business we’re winning, but also, if customers are closing plants, we have to react to it," Magna chief executive officer Donald J. Walker said. "We have been working on moving our footprint, either by building new facilities or shifting production to lower-cost regions."

Delphi Automotive Plc president and chief executive officer Rodney O’Neal echoed that view.

"We have implemented several restructuring initiatives, primarily in Europe, and we continue to rotate our footprint to lower-cost countries," he said during the company’s earnings conference call. At the same time, "we continue to invest (in) strategic growth initiatives," including acquisitions and organic growth in China. "We are on track to double the size of our China business over the next four to five years."

Asia accounted for 34 percent of Troy, Mich.-based Delphi’s new business bookings in 2012. Still, Europe remains a meaningful market for Delphi, and every 1-percent reduction in industry volume there equates to a decline of about $60 million in revenue. O’Neal expects European auto production to be down 4 percent in 2013.

"It’s clear (Europe) will be a prolonged weak industry environment as the entire region works through recessionary economic conditions," Tenneco Inc. chief operating officer Hari N. Nair told investors recently. "We continue to take actions that adapt our footprint and cost structure to align with this environment." The goal is to align operations "with what we expect future markets will demand based on customers’ plans, industry forecasts and expectations for economic recovery."

Meanwhile, Lake Forest, Ill.-based Tenneco has leveraged higher volumes with its position on strong selling platforms in North America, especially with Ford Motor Co., General Motors Co. and Volkswagen AG, and is ramping up programs at its new plants in the Asia-Pacific region.

Maumee, Ohio-based Dana Holding Corp. uses its diversification to manage hot and cold markets.

"Our regional sales mix continues to be balanced, with an expected shift in sales from South America to North America and from heavy vehicle to light vehicle," president and chief executive officer Roger J. Wood said. "There are a lot of underlying dynamics going on in almost every region of the world. In North America, the light vehicle market overall will continue to be strong in 2013."

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