Supplier Optimism about Auto Outlook Wanes

Parts makers are less upbeat about the global auto industry now than they were in May, according to the Original Equipment Suppliers Assn.

The OESA Automotive Supplier Barometer's sentiment index fell to 55 in July from 60 in May. The report says North American production orders appear to be increasing. But survey respondents are wary because of Europe's economic slowdown.

The proportion of suppliers optimistic about the 12-month outlook for their businesses fell to 35% from 51% two months earlier. Pessimists account for 16% of the total vs. 9% in May. Among the reasons cited by the latter group are mounting inventories of fullsize pickups and weak demand for Class 8 heavy-duty trucks.

Forecasts of North American light vehicle production are rising. The median estimate for 2012 is 14 million vehicles, up 500,000 units from January. The 2013 prediction has risen by 700,000 units in that period to 14.8 million units. The average North American light vehicle volume at which suppliers break even is 11.2 million vehicles, up from 10.5 million a year ago.

The survey also finds:

Hiring hourly workers and buying new capital equipment are the top priorities of most survey respondents, followed by expanding salaried staff, expanding existing facilities and adding contract or temporary employees.

Four in 10 suppliers cite some likelihood they will make a significant acquisition next year. But only one in 10 companies expects to sell assets.

Parts makers say the main reason for asset purchases is to reach new customers by expanding into additional geographic markets. Acquisition Interest is strongest in North America, followed by Asia, Europe and South America.

Almost all (97%) of the companies polled expect revenue gains in 2013, and 92% expect to boost earnings before interest and taxes next year.