Magna Takes Loss, Other Suppliers Soaring

Magna Takes Loss, Other Suppliers Soaring

By Michelle Krebs August 10, 2009

Magna International Inc. is embroiled in a bidding war with Belgium's RHJ International SA to take over General Motors Co.'s European operations, but Aurora, Ontario, Canada's Magna has another hassle in the form of its balance sheet: the company lost $205 million in the second quarter.

Magna's sales for the quarter slumped to $3.71 billion, a 45 percent drop, the company said.

Magna's bid for GM's Adam Opel AG operations in Europe also is said to be more problematic than the competing RHJ bid, largely because Magna's partner in the bid is the Russian bank Sberbank -- but also because Magna is seeking more capital from the German government than the RHJ proposal. The Magna/Sberbank deal reportedly remains the front-runner with the German authorities, however.

Another auto-related supplier, once high-flying Sirius XM Radio Inc., also had a rough ride in the second quarter. The company lost $157.4 million and its tussle to turn a profit has been sidetracked by the nation's sharp decline in new-vehicle sales, an important source of original-equipment revenue.

And although bankruptcies and threats of bankruptcies abound, some recently distressed suppliers are enjoying a fairly remarkable resurgence.

One example is automotive and commercial-vehicle mulit-line supplier ArvinMeritor Inc. At the depth of the U.S. stock market's decline in March, ArvinMeritor shares were 35 cents. Barely five months later, the company's stock is 20 times that amount, closing last week at more than $7. Arvin stock has doubled in just the last month.

Chassis-components supplier Dana Corp. has a similar story -- only the performance of the recently-emerged-from-bankruptcy Toledo, Ohio, supplier exceeds that of ArvinMeritor. Dana shares plunged to 19 cents in March -- and last week closed at $4.75, a 2,500-percent gain.

Even these gains are relative, though, to many of the automotive suppliers' former valuations. In early 2008, Dana was a $12 stock, ArvinMeritor exceeded $15. Borgwarner Inc., long regarded as one of the industry's healthier and more-stable suppliers, traded last week at slightly more than $32 after seeing a low earlier this year of around $15. Yet barely more than a year ago, Borgwarner's stock had exceeded $50.

So like their domestic automaker customers, many suppliers' stock prices still have a long haul back. -- By Bill Visnic

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.