October 29, 2008 / 3:44 PM / in 9 years

WRAPUP 1-BorgWarner, Tenneco hit by auto market slump

 * BorgWarner swings to loss, cuts 2008 outlook
 * Tenneco axing 1,100 jobs, closing five plants
 * Suppliers blame financial crisis, slowing economy
 * BorgWarner shares down 9 pct, Tenneco off 8 pct
 By Soyoung Kim and Kevin Krolicki
 DETROIT, Oct 29 (Reuters) - Two of the largest U.S. auto parts makers said on Wednesday that the global credit crisis and economic slowdown hammered their business in the just-completed quarter and would lead to more job cuts and plant closings.
 The weak conditions caused BorgWarner Inc (BWA.N) to post a quarterly loss and Tenneco Inc (TEN.N) to announce future job cuts and plant closings, sending shares of both companies lower.
 Shares of BorgWarner tumbled as much as 14 percent after the supplier lowered its full-year financial outlook in the wake of the results that missed Wall Street estimates, while Tenneco shares were down 8 percent.
 Both suppliers expected market conditions to deteriorate further in 2009, saying the credit crisis and a worsening global economy are dampening already-weak appetite for vehicles.
 “The crisis in the financial sector and deteriorating global economic conditions has caused significant turmoil and uncertainty,” BorgWarner Chief Executive Tim Manganello said on a conference call with analysts.
 “Much has changed in the past three months. The crash of the U.S. financial sector has basically frozen liquidity and our U.S. economy. The economic issues of the US have spread to other regions around the world,” Manganello said.
 In response to the abrupt downturn in global demand, BorgWarner said it will reduce 500 jobs in Europe, or 6 percent of its workforce in the region. The supplier has also increased the number of cuts in North America by 200 to 1,200 positions, or 16 percent of its workforce.
 Auto parts suppliers, already pressured by U.S. auto sales at decade lows, have been forced to launch more aggressive cost-cutting actions over the past weeks in the wake of the escalating credit crisis.
 Industrywide U.S. auto sales plunged 24 percent in September, as an escalating credit crisis hit the slumping industry and raised new doubts about when the world’s largest auto market would stabilize.
 “As difficult as this market is, this may be one of the best quarters from an industry production perspective that we’ll see in a while,” Manganello said.
 DEEPER CUTS
 Tenneco Inc (TEN.N) said it is cutting 1,100 jobs worldwide and closing four North American manufacturing facilities as part of a restructuring, which it estimates will save $64 million annually.
 “We must act quickly by better aligning our operations with the new realities of the market.” Tenneco Chief Executive Gregg Sherrill said in a statement.
 Tenneco expects to record up to $60 million in charges -- about $44 million in cash -- related to the restructuring steps it aims to complete by the end of 2009.
 The latest job cuts -- 500 salaried and 600 hourly positions -- represent more than 5 percent of Tenneco’s global workforce. The company has already slashed 1,150 jobs worldwide so far this year, including 760 in North America.
 In addition to the four manufacturing facilities in North America, Tenneco said it will close its engineering operation in Dunsborough, Australia.
 BorgWarner, which makes turbochargers and transmission components, posted a third-quarter loss of $130.4 million, or $1.12 per share, compared with earnings of $83.2 million, or 70 cents per share, a year earlier. The company had posted earnings growth in the first and second quarters as overseas sales offset the slump in the U.S. auto market.
 Excluding charges for restructuring, a write-down on the value of a past acquisition and other one-time charges, BorgWarner had adjusted earnings of 44 cents per share.
 That was below the average forecast of analysts surveyed by Reuters Estimates at 54 cents per share.
 Given the slowdown in auto production, BorgWarner said it now expected to earn between $2.25 and $2.35 per share, excluding one-time items, down from its own previous forecast of $2.80 to $2.95.
 Sales for the July-September period were $1.32 billion, flat from a year earlier.
 Shares of BorgWarner were down $2.26 or 9.46 percent at $21.63 on the New York Stock Exchange near midday, off an earlier low at $20.44. Tenneco shares were down 7.8 percent at $2.85, off an earlier low at $2.81.  (Editing by Patrick Fitzgibbons and Matthew Lewis)   

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