Wheel supplier update.
01-02-2006, 08:51 PM
#1
Race Director
Thread Starter
Member Since: Aug 2005
Location: Hudson WI
Posts: 13,598
Received 181 Likes
on
162 Posts
NCM Sinkhole Donor
Wheel supplier update.
Wheel suppliers take a pounding
Amcast's woes disrupt Corvette wheel shipments
Robert Sherefkin
Automotive News / January 2, 2006 - 6:00 am
The wheels are coming off the wheel industry.
Beset by reduced business from automakers, higher raw material and energy costs and cutthroat pricing, the key players in North American wheel making are grappling with financial problems.
The segment's instability caused a supply disruption for at least one General Motors product -- the Chevrolet Corvette -- in December.
Prospects for a speedy recovery appear slim, because low-priced wheels have begun to trickle in from Asia.
The situations at North America's three largest wheel makers illustrate the segment's problems:
1. Amcast Industrial Corp. sought Chapter 11 protection in December for the second time, just months after emerging from a previous reorganization. The company briefly cut off shipments last month to its largest customer, GM.
2. Hayes Lemmerz International Inc. is facing widening losses and a cash-flow shortfall less than two years after emerging from Chapter 11.
3. Superior Industries International Inc. is relatively stable and debt-free. The company's lean operating model has made it a textbook example of how to prosper in a cyclical industry. Still, the problems of the wheel industry have led to Superior's first quarterly loss in over two decades.
Structural problems
Those problems appear to be structural. The market share for GM and Ford Motor Co. is eroding, and both companies reduced production last year. That means fewer wheels purchased from North American suppliers.
Wheel makers in particular are facing aggressive competition from producers in low-cost countries that appear to be winning the favor of customers, says turnaround specialist John Groustra, a partner at consulting firm Conway MacKenzie & Dunleavy PC, of Birmingham, Mich. He once advised Amcast during a restructuring of their credit agreements.
And the price of steel -- a fundamental raw material for wheel makers -- rose through most of 2005. A ton of steel costs about $560, compared with an average of $462 during the third quarter, according to data from CRU, a metals research firm in London.
Amcast threatens shutdown
Amcast, a Fremont, Ind., supplier of aluminum wheels, sought Chapter 11 protection Dec. 1, just three months after emerging from a previous reorganization. Its latest financial crisis erupted on Nov. 29. The supplier gave GM 24 hours to hand over substantial price increases, make a $30 million deposit and meet other demands, or face a halt in shipments, according to documents GM filed with the U.S. Bankruptcy court in Indianapolis.
At a meeting in Detroit the next day, GM offered price relief but declined to agree to other demands, according to the documents.
Amcast, which supplies 13 GM assembly plants, stopped shipping wheels on Nov. 30. It resumed shipments to GM on Dec. 7, two days after the automaker won a court order forcing the supplier to do so.
U.S. Bankruptcy Judge Frank Otte entered an emergency order on Dec. 21 that requires Amcast to continue production. Meanwhile, according to court documents, Amcast threatened to shut down production on Dec. 23 and put 727 employees out of work without warning or severance.
GM, which accounts for about 80 percent of Amcast's wheel business, has agreed to prop up Amcast financially for up to six months with cash and higher prices for its wheels, according to terms filed in court. If Amcast finds an acceptable buyer for its assets, GM would agree to keep its business at those locations for two years, according to court documents.
As of Tuesday, Dec. 27, no objections to the terms had been filed. Another hearing is scheduled Feb. 21.
GM and lawyers for Amcast declined comment.
The Chapter 11 filing has caused "significant disruption" in wheel supplies for Corvettes, according to a Dec. 15 memo from GM to Chevrolet dealers.
"Unfortunately, this situation has caused GM to make several adjustments affecting wheel options, production volumes and production schedules," the memo said. "Many orders may need to have wheel selections changed based on wheel availability."
Even if Amcast were to be liquidated, it would not allow other wheel makers to raise prices and make more money, according to one analyst.
Wheel imports from Asia in 2005 will about offset the subtraction of Amcast's capacity from the market, said Rob Hinchliffe, an analyst with UBS Securities LLC in New York.
Hayes Lemmerz
Hayes Lemmerz wiped clean its balance sheet after its 2003 emergence from Chapter 11. But its international sales growth is not fast enough to offset its dependence on GM, Ford and the SUV market in North America.
Hayes Lemmerz CEO Curtis Clawson was asked about the uncertainty of the business for 2006 during a Dec. 8 earnings call with analysts. Clawson cited pricing pressures from his automaker customers. He said "the environment has become more desperate in terms of market share" for domestic automakers, and "their pricing reactions have reflected that."
The Northville, Mich., company's net loss widened to $13.3 million for the third quarter ended Oct. 31, from a net loss of $5.3 million a year earlier. In its Dec. 8 earnings call, the company reported that it now expects adjusted cash flow to range from $180 million to $190 million for the year, down from a prior forecast of $190 million to $205 million.
Hayes Lemmerz cut its annual worldwide revenue forecast range to $2.2 billion to $2.3 billion, from $2.3 billion to $2.4 billion.
In its third-quarter report, Hayes said competition from China and other low-cost countries could hurt its outlook. Hayes said such competition allows customers to "selectively re-source business to competitors in these countries." The resulting lower prices hurt sales in the third quarter and Hayes "expects the pricing pressure to continue in future periods."
Hayes said it must cut costs and improve productivity to compete with foreign suppliers. If not, the company said, "profitability could suffer."
Superior Industries
The industrywide troubles contributed to Superior Industries' third quarter loss of $501,000 on sales of $187.6 million -- its only quarterly loss in 22 years. The Van Nuys, Calif., company posted a $5.48 million quarterly profit during the same quarter a year ago.
Lower volumes of business battered the company's balance sheets. About 73 percent of Superior's business during the first nine months of 2005 came from GM and Ford, according to its quarterly report.
The company's recent share price of $22.50 was less than half its 2002 high of $53.80. CEO Steven Borick said in the company's third-quarter report that Superior would be profitable in the fourth quarter.
"We have the staying power," Superior CFO Jeff Ornstein told Automotive News in a recent interview. "We have the balance sheet. This is survival of the fittest."
Indeed. Hinchliffe, the UBS analyst, says in a report that the giant maker of aluminum wheels could snap up Amcast's business if the smaller supplier ends up in liquidation.
Amcast's woes disrupt Corvette wheel shipments
Robert Sherefkin
Automotive News / January 2, 2006 - 6:00 am
The wheels are coming off the wheel industry.
Beset by reduced business from automakers, higher raw material and energy costs and cutthroat pricing, the key players in North American wheel making are grappling with financial problems.
The segment's instability caused a supply disruption for at least one General Motors product -- the Chevrolet Corvette -- in December.
Prospects for a speedy recovery appear slim, because low-priced wheels have begun to trickle in from Asia.
The situations at North America's three largest wheel makers illustrate the segment's problems:
1. Amcast Industrial Corp. sought Chapter 11 protection in December for the second time, just months after emerging from a previous reorganization. The company briefly cut off shipments last month to its largest customer, GM.
2. Hayes Lemmerz International Inc. is facing widening losses and a cash-flow shortfall less than two years after emerging from Chapter 11.
3. Superior Industries International Inc. is relatively stable and debt-free. The company's lean operating model has made it a textbook example of how to prosper in a cyclical industry. Still, the problems of the wheel industry have led to Superior's first quarterly loss in over two decades.
Structural problems
Those problems appear to be structural. The market share for GM and Ford Motor Co. is eroding, and both companies reduced production last year. That means fewer wheels purchased from North American suppliers.
Wheel makers in particular are facing aggressive competition from producers in low-cost countries that appear to be winning the favor of customers, says turnaround specialist John Groustra, a partner at consulting firm Conway MacKenzie & Dunleavy PC, of Birmingham, Mich. He once advised Amcast during a restructuring of their credit agreements.
And the price of steel -- a fundamental raw material for wheel makers -- rose through most of 2005. A ton of steel costs about $560, compared with an average of $462 during the third quarter, according to data from CRU, a metals research firm in London.
Amcast threatens shutdown
Amcast, a Fremont, Ind., supplier of aluminum wheels, sought Chapter 11 protection Dec. 1, just three months after emerging from a previous reorganization. Its latest financial crisis erupted on Nov. 29. The supplier gave GM 24 hours to hand over substantial price increases, make a $30 million deposit and meet other demands, or face a halt in shipments, according to documents GM filed with the U.S. Bankruptcy court in Indianapolis.
At a meeting in Detroit the next day, GM offered price relief but declined to agree to other demands, according to the documents.
Amcast, which supplies 13 GM assembly plants, stopped shipping wheels on Nov. 30. It resumed shipments to GM on Dec. 7, two days after the automaker won a court order forcing the supplier to do so.
U.S. Bankruptcy Judge Frank Otte entered an emergency order on Dec. 21 that requires Amcast to continue production. Meanwhile, according to court documents, Amcast threatened to shut down production on Dec. 23 and put 727 employees out of work without warning or severance.
GM, which accounts for about 80 percent of Amcast's wheel business, has agreed to prop up Amcast financially for up to six months with cash and higher prices for its wheels, according to terms filed in court. If Amcast finds an acceptable buyer for its assets, GM would agree to keep its business at those locations for two years, according to court documents.
As of Tuesday, Dec. 27, no objections to the terms had been filed. Another hearing is scheduled Feb. 21.
GM and lawyers for Amcast declined comment.
The Chapter 11 filing has caused "significant disruption" in wheel supplies for Corvettes, according to a Dec. 15 memo from GM to Chevrolet dealers.
"Unfortunately, this situation has caused GM to make several adjustments affecting wheel options, production volumes and production schedules," the memo said. "Many orders may need to have wheel selections changed based on wheel availability."
Even if Amcast were to be liquidated, it would not allow other wheel makers to raise prices and make more money, according to one analyst.
Wheel imports from Asia in 2005 will about offset the subtraction of Amcast's capacity from the market, said Rob Hinchliffe, an analyst with UBS Securities LLC in New York.
Hayes Lemmerz
Hayes Lemmerz wiped clean its balance sheet after its 2003 emergence from Chapter 11. But its international sales growth is not fast enough to offset its dependence on GM, Ford and the SUV market in North America.
Hayes Lemmerz CEO Curtis Clawson was asked about the uncertainty of the business for 2006 during a Dec. 8 earnings call with analysts. Clawson cited pricing pressures from his automaker customers. He said "the environment has become more desperate in terms of market share" for domestic automakers, and "their pricing reactions have reflected that."
The Northville, Mich., company's net loss widened to $13.3 million for the third quarter ended Oct. 31, from a net loss of $5.3 million a year earlier. In its Dec. 8 earnings call, the company reported that it now expects adjusted cash flow to range from $180 million to $190 million for the year, down from a prior forecast of $190 million to $205 million.
Hayes Lemmerz cut its annual worldwide revenue forecast range to $2.2 billion to $2.3 billion, from $2.3 billion to $2.4 billion.
In its third-quarter report, Hayes said competition from China and other low-cost countries could hurt its outlook. Hayes said such competition allows customers to "selectively re-source business to competitors in these countries." The resulting lower prices hurt sales in the third quarter and Hayes "expects the pricing pressure to continue in future periods."
Hayes said it must cut costs and improve productivity to compete with foreign suppliers. If not, the company said, "profitability could suffer."
Superior Industries
The industrywide troubles contributed to Superior Industries' third quarter loss of $501,000 on sales of $187.6 million -- its only quarterly loss in 22 years. The Van Nuys, Calif., company posted a $5.48 million quarterly profit during the same quarter a year ago.
Lower volumes of business battered the company's balance sheets. About 73 percent of Superior's business during the first nine months of 2005 came from GM and Ford, according to its quarterly report.
The company's recent share price of $22.50 was less than half its 2002 high of $53.80. CEO Steven Borick said in the company's third-quarter report that Superior would be profitable in the fourth quarter.
"We have the staying power," Superior CFO Jeff Ornstein told Automotive News in a recent interview. "We have the balance sheet. This is survival of the fittest."
Indeed. Hinchliffe, the UBS analyst, says in a report that the giant maker of aluminum wheels could snap up Amcast's business if the smaller supplier ends up in liquidation.
and that will include the Vette 
