Magna International Inc. (USA) (MGA), Autoliv Inc. (ALV): Automotive Suppliers: Performance Review, Part One

The company is continuously looking at investing and expanding in low-cost countries, where light-vehicle production has increased along with demand for automobile-protection products. A quarterly growth of 24% in China shows that the company’s big investments in this market are finally starting to pay off.

Autoliv Inc. (NYSE:ALV) is executing cost-control strategies by streamlining manufacturing, consolidating its supplier base and increasing the source of components from low-cost countries. Since the company does not foresee signs of improvement in the Western European light-vehicle production, it started a capacity-alignment program to adjust costs. In addition, the company is making efforts to adjust its debt position.

Autoliv Inc. (NYSE:ALV) still maintains a stable market share worldwide, sustained by the increasing importance of safety needs. However, the company faces customer-concentration risks, as its top three customers account for more than 45% of sales. Plus, the continuing decrease in sales in Europe is also a factor of concern.

Bottom line

American Axle’s could benefit by a clear recovery in the U.S. construction industry as it would boost demand for pickup trucks. Nonetheless, I do not foresee great increases in production or improvements in the company’s earnings to justify investing in this stock for now.

Magna International Inc. (USA) (NYSE:MGA)’s quarter has been good, but the company’s outlook is still constrained by the performance of car sales, which has not yet shown full recovery. Until then, I would not keep Magna in my portfolio.

Autoliv Inc. (NYSE:ALV) will maintain its market share and production levels if the market does not worsen. I would start investing in the company when sales in China completely offset the constant decrease in European sales and profits increase again.

Vanina Egea has no position in any stocks mentioned. The Motley Fool recommends Autoliv. Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Automotive Suppliers: Performance Review, Part One originally appeared on Fool.com and is written by Vanina Egea.

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