Auto-Suppliers Take a Beating

Updated from Thursday, Jan. 28

NEW YORK (TheStreet) -- Auto-supplier stocks took a beating Thursday after one of their largest customers, Toyota(TM), decided to suspend sales and production of numerous vehicle models in North America.

On Tuesday, Toyota announced that it is instructing Toyota dealers to temporarily suspend sales of eight models and said it expects to stop producing vehicles on several production lines for the week of February 1.

The announcements came after Toyota said last week that it would recall about 2.3 million vehicles in the U.S. to correct "sticking accelerator pedals." Today, Toyota expanded the recall to China and Europe.

On top of that, Toyota on Wednesday expanded a separate, ongoing recall announced last year by 1.1 million vehicles. These vehicles are the subject of a recall related to gas pedals getting caught in floor mats and were originally estimated to affect 4.3 million vehicles.

Not surprisingly, Toyota gas pedal supplier CTS Corp(CTS) took the brunt of the beating Thursday, plunging 8.8% to $7.70. CTS is currently working with Toyota on a revised gas pedal design. The company said in its statement that it hasn't been implicated in the previously announced November 2009 recall. That recall involved gas pedals in car models dating back to 2002, and CTS only began supplying Toyota with pedals in 2005. However, adding to the discomfort of CTS is news that Ford's venture with Jiangling Motors in Nanchang City, Jiangxi Province, China, has suspended the production of a light bus vehicle pending the review of a pedal part recently sourced from CTS.

CTS on Wednesday said it expects 2010 earnings of 45 cents to 53 cents on sales of 10% to 15%. Analysts polled by Thomson Reuters have been expecting full-year earnings of 52 cents on sales growth of about 28% to $640 million. The three-month average daily trading volume for CTS is about 161,000; although about 1.7 million shares traded hands today as the share price slid.