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Sector Snap: Auto Companies

NEW YORK (AP) â¿¿ Reduced expectations for U.S. auto sales in 2012 stemming from economic uncertainty led a Jefferies analyst on Wednesday to cut his price targets and earnings estimates for nearly a dozen automotive companies.

Analyst H. Peter Nesvold said he now expects U.S. sales of 12.7 million vehicles in 2012, down from his previous prediction of between 13.5 million and 13.7 million. The new prediction is based on an expectation of real gross domestic product growth of 1.5 percent to 2 percent for the year and an unemployment rate of 9.2 percent, he said.

"While the financial markets have retraced much of their month-to-date losses in recent sessions, downside risks to our previous 2012 outlook have been building," Nesvold wrote in a note to investors. "We feel it prudent to at least reset the bar at levels that at this time look more aligned with a 'base case' rather than 'optimistic case' scenario."

The analyst's 2012 production estimate was slightly higher than the sales prediction at 12.9 million vehicles, in part to account for expectations of a slight increase in inventories ahead of a stronger sales year in 2013. Nesvold also cut his 2012 European production forecast to 19.3 million vehicles from 19.6 million.

Nesvold cut his price targets for "Buy"-rated Ford Motor Co. and "Hold"-rated General Motors Co. both by $4, to $15 and $29, respectively.

He also cut price targets for "Buy"-rated auto suppliers Dana Holding Corp., Lear Corp., Tenneco Inc. and TRW Automotive Holdings Corp. by between $4 and $8 each.

Among "Hold"-rated auto suppliers, Nesvold cut price targets for Autoliv Inc., American Axle & Manufacturing Holdings Inc., BorgWarner Inc., Gentex Corp. and Johnson Controls Inc.

In addition, Nesvold said he cut his 2012 earnings estimates for the group of 11 companies by an average of 8.4 percent to levels about 7.4 percent below average analyst expectations.

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