GDP Weighs on Auto-Parts Suppliers - TheStreet



) -- Shares of


( ARM) and


(DAN) - Get Report

dropped by more than 4% Tuesday, pressured by disappointing economic news and profit taking.

Dana fell by 4.7% to $10.40 and ArvinMeritor lost 4.1% to $11.10 in afternoon trading.

Weaker-than-expected revisions to third-quarter GDP numbers appeared to weigh on auto-supplier stocks in general Tuesday, since the sector's prospects depend heavily on a strong economic rebound, said David Silver, an analyst with Wall Street Strategies, in an email.

Tuesday morning, the Commerce Department issued a revised annual GDP growth rate of 2.2% for the third quarter, slower than the previous estimate of 2.8%.

Silver added that because ArvinMeritor, in particular, is a "momentum stock," the recent 11-day

rally in the company's share price

has naturally led to profit taking. "A little consolidation is expected," he said.

"This morning's news shows that maybe the economy isn't nearly as strong as some of the data is pointing to," Silver added. Dana's stock movement Tuesday and over the last week has likely been driven my similar forces.



(F) - Get Report

shares added 1.7% to $9.80 Tuesday.

One analyst said he expects Ford to benefit from stronger U.S. and global markets for vehicles in 2010 -- which, of course, would buoy auto-parts suppliers as well. Efraim Levy, of Standard and Poor's, said consumers in more regions of the country are picking up on their car buying again.

Levy has a hold commendation on Ford stock. He expects the company to post a profit of 30 cents a share for the full-year 2010, compared to a loss of 10 cents a share in 2009, excluding unusual items.

In addition to the goodwill Ford generated by avoiding government assistance (not to mention bankruptcy), Levy said that strong sales of the Ford Fiesta in Europe and other regions outside North America will give the auto giant a lift. Levy expects North America Fiesta sales to improve in 2010, as well.

The company's solid foothold in the hybrid-vehicle market will also help, Levy said, as automakers these days "have to have" ecologically-friendly vehicles among their product offerings.

On Monday, word emerged that Ford would offer buyout and retirement packages to more than 40,000 of its hourly workers, saying that it still had far too many people on its payroll given current sales levels. The news came less than two weeks after the company said it would unfreeze pay incentives for its employees. Those seemingly conflicting moves, Levy said, indicate that Ford is striving to maintain morale among those workers who remain in the fold.

-- Reported by Andrea Tse in New York

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Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.