The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( MagicDiligence) -- It comes as no great surprise that investors would be wary about investing into the automotive sector: 2008-09 are fresh in people's minds, during which American automakers General Motors ( GM) and Chrysler filed for bankruptcy, and Ford ( F) barely survived. Auto suppliers such as Delphi and Lear ( LEA) trudged into bankruptcy court. To put it simply, the industry was decimated by the "Great Recession." Even in the best of times, this is a difficult business. Auto sales are highly correlated to the general economic cycle. Capital costs for production equipment are high. Labor disputes and rising commodity costs are ever-present dangers. Consumer tastes can change quickly, wreaking havoc on model design plans that take years to come to fruition. Tight credit markets make it difficult for many buyers (consumers and businesses) to finance new vehicle purchases. And, historically, both automakers and suppliers have carried poor balance sheets with large debt burdens, "living on the edge" in a very unpredictable industry.
This also remains well below the scrappage rate of about 15 million units. A similar story exists for Europe. Put simply, there is still plenty of room for rebound growth in TRW's main markets. Another growth driver is increasing auto sales in developing economies, particularly China. China is now the world's largest auto market at about 19 million units, and has been growing at over 30% rates up until this year. However, China has less stringent safety requirements at the moment, with content per vehicle at only about $200, compared to about $350 for U.S. and Japanese vehicles (India is even higher). As safety requirements are developed, TRW stands to earn more per vehicle sold in these geographies. Even vehicles for developed countries continue to add more advanced safety equipment, such as side curtain air bags and electronic stability control systems.