Visteon, TRW and Lear all report big 3Q losses

NEW YORK - A trio of major U.S. auto suppliers announced big third-quarter losses on Thursday, blaming steep drops in U.S. and European vehicle production. Executives for the companies said they're bracing for those declines to continue into next year.

TRW Automotive Holdings Corp., Visteon Corp. and Lear Corp. all said they plan to keep slashing costs in order to ride out the sales declines. Both TRW and Visteon reduced full-year profit guidance and announced plans to cut their salaried work forces.

The losses come at a time when all of the companies have seen their share prices and market capitalizations decimated by investor worries about the future of the automotive industry and wild fluctuations in the financial markets.

John C. Plant, TRW's president and chief executive, said that while European sales and a strong euro helped boost TRW's sales in the first half of the year, the third-quarter drop in European sales was "faster and deeper" than the company expected, he said.

Plant said he expects sales on both sides of the Atlantic to continue to decline into next year, with a rebounding dollar being an added pinch on European sales.

As a result, the Livonia, Mich.-based company, which posted a third-quarter loss of $54 million, expects to report profit of 90 cents to $1.10 per share for the year, about half of what analysts had expected.

"The second half of 2008 will be the worst six-month period we have faced since becoming an independent company," Plant told analysts in a conference call.

Plant said TRW will continue to right-size itself to offset the declining sales, adding that the company is in the process of eliminating about 1,000 salaried positions, with about 70 percent of those cuts expected to be complete by the end of this week.

Visteon, which said its quarterly loss widened to $188 million and cut its full-year sales guidance by more than a half a billion dollars, said it's trimming about 800 salaried jobs from its global work force.

Those cuts are on top of the roughly 2,000 hourly and salaried cuts the Van Buren Township, Mich.-based company said it made during the recent quarter.

Donald J. Stebbins, Visteon's chief executive, said the speed and severity of the third-quarter sales downturn was worse than expected. Stebbins predicted that the fourth quarter and 2009 will both be "very challenging," adding that Visteon will continue the restructuring moves it needs to include possible job cuts in Europe.

Joseph C. Amaturo, an analyst for Buckingham Research Group, cut his rating for Visteon to "Neutral" from "Strong Buy" and suspended his $6 price target for the company, citing the increasingly tough production environment and the acceleration of the company's cash burn.

"We are alarmed by Visteon's free cash flow results and we believe Visteon's cash burn is more severe than our previous expectations," Amaturo wrote in a note to investors.

Amaturo said declining global production will make it harder for Visteon to restructure itself and added that its exposure to the European markets will put pressure on its earnings next year.

Officials for Lear, which swung to a $98.2 million quarterly loss, also said they are preparing for a long-term industry downturn.

The Southfield, Mich.-based company said earlier this month it was undertaking a variety of cost-cutting actions, including an undisclosed number of layoffs, aimed at saving $150 million over the next 12 months.

Bob Rossiter, Lear's chairman, president and chief executive, told analysts Thursday that tough market conditions will not force the company to violate its debt agreements. He wouldn't comment on the possibility of it being taken private.

"We're absolutely confident that we're going to make it through this period," Rossiter said.

In afternoon trading, TRW rose 75 cents, or 16 percent, to close at $5.41 — down 74 percent so far this year. Visteon fell 1 cent to finish at 71 cents — off 84 percent; and Lear slid 25 cents, or 10.4 percent, to end at $2.16 — having lost 92 percent of its value since the start of 2008.

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