Analyst cuts ratings for trio of auto suppliers

A Deutsche Bank analyst on Wednesday cut his ratings for a trio of auto suppliers, citing reduced U.S. automotive production expectations for this year and next.

Analyst Rod Lache cut his 2008 U.S. auto sales forecast to 14 million vehicles from his previous estimate of 14.5 million. He also cut his 2009 sales prediction to 14 million vehicles from 15 million.

The analyst also said that sales trends and demand indicators in Europe continue to weaken, and cut his 2009 Western European sales forecast to 13.7 million units from 14.6 million.

"We believe that our estimates are conservative, but by no means pessimistic," Lache wrote in a note to investors. "In addition, we continue to believe that the effect of segment mix shifts and rising raw materials are considerably more difficult to forecast."

In addition, the analyst said that the U.S. automakers remain at risk, especially Chrysler LLC given its heavy dependance on truck sales and lack of geographic diversification.

In light of the lower vehicle sales outlook, Lache cut his ratings for Autoliv Inc., American Axle & Manufacturing Holdings Inc. and TRW Automotive Holdings Corp. to "Hold" from "Buy."

Lache said he likes the geographic diversity of TRW and Autoliv, and still expects them to benefit from increased global demand for safety equipment.

"Despite our belief that they have the ability to benefit from restructuring and/or from a recovery of North American and Western European demand, we now believe that catalysts for upside are likely to be longer term than we previously envisioned," Lache said.

Meanwhile, while Lache said he expects labor-related costs savings to offset lower sales volumes at American Axle, worries about the health of the company's top customers, General Motors Corp. and Chrysler, will continue to weigh on its shares.

Lache said that Goodyear Tire and Rubber Co. remains his only "Buy" rated stock in the sector. He cited its current valuation and expectations that the company will remain cash-flow positive despite the problems in the North American auto industry.

In morning trading, American Axle rose 45 cents, or 6.1 percent, to $7.89. Autoliv rose 23 cents to $39.46 and TRW rose 35 cents to $18.10 and Goodyear rose 24 cents to $20.26.