Retail is certainly in the dumps, but retail looks downright perky compared with auto parts manufacturers. Only the airlines can really give the domestic auto industry a run for its money in the doldrums. Over the weekend, auto parts maker Delphi
Today's announcement from Dana follows its announcement just three weeks ago that it would have to take a $10 million to $15 million charge against its second-quarter earnings, as well as cut its earnings guidance for full-year 2005 by half. Today's statement virtually assures that 2005 earnings will come in even lower than the reduced guidance of three weeks ago, not to mention the lower earnings that will result from the restatement of prior quarters.
Also buried in today's release is the fact that Dana and its auditors have determined that Dana has material weaknesses in its internal controls for financial reporting. Given today's news, that statement is obvious. More importantly, it's not unreasonable for investors to interpret the statement as a warning of bad news yet to come.
The domestic auto industry has many problems that have been festering for years, but they all seem to be coming home to roost at once. There are even rumors today that it is only a matter of time before General Motors
The steep 32% decline today in Dana's share price brings its dividend yield up to a huge 7.8%, but this large yield is neither healthy nor well-funded, unlike the high yields of many REITs. In fact, I wouldn't be at all surprised to hear in the near future that Dana has eliminated its dividend altogether.
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