To judge from the headlines, future historians could well peg 2005 as the year that America's auto industry died. Parts-maker Delphi has filed for bankruptcy. Competitors Visteon
Yet all is not lost. At least one company in this industry still knows how to make a profit: Motley Fool Stock Advisor recommendation BorgWarner
That's not to say BorgWarner doesn't feel the industry's pain. In its press release, CEO Timothy Manganello termed the auto industry's market environment "difficult" and "challenging." Still, that didn't prevent the company from reaffirming its previous earnings guidance of $4.20 to $4.25 in per-share profits for the year. If the company hits that target, it would equal roughly 9% year-over-year growth against 2004, and -- even more surprising given how recently everyone else in the industry appears to have disintegrated -- 15% to 20% growth in the current fourth quarter.
Then again, its competitors' ongoing financial collapse might be a catalyst for BorgWarner's success. As the company noted, worldwide production in the quarter was up just 5% year over year. With BorgWarner boosting its own revenues at better than twice that rate organically, and five times that rate, er, inorganically, the company is clearly stealing market share from its competitors.
That said, BorgWarner's report did contain two big, bright red flags. Its inventories and accounts receivable both rose faster than sales, suggesting that the company's quality of earnings may not be as good as it seems. Inventories rose 57%, and accounts receivable were up 33%. Mind those numbers, Fools. Even the mighty Borg may eventually prove vulnerable to this industry downturn.
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Fool contributor Rich Smith has no position in any of the companies mentioned in this article.