Detroit isn't making things easy for its parts makers these days. With General Motors (NYSE:GM) projecting a 12% cut in output next quarter, Ford (NYSE:F) 21%, and DaimlerChrysler (NYSE:DCX) well on its way to cutting 16% this fiscal half, things are looking bleak indeed for wheelmaker Superior Industries (NYSE:SUP). Wednesday morning's third-quarter results should tell us exactly how bleak.

What analysts say:

  • Buy, sell, or waffle? Two more analysts got depressed and stopped following Superior since last quarter. Now we're down to just one hold, and six sell ratings. Ugh.
  • Revenues. On average, analysts expect flat sales of $187.8 million .
  • Earnings. . but a ballooning loss of $0.13 per share.

What management says:
Wednesday's news looks likely to be dominated by a series of one-time items as Superior restructures itself to deal with the downturn in business among U.S. automakers. In September, management announced two steps to right-size its business. First, it has sold an Arkansan aluminum-suspension-components factory to Saint Jean Industries. Expect to see a $15 million payment off of this sale show up on Wednesday, and another $2 million in payments on a promissory note (part of the purchase price) arrive in Q3 2008 and Q3 2009. Second: It is in the process of closing down a Tennessee factory and laying off the 500 employees there. Severance costs are expected to approximate $1 million. Asset impairment costs have yet to be determined -- see Wednesday's news for the tally.

Back in the Q2 earnings release, the company mentioned one more, hopefully non-recurring, hindrance to profits. The firm is opening up a new plant in Mexico, and expects "substantial start-up costs" to appear in its Q3 numbers. Meanwhile, that plant won't begin manufacturing wheels until next quarter.

What management does:
Just like last quarter, I think it's safe to show the numbers here. With trends as clear as these, you don't need commentary to describe how bad things are at Superior:

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

8.6

7.4

6.4

4.3

2.8

2.5

Op.

6.6

5.3

4.2

2.4

0.8

0.3

Net

4.7

3.7

3.0

(0.7)

(1.8)

(2.0)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Between the charges to shut down or sell off existing businesses, and the charges to start up new ones in lower-cost foreign countries, I won't be at all surprised if Wednesday's news shows Superior's rolling margins continued to fall in Q3. In fact, I suspect we'll see the operating margin turn negative, and with December's $42 million charge for an asset write-down continuing to weigh on the net, I'd say that a negative net margin Wednesday is pretty much a given.

Trends on the income statement give little reason to hope for anything better. Year to date, sales are down 4% year over year, while the cost of goods sold has hardly budged at all (squeezing the gross margin). Meanwhile, selling, general, and administrative costs are heading the wrong way -- rising 13% despite the decline in sales. Long story short, I see why the analysts are so uniformly pessimistic about Superior. While the cyclicality of this business tells me that they're probably wrong to be so pessimistic long-term, in the short-term, I think they're absolutely right in predicting a loss -- of some magnitude -- Wednesday.

Competitors:
Superior supplies all the usual suspects. In addition to the Detroit Big 3, its wheels can also be found on products from BMW (OTC: BAMXF.PK), Nissan (NASDAQ:NSANY), and Toyota (NYSE:TM).

Who's crazy enough to recommend investing in the auto sector these days? We are, for one -- and have recommended automakers and auto parts-makers in the Motley Fool Stock Advisor. You can check out the newsletter yourself with a free report.

Masochists with a superior threshold for pain may enjoy the following recent columns on Superior Industries:

BMW is a Stock Advisor selection.

Fool contributor Rich Smith does not own shares of any company named above.