Auto parts makers, dealers hit by car sales slump

DETROIT (Reuters) - Leading auto parts suppliers posted steep losses while U.S. dealership groups reported sharp declines in earnings on Thursday as a deepening slump in auto sales forced a new round of cost cutting and clouded the outlook for recovery.

From airbag and safety equipment manufacturer TRW Automotive Holdings Corp to seating and electronics maker Lear Corp to dealership group Penske Automotive Group Inc , the slump in auto sales to levels unseen in 15 years prompted job reductions, cuts in capital expenditure and decreases in advertising spending.

The future also looks uncertain as several companies either withdrew their outlook for the forthcoming quarter or lowered their estimates, citing volatility in both the global auto and financial markets.

Shares rose sharply on Thursday for TRW and car retailer Penske Automotive Group after they said they may implement additional cost-cutting actions.

Economic weakness has driven U.S. light-vehicle sales to near 15-year lows through September and indications are that October will be as bad or worse due to a drop in consumer confidence.

TRW, which lost $54 million in the third quarter, announced it is cutting 1,000 salaried positions and warned that it may implement additional cost-cutting in the next six months because of the sharp decline in global vehicle production.

Lear, which lost $98.2 million last quarter and plans to cut operating costs by another $150 million over the next year, said it was seeing "recessionary conditions" in North America and increasing weakness in Europe.

Lear expects North American light vehicle production to fall 15 percent to 12.9 million units this year and forecast further declines for 2009. It also expects European production to drop next year.

DEALERS HURTING

Visteon Corp , which has been restructuring for the last three years and posted a $188 million loss, is slashing 2,800 jobs.

Visteon -- bailed out in 2005 by former parent Ford Motor Co -- said it has reduced global hourly workforce by 12 percent this year to 26,000 workers at the end of the third quarter.

The company also reduced its 2008 sales forecast by $600 million, to $9.4 billion, and said it was not in a position to provide a 2009 financial outlook due to "continued uncertainty" in the auto industry.

Automotive retail and service company Asbury Automotive , which saw earnings fall 68 percent, said the headwinds facing the company and the industry intensified during the third quarter as consumer confidence sagged under the weight of declines in the housing and equity markets.

The company said it was suspending its dividend, reducing capital expenditure and cutting advertising expense to conserve cash.

Asbury, which is in the process of moving its headquarters from New York to Atlanta, said it expects $7 million in restructuring costs over the next six months but expects to save $25 million in annually with the cost-cutting actions by March 2009.

Rival dealership group Penske Auto, which saw profit fell 44 percent, cut worldwide employment levels by 4.3 percent in the third quarter and warned that it might implement further cost-cutting.

Penske said it would not provide an outlook for the fourth quarter and was withdrawing its previously issued full-year earnings estimate.

Penske shares rose 10.9 percent in morning trading to $7.03 on the New York Stock Exchange while Asbury shares were trading down 9.3 percent at $2.72 on NYSE.

TRW shares were up 14.4 percent at $5.33 but were off the day's high of $6.17 while Lear shares were down 9.1 percent at $2.19 on the NYSE.

(Reporting by Poornima Gupta; Editing by Patrick Fitzgibbons and Brian Moss)