U.S. market still the strongest for the Canadian parts suppliers
San Francisco, CA -- (SBWIRE) -- 02/25/2013 -- The Canadian auto-parts sector is ready and able, as a gradual economic recovery is helping to fuel stronger growth for the countries largest suppliers.
The fortunes of the Magna International Incorporated, Linamar Corporation, and Martinrea International are becoming tightly tied to the Detroit Three and the health of the U.S. Vehicle market. The overall outlook for the each of the companies, as well as the two markets is reason for pointed optimism.
The Auto sales numbers in the United States is still the most highly important for Canada's parts market. The boom in the Chinese and South American markets have received a boom, with a rise of 13.5% since 2012 to nearly 14.5 million vehicles overall. This year, over 15.3 million new vehicles were sold in the United States, according to Polk, a Michigan-based research firm.
Polk cites the low interest rates, healthier housing sector, and a wave of new vehicles introduced by major makers of auto parts as the likely cause of the growth. Consumers are still eager to switch out their own worn-out vehicles after spending the last half-decade delaying such purchases due to the poor market.
"They're facing the best decade in their history," said Dennis DesRosiers, an industry consultant in Richmond Hill, Ontario. "No later than two years from now, we're going to have a record level of production in North America, and if you produce record numbers of vehicles, you're going to have record (parts) supply."
The recovery has been steady for Ford, General Motors, and Fiat Chrysler, since their lows in the recession. Supplier lists are being reduced by as much as half, giving survivors of the low-points a bigger share of the spoils, according to Capital Markets auto-parts analyst Peter Sklar. That move further promotes Canadian suppliers in their growing demand for global parts supply as automakers.
"We think this is a good entry point for investors, in terms of valuation," he said. "They're at the low end of the range of where they're going to trade. For this year, for 2013, we think they're all going to have good earnings growth, so the stocks are going to go up."
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