Tuesday Ticker: March 17, 2020

Auto Parts in Peril?

After a strong decade following the great recession, auto parts manufacturers–both OEM and aftermarket–have seen their businesses struggle to manage rises in wages and material costs and drops in demand. With the outbreak of the Coronavirus in China, two Canadian businesses saw significant early drops in their value. As the markets continue to fall, questions remain about whether the sector will ever recover to its 2018 heights.

Magda International

Ontario-based Magna International’s stock has dipped below $49.00. Loosing more than $20 since its February high, the stock is now at its lowest point since February of 2014.

Since the beginning of February, more than 5.7 million stocks have traded hands. During the same period of 2019, just 2.4 million stocks were traded.

Its all-time high, about $83, occured in mid-2018.

The stock has been in freefall since the middle of February, when the spread of the Coronavirus through China disrupted its auto parts manufacturing. The recent lows may, however, be emblematic of broader losses in the auto parts manufacturing sector.

Between 2009-2019, the auto parts sector grew enormously and was worth more than $50 billion-per-year. Since that time, vehicle sales have been driven down, while material costs have risen precipitously, and the auto parts sector has shed hundreds-of-thousands of jobs.

LKQ

Chicago-based LKQ’s stock has dipped to just above $23.00 U.S. Loosing just short of $10 since its February high, the stock is now at its lowest point since April of 2013.

Like Magna, the fortunes of LKQ investors rose during the decade after the Great Recession of 2008-2012. Its value dipped below $5.00 U.S. in December 2008. The stock reached its zenith in January of 2018, when it was valued at more than $47.

Martinrea International

Ontario-based Martinrea’s stock has dipped to below $9.00 U.S. Losing just short of $6 since its January high water mark, the stock is now at its lowest point since February of 2017.

Like Magna, Martinrea was one of the first businesses to see investor panic affect its stock price in the 2020 Coronavirus market drop. Despite broader concerns, its president, Frank D’Eramo still has faith in the business’s future, investing a quarter-million dollars into the company this week.

Unlike other auto parts manufacturers, Martinrea has yet to recover to its pre-recessionary high. In fact, its stock held the most value in May of 2007.

Hopes remain high for its future. In 2019, the company performed admirably, securing $140 million of new business. It also reached a promising deal with Daimler to manufacture lightweight structures for the EVA II.

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