Auto-industry hazards are wrecking a deal between two parts makers. American Axle & Manufacturing shares tumbled as much as 17 per cent even though its USD 1.6 billion agreed acquisition of rival Metaldyne Performance should diversify earnings and bring hefty cost savings. Investors have become understandably cautious, however, when it comes to cars.
The prospect of a sales slowdown is already weighing on Ford Motor and General Motors, for example. Their stocks have fallen by 19 per cent and nearly 9 per cent, respectively, this year as shareholders factor in the chance that the US market has peaked. The two manufacturing titans also happen to be the biggest customers for Metaldyne and American Axle, which was spun out of GM over two decades ago.
Suppliers are often the first to be hit by a shrinking market as their customers push for lower prices and delay paying bills. Several parts makers went bust around 2005, for example, years before America’s Big Three suffered their near-death experience.
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