The news last Friday morning had a lot of people talking. Johnson Controls beat Wall Street's expectations with its fourth-quarter earnings, the first in a series of announcements that is expected, over the coming days, to produce a number of strong financial results for suppliers. In North America, 2010 will be a case of the "haves" and the "have-nots", according to SupplierBusiness.

Analysts were clearly enthusiastic. But the excitement wasn't for JCI so much as the entire sector - or least the parts industry's most robust companies.  JCI comes across like a model for the supplier survivor of 2010, emerging from the perfect storm.

But the year-end figures will see both winners and losers among North American component makers. The industry is beginning to see a large gap open up between strong suppliers and weak ones - a situation that could foretell a new period of consolidation.

IAC's Wilbur Ross recently forecast more suppliers will go out of business this year. Magna co-CEO Don Walker says his company is looking at a number of parts suppliers for potential acquisitions.

Relentless cost cutting at JCI and other suppliers, along with rising revenues, will lead to better-than-expected results throughout the parts industry. The JCI results increased investors' hope that a broad auto business recovery is in place.

The enthusiasm is beginning to turn up in the strong buy recommendations not just for JCI, but the likes of Magna and perennial favorite Gentex. Johnson Controls grew its market share not only in North America, but in Europe and China. Both its interiors and battery businesses were profitable in the quarter.

"We are benefiting from those vast cost improvement initiatives, those restructuring costs we took last year," JCI CEO Steve Roell said on a conference call. "We're cautiously optimistic about our production in North America." The supplier raised its 2010 forecast for sales and net earnings, counting on vehicle production to increase around the world.

"Globally, we've gained market share from financially distressed suppliers and we continued to get new business," CFO Bruce McDonald, told Bloomberg. But the key is that JCI is taking market share away from troubled competitors such as Lear, which went into bankruptcy in 2009.

McDonald said Johnson Controls won US$200 million to US$300 million in business from troubled suppliers in 2009.

"Automakers are very worried about long-term continuity of supply," he said.

Not every parts maker will have credit lines to finance upcoming production increases, but the strongest will. Automakers will focus on the most secure suppliers. Indeed, Chrysler has said it will accelerate payments to suppliers of important components - but certainly not for everyone.

Stable suppliers will command higher prices for parts and can stand up to the typical price reductions demanded by automakers. So suppliers still standing tall may be able to leverage their financial or technical strength now more than anytime in the past decade.

This article was supplied to just-auto by SupplierBusiness, an IHS Global Insight company.

See also: US: Johnson Controls back in the black