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US: Gentex warns of tougher future as sales and income fall

By just-auto.com editorial team | 22 October 2008

Gentex Corporation has reported a fall in its third quarter net sales and income, with the company warning that the industry was experiencing a "perfect storm", with things likely to get "worse before they get better".

The company which manufactures automatic-dimming rearview mirrors and commercial fire protection products, said its net sales for the third quarter declined by 6% to $153.1m.

Net income in the period fell 49% compared with the same quarter last year,.

For the first nine months of 2008, net sales increased by 4% to $501.5m. Net income decreased by 20% for the first nine months of 2008 compared with the same period in 2007.

"The third quarter of 2008 is one of the toughest quarters that Gentex has experienced since the early '90s," said Gentex chairman and chief executive officer Fred Bauer. "The 'perfect storm' has been created with the global automotive industry experiencing record declines in sales levels, resulting in significant production cuts on their part, coupled with the global financial credit crisis.

"However, while we are operating in an industry that is experiencing the most significant production declines in nearly 20 years, particularly at the 'Detroit Three,' the company's global diversification was its saving grace during the quarter," said Bauer. "Our auto-dimming mirror units shipped overseas increased by 13% in the third quarter, offset by a 27% decline in North American shipments."

Bauer said that for the first nine months of the year, the company's shipments to automakers headquartered outside North America represented 76% of its total automotive unit shipments.

Total shipments for the third quarter of 2008 decreased 5%. Automotive revenues decreased by 6% in the third quarter to $147.3mn and increased by 4% for the first nine months of 2008, compared with the same prior-year period.

For the third quarter of 2008, shipments in North America decreased by 27% compared with the same period in 2007, primarily as a result of significantly lower light vehicle production.

Gentex senior vice president Enoch Jen said: "Unfortunately, it seems that the automotive environment is going to get worse before it gets better. Based on CSM Worldwide's mid-October light vehicle production forecast, we currently expect our top line revenue to decline by approximately 15% in the fourth quarter of 2008 compared with the fourth quarter of 2007. Light vehicle production is expected to decline by 19% in North America (including a 32% decline in light truck/SUV production), 11% in Europe and 7% in Japan and Korea for the fourth quarter of 2008.

"A number of our automotive customers are planning significant extended holiday plant shutdowns, and given the significant uncertainties in the marketplace, we believe that there is potentially more downside than upside to current forecast global light vehicle production levels," said Jen.

Jen said that the company currently expects its gross margin in the fourth quarter to be approximately 29%, primarily depending upon top line revenues, purchasing cost reductions, and the depth of global light vehicle production cuts.