Baird cuts auto & truck parts suppliers sector

(Reuters) - Robert W. Baird & Co downgraded the U.S. auto & truck parts suppliers sector to "market weight" from "overweight," saying light-vehicle sales in the United States would likely be depressed for several years, and that auto sales in European and emerging markets were headed for a cyclical downturn.

Analyst David Leiker said light-vehicle sales in the United States were at their lowest in 15 years. The European market has seen two months of lower light-vehicle sales with talk of significant production cuts, while China seems to be headed to a downturn with the slowest pace of wholesale shipments in over three years, he added.

"Economic activity in the U.S. remains weak with tight credit conditions and a dramatic collapse in the housing market... these conditions show no signs of improvement. Looser credit and a stable housing market are critical elements for the supplier group to stage a cyclical recovery in equity values," the analyst said.

Plunging used-vehicle prices and tightening credit standards will likely constrain demand further, Leiker wrote in a research note.

The analyst, however, maintained his "outperform" rating on ArvinMeritor Inc ARM.N, BorgWarner Inc (BWA.N), Gentex Corp (GNTX.O), Johnson Controls Inc (JCI.N) and Snap-on Inc (SNA.N). Leiker also maintained his "neutral" rating on Harman International (HAR.N)

The analyst said his top supplier ideas are Johnson Controls and Gentex, as both companies have among the best business models in the group.

(Reporting by Adveith Nair in Bangalore; Editing by Himani Sarkar)