Strong Q3 at car suppliers fails to clear outlook

STOCKHOLM/PARIS (Reuters) - Automotive suppliers posted upbeat third-quarter results on Tuesday as the effect of government stimulus schemes took hold, but shares wilted on a sense of growing uncertainty about prospects in 2010.

The world number one maker of air bags and seat belts, Autoliv (ALIVsdb.ST), swung to a profit after a loss-making year while French auto parts manufacturer Faurecia (EPED.PA) said it was optimistic about sales prospects for its second half.

Sweden's SKF (SKFb.ST), the world's biggest bearings maker, also delivered an upbeat report. Earnings fell less than expected and it offered the first signs that demand was likely to pick up during the fourth quarter.

Yet shares in all three companies dropped between 1 and 6 percent, reflecting what analysts said were doubts over the prospects of firms that do much of their business in Europe, where stimulus measures were among the strongest.

"We'll certainly see profits improve in Q4, 2009," said Michael Tyndall, an auto sector analyst at Nomura in London. "But what are companies going to say at the end of the year? They're all going to say we're worried about the outlook."

He said there would be a drop-off effect next year from the expiry of stimulus effects for the car industry in the world's major economies -- but it would be far from uniform.

"The outlook for growth in the U.S. is positive, single-digit growth," he said. "The Chinese market is very difficult to read, but chances are that it will continue to grow strongly."

"It's in the European region that we've seen some of the most generous stimulus programs, the classic case being Germany," he said, adding that firms SKF, Faurecia and Autoliv were all heavily exposed to the European car market.

"This is where they make most of their profits, by virtue of the fact that the euro is so strong," he said. "But the truth of the matter is that no-one has a really strong conviction about what the outlook is like for 2010."

Volkswagen AG (VOWG.DE), which reports its third quarter results on October 29, said it had a "very good" third quarter and it sees the struggling Russian car market rising in the long term. Germany, however, would be hard-hit by the end of scrappage schemes, company executives said.

"LITTLE VISIBILITY"

Faurecia raised its sales forecast for the second half to a 5 percent drop from a 10 percent drop, saying incentives schemes helped brighten the situation in Europe and the United States.

The company posted a 21 percent decline in sales for the quarter added that it sought to reach break-even on global cash flow during the second half. By 1440 GMT its shares were down 6.4 percent in Paris.

Sweden's SKF, a bellwether for the manufacturing sector which owes roughly a third of its business to the car industry, posted a quarterly pretax profit of $99 million, beating expectations by a good margin. Shares in Stockholm-listed SKF were down 3.48 percent by 10:40 a.m. EDT (1440 GMT).

For Sweden-based Autoliv, which does most of its business in Europe and the United States, the quarter marked a return to profitability with the company predicting a 10 percent increase in organic sales during the fourth quarter.

Autoliv shares were down 1.35 percent by 10:40 a.m. EDT (1440 GMT).

(Reporting by Nick Vinocur, Niklas Pollard, Johannes Hellstrom in Stockholm and Helen Massy-Beresford in Paris, editing by Marcel Michelson)