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Fuel Systems lags U.S. auto parts makers as Europe drags
August 18, 2014 / 4:10 PM / in 3 years

Fuel Systems lags U.S. auto parts makers as Europe drags

Aug 18 (Reuters) - Weak demand for alternative fuel vehicles and increasing competition in Europe are weighing on Fuel Systems Solutions Inc at a time when its peers are riding a recovery in the U.S. auto industry.

Fuel Systems, whose products allow vehicles to run on propane and natural gas, said it has lost customers in Europe, which contributes about 40 percent of its revenue.

Where the Dow Jones U.S. Auto Parts index has risen more than 20 percent in the past year, Fuel Systems shares have nearly halved.

The company’s shares fell as much as 9 percent on Monday after the company cut its revenue forecast for the year.

“Their issue is that where they’ve been historically strong has gotten weaker,” Lake Street Capital Markets LLC analyst Robert Brown told Reuters.

“The adoption of alternative fuels in the U.S. is actually expanding quite nicely but the dynamics in Europe have been a headwind,” he said.

U.S. automakers are increasingly using alternative technology to boost fuel economy and meet stricter mileage and emissions standards.

Auburn Hills, Michigan-based BorgWarner Inc, one of the largest suppliers of turbocharging technology, reported a higher second-quarter profit last month.

But Europe is still playing catch-up after a euro-zone crisis that weakened automotive demand.

Fuel Systems was also hurt by the expiration of Italian subsidies for the alternative fuel market a couple of years ago, Brown said.

The company reported a 21 percent fall in second-quarter revenue on Monday and reported its seventh loss in 10 quarters.

Brown said Fuel Systems had lost a contract with Peugeot SA to rival Landi Renzo SpA due to pricing pressure.

The company also lost Volkswagen and Honda Motor Co in China and Thailand, respectively, as the automakers brought the services outsourced to Fuel Systems in-house, Brown said.

Brown is top-rated for the accuracy of his earnings estimates on Fuel Systems by StarMine.

New York-based Fuel Systems’ shares were down 8 percent at $9.73 in afternoon trading on the Nasdaq. (Editing by Don Sebastian)

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