May 21, 2014 2:22 am JST

Automakers' group suppliers seen struggling in fiscal 2014

Production may slow at this Denso plant in Aichi Prefecture.

TOKYO -- Autoparts makers tied to Japan's biggest car manufacturers will likely sustain profit declines this fiscal year, due to a drop in domestic output by their main customers and as contracts are siphoned away by competitors.

     Toyota Motor Corp.'s annual output in Japan is expected to drop 5% this fiscal year. Group supplier Denso Corp.'s pretax profit is seen shrinking 9.9% as a result, weighed down also by costs for launching new production facilities abroad. Aisin Seiki Co. projects a 2.9% profit drop, with investment in research and development eroding earnings, as is the case at Toyota.

     Nissan Motor Co.'s Japanese production is seen coming below 1 million units. Calsonic Kansei Corp., which supplies mainly to Nissan, will likely see a 1.8% profit decline. Although car air conditioning will likely fare well in the U.S. and China, that would not fully absorb the negative impact at home. The halt in the yen's decline will also likely weigh on results. Due to production issues at Nissan's operations in the U.S. last fiscal year, however, Calsonic Kansei's year-on-year decline is seen as relatively mild.

     Honda Motor Co. is aiming for record sales in Japan this fiscal year, eyeing sales of more than 1 million units. But pretax profit at group supplier TS Tech Co. is seen falling 6.8%. The company has lost contracts for supplying seats for Honda's luxury Acura brand in the U.S.

     Last fiscal year, both Denso and TS Tech logged record profits, helped by brisk auto sales abroad and a demand boost at home before the April 1 sales tax increase.

     While having strong ties to automakers brings steady orders, these suppliers are much more vulnerable to fluctuations in carmaker output. And because they have limited business with other manufacturers, a downturn in demand from their main customers affects them directly.

     Meanwhile, Akebono Brake Industry Co., a supplier without any particular ties to specific automakers, is on track to log a 30.7% profit jump. The company will offset a decrease in supply to Nissan by increasing shipments to Mazda and Mitsubishi Motors. Larger sales to Ford will also likely push up results.