Struggling auto suppliers could see profits by 2012, experts say

— -- It might be difficult to see it now — as parts factories close, jobs are cut and companies file for bankruptcy — but in a few years, auto suppliers that survive this difficult period can look forward to profits, experts say.

The entire industry is learning, painfully, how to survive making fewer cars. So when sales start to climb again, so, too, should profits.

The suppliers that survive, experts say, will be the ones with varied customers around the world, contracts to build parts on different types of vehicles, and the best technology. They will be the ones that stay lean and bank their profits, even in the best of times when it's tempting to acquire new companies or pay big bonuses.

"Hopefully, suppliers and automakers will remember this during the next economic upturn," said Kathleen Ligocki, former chief executive of Novi, Mich.-based Tower Automotive, who led the company through its bankruptcy. Today, Ligocki leads GS Motors, a company that distributes Chinese vehicles in Mexico.

Survival keys: Light parts, wide clientele, ready cash

For most of the decade, suppliers have built their businesses on making about 15 million vehicles in North America.

Now, suppliers are adjusting their businesses to break even in a market where automakers are building 10 million vehicles in North America.

"Once you break through that level, you make a lot of money quickly. Once you're below it, you lose a lot of money very quickly," said Larry Denton, an auto consultant who once headed Dura Automotive in Rochester Hills, Mich.

But the ramp-up won't come quickly.

It will take until about the first quarter of 2012 to reach a point where auto production in North America is on track for 12.6 million vehicles, the number of cars and light trucks built in 2008, said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide in Northville, Mich.

When volumes return in a smaller supply sector, the industry will have its best chance at profitability in the last 30 years, said Craig Fitzgerald, automotive consultant at Plante & Moran.