European Auto Sales a Potential Negative for Magna

A soft European market is a short-term negative for all 3 Canadian auto part suppliers.

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Car sales in Europe fell 10% in March, marking the 18th consecutive month of declines.  The real pain was felt in Germany which suffered a remarkable 17.1% decrease.

Although the bulk of their operations are based in North America, the 3 big Canadian auto parts suppliers do have European operations.  Tabled below are the 2012 European revenues that were generated by each.

Company

2012 European Revenues

% of Total

Magna Int’l (TSX:MG,NYSE:MGA)

$10,089

33%

Martinrea (TSX:MRE)

547

19%

Linamar (TSX:LNR)

493

15%

Source:  Capital IQ

Magna, Martinrea, and Linamar are off 2.4%, 0.8%, and 1.3% thus far today.  This is probably a combination of these weak European results as well as a soft market.

Although weak European car sales may have a short-term impact, the reality is that a strong U.S. market is helping to offset the European weakness.  In addition, this weakness could turn out to be a long-term positive as each has the financial flexibility to take advantage and ensure a strong rebound once the clouds part.

Though cyclical, these auto parts suppliers are well run and financially sound, just the kind of businesses Canadian investors deserve to own.  While these types of companies are relatively scarce in Canada, the U.S. market is home to some of the best in the world.  We have created a special FREE report that identifies 3 U.S. businesses that are worthy of every Canadian’s hard earned investment dollars.  Simply click here to receive “3 U.S. Stocks Every Canadian Should Own” – FREE!

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Fool contributor Iain Butler owns shares in Magna and Martinrea.  The Motley Fool does not own shares in any company mentioned.    

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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