AUTO INDUSTRY REPORTER
Shares of Wescast Industries Inc. WCS.A-T, one of Canada's largest auto parts makers, plunged yesterday after the company said its financial condition had been worsened by the automotive crisis. Among other issues, Wescast said the auto industry's troubles "raise uncertainty about its ability to continue as a going concern." The maker of exhaust manifolds, which is based in Brantford, Ont., issued financial results that provided an example of how Canadian parts companies are being battered by the crisis afflicting their largest customers, the Detroit Three auto makers.
Wescast lost $110.7-million in the year ended Dec. 31, with much of the loss attributed to a restructuring charge of $72.7-million for a foundry in Wingham, Ont., that will close next week. A slash in production by Chrysler LLC., Ford Motor Co. and General Motors Corp. also contributed.
"The global credit market crisis has had a dramatic effect on the automotive industry and the financial health of the company's [auto maker]customers," Wescast said in a note accompanying financial statements it filed with securities regulators yesterday. "These factors, among others, raise uncertainty about the ability of the company to continue as a going concern." Wescast shares dropped 19 per cent on the day.
The note should not be interpreted as indicating that Wescast is "on the verge," Wescast chief executive officer Ed Frackowiak said in an interview. "We don't even have any debt. We have cash."
The company said it has total debt of $4.7-million and cash of $9.1-million and is negotiating a new credit agreement that will provide $30-million in revolving loans as of March 29.
"The company believes that its conservative capital structure, recent investments in its global work force and facilities, and its continued drive for new technologies and innovation provides Wescast with the flexibility and position to grow successfully in the future," Wescast said.
Wescast is Canada's fourth-largest publicly traded auto parts company by revenue and has operations in China, Europe and North America.
Several U.S. parts makers have included going-concern notices in their fourth-quarter financial results, but the real crisis for Canadian and U.S. auto suppliers is not expected to hit until next month.
WESCAST (WCS)
Close: 65¢, down 15¢
CLARIFICATION
A brief article on Wescast Industries Inc.'s financial statements posted online March 27 identified challenges faced by the automotive industry as a whole and was not intended to relate to Wescast specifically.