UPDATE 1-Lehman cuts price targets on 7 auto parts suppliers

(Adds details)

July 2 (Reuters) - Lehman Brothers cut its price targets on
seven U.S. auto parts suppliers, particularly those most
exposed to traditional trucks, saying the mix of vehicles sold
in June reflected a deterioration in the move away from
higher-margin traditional trucks towards more fuel-efficient
vehicles.

"We believe the auto downturn has entered a second phase in
which falling resale values of large vehicles freeze buyers out
of the market," analyst Brian Johnson wrote in a note to
clients.

The sector's valuation has already come under pressure over
the past few weeks, with many of the stocks trading at
multi-year lows, said Johnson, who rates the sector "neutral."

Johnson, however, expects some of the hard-hit names like
Dana Holding Corp (DAN.N: Quote, Profile, Research) and Lear Corp (LEA.N: Quote, Profile, Research) to recover over
time as investors realize that the ongoing earnings power
justifies a higher valuation.

He named BorgWarner Inc (BWA.N: Quote, Profile, Research) as his top pick.

The analyst expects diversified suppliers such as
BorgWarner and Johnson Controls (JCI.N: Quote, Profile, Research) to be less impacted
than American Axle & Manufacturing Holdings Inc (AXL.N: Quote, Profile, Research), which
has a huge exposure to the Big 3 -- General Motors Corp (GM.N: Quote, Profile, Research),
Ford Motor Co (F.N: Quote, Profile, Research) and Chrysler [CBS.UL].

Ninety percent of American Axle's total revenue is linked
to the Big 3, of which 90 percent is for body-on-frame trucks.

The analyst, who cut his production forecasts and earnings
estimates across the board, sees sales of traditional full-size
pickups and SUVs continuing to decline quickly.

Sky-rocketing oil prices have brought demand for trucks to
a screeching halt. Light truck sales dropped to less than 48
percent of new vehicle sales in April and 44 percent in May --
the first time they were below 50 percent since 2001.

In June, sales of domestic and imported light trucks were
down 19.4 percent from the same month a year ago, the
automakers said on Tuesday.

The following table shows the changes in price targets:
COMPANY PRICE TARGET CLOSING PRICE

New Old July 1
ArvinMeritor (ARM.N: Quote, Profile, Research) $17 $18 $12.34
American Axle & Manufacturing (AXL.N: Quote, Profile, Research) $11 $20

$8.74 BorgWarner Inc (BWA.N: Quote, Profile, Research) $58 $60
$45.09 Dana Corp (DAN.N: Quote, Profile, Research) $12 $15
$5.28 Johnson Controls (JCI.N: Quote, Profile, Research) $36 $38
$29.18 Lear Corp (LEA.N: Quote, Profile, Research) $22 $28
$15.35 Tenneco (TEN.N: Quote, Profile, Research) $18 $21
$13.95
(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by
Himani Sarkar)