European auto woes latest hit to U.S. suppliers

By Soyoung Kim

DETROIT (Reuters) - An abrupt downturn in European auto demand represents the latest hit to U.S. auto suppliers, already struggling with the fallout from a U.S. auto market that has plunged to 15-year lows and could drop further.

In the span of a week, TRW Automotive Holdings Corp (TRW.N), Johnson Controls Inc (JCI.N) and Lear Corp (LEA.N) cut their financial outlooks, blaming the credit turmoil for a downturn in European auto sales over the past month.

The possibility of a merger between General Motors Corp (GM.N) and Chrysler LLC further complicates the picture for suppliers, given uncertainty regarding what models and brands a combined automaker might choose to build.

Sources familiar with the situation have said Chrysler has held talks with GM and other automakers including Renault (RENA.PA) about a sale of all or part of its assets.

Europe had provided a silver lining for many leading U.S. auto suppliers such as TRW, which supplies auto safety products including airbags and electronic stability controls.

But the slump that started in the United States is fast spreading to other key markets, as a global credit crunch rocks consumer confidence.

Analysts say more suppliers will be forced to cut financial outlooks and slash jobs in coming weeks. Stock prices for those top suppliers could also be at risk for steep falls after outperforming rivals that rely more on U.S. sales, they say.

"Europe has softened in the last 45 days," Johnson Controls Chief Executive Stephen Roell told Reuters. "I would characterize the last 45 days as a significant softening."