FEDERAL-MOGUL CORPORATION Reports Operating Results (10-Q)
FEDERAL MOGUL CORPORATION is a leading global supplier of powertrain chassis and safety technologies serving the world's foremost original equipment manufacturers of automotive light commercial heavy-duty agricultural marine rail off-road and industrial vehicles as well as the worldwide aftermarket. The company's leading technology and innovation lean manufacturing expertise as well as marketing and distribution deliver world-class products brands and services with quality excellence at a competitive cost. Federal-Mogul is focused on its sustainable global profitable growth strategy creating value and satisfaction for its customers shareholders and employees. Federal-Mogul was founded in Detroit in 1899. The company is headquartered in Southfield Michigan and employs 50000 people in 35 countries. Federal-mogul Corporation has a market cap of $1.11 billion; its shares were traded at around $11.2 with and P/S ratio of 0.2. Highlight of Business Operations:Net sales decreased by $312 million, or 18%, to $1,380 million for the three months ended September 30, 2009 from $1,692 million in the same period of 2008. The impact of the U.S. dollar strengthening, primarily against the euro, decreased reported sales by $62 million.
In general, light and commercial vehicle OE production volume declined in all regions. Despite these production volume declines, the Company generally maintained its OE market share in all regions. Global aftermarket volumes decreased in all regions due to a combination of factors including the economic recession reducing consumer spending and the frailty of Eastern European financial markets. The combined impact of these factors was a net sales volume decline of $244 million. Net customer price decreases were $6 million.
Cost of products sold decreased by $245 million to $1,168 million for the third quarter of 2009 compared to $1,413 million in the same period of 2008. This was primarily due to a $123 million decrease associated with the decline in sales volume. This reduction is due to reduced material, manufacturing labor and variable overhead costs as a direct consequence of the lower production volumes, partly offset by increases in the cost base resulting from changes in the mix of products manufactured and sold in the period. Productivity in excess of labor and benefits inflation of $31 million represents improvements in the total manufacturing cost base in excess of those due to reduced production volume and mix changes. Other factors contributing to this decrease were currency movements of $58 million and material sourcing savings of $31 million.
Gross margin was $212 million, or 15.4% of sales, for the three months ended September 30, 2009 and $279 million, or 16.5% of sales, in the same period of 2008. Favorable productivity in excess of labor and benefits inflation of $31 million and material sourcing savings of $31 million were more than offset by sales volume decreases that reduced margins by $121 million, net customer price decreases of $6 million and increased pension expense of $3 million. The impact of the U.S. dollar strengthening, primarily against the euro, decreased reported gross margin by $4 million.
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