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Surging oil prices are expected to cut 2011 profits of auto suppliers, who are largely unable to pass along short-term increases in the price of raw materials.

Of 119 suppliers that responded last week to an online Automotive News survey, 87 percent said the oil price spike will dampen their 2011 profits. Most respondents said the hit would be 10 percent or less.

A silver lining, so far, is that only 14 percent of respondents said they have seen cuts in automakers’ production plans as a result of higher oil prices.

Suppliers also say they have made progress over the past four years reducing their sales reliance on truck and SUV platforms, which are most vulnerable to oil shocks.

With prices near $105 a barrel, the oil run-up could trim this year’s profits, said Dave Grimes, business director for the Cellasto parts unit of German chemical giant BASF.

Cellasto makes foam insulators used in shocks and struts for noise and vibration dampening. The unit had 2010 sales of about $50 million.

Grimes said the prices of polyester materials Cellasto uses for the bumpers, including material supplied by Cellasto’s parent company, are rising with the price of oil.

But there’s little hope of passing those higher materials costs to the automakers until the automakers are convinced soaring oil prices are more than just a short-term shock, he said.

“They aren’t ready to hear a request yet,” Grimes said.

The oil spike is also taking a bite out of short-term profits at Visteon Corp., said CEO Don Stebbins.

But like many suppliers, Visteon has cut costs in recent years and is better able to weather a shock than it was in 2008, Stebbins said. Visteon, which produces many plastic parts for interiors and other systems, emerged from Chapter 11 protection from creditors in October.

One supplier executive who asked not to be named said rising resin costs will kill some small suppliers that were weakened during the recession.

Suppliers of plastic parts have contracts that require them to continue shipping parts whether or not raw-material cost increases have made the work unprofitable, the executive said.

If suppliers go belly-up, automakers could end up spending more to transfer work to other suppliers than absorbing the higher raw-material costs themselves, the executive said.

Said the executive: “Then the OEMs will have to spend to fix the mess they created.”

 

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