Linamar stock rout doesn’t reflect auto-industry reality, CEO says

The CEO of Canadian auto-parts supplier Linamar Corp. says the business’s recent stock rout – down 26 percent so far this month – is “frustrating” and reflects a few key misunderstandings concerning the health of the auto industry.

Linda Hasenfratz said she believes there are two reasons for the share-price decline, that has outpaced the 8.3 per cent stop by the S&P/TSX Composite Index within the same time period by a factor of three.

First, she said, people are growing increasingly nervous about the economy and what weakness means for manufacturers.

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“We’re not simply because degree of pessimism (in reality) and I worry that if people obsess with it too much then it will begin to be realized,” Hasenfratz said in an interview Monday in front of an evening meal speech towards the Toronto Region Board of Trade.

Second, individuals are assuming the interest rate of technological change in the car market is going to leave traditional suppliers like Linamar within the dust – an idea that isn’t reflected within the reality of the industry, she said.

“I have no idea if it’s fear or maybe people just do not understand what is happening in terms of technology in the industry, but they’re leaping to conclusions about things,” she said.

“There’s just so much uncertainty about what is happening in terms of technology, autonomous vehicles and electric vehicles – that makes people a bit panicky and then they start selling stock simply because you make powertrain parts. It’s type of crazy.”

I worry when people dwell on it too much then it will start to become a reality

Hasenfratz said Linamar supplies parts to electric and hybrid vehicles and is diversifying to make sure it’s successful “in a number of scenarios.”

“We desire to be part of (electric vehicles), we want to participate hybrids and we want to be a part of more traditional gas and diesel engines as well because we believe there’s going to be a place for all those in the future,” she said.

But she also noticed that the excitement around self-driving cars and electric vehicles doesn’t jibe using the reality that she saw finally week’s North American International Auto Show in Detroit, or even the reality of auto sales, which are currently covered with gasoline-powered pickups, SUVs and crossovers.



“It’s interesting to determine the main difference between what’s being discussed and what’s being shown and being purchased,” Hasenfratz said.

Linamar doesn’t give a financial outlook, nevertheless its sales within the third quarter were up 25 % from the year earlier and Hasenfratz said she expects to see volume growth in North America, Asia and europe this year.

She also expects to see some upside from the weak loonie, even though it “won’t be substantial” because the company is naturally hedged against the U.S. dollar.

Last week, Linamar competitor Magna International Inc. substantially increased its 2016 revenue forecast to US$34.6 billion-$36.3 billion, up from an early on forecast of US$31.3 billion-$32.6 billion.