Contractors face trickle-down of GM cuts.

By the time General Motors Corp. announced this month it would slash vehicle production because of falling truck and SUV sales, Superior Industries International Inc. had already been struggling with the news.

The Van Nuys-based original equipment manufacturer, a supplier of aluminum wheels to G.M., Ford Motor Co. and other automakers, had advance notice two months ago, and it has been grappling with a response ever since--with none of its options very desirable.

The company is considering laying off temporary workers, capping overtime and running plants on four-day weeks. Also under consideration if orders keep falling: shuttering a domestic plant.

"I've been here ... 20 plus years, and I've never seen it like this," said Jeff Ornstein, Superior's chief financial officer during the fourth-quarter conference call. "What do you do with a plant that's geared up for 40,000 wheels? What do you do with the people? What do you do with the experience base?"

With soaring fuel prices cutting into sales of gas-guzzling tracks and SUVs that are market strongholds for U.S. auto manufacturers, GM and Ford announced they would cut vehicle production levels.

Those cuts are expected to have a ripple effect on the domestic parts industry, which has already suffered big job losses. Some 133,000 jobs, or 16 percent of its total workforce, were lost between 2000 and 2004, and another 127,000 are expected to be lost by 2010, according to a study by Roland Berger Strategy Consultants.

But the production cuts were a particular one-two punch for Superior Industries, which is one of the largest component suppliers to GM and Ford, employing about 1,000 workers in L.A. County.

It maintains a 38 percent share of the 40 million aluminum wheels made in the U.S., but it is particularly dependent on the Big Three automakers for its sales, with GM accounting for 45 percent of its sales, Ford 36 percent and DaimlerChrysler AG's Jeep unit 9 percent.

One problem for Superior is that its flashy aluminum wheels are more commonly outfitted on trucks and SUVs. "Those vehicles are more expensive, so they tend to have higher-end wheels," said analyst Rob Hinchliffe of UBS Investment Bank. "The trucks and SUVs also have fuel efficiency issues, so they often have the aluminum wheels to reduce the weight."

Following news of the production cuts earlier this month, several Wall Street analysts downgraded nine of the major components suppliers for GM and Ford, including Superior.

Wall Street seemed to shrug off the news with the company stock closing March 24 at $25 a share, about where it's been since February. However, the shares have slid steadily downward since a year ago when they topped $42.

With February sales down 12.7 percent from January, GM announced it would cut production by 10 percent, or 45,000 vehicles in the first quarter and another 10 percent, or 139,000 vehicles, in the April-June period to control inventory.

Ford saw sales fall 3 percent and truck sales 8 percent. It announced it would cut production by 10,000 vehicles in the first quarter and another 1.2 percent, or 11,000 vehicles, in the second quarter.

U.S. auto suppliers have been pressured for years to match the low prices of Chinese producers by outsourcing. Auto makers, like other manufacturers, are increasingly turning to China, with its increasing industrial capacity and much lower labor costs than even Mexico, where auto parts manufacturing traditionally landed when leaving the country.

Superior operates 10 plants: seven domestically, two in Mexico and one in Hungary. It also has a third plant under construction in Mexico, but it has resisted moving additional operations overseas.

Still, after Ford announced it would start purchasing cheap aluminum wheels from China last year, Superior's board moved forward with plans to start a Chinese joint venture in Shanghai.

It also has high hopes for its new highly automated manufacturing plant that is near completion in Chihuahua, Mexico, though that could mean the closure of a domestic plant.

"When Mexico is fully running at 2.5 million wheels and we're still flat, one of our plants will have to go--probably," Ornstein said during the conference call.