Analysts: Suppliers May Gain From Auto-Makers' Tech War

Auto makers are near the end of an up-cycle for sales while spending on a "technology arms race" will hurt profits but help their suppliers, an analyst said Tuesday. General Motors Co.

is slated to post fourth-quarter results Wednesday, following lack-luster earnings recently from Fort Motor Co.

. GM recently said its industry is in a "technology arms race" with heavy spending on improved fuel economy, in-vehicle connectivity, voice and gesture recognition, semi-autonomous driving capabilities and electric vehicles. Automakers "don't have the engineering resources to develop all of these technologies in addition to designing their core vehicles," according to Credit Suisse's Daniel Galves. The spending will hurt profits of auto makers but help a handful of suppliers, Galves said. Galves likes automobile seat supplier Lear Corp.

and systems supplier Magna International Inc.

. Morgan Stanley's Adam Jonas cited Tuesday's announcement that privately held Uber aims to develop a fleet of autonomous taxis in a Pittsburgh laboratory. GM and Ford "will need to execute transformational changes" to survive in the long term, according to Jonas. In line with Galves, Jonas favors investments in what he calls "high-tech mega-suppliers" like Delphi Automotive PLC

, Mobileye NV

and Magna International. Ford and GM met with analysts recently at the Detroit Auto Show. Investor sentiment is "apathetic and unlikely to change in the near term," according to Galves. "We struggle to see catalysts in the next few months," Galves said of auto-maker stocks. General Motors, which offered an outlook in Detroit show, is expected to post earnings of $0.83 cents a share on revenue of $40.12 billion. Deutsche Bank's Rod Lache expects GM will miss the earnings consensus by about 6 percent. GM's earnings before interest and taxes of $1.9 billion will be flat compared with a year earlier, and production in North America will be down 3.9 percent, according to Lache.