Glendale-based automotive supplier Strattec Security Corp. saw a modest impact from the ongoing United Autoworkers Strike during its first fiscal quarter, but is expecting continued negative impact in the current quarter.
The maker of vehicle access products, including locks, keys, doors and lift gates reported sales of $135.4 million for the quarter ending Oct. 1, a 12.5% increase over last year. Net income also improved from $125,000 to nearly $4.2 million and earnings jumped from 3 cents to $1.05 per diluted share.
“Like everyone connected to the auto industry, we are concerned about the UAW strike,” said Frank Krejci, president and CEO of Strattec. “While the strike only modestly affected our sales in September, the situation has changed considerably in October as the strike escalated to include the manufacturing of high-volume pickup trucks and SUVs for our three major customers. We will continue to adjust our execution to whatever the outcome, however, our earnings will be negatively impacted until the strike ends, at which time we will work in earnest with our customers to try and recover lost sales and profitability.”
Around $10.8 million of the roughly $15 million increase in revenue was the result of negotiated pricing relief, including $8 million for one-time retroactive pricing for parts shipped in the prior fiscal year.
The company did benefit from increased sales to Ford for the new power end gate on its F-Series Super Duty pickup and increased sales to Stellantis on account of increased minivan production.
“I am very proud of our entire team for the results in the quarter. The team was able to capture inflationary price increases in the form of one-time recoveries as well as enhanced margins for the future. Additionally, the higher sales beyond the pricing relief achieved in the quarter reflected our ability to increase the reach of our most successful products across the product line-ups of our customers. And in support of our effort to protect margins, we implemented a salaried staff reduction in our Mexican operations,” Krejci said.
Strattec’s gross margins improved from 10.4% to 13.8%, however the pricing relief contributed 470 basis points to the improvement. Unfavorable exchange rates with Mexico, a mandatory 20% increase in the Mexican minimum wage and higher freight costs offset the margin improvements.
“Fortunately, our exit of a long-standing joint venture arrangement at the end of our prior fiscal year has meaningfully strengthened our balance sheet while providing greater focus on our core business. Now with greater control over our business, we look forward to the future,” Krejci said.
