Tecumseh Products Company (NASDAQ:TECUA)

xMacroeconomics (< 20) Submitted: 11/28/2007 12:04:21 PM : Start Price: $22.97 TECUA Score: +74.65

Tecumseh Products Company has been selling off its non-core businesses in an attempt to become solely a compressor company.

They disclosed several risks that do not appear priced into the stock.

80% of their manufacturing takes place outside of the united states

41.7% Brazil
27% France
12% India

They have stated that their results are senitive to movements in the exchange rates of those countries. They have entered into currency forward contracts. Those only serve to mitigate currency losses and not prevent the harm they cause to the business structure.

All three of those country's currencies have had extremely strong movement against the dollar and even if the exchange does not hurt the company's bottom line, the erosion in competitiveness might.

"Due to the high material content of copper (and, to a lesser extent, aluminum) in compressor products, our results of operations are very sensitive to the prices of these commodities. Overall, commodity prices increased very rapidly during 2005, 2006 and into 2007. Due to competitive markets, we are typically not able to quickly recover these cost increases through price increases and other cost savings."

Copper has retreated a little since this comment was made, but long term commodity prices are not likely to see a substantial decline.

Also

"Interest expense amounted to $25.5 million in the first nine months of 2007 compared to $16.8 million in the first nine months of 2006."

25m in interest ? This ship is sinking and when they run out of cash from the sale of the other businesses, the party is officially over.