Housing and automotives are possibly the two least attractive American businesses to be in at present. The US housing bubble has popped and the US auto sector has seen nothing but red ink and job cuts, so it is no surprise that Tomkins, which is heavily invested in both, is hurting.
According to Tomkins, July and August have been worse than expected and they are warning that profits will be £11 million lower than earlier forecasts. The real danger now is that the slow down continues. It seems likely that neither autos or housing will improve anytime soon in the US, which means this may not be the last Tomkins profit warning.
On the upside, the company does have some innovative products in autos that should secure it more business in the medium-term. The question is whether investors will be willing to wait that long for recovery. Also, any improvement in autos may be spoiled by continued weakness in housing, which (once again) questions the logic of bolting these two divisions together to form one company.