Federal-Mogul Corp., the auto-parts maker controlled by billionaire Carl Icahn, is luring investors led by UBS AG and TIAA-CREF who anticipate a rebound after this year's slump.

Investors may figure that the market is unfairly punishing the Southfield, Michigan-based company for its association with carmakers, said George Putnam, publisher of the Turnaround Letter and fund manager of Boston-based New Generation Advisers Inc. The stock has lost almost half its value in 2008.
Federal-Mogul may rebound 60 percent by year-end, according to Robert Goodman, an analyst at CRT Capital Group in Stamford, Connecticut, who recommends buying.
The parts maker gets more than a third of its revenue and most of its profit from selling replacement items such as Champion spark plugs, making it less vulnerable than competitors to slumping auto sales.
Sixty percent of the supplier's business is outside the U.S., exposing it to faster-growing economies. No more than 6 percent of revenue comes from any one customer, according to a company filing.
``Federal-Mogul is well-positioned,'' Putnam said. ``We think the stock is cheap right now.'' His fund bought almost 600,000 shares of the parts maker, or a 0.6 percent stake, last quarter, making it the sixth-biggest buyer during the period.
Icahn, 72, who last month dropped a bid for control of Internet search-engine company Yahoo! Inc., is another attraction. The New York-based investor owned 6.4 percent of the shares ahead of the company's Chapter 11 filing in 2001 and was the biggest holder of its debt before it emerged from bankruptcy in December. Now he owns three-quarters of the stock, a stake valued at $1.23 billion. ``Icahn's involvement draws interest,'' Putnam said. The May issue of the Turnaround Letter describes the investor as ``a large, savvy holder.''
Federal-Mogul rose 60 cents, or 3.8 percent, to $16.29 at 04:00 P.M. New York time in Nasdaq Stock Market composite trading, its biggest gain in almost two weeks.
Zurich-based UBS purchased a 5.7 percent stake in the three months ended June 30, making it the second-biggest holder, according to data compiled by Bloomberg. Solus Alternative Asset Management LP bought a 2.6 percent stake in the second quarter, and TIAA-CREF, the biggest U.S. pension-fund manager, owned 2.1 percent as of June 30.
Icahn purchased two-thirds of his holdings, 50.1 million shares, for $900 million, or $17.96 each, on Feb. 25, according to a regulatory filing. Those shares have lost 9.3 percent of their value, costing Icahn $83.7 million on paper. The rest of his stake was acquired in an exchange of debt while the company was in bankruptcy.
Federal-Mogul may recover to $26 by year-end, according to Goodman at CRT Capital. That price would boost the value of Icahn's shares to $1.95 billion.
The 11 percent decline in U.S. auto sales this year through July, higher raw materials costs, and the credit crisis are weighing on U.S.-based parts makers. Annual vehicle sales may fall to 14.2 million units, the lowest since 1993, according to J.D. Power & Associates, a Westlake Village, California-based market research firm.
(Source: Bloomberg)