Overview

The following Management Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of Stoneridge, Inc. (the "Company"). This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the financial statements.

We are an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the medium- and heavy-duty truck, agricultural, automotive and off-highway vehicle markets.

We recognized a net loss for the quarter ended March 31, 2009 of $11.6 million, or $(0.49) per diluted share, compared with net income of $6.5 million, or $0.28 per diluted share, for the first quarter of 2008.

Our first quarter 2009 results were negatively effected by the continued dramatic decline in the global commercial and North American automotive vehicle markets as well as the economy as a whole. In addition, our results were effected by foreign currency exchange rates. Foreign exchange translation adversely effected our revenues by approximately $7.5 million during the quarter ended March 31, 2009 when compared to the quarter ended March 31, 2008. In addition, the results of our PST Eletrônica S.A. ("PST") joint venture in Brazil declined between the two periods. Equity earnings in the joint venture declined from $3.6 million for the first quarter of 2008 to $0.6 million in the first quarter of 2009 due to lower demand for PST's security products.

The decrease in selling, general and administrative expenses ("SG&A") was primarily due to decreased design and development and reduced compensation and compensation related expenses incurred during the quarter ended March 31, 2009. The decrease in design and development costs were caused by customers delaying new product launches in the near term as well as planned reductions in our design activities.

Also affecting our results were our restructuring initiatives. Costs incurred during the quarter ended March 31, 2009, related to these restructuring initiatives amounted to approximately $1.0 million and were primarily comprised of one-time termination benefits. These restructuring actions were in response to the depressed conditions in the North American and European commercial vehicle and North American light vehicle markets. First quarter 2008 restructuring expenses were approximately $2.5 million and were comprised of one-time termination benefits and line-transfer expenses related to our initiative to improve the Company's manufacturing efficiency and cost position by ceasing manufacturing operations at our Sarasota, Florida, and Mitcheldean, United Kingdom, locations.

At March 31, 2009 and December 31, 2008, we maintained a cash and equivalents balance of $89.2 million and $92.7 million, respectively. As discussed in Note 6 to the condensed consolidated financial statements, we have no borrowings under our asset-based credit facility. At March 31, 2009 and December 31, 2008, we had borrowing capacity of $56.3 million and $57.7 million, respectively.

Significant factors inherent to our markets that could affect our results for the remainder of 2009 include the financial stability of our customers and suppliers. Our results for 2009 also depend on conditions in the commercial and automotive vehicle markets, which are generally dependent on domestic and global economies.

On April 24, 2009, we entered into the United State Treasury's Auto Supplier Program (the "Program"). Entrance into the Program was retroactive to March 18, 2009. As part of entrance into the Program, we were required to amend our credit facility, to allow us to sell certain accounts receivables due from General Motors Corporation ("GM") or Chrysler, LLC ("Chrysler") to GM Supplier Receivables LLC and Chrysler Receivables SPV LLC, respectively, special purpose entities created by the United States Treasury Department. The Program guarantees these receivables, net of a two percent administrative fee imposed on the receivables included in the Program.

On April 30, 2009, Chrysler filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. The effect of this bankruptcy is under review by management at this time. Our sales to Chrysler for the three months ended March 31, 2009 were approximately $5.0 million or approximately 4.1% of consolidated net sales. Accounts receivable from Chrysler as of March 31, 2009 were approximately $4.0 million. We have collected or have been able to include a significant portion of this receivable amount in the Program. We believe that we will be able to collect the majority of the remaining receivable balance from Chrysler.

Results of Operations

We are primarily organized by markets served and products produced. Under this organizational structure, our operations have been aggregated into two reportable segments: Electronics and Control Devices. The Electronics reportable segment includes results of operations that design and manufacture electronic instrument clusters, electronic control units, driver information systems and electrical distribution systems, primarily wiring harnesses and connectors for electrical power and signal distribution. The Control Devices reportable segment includes results of operations that design and manufacture electronic and electromechanical switches, control actuation devices and sensors.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Net Sales. Net sales for our reportable segments, excluding inter-segment sales,
for the three months ended March 31, 2009 and 2008 are summarized in the
following table (in thousands):

                                        Three Months Ended
                                             March 31,                           $ Increase /      % Increase /
                                 2009                        2008                 (Decrease)        (Decrease)
Electronics             $  82,771          68.4 %   $ 133,216          65.6 %   $      (50,445 )           (37.9 ) %
Control Devices            38,314          31.6        69,854          34.4            (31,540 )           (45.2 ) %
Total net sales         $ 121,085         100.0 %   $ 203,070         100.0 %   $      (81,985 )           (40.4 ) %

The decrease in net sales for our Electronics segment was primarily due to volume declines in commercial vehicle production. Our net sales were negatively effected by foreign currency exchange rates of approximately $7.5 million between the two periods.

The decrease in net sales for our Control Devices segment was primarily attributable to production volume reductions at our major customers in the North American light vehicle market.

Net sales by geographic location for the three months ended March 31, 2009 and 2008 are summarized in the following table (in thousands):

                                        Three Months Ended
                                             March 31,                           $ Increase /      % Increase /
                                 2009                        2008                 (Decrease)        (Decrease)

North America           $  99,230          82.0 %   $ 147,198          72.5 %   $      (47,968 )           (32.6 ) %
Europe and other           21,855          18.0        55,872          27.5            (34,017 )           (60.9 ) %
Total net sales         $ 121,085         100.0 %   $ 203,070         100.0 %   $      (81,985 )           (40.4 ) %

The decrease in North American sales was primarily attributable to lower sales volume in our North American light vehicle and commercial vehicle markets. Our decrease in sales outside North America was primarily due to lower sales volume in the European commercial vehicle market and adverse foreign exchange rate movements.

Condensed consolidated statements of operations as a percentage of net sales for the three months ended March 31, 2009 and 2008 are presented in the following table (in thousands):

                                                        Three Months Ended
                                                             March 31,                            $ Increase /
                                                2009                          2008                 (Decrease)
Net Sales                              $ 121,085         100.0 %     $ 203,070         100.0 %   $      (81,985 )

Costs and Expenses:
Cost of goods sold                       101,810          84.1         151,253          74.5            (49,443 )
Selling, general and administrative       27,077          22.4          36,282          17.9             (9,205 )
Restructuring charges                        958           0.8           1,422           0.7               (464 )
Operating Income (loss)                   (8,760 )        (7.3 )        14,113           6.9            (22,873 )
Interest expense, net                      5,497           4.5           5,372           2.6                125
Equity in earnings of investees             (575 )        (0.5 )        (3,819 )        (1.9 )            3,244
Loss on early extinguishment of debt           -             -             499           0.3               (499 )
Other expense, net                             6             -             402           0.2               (396 )
Income (loss) Before Income Taxes        (13,688 )       (11.3 )        11,659           5.7            (25,347 )
Provision (benefit) for income taxes      (2,108 )        (1.7 )         5,112           2.5             (7,220 )
Net Income (loss)                      $ (11,580 )        (9.6 ) %   $   6,547           3.2 %   $      (18,127 )

Cost of Goods Sold. The increase in cost of goods sold as a percentage of sales was due to the significant decline in volume and a less favorable product mix related to North American commercial vehicle products during the quarter ended March 31, 2009.

Selling, General and Administrative Expenses. Product development expenses included in SG&A were $8.5 million and $12.3 million for the first quarters ended March 31, 2009 and 2008, respectively. The decrease in design and development costs was caused by customers delaying new product launches in the near term as well as planned reductions in our design activities. The decrease in SG&A costs excluding product development expenses was due to lower employee related costs primarily incentive compensation.

Restructuring Charges. Costs from our restructuring initiatives for the quarter ended March 31, 2009 decreased compared to the first quarter of 2008. Costs incurred during the quarter ended March 31, 2009, related to restructuring initiatives amounted to approximately $1.0 million and were primarily comprised of one-time termination benefits. These restructuring actions were in response to the depressed conditions in the North American commercial vehicle and automotive markets. First quarter 2008 restructuring expenses were approximately $2.5 million and were comprised of one-time termination benefits and line-transfer expenses related to our initiative to improve the Company's manufacturing efficiency and cost position by ceasing manufacturing operations at our Sarasota, Florida, and Mitcheldean, United Kingdom locations. Restructuring expenses that were general and administrative in nature were included in the Company's condensed consolidated statements of operations as restructuring charges, while the remaining restructuring related expenses were included in cost of goods sold.

Restructuring charges recorded by reportable segment during the three months ended March 31, 2009 were as follows (in thousands):

                                                                           Three Months Ended
                                                                             March 31, 2009
                                                                                                      Total
                                                                                                  Consolidated
                                                                                                  Restructuring
                                                          Electronics       Control Devices          Charges

Severance costs                                          $         369     $             497     $           866
Contract termination costs                                          92                     -                  92
Total general and administrative restructuring charges   $         461     $             497     $           958

All restructuring charges result in cash outflows. Severance costs related to a reduction in workforce. Contract termination costs represent costs associated with long-term lease obligations that were cancelled as part of the restructuring initiatives. Other associated costs include miscellaneous expenditures associated with exiting business activities.

Restructuring charges recorded by reportable segment during the three months ended March 31, 2008 were as follows (in thousands):

                                                                           Three Months Ended
                                                                             March 31, 2008
                                                                                                      Total
                                                                                                  Consolidated
                                                                                                  Restructuring
                                                          Electronics       Control Devices          Charges

Severance costs                                          $         873     $             365     $         1,238
Other costs                                                          8                   176                 184
Total general and administrative restructuring charges   $         881     $             541     $         1,422

Equity in Earnings of Investees. The decrease in equity earnings of investees was predominately attributable to the decrease in equity earnings recognized from our PST joint venture. Equity earnings for PST declined from $3.6 million for the quarter ended March 31, 2008 to $0.6 million for the quarter ended March 31, 2009. The decrease primarily reflects lower volumes for PST's product lines and unfavorable exchange rates during the quarter ended March 31, 2009.

Income (Loss) Before Income Taxes. Income (loss) before income taxes is summarized in the following table by reportable segment (in thousands).

                                              Three Months Ended
                                                  March 31,              $ Increase /       % Increase /
                                              2009          2008          (Decrease)         (Decrease)

Electronics                                $   (2,206 )   $  12,991     $      (15,197 )           (117.0 ) %
Control Devices                                (7,020 )       2,076             (9,096 )           (438.2 ) %
Other corporate activities                      1,015         1,907               (892 )            (46.8 ) %
Corporate interest expense                     (5,477 )      (5,315 )             (162 )             (3.0 ) %
Income (loss) before income taxes          $  (13,688 )   $  11,659     $      (25,347 )           (217.4 ) %

The decrease in income before income taxes in the Electronics segment was primarily related to decreased revenue and unfavorable product
mix. Additionally, these factors were negatively effected by foreign exchange rates during the quarter ended March 31, 2009 when converting functional currency to United States Dollars.

The decrease in income before income taxes in the Control Devices reportable segment was primarily due to lower revenue.

The decrease in income before income taxes from other corporate activities was primarily due to the $3.0 million decrease in equity earnings from our PST joint venture. The decrease is partially offset by a decrease in compensation related expenses and the loss recognized on the purchase and retirement of $11.0 million in face value of our senior notes in the first quarter of 2008.

Income (loss) before income taxes by geographic location for the three months ended March 31, 2009 and 2008 is summarized in the following table (in thousands):

                                        Three Months Ended
                                             March 31,                           $ Increase /       % Increase /
                                 2009                        2008                 (Decrease)         (Decrease)

North America           $  (9,076 )        66.3 %   $   9,921          85.1 %   $      (18,997 )           (191.5 ) %
Europe and other           (4,612 )        33.7         1,738          14.9             (6,350 )           (365.4 ) %
Income (loss) before
income taxes            $ (13,688 )       100.0 %   $  11,659         100.0 %   $      (25,347 )           (217.4 ) %

The decrease in our profitability in North America was primarily attributable to lower sales volumes during the quarter ended March 31, 2009. The decrease in profitability outside North America was primarily due to lower sales volumes and unfavorable foreign exchange rates during the quarter ended March 31, 2009.

Provision (Benefit) for Income Taxes. We recognized a provision (benefit) from income taxes of $(2.1) million, or 15.4% of pre-tax loss, and $5.1 million, or 43.9% of the pre-tax income, for federal, state and foreign income taxes for the quarters ended March 31, 2009 and 2008, respectively. As reported at December 31, 2008, the Company is in a cumulative loss position and provides a valuation allowance offsetting federal, state and certain foreign deferred tax assets. As a result, a tax benefit is not provided for losses incurred during the first quarter of 2009, for federal, state and certain foreign jurisdictions. The inability to recognize a tax benefit for these losses and other deferred tax assets had a significant impact on our effective tax rate as well as the comparability of the current quarter effective tax rate to prior periods, in which the Company had not recorded a federal valuation allowance. The difference in the effective tax rate for the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008, was primarily attributable to the federal valuation allowance provided against the first quarter domestic loss offset by recording a tax benefit related to current period losses in certain foreign jurisdictions in which it is more likely than not that the benefit of those losses will be realized in the current year. Additionally, the effective tax rate for the quarter ended March 31, 2008 was negatively affected by the valuation allowance that was required to be recorded during 2008 related to the restructuring expenses incurred in connection with certain United Kingdom operations.