momentum auto exec-2009
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Automotive
Momentum: KPMG’s Global Auto Executive Survey 2009 Industry concerns and expectations 2009-2013
kpmg internAtionAl
KPMG Global Auto Executive Survey 2009
Contents – Foreword 01 Survey methodology 02 Executive summary 04 Introduction 06 Oil prices and the KPMG Global Auto Executive Survey 07
1/ Auto-making in crisis 08 2/ New markets 22 3/ Technology and innovation 26 4/ Beyond crisis: challenges and opportunities 34
Conclusion 40
Foreword 1
Foreword –KPMG’s Global Auto Executive Survey 2009 coincided with the unfolding of an unprecedented global economic crisis with profound implications for the automotive industry. The expectations recorded in this survey reflect the depth of the crisis.
The cautious optimism evident among automotive decision-makers in 2007 is gone. In the last quarter of 2008, companies expect lower revenues, lower profits, more bankruptcies, and a long cycle of restructuring to come. They see more overcapacity emerging, and they believe investment will slow.
These lowered expectations are not confined to the mature automotive economies. In China and India too – economies where growth is still high – companies believe that production and sales in the coming five years will be considerably lower than previously anticipated.
A sharp lowering of expectations is hardly surprising, given the extent of the current downturn and its impact on auto sales. What is surprising can be found in the detail. For example, the KPMG Survey shows that many automotive companies saw today’s crisis coming: our historical comparisons show that concerns over the global economy have actually been rising for the last three years.
It is clear that the near future is going to be These are difficult times. Yet the KPMG very tough for the automotive industry. Yet Global Auto Executive Survey shows that the KPMG Survey also shows that long-term many companies are well aware of the concerns have not greatly changed. When challenges they face – and that many are asked about long-term trends, opportunities ready to build on their strengths as they and challenges, companies continue to say face those challenges. they retain a long-term focus on innovation and technology – particularly fuel technologies.
The 2009 Survey suggests that innovation and technology are likely to be at the heart of industry efforts to recapture profitability in the coming months and years. For example, innovation – especially process innovation – is still seen by companies as the best way to cut costs, rather than attacking direct overheads. Companies also believe that product innovation will be key to rebuilding
Uwe Achterholt sales: it is notable that despite the fall in energy costs during the last few months, Global Chair, Automotive
expectations of sales of hybrid and other KPMG in Germany
fuel-efficient vehicles continue to rise sharply compared with previous years.
And in the midst of pessimism, companies also tell us about success. They say that effective management will be the key to success. They do not believe that it is marketing or brand power that will pull them out of recession, but the leveraging of technology and meeting customer needs.
2 KPMG Global Auto Executive Survey 2009
Survey methodology –The KPMG Global Auto Executive Survey 2009 is the tenth consecutive annual survey of senior global auto executives carried out by KPMG firms. This year the survey is more extensive than in previous years: 200 respondents took part in the survey between September 22 and October 31 2008, including companies in the Americas, Asia Pacific, Europe, Africa and the Middle East.
Survey methodology 3
Survey participants by job title
Source: KPMG Global Auto Executive Survey 2009
Directors Head of department ‘C’ level executives
Key
managers and senior managers
others vice president president
39%
5%
26%
2%
6%
17%
7%
Survey participants by company type
Source: KPMG Global Auto Executive Survey 2009
Key
vehicle manufacturers tier 1 supplier tier 2 supplier
41%
46%
14%
A small number of questions in the survey were asked of companies in the U.S. but not of companies in other countries (these were questions relating to U.S. restructuring plans and progress). Where these results are cited in the survey, they are also flagged as ‘U.S. only’ results.
Each year we ask executives to describe themselves and their companies. Although we look for a balanced mix of auto-makers and suppliers, this year* no respondents chose to describe themselves as Tier 3 suppliers, although in previous years the survey did include responses from Tier 3 suppliers. In order to present results that are comparable with previous years, we have therefore grouped Tier 2 and Tier 3 suppliers together. This year’s results from Tier 2 suppliers are therefore compared with the previous two-year results from a combination of Tier 2 and Tier 3 suppliers.
* Research took place in the last quarter of 2008. Report published in early 2009.
4 KPMG Global Auto Executive Survey 2009
Executive summary –The mood has changed, and the change has been very rapid
Only 12 months ago, companies were 1/Auto-making in crisis beginning to express a cautious optimism after several years of challenge. Companies
The 2009 KPMG Auto Executive Survey saw a world where growth was strong,
makes it clear that the fundamental issues and emerging market growth was
concerning auto-makers have been unprecedented. They saw margins and
rebalanced, but the pattern of concernprofits beginning to be rebuilt, as a result
remains unchanged. of long-term restructuring and globalization of manufacturing. Key issues
• Product quality remains the most cited issue.Today, much of that optimism has been deferred, if not abandoned. In established • The deterioration of the global economy
markets, sales are falling, investments are has continued to rise as a concern.
being reviewed, and some very large auto • Labor relations continue to fall in importance.
companies are close to insolvency.
Margins and profitability are expectedIn emerging markets, prospects are being to fall scaled back far and fast, as consumer
• The great majority of companies surveyed markets are hit by rapid credit contraction and
think there will either be no growth ina sudden slowdown in overall growth rates.
profits or that profits cannot be predicted over the coming five years – and almost a
But auto-making is a long-term business with quarter think profits will actually decline.
a long-term horizon, and long-term concerns have not changed. Automotive companies • Captive finance company profits are
remain concerned with innovation and the expected to decline sharply.
leveraging of technology into products that • The rate of bankruptcies is expected
will enter the market long after the current to increase (in 2007 the rate was
downturn has worked through. expected to decline).
• Tier 1 suppliers are by far the most likely to consider that bankruptcies will increase.
Market share expectations continue to shift in favor of emerging Asian and mature Japanese and Korean brands • Chinese brands have moved from
second to first place in market share expectations, and Indian brands from fourth to second place.
• Expectations for U.S. auto-makers have declined further from a low level.
• Europe, Middle East and Africa (EMA) companies are markedly more optimistic on market share expectation than companies in the Americas or Asia Pacific (ASPAC).
Auto industry assessments of levels of overcapacity have shifted for the worse • ASPAC companies are most likely to consider
that the industry has overcapacity, while companies in the Americas are least likely.
Cost saving is a rising concern • Innovation (in manufacturing processes and
materials technology) is more important than direct overhead cost reductions.
• The importance of low-cost country sourcing is falling.
More M&A and alliances are expected • High costs and declining economies
will drive restructuring.
• Vehicle makers and dealers expected to restructure most.
• Investment will grow more slowly – but innovation investment will be resilient.
Executive summary 5
2/ New markets
New-market growth expectations outside China have been rebalanced • Central and South America
expectations are resilient.
• Africa and the Middle East will also grow.
Chinese growth seen as significantly lower • Vehicle sales to grow more slowly
over five years.
• More than half of companies see overcapacity emerging in the near term.
• Export expectations are sharply reduced.
3/ Technology and innovation
Technology and innovation remain key industry trends • Fuel efficiency improvements,
alternative fuel technologies and environmental pressures are considered the three most influential trends.
• Cost concerns are greatest among suppliers.
Fuel efficiency and alternative propulsion will drive product innovation • Hybrid systems continue to be the most
important product innovations.
• Electric and battery technologies are growing in importance.
• Overall, there is increasing strategic focus on technology.
• ASPAC companies are most innovation-focused.
Consumer purchases to become more cost-driven • For the consumer fuel efficiency now
more important than product quality.
• Affordability is increasing in importance.
• Consumers to become more discriminating.
4/ Beyond crisis: challenges and opportunities
Opportunities to find growth remain • Potential for growth seen in alternative
fuels, fuel efficiency and emerging markets.
• ASPAC companies are more focused on environment-related opportunities.
• Only limited opportunities seen in relation to cost-cutting strategies.
External challenges dominate • Global economy and financing costs are
seen as the key challenges.
• Vehicle manufacturers most likely to see environmental pressure as a challenge.
6 KPMG Global Auto Executive Survey 2009
Introduction –Seldom has a year made such difference
Last year’s KPMG Global Auto Executive Survey reported on an industry that saw itself emerging from a long round of cost cutting and restructuring. It saw itself emerging into a world where overall growth seemed assured, and where both sales and profits would be higher for companies that were, in most cases, leaner and fitter.
In 2008, all that has changed. The momentum of optimism has been checked: companies are now confronted with a world gone into reverse, where growth is highly uncertain and where prices and financial conditions are highly volatile. This change is visible in many areas. It is visible in lower expectations for revenues and profitability, higher expectations of bankruptcy, and more pessimism on the speed at which the industry can adapt to challenging conditions. More companies expect overcapacity to emerge in key regions, and that sales and production growth will fall in emerging markets in particular. Investment is expected to grow at a slower pace.
Meanwhile, the market share winners of previous years are expected to continue to advance while the losers will do even worse, say companies. The strong will get stronger, and the weak weaker.
Yet what is also striking is that amid immediate concerns over downturn and volatility, the auto industry maintains a long-term focus on basic issues, and especially on technology, fuel efficiency and the environment. On a five-year horizon, say companies, these issues continue to dominate their thinking.
Times have grown much harder – but the fundamental drivers of automotive success have not greatly changed.
Oil prices and the KPMG Global Auto Executive Survey 7
Oil prices and the KPMG Global Auto Executive Survey – This year’s Global Auto Executive Survey took place against a background of financial instability and great volatility in oil prices.
The survey was conducted from the end of September 2008, and through the following month. During that period, the spot price of West Texas Intermediate (WTI) crude oil fell from US$96.29 a barrel (on September 29) to US$61.92 a barrel (on October 27). At the same time an unprecedented global financial crisis unfolded, and governments around the world committed large sums to bailing out banks and stimulating their faltering economies.
This was in stark contrast to the background of the previous four years of the survey, when prices rose consistently – the spot price of WTI rose from US$33.01 a barrel on January 1, 2004, to US$99.64 on January 1, 2008, spiking at US$141.06 a barrel on July 1, 2008. Growth was high in the Organisation for Economic Co-operation and Development (OECD) countries and at unprecedented levels in the four BRIC* emerging economies.
What does this background of instability and price fall mean for this year’s survey results – given that expectations built up over the previous four years were being challenged by very rapid changes in external conditions? It is clear from the results that most, if not all, companies answered the survey questions fully aware of the extent of the downturn:
they report revenues and profitability falling, overcapacity rising, and bankruptcy more likely. Perhaps more surprisingly, they also say that they expect the importance of hybrid and fuel-efficient vehicles to grow very strongly. We believe this reflects the fact that oil prices remain historically high. At the time of publication, the oil price was around US$50 a barrel – lower in inflation-adjusted terms than any of the previous three years. But this is markedly higher than the inflation-adjusted average over the past two decades, when from 1988 to 2007 oil averaged US$33.36 a barrel in inflation-adjusted terms (2007 dollars).
(Price sources: U.S. Energy Information Administration; inflationdata.com)
*Brazil, Russia, India and China
8 KPMG Global Auto Executive Survey 2009
1/ i i isisAuto-mak ng n cr
Global economy concerns rising
Product quality
The global economy
Reducing costs
New technologies
New products
Affordability
Environmental issues
Product/pricing incentives
Labor relations
The mood of the world’s auto industry has reversed: after the relative optimism of 2007 with its expectations of a gradual return to stability and prosperity, expectations in 2008 have changed for the worse.
How important is each of the following
of the auto industry?
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
issues to the current state
Key
No data for 2006 and 2007
96% 90%
94%
81% 87%
76%
86% 85%
89%
83% 82%
81%
79% 81%
73%
72%
63% 69%
52%
65% 72%
70%
59% 49%
52%
52%
40 50 60 70 80 90 100
% rating important 4-5 on a scale of 1-5, where 1 means “Not at all important” and 5 means “Extremely important”
Yet in retrospect, it is clear that some of the industry’s most fundamental concerns have been on a rising track for some time. When companies were asked what were the most important issues for the industry overall – the question that reveals the relative weight of long-term concerns – in 2008, the deterioration of the global economy rose to second place (from fourth place in 2007). While traditional long-term concerns hold their place in the rankings of overall issues (product quality remains the most cited issue, for example) companies have been consistently forecasting a deterioration of overall global growth for the last four years, with concerns about the global economy rising year on year from 2005.
However, the number of companies citing labor relations as important has fallen in 2008: just under half of companies rate labor relations as important in 2008, compared with 59 percent in 2007. The number of companies rating labor relations as unimportant has also risen sharply from 9 percent in 2007 to 16 percent in 2008. This is consistent with the deterioration of confidence in other areas in 2008: while last year companies remained concerned about labor shortages – especially in the fastest expanding markets – in 2008, they appear to expect their key labor markets to loosen.
1/ Auto-making in crisis 9
Profi
As financial costs rise and raw material 50
costs remain volatile, expectations that profitability over the next five years will also remain volatile have risen very sharply. An increase of expectations of ‘volatile 40
or unpredictable’ profits from 37 percent of respondents in 2007 to 46 percent of respondents in 2008 represents a sharp rise in uncertainty and one that is all the 30
more striking in that the automotive industry relies to an unusual degree on long-range forecasting. The minority of companies
20 predicting rising profits in 2007 (26 percent) has also fallen sharply in 2008, to only 15 percent. The great majority of companies (85 percent) think there will be either no 10 growth in profits, or that profits cannot be predicted over the coming five years. And almost a quarter (24 percent) think profits will actually decline. 0
38% 37%
46%
26%
23%
15%15% 16%
26%
19%
14%
24%
The profitability of the industry will be volatile and unpredictable
The profitability of the industry will generally rise
The profitability of the industry will basically be flat
The profitability of the industry will generally decline
lower and more volatile few years?
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
ts forecast to be Do you think the number of bankruptcies will increase, remain the same, or decrease in the next
Key
Supplileast profitable
80
Who will suffer most from the expected decline in profitability? Companies believe that the pain will be distributed approximately according to a respective 60
position in the automotive value chain: Tier 3 suppliers, where profitability is in any case lowest, will suffer most (only 36 percent of respondents see Tier 3 companies as 40
profitability leaders). This pattern is the same as 2007, with one very significant exception: the sharp decline in expectations for captive finance companies. Expectations of their 20
profitability have collapsed from 76 percent of respondents to only 54 percent, reflecting the liquidity squeeze and the
0 recent unprecedented rise in the cost of wholesale funding.
76%
54%
36%
45%
27%
49%
40%40%
50%50%
56%
manufacturer Captive finance companies
Dealers
next five years? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
2007 2008
Vehicle
*In previous years Tier 2 and 3 suppliers were combined in the questionnaire
Tier 2 suppliers Tier 3 suppliers* Tier 1 suppliers
Of the following types of automotive companies, which do you expect to be among the most profitable over the
Key
ers seen as
10 KPMG Global Auto Executive Survey 2009
0
20
40
60
80
100
70%
90%87%
73%
65%68%68%
62%59%
Healthcare benefit cost
Pension liabilityExcess debtNon-competitive cost structure
Declining revenue base
87%
1/ Auto-making in crisis 11
Asian finance companies may suffer
On a regional basis, companies are in broad agreement about the impact of what is expected to be a very difficult period for profitability – with one exception. Asia is significantly more pessimistic about the profit prospects for finance companies. As both consumers and financial institutions in Asia tend to have less debt – and thus, in principle, more borrowing capacity than their counterparts in Europe and the Americas – this pessimism is all the more striking, reflecting both the global nature of the contraction in demand and the narrowing of financing options.
80
60
40
20
0
44%
55%
47%
56%
41% 40% 45%
56%
49%
64%
48%
37%
33%
55% 52%
40%
45%
36%
Of the following types of automotive companies, which do you expect to be
next five years?
Source: KPMG Global Auto Executive Survey 2009
Americas
among the most profitable over the
Key
emA ASpAC
Vehicle Financial Tier 1 suppliers Tier 2 suppliers Dealers Tier 3 suppliers manufacturer services companies
100
12 KPMG Global Auto Executive Survey 2009
Companies say they expect that the rate of bankruptcies will increase. The deterioration in expectations is both very steep and 80
represents a reversal of trend. Only 12 months ago, companies reported increasing optimism with expectations of increased
60 bankruptcies falling year on year from 56 percent to 36 percent. In 2008, 77 percent of companies expected the rate to increase – one of the largest one-year deteriorations
40 in expectation in the survey. The number of companies expecting no change has fallen sharply, while the number expecting bankruptcies to fall has declined to a barely 20
significant 3 percent.
0
Revenue loss a key concern
Loss of revenues as demand growth slows 100
or goes into reverse has taken over as the most important driver of bankruptcy – cited by 90 percent of respondents, compared
80to 70 percent the previous year. However, it is striking that all the potential drivers of bankruptcy are cited more often in 2008 than in 2007 (multiple answers could be given), suggesting that companies believe that 60
legacy cost structures, indebtedness and social costs, including pensions and healthcare, are all exerting greater
40negative pressure in the deteriorating business environment.
20
0
31%
48%
20%
56%
36%
77%
10% 13%
3%
Increase Remain the same Decrease
few years?
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
Bankruptcies to rise Do you think the number of bankruptcies will increase, remain the same, or decrease in the next
Key
70%
90% 87%
73%
65% 68%68%
62% 59%
Healthcare benefit cost
Pension liabilityExcess debtNon-competitive cost structure
Declining revenue base
87%
of bankruptcy? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
2007 2008
Which of the following do you think are among the most important drivers
Key
1/ Auto-making in crisis 13
Tier 1 suppliers see most bankruptcies
Tier 1 suppliers are markedly the most likely to consider that bankruptcies will increase, with 87 percent forecasting an increase, against 75 percent of vehicle manufacturers (vehicle manufacturers are the only class of company where any respondents believe that bankruptcies may decrease. This may reflect their expectation of direct government support packages during 2009). No Tier 2 suppliers forecast a decrease in bankruptcies, but they are also most likely to see the bankruptcy rate as flat. There were no Tier 3 suppliers in the 2009 survey – see methodology note on page 3.
in the next few years?
Source: KPMG Global Auto Executive Survey 2009
Decrease
Do you think the number of bankruptcies will increase, remain the same, or decrease
Key
increase remain the same
87%
13%8%
17%
75%
33%
67%
OEMs Tier 1 supplier Tier 2 supplier
14 KPMG Global Auto Executive Survey 2009
Chinese and Indian brands to gain market share
On a regional basis, EMA companies are markedly more optimistic on market share expectation than companies in the Americas or ASPAC – and in particular, they are more optimistic on the prospects for European brands (more than half of EMA companies see market share increases for VW and BMW).
Market share expectations continue to shift in favor of emerging Asian and mature Japanese and Korean brands; U.S. brands are expected to perform worst. Year on year Chinese brands have moved from second to first place in market share expectations, and Indian brands from fourth to second place, relegating Toyota from top position to third. Expectations of Honda’s market share have grown, as have expectations for many European brands. Meanwhile, expectations for General Motors, Ford and Chrysler have declined further from an already low level, with 63 percent of respondents expecting Ford to lose market share, 66 percent for General Motors and 69 percent for Chrysler.
100
81%
12%
7%
78%
16%
6%
68%
22%
11%
67%
22%
12%
62%
28%
9%
60%
26%
13%
43%
43%
14%
40%
45%
16%
33%
39%
28%
33%
37%
30%
32%
51%
17%
20%
44%
35%
20%
32%
17%
53%
30%
15%
12%
66%
13%
24%
63%
10%
21%
69%
48%
For each of the following companies,
market share increase, remain the same, or decrease?
Source: KPMG Global Auto Executive Survey 2009
Decrease
over the next five years, will their
Key
increase remain the same
80
60
40
20
0
Chines
e br
ands
India
n br
ands
Toyo
ta
Hyund
ai/Kia
Honda
olksw
agen
Renau
lt Niss
an
BMW
Russia
n br
ands Fia
t
Mer
cede
s
Mits
ubish
i
Peuge
ot/C
itroe
n
Subar
u/Fu
ji
Gener
al M
otor
s Fo
rd
Chrys
ler
V
1/ Auto-making in crisis 15
Overcapacity to increase
Auto industry assessments of levels of overcapacity have also shifted, for the worse, reflecting the declining demand expectations. Overall, more companies believe that overcapacity is now an issue, and the proportion of respondents believing it to be in the range of 11-20 percent has risen markedly year on year, from 32 percent to 59 percent. This assessment is confirmed by partial production suspensions announced by a range of auto-makers during the two months following completion of this survey.
60 59%
the automotive industry today? If yes, how much?
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
Is there global overcapacity in
Key
48
36
24
12
0
None 1-10% 11-20% 21-30% 31-40% More than 40%
0%
6%
21%
44%
15%
5% 5%
30%
0% 0%
32%
24%
14%
20%
15%
3% 3%
Asian compani
100
Regional assessments of the level of overcapacity do not differ markedly,
80although ASPAC companies are most likely to consider that the industry has overcapacity, while companies in the Americas are least likely. Yet in all cases, 60 the proportion of companies seeing overcapacity is high – even in the Americas more than three quarters of companies see overcapacity. 40
20
0
77%
85% 86%
EMEAAmericas
automotive industry today? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
most overcapacity
ASPAC
Note: ‘Yes’ percentages represented
Is there global overcapacity in the es see
16 KPMG Global Auto Executive Survey 2009
Cost saving is innovation-focused
Amid declining revenues and falling profitability, companies will need to cut costs further. In 2008, companies were generally more likely to rate cost savings opportunities as important, compared to 2007. Respondents continue to see innovation (in manufacturing process and materials technology) as a more important cost-saving opportunity than direct overhead cost reductions. The one area of potential cost saving that has fallen –both in relative and absolute importance in respondents’ ratings – is low-cost country sourcing, reflecting the widespread belief that the direct cost advantage of low-cost country sourcing has largely been captured, and that future savings will be found in process and productivity improvements.
rate their opportunity for future cost
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
For auto manufacturers and suppliers,
savings in the following areas
Key
Manufacturing process and technology innovations
(including plant flexibility)
Low-cost country sourcing
Product materials innovation
Overhead cost reduction including shared services
Healthcare, benefits and pension costs
Direct labor
Computer modeling and simulation in design
Local regional tax incentives
Restructuring
Supply chain management
No data for 2006 and 2007
No data for 2006 and 2007
16%
67% 66%
31%
48%
58%
59% 65%
61%
67% 57%
61%
50% 46%
36%
28% 46%
34%
29% 46%
32%
16%
38%
43% 43%
26%
70%
10 20 30 40 50 60 70
1/ Auto-making in crisis 17
Suppliers see most cost-saving opportunities
Tier 2 suppliers have higher expectations of finding cost savings in almost all areas except social costs and supply chain management. In particular, they see more savings potential in restructuring – reflecting the likely productivity and profitability gains in what is the most fragmented segment of the automotive supply chain.
100
cost-savings in the following areas
Source: KPMG Global Auto Executive Survey 2009
For auto manufacturers and suppliers, rate their opportunity for future
Key
oems tier 1 supplier tier 2 supplier
0
90
80
70
60
50
40
30
20
10
68%69%
77%
65%66% 70%
59%57%
67%
55%
62%
52% 49%49%
56%
43%
49%
63%
43%44%44%
32%
27%
41%
28%29%30%
25%
30% 27%
Man
ufac
turin
g pr
oces
s
and
tech
nolog
y inn
ovat
ions
Produ
ct m
ater
ials i
nnov
ation
Low
cost
coun
try so
urcin
g
Supply
chain
man
agem
ent
Overh
ead
cost
redu
ction
includ
ing sh
ared
serv
ices
Restru
ctur
ing
Compu
ter m
odell
ing
and
simula
tion
in de
sign
Loca
l reg
ional
incen
tives
Direct
labo
r
Health
care
, ben
efits
and
pens
ion co
sts
18 KPMG Global Auto Executive Survey 2009
Manufacturers and dealers face consolidation
Vehicle manufacturers and dealers will face consolidations in the next five years, say companies. The level of expectation of mergers and acquisitions (M&A) and alliances over the coming five years is an important indicator of the impact of operating conditions, as well as of the level of competitiveness among companies: both factors are likely to drive restructuring. Expectations of M&A and alliances have been on a rising track since 2006 for all segments of the industry except vehicle manufacturers. In 2008, companies expect such restructuring to increase among vehicle manufacturers, and they expect all M&A and alliance activity to rise, with the biggest rises among vehicle manufacturers (from 47 percent of respondents to 71 percent) and dealers (from 49 percent of respondents to 60 percent).
This result echoes the responses given when companies were asked when they thought restructuring among U.S. vehicle manufacturers would be largely completed.* In this year’s survey, it was clear that expectations of restructuring for better profitability had been deferred, with 90 percent of respondents expecting the cycle of restructuring to continue to 2010 or beyond, compared to 73 percent in 2007.
*Questions asked of U.S. companies only.
80
64
48
32
16
0
59%
72% 71%
41%
49%
60%61%
64%
52%
43%
59%
47%
71%
Dealers
For the following type of automotive
remain the same, or decrease over the next five years?
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
Tier 2
Tier 3
Vehicle manufacturer Tier 2 suppliers Tier 1 suppliers
companies, do you expect alliances, mergers and acquisitions to increase,
Key
1/ Auto-making in crisis 19
M&A driven by economic downturn
In 2007, companies were likely to see restructuring driven by growth opportunities; in 2008, the primary drivers of M&A and alliances were more likely to be costs, the risk of bankruptcy and rationalization in the face of a declining economy. The perceived importance of access to new markets has fallen, while the potential for product synergies and lowering raw material costs has risen.
The importance of a declining economy continues to rise as a restructuring driver (as it has consistently over the last three years), and the risk of bankruptcy is now seen as significant by 73 percent of respondents, compared with 55 percent and 33 percent in the two previous years respectively. The number of respondents citing a growing economy as a driver has fallen from 66 percent in 2007 but still stands at 61 percent – a reminder that while recession grips the OECD economies, there remains very significant growth in the four BRIC economies.
and acquisitions in the industry? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
2006 2007 2008
In general, which of the following do you think will be among the most important drivers of alliances, mergers
Key
Access to new markets and customers
Potential for product synergies
Access to new technology
Raw materials cost pressures
Expanding economy
Direct labor cost pressures
Declining economy
Pension and healthcare costs
Risk of bankruptcy
83%
44%
75% 85%
49%
80%
67% 74%
35%
66% 61%
23%
53% 65%
31%
58% 68%
23%
55% 33%
55% 73%
33%
No data for 2006 and 2007
No data for 2006
95%
20 32.5 45 57.5 70 82.5 95
20 KPMG Global Auto Executive Survey 2009
U.S. restructuring cyclemay yet succeed
60
30%
58%
10%
43%
50%
6%
Disagree Neutral Agree
Will restructuring programs in the
more efficient and competitive?*
Note: this question was asked before October 31 2008 and does not take
and discussions.
Source: KPMG Global Auto Executive Survey 2009
2007 2008
U.S. enable U.S. OEMs to be
into account any subsequently announced restructuring programs
Key
48 * Question asked of U.S. companies only.
36
24
12
0
Despite the cash crisis that has engulfed U.S. vehicle makers, many respondents continue to believe that the U.S. makers will restructure and become more profitable. A large proportion of respondents – 50 percent – continue to agree that the current restructuring plans of U.S. OEMs will be successful. This level represents a somewhat more pessimistic result than in 2007, when 58 percent agreed that restructuring will be successful, although the decline must be set against a background of crisis among the U.S. major manufacturers which has greatly increased uncertainty over their long-term business viability, as well as over the details of their short-term restructuring programs.
The number of respondents who are neutral on the success or failure of restructuring has greatly increased – from 30 percent to
43 percent – but the number thinking that restructuring will fail has actually fallen marginally, from 10 percent to 6 percent. When asked when restructuring will be completed, the overall results show a tendency to defer expectations of completion, although the number expecting completion by 2010 has risen from 40 percent to 47 percent.
Multiple responses allowed
1/ Auto-making in crisis 21
Investment growth to fall
Industry investment expectations have fallen across the board in line with other indicators of deterioration, although more than half of companies still forecast some investment growth in all areas. But there is a clear division between the areas where investment expectations are close to those of 2007, and areas where investment expectations have fallen more sharply. Companies expect innovation investment to be resilient: 91 percent of respondents see increasing investment in new models (against 94 percent in 2007), and 92 percent see increasing investment in new technology (against 93 percent in 2007). Expectations of restructuring investment are also roughly stable. However, expectations of investment increases in marketing, new plants and logistics have all fallen significantly.
New models/products
New technologies
Marketing and advertising
New plants
Logistics/distribution
Mergers and acquisitions
Vertical integration
Respondents from companies in all segments and regions of the industry overwhelmingly believe that Asia will build the most manufacturing capacity in the next five years (84 percent of respondents). Asian companies themselves are significantly more optimistic than others on the likelihood of increasing investment in almost all potential areas of investment. The one exception is expectations of rising investment in new technologies – although even there, the expectation is high at 90 percent of Asian respondents – and the difference between Asia and other regions is marginal.
Do you expect manufacturers to increase their investment over the next two years in the following areas? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
2007 2008
Key
92%
94% 91%
93%
55%
72% 52%
72%
60% 69%
66% 67%
52% 51%
40 50 60 70 80 90 100
22 KPMG Global Auto Executive Survey 2009
2/ New markets – l i i i
i i i isifi i lli i
l li
l i li l l fi ial isis i i lt i i l il i
i i ill markets of today and the potential global exporters of tomorrow.
l islowing in new markets too. Compared with l li ill l
i lmore overcapacity emerging. The expectations
iis moderating very significantly.
In a wor d now dom nated by mpend ng recess on n the OECD – together w th r ng nanc ng costs; fa ng conf dence; and the
rea threat of bankruptcy for more than one of the estab shed auto-makers – new markets offer one area of conso at on. A though the mpact of the g oba nanc cr s be ng fen every economy n the wor d, Braz , Russ a, Ind a and Ch na st represent the growth
Neverthe ess, compan es see momentum
ast year, they be eve there w be ess product on growth, ess export growth, and
are for cont nued growth, but the forecast pace
4%
2/ New markets 23
More balanced growth in new markets
60
three years?
Source: KPMG Global Auto Executive Survey 2009
Which one of the following markets or regions, other than China and India, will have the greatest growth of consumer demand in the next
Companies believe that even when China and India are discounted, emerging markets will still grow faster than any other region. Expectations of growth over the next three 48 years in markets outside China and India are globally well-distributed. Expectations are strongest for Central and South America, reflecting the relative resilience of Brazilian 36
demand as economies elsewhere turn down. Nevertheless, a significant minority of respondents also expect strong growth in the Middle East and Africa, and again in 24
Russia and Ukraine. No respondents saw any other region (such as South East Asia, or any developed region) assuming growth leadership. 12
0
14%
6%
29%
43%
14%
Russia Other Central and Eastern Europe Middle East south-east South America and Africa Asian country
China demand growth to slow
Expectations of a rise in demand for vehicles in China have been revised downwards. A year ago, most respondents forecast vehicle demand in China at 12-16 million vehicles a year in five years time (59 percent of companies). Today, only 30 percent of companies believe that this figure will be achieved. The number of respondents seeing demand at only 10-12 million units has risen from 13 percent to 30 percent, while the proportion of those forecasting even less – demand of less than 10 million units – has risen from 4 percent to 10 percent. There has been a small rise at the higher end of expectations, but it is far outweighed by the downward revision of most respondents. China is growing, but the growth rate is moderating and that will be reflected in vehicle sales, say companies.
annual volume of units sold in China in five years?
Source: KPMG Global Auto Executive Survey 2009
Key
10-12 million 12-14 million 14-16 million 16-18 million 18+ million
In your opinion, what will be the
less than 10 million
10%
30%
10%
20%
10%
20% 13%
15%
9%
25%
34%
2007 2008
24 KPMG Global Auto Executive Survey 2009
Overcapacity already emerging in China
There is a near-term problem of auto-making overcapacity in China, say the majority of companies. The proportion of companies forecasting the emergence of overcapacity as an issue within the next five years has risen from 45 percent to 63 percent -- and more than a quarter of companies now see the issue as immediate (within the next two years). With Chinese job losses mounting and domestic demand likely to fall, companies are increasingly saying that the Chinese auto sector is now overbuilt. A remarkable 81 percent of all respondents see overcapacity emerging within 10 years, and 99 percent believe the problem will eventually emerge – the clearest consensus expressed in the survey.
become a serious problem?
Source: KPMG Global Auto Executive Survey 2009
1-2 years 3-5 years 6-10 years 10+ years
When will overcapacity in China
Key
9%
27%
36%
18%
18%
36%
20%
35%
2007 2008
Note: Due to the rounding of percentages, the chart adds up to 99 percent not 100 percent.
2007
31%
42%
26%
Does not add to 100% due to roundingQuestion phraseology varied between 2007 and 2008. In the 2007 survey the U.S. market was referred to rather than “other markets”
1%
2008
18%
46%
36%
Does not add to 100% due to roundingQuestion phraseology varied between 2007 and 2008. In the 2007 survey the U.S. market was referred to rather than “other markets”
2/ New markets 25
Chinese export momentum falling Source:
KPMG Global Auto Executive Survey 2008
1-2 years 3-5 years 6-10 years 10+ years
When will China sell a significant number of cars in the U.S. market?
Key
China’s momentum as a global exporter is 1% slowing. Consistent with lower expectations for production and emerging overcapacity, companies are also growing more pessimistic about China’s sales overseas. Asked when China would sell one million or more vehicles in other markets (in 2007 companies were asked when China would achieve one million plus sales in the U.S. alone), expectations of that level of sales being achieved within five years have fallen sharply from 32 percent to 18 percent. This fall is even more striking when the larger arena of sales in the 2008 question is taken into account.
31%
42%
26%
In 2008, respondents were asked for the 2007 first time, questions about the prospects for automotive industry growth in India, Brazil and Russia. Although there are no previous survey results to allow comparative findings for these markets, expectations appear to be guardedly optimistic – especially for India and Brazil. When asked to forecast India’s achievement of one million or more vehicles manufactured annually outside India, a high proportion (58 percent) thought that figure would be achieved within three to 10 years.
In Brazil’s case, 55 percent of respondents thought that market growth over the next two years would be strong – no respondents foresaw contraction. Expectations for Russia were somewhat more cautious. However, in contrast to the results for China, three quarters of respondents said that overcapacity would not emerge in Russia for at least six years, and the remaining 25 percent considered that it would be 10 years or more before Russia’s automotive capacity would be fully built up.
18%
46%
36%
other markets?
Source: KPMG Global Auto Executive Survey 2009
3-5 years 6-10 years 10+ years
When will China sell a significant (ie, 1,000,000) number of cars in
Key
2008
26 KPMG Global Auto Executive Survey 2009
3/ Technology and innovation – Gi l l i
l ii i i l l fi ial isis
l l i i
l i isialready visible before the survey began – i i iki i in firmly focused on technology and innovation.
ven that the G oba Auto Execut ve Survey 2009 took p ace aga nst a background of mpend ng recess on, g oba nanc crand the rea threat of bankruptcy for more than one ead ng auto-maker – and g ven that most of the e ements of th s cr s were
t rema ns str ng that auto compan es rema
3/ Technology and innovation 27
Fuel
29%
23% 22%
12%
10%
7% 6%
4% 3%3%
12%
the automotive industry today? (Multiple responses allowed)
Source: KPMG Global Auto Executive Survey 2009
lleading trend
What are the most important trends in techno ogy the
30
25
20
15
10
5
0
Switc
hing
to al
tern
ative
fuel
vehic
les
Produ
ction
of e
nviro
nmen
t-frie
ndly
cars
Use o
f lat
est t
echn
ology
(eg,
fuel
cell t
echn
ology
Reduc
ing co
sts
Man
ufac
turin
g sm
all ca
rs,
Dealin
g w
ith e
cono
mic
crisi
s
Ensur
ing sa
fety
Rising
fuel
cost
s
Compe
tition
Other
s: glo
baliz
ation
, nee
d fo
r
Man
ufac
turin
g fu
el-ef
ficien
t car
s
prop
ulsion
, hyb
rid sy
stem
s, et
c)
effic
ient v
ehicl
es, M
&A, etc
In the formation of their strategies, this year’s survey shows clearly that auto-makers are looking beyond the current economic and financial turmoil. Amid global conditions that amount to an economic and industry crisis, the world’s auto-makers still consider innovation and technology to be the most important trend over the next five years. Fuel efficiency improvements, alternative fuel technologies and environmental pressures are considered the three most influential trends.
Costs, economic crisis and competition all attract a much lower proportion of responses. (Note that rising fuel costs are considered important by only 3 percent of respondents, compared to 29 percent of respondents who consider the manufacture of fuel-efficient cars the most significant trend. This apparent contradiction must be interpreted in the light of a background of falling oil prices during late 2008, leaving prices at less than half of their peak in mid-2008, but still at an historic high compared to the average of the last two decades.)
28 KPMG Global Auto Executive Survey 2009
Environment a priority for vehicle makers
On a company basis, the view of the relative importance of trends reveals important priority variations according to business segment. In particular, vehicle manufacturers are much more likely to see environmental issues as significant than are suppliers. This is confirmation of views expressed in KPMG firms’ interviews with auto companies over the last year.
Suppliers typically say that environmental concerns are issues for their customers, and only indirectly issues for suppliers themselves; and vehicle manufacturers tend to say that environmental concerns are transmitted directly to them by customers and by regulators. However, suppliers are more concerned than auto-makers with reducing costs, as cost pressure is typically transmitted to suppliers by their customers. Cost concerns increase the lower down the value chain the company sits.
40
27%
35%
19%19% 19%
12% 13%
8%
10%
12%
9%
4%
9%
4% 4% 4% 4% 4%
0%
3%
15%15%
the automotive industry today?
Source: KPMG Global Auto Executive Survey 2009
30% 29%
30%
13%
9%
5%
3% 3%
1%
3%
8%
What are the most important trends in
Key
oems tier 1 supplier tier 2 supplier
35
30
25
20
15
10
5
0
Man
ufac
turin
g
fuel-
effic
ient c
ars
Switc
hing
to al
tern
ative
fuel
Produ
ction
of
envir
onm
ent-f
riend
ly ca
rs
Use o
f lat
est t
echn
ology
Reduc
ing co
sts
Man
ufac
turin
g sm
all ca
rs
Dealin
g w
ith e
cono
mic
crisi
s
Ensur
ing sa
fety
Rising
fuel
cost
s
Compe
tition
Other
s
3/ Technology and innovation 29
and 4/5 on a scale 1 means “not at all important” and 5 means “extremely important” for 2007
30 KPMG Global Auto Executive Survey 2009
Fuel technology the key product innovation
Auto companies’ long-term focus on fuel efficiency and alternative propulsion is also evident when companies are asked about the relative importance of individual product innovations. In 2008, hybrid systems continue to be considered the most important industry innovations, and with even greater conviction than in 2007 – 91 percent of respondents consider hybrids important in 2008, up from 79 percent in 2007. Sales expectations for hybrid vehicles have also risen sharply: in 2007, only 27 percent of companies thought that hybrid sales would exceed 800,000 units in the year ahead; in 2008, 80 percent of respondents think that sales will exceed 1.5 million units in the year ahead.
100
90
80
70
60
50
40
30
20
10
0
Electric and battery technology has also risen sharply in companies’ ratings of importance, from 60 percent to 82 percent. Overall, the proportion of respondents rating individual technologies as ‘unimportant’ has tended to fall slightly across the board, indicating an increasing focus on technology by all auto companies.
79%
91%
60%
82% 78%
76%
67%
61%
51% 55% 56%
53%
41%
51% 50% 49%
31%
41%
For the following automotive product
the industry over the next five years
Source: KPMG Global Auto Executive Survey 2009
2007 2008
innovations, rate the importance to
Key
Hybrid
syst
ems
Electri
c and
bat
tery
tech
nolog
y
Fuel
cell t
echn
ology
Advan
ced
mat
erial
s
Safet
y inn
ovat
ions
Ethan
ol an
d ot
her
alter
nativ
es
Advan
ced
desig
ns
Diesel
elem
atics
or
pers
onal
assis
tanc
ee)itsopmocn Tobrac,ge(
% citing important on a scale listing important, neutral, and unimportant for 2008
3/ Technology and innovation 31
Asian companies most innovation-focused
100
90
80
70
60
50
40
30
20
10
0
93%
86%
93%
75%
86% 83%
78%
70%
82%
57%
49%
82%
55%
50%
60%
52%
45%
53%
42% 46%
66%
52%
41%
58%
34%34%
58%
For the following automotive product
the industry over the next five years.
Source: KPMG Global Auto Executive Survey 2009
Americas
innovations, rate the importance to
Key
emA ASpAC
Hybrid
syst
ems
Electri
c and
bat
tery
Fuel-
cell t
echn
ology
Safet
y inn
ovat
ions
Advan
ced
mat
erial
s
Ethan
ol an
d ot
her a
ltern
ative
s
Advan
ced
desig
ns
Diesel
elem
atics
or p
erso
nal
tech
nolog
y
assis
tanc
e se
rvice
s
T
Regional ratings of the relative importance of product innovations produce very significant results: with a large degree of consistency, ASPAC companies are more innovation-focused by outlook than companies in the Americas, and EMA companies are less innovation-focused (in terms of their tendency to rate technology issues as important). With the single exception of their rating of electric technologies, ASPAC companies tend to rate all product innovations as important in more cases than do companies in the Americas or in EMA. Also with two exceptions (electric technologies and advanced designs), EMA companies tend to rate product innovations as important in fewer cases. A comparable pattern was evident when companies were asked about the impact of alternative energy on their M&A and alliance strategies: ASPAC companies were more likely to report more joint ventures, and less likely to report ‘no impact’ – although in this case, EMA companies were also more likely to report a strategic response than companies in the Americas.
% citing important on a scale listing important, neutral, and unimportant for 2008 and 4/5 on a scale 1 means “not at all important” and 5 means “extremely important” for 2007
32 KPMG Global Auto Executive Survey 2009
Cost will determine purchase decisions
Expectations of the drivers of consumer purchases have changed significantly: as economies turn down, companies now expect cost issues to take over from quality as the leading determinants of consumer behavior over the coming five years. Although quality is cited by almost the same high proportion of respondents as in 2007 (85 percent this year, against 86 percent last year), companies now think that fuel efficiency is more important. Fuel efficiency is now rated as the most important issue by a very high 96 percent of respondents. Alternative fuel is rated highly at almost last year’s level, while affordability rises in significance from 69 percent to 83 percent.
100
Other cost issues come lower in the ranking – sales incentives for example is last – although this should not be interpreted as an insignificant result at 59 percent of respondents, having risen significantly from 45 percent of respondents in 2007. The tendency is for all factors to receive higher ratings from respondents in 2008, indicating that companies expect to see more critical and discriminating customers in the next five years.
be to consumer purchase decisions?
Source: KPMG Global Auto Executive Survey 2009
2007 2008
Over the next five years, how important will the following issues
Key
90
80
70
60
50
40
30
20
10
84%
96%
69%
83% 86% 85%
70%
75%
65%
70%
50%
72%
62%
69%
54%
63%
49%
59%
45%
59%
Fuel
effic
iency
Afford
abilit
y
Quality
Safet
y
Altern
ative
fuel
Enviro
nmen
tal f
riend
lines
s
Vehic
le st
yling
and
desig
n
New te
chno
logies
Servic
eabil
ity
Sales i
ncen
tives
,
such
as 0
% fi
nanc
ing
0
3/ Technology and innovation 33
34 KPMG Global Auto Executive Survey 2009
4/ isichallenges and opportunities – The automotive industry is by nature
l i il i ii l i i l
i ll i i
i l l ipace of change has accelerated in recent years. The Global Auto Executive Survey 2009
l i i iiti ly i l
l i li i li
ll i iemerging markets.
Beyond cr s:
forward- ook ng: wh e the pace of nnovat on mp ementat on s fast, the cyc e of much automot ve research and deve opment can be ong. The matur ng of emerg ng markets s a so a ong-term ssue, even though the
revea s that automot ve compan es cont nue to see opportun es not on n techno ogy, but a so n the app cat on of techno ogy and the management of consumer expectat ons – as we as n the cont nued growth of
4/ Beyond crisis: challenges and opportunities 35
New markets and fuel technologies the key opportunities Companies remain focused on growth. ASPAC companies are much more likely to When asked about the opportunities for the cite opportunities in alternative fuels and automotive industry in the next five years, environment-friendly cars. This result is companies point to what they consider to confirmed when companies were asked about be businesses and markets that have been automotive trends: again ASPAC companies insufficiently explored by the automotive were much more likely to cite the production industry. Alternative fuels and fuel efficiency of environment-friendly cars as a significant figure in the top three opportunities; emerging trend than were other companies. markets rate as second in importance, reflecting the fact that despite declining The conclusion has to be that in the global expectations of sales and production growth Auto Executive Study 2009, ASPAC revealed in responses to earlier questions, companies are more focused than others these are still growth markets and are likely on the environment as an opportunity. to remain so for the foreseeable future. It is also striking that cost control is rated the least significant of opportunities – in sharp contrast to surveys in previous years, the expectation of opportunity has shifted away from costs and towards new products and new markets. On a regional basis, the results point to one important differential in emphasis.
0
25
20
15
10
5
21%
19%
17% 16%
13% 12%
6% 5%
11%
What are the chief opportunities for
the next few years?
Source: KPMG Global Auto Executive Survey 2009
the automotive industry now and for
Altern
ative
fuel
cars
Explor
ation
of e
mer
ging
mar
kets
Fuel-
effic
ient c
ars
Develo
ping
new
tech
nolog
y
Enviro
nmen
t-frie
ndly
cars
Low
-pric
ed ca
rs
Mee
ting
cust
omer
dem
and
Cost c
ontro
l
Other
s: re
stru
ctur
ing,
impr
oved
des
igns,
etc
36 KPMG Global Auto Executive Survey 2009
0
25
20
15
10
5
20%
18%
14% 13%
11%
7% 7% 6%
5% 4%
2%
6%
five years?
Source: KPMG Global Auto Executive Survey 2009
iare key challenges
What are the most important challenges facing the automotive industry over the next two to
Economy and env ronment
Global
econ
omy c
risis
Enviro
nmen
tal c
once
rns
Finan
cing
cost
Use o
f alte
rnat
ive fu
els
Compe
tition
Overc
apac
ity
echn
ologic
al inn
ovat
ion
Intro
duct
ion o
f new
low-co
st ve
hicles
Incr
easin
g w
ages
Cost r
educ
tion
Low
-cost
coun
try so
urcin
g
Other
s: re
main
ing p
rofit
able,
acce
ss to
inve
stm
ent c
apita
l, etc
T
Companies are highly concerned about demand and financial costs. When asked about challenges rather than opportunities, respondents give a high rating to the global economy and financing costs. However it is significant that environmental concerns have not been eclipsed by the global financial crisis – the environment still ranks above financing or technology issues. Also striking is the very low proportion of respondents rating low-cost country sourcing as a significant challenge, suggesting that most companies consider that the challenges of capturing potential savings in emerging economies are now well understood.
4/ Beyond crisis: challenges and opportunities 37
38%
33%
31%
22% 21%
30%
8%
19%
14% 15% 15%
7%
15%
4%
9%
7%
4%
9%
4%
8%
2%
8% 8%
4% 4%
12%
5%
3% 4%
0% 0%
3%
6% 7%
4%
years?
Source: KPMG Global Auto Executive Survey 2009
Vehicle makers see the environment as the key challenge
31%
19%
28%
12% 13%
12% 13%
What are the most important challenges facing the automotive industry over the next two to five
Key
oems tier 1 supplier tier 2 supplier
40
35
30
25
20
15
10
5
0
Rising
raw m
ateria
l cos
ts
Rising
cost
of fu
el/en
ergy
Global
econ
omic
crisis
Enviro
nmen
tal co
ncer
ns
Finan
cing c
osts
Use of
alte
rnate
fuels
Compe
tition
Overca
pacit
y
echn
ologic
al inn
ovati
on
Intro
ducti
on of
new lo
w-cost
vehic
les
Incre
asing
wag
es
Cost r
educ
tion
Low-co
st co
untry
sour
cing
Other
s
T
Responses by business segment to the question of challenges reveal significant differentials. Vehicle manufacturers are far more likely than suppliers to consider that environmental challenges are significant. Tier 1 suppliers are far more likely than any other companies to be concerned with a challenge from competitors; Tier 2 suppliers, which tend to operate the most labor-intensive of automotive operations, are more likely than any other companies to be concerned with labor costs.
38 KPMG Global Auto Executive Survey 2009
Success comes from good management
In such difficult times, what is the key success factor in the automotive industry? Companies are most likely to give answers that stress management rather than technology. They are most likely to say that success comes from the leveraging of technology – not the raw development of new technologies, but the application of technology to product and processes. The second most cited factor is meeting customer expectations. Consistent with results elsewhere in the survey, the maintenance of brand image and the manufacturing of safe vehicles is rated as critical by very few companies (3 percent in each case), suggesting that the great majority of auto companies now feel that they have reached a plateau of achievement in building their brands and their reputations for safety.
0
30
25
20
15
10
5
17% 16%
14% 13% 13%
8% 8% 7%
6% 6%
3% 3%
26%
What are the critical success factors in today’s automotive environment?
Source: KPMG Global Auto Executive Survey 2009
Leve
ragin
g te
chno
logy
Mee
ting
cust
omer
exp
ecta
tions
Afford
able/
cost
-effi
cient
cars
Cost c
ontro
l
Man
ufac
turin
g hig
h-
Flexib
ility i
n ad
aptin
g to
chan
ge
Main
taini
ng liq
uidity
/pro
fitab
ility
Appro
priat
e pr
oduc
t pric
ing
Fuel-
effic
ient c
ars
Stayin
g co
mpe
titive
Brand
imag
e
quali
ty p
rodu
cts
Man
ufac
turin
g sa
fe ve
hicles
mult
i-fun
ction
mod
els, c
onve
nienc
e
Other
s, eg
man
ufac
ture
of
envir
onm
ent-f
riend
ly ca
rs,
4/ Beyond crisis: challenges and opportunities 39
Brand no longer guarantees success
On a regional basis, there is a broad measure of agreement on many, but not all, success factors. Competitiveness and affordability of products is more important to EMA companies. Companies in the Americas are more concerned than others about profitability and pricing – reflecting their earlier entry into recessionary conditions. What is perhaps most interesting, is that there are two potential success factors – both traditional areas of automotive business concern – where there is a striking measure of agreement (in terms of the small number of companies that consider them critical) that these are no longer prime concerns. Neither brand image nor manufacturing safe vehicles is cited as being key by more than 5 percent of companies in any region, and brand image attracts no citations at all in the Americas. Almost all companies now consider that technology, pricing and – to some extent costs – are the key success factors for the future.
40
What are the critical success factors in today’s automotive environment?
Source: KPMG Global Auto Executive Survey 2009
Americas
Key
emA ASpAC
35
30
25
20
15
10
5
0
8%
21% 20%
19%
13%
16%
7%
22%
11%
14% 13%13%
14% 15%
9%
12%
9%
6%
2%
12%
5%
14%
4% 5%
8%
6%
4% 3%
10%
2%
5% 4%
2%
0%
3% 4%
24%
19%
38%
Mee
ting
cust
omer
exp
ecta
tions
Afford
able/
cost
-effi
cient
cars
Cost c
ontro
l
Man
ufac
turin
g hig
h-
Leve
ragin
g te
chno
logy
Flexib
ility i
n ad
aptin
g to
chan
ge
Main
taini
ng liq
uidity
/pro
fitab
ility
Appro
priat
e pr
oduc
t pric
ing
Fuel-
effic
ient c
ars
Stayin
g co
mpe
titive
Brand
imag
e
quali
ty p
rodu
cts
Man
ufac
turin
g sa
fe ve
hicles
Other
s
Conclusion – The results of the KPMG Global Auto Executive Survey 2009 highlight the i l l
i i
40 KPMG Global Auto Executive Survey 2009
i i i ii i
i ii i i l
very vulnerable to the downturn. But at the i i l
i i li irl ili
l i ill lii
i i i
i l iti in new technologies – particularly alternative
l l ici l i is l i ll i il i
i l i lly increased their sales expectations for hybrid
l i lsi icl lt that reflects the fact that oil prices remain hi i ll i
i i i l l iisi isi
i ll ill i i isi itithe long-term concerns of automotive
i i iki l ll i l i l in
an era of gradual but inexorable shift away il l
i ii ll li ly
to be the industry leaders of the future.
down sharply.
them, a return to intensive restructuring.
means that process innovation will have to intensify.
discriminating, and more concerned with total cost of ownership.
mpact of the g oba downturn on the automot ve ndustry.
The downsh ft n expectat ons s not conf ned to the mature automot ve econom es of the OECD. Expectat ons for growth n Ch na and Ind a have a so proved
same t me, expectat ons for Centra and South Amer ca, and for the M dd e East and Afr ca, have proved fa y res ent. In the onger term, compan es st be eve that emerg ng markets represent an area of cont nu ng opportun ty.
Compan es a so see great opportun es
fue and fue eff ency techno og es. It remarkab e that desp te the fa n o pr ces dur ng ate 2008, compan es have actua
and a ternat ve propu on veh es – a resu
stor ca y h gh.
The automot ve ndustry s c ear y fac ng an unprecedented cr s – a cr s that compan es fu y expect w reshape the ndustry. But even am d cr s cond ons,
compan es rema n str ng y stab e: deve op ng and everag ng techno ogy
from o dependence. One of the essons of the 2009 survey s that compan es that manage that sh ft successfu y are ke
• Sales and profitability expectations are
• More bankruptcies are expected, and with
• Costs will have to be cut, which in turn
• Customers will become more
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KPMG’s Global Automotive contacts
Gl l i iKPMG in Germany
lTel: +49 89 9282 1355
Gl l i iKPMG in Germany [email protected] Tel: +49 89 9282 1147
Fiona Sheridan Gl l i iManager Automotive KPMG in the U.K. [email protected] Tel: +44 20 7311 8507
i ivi l i l i i ly i i
i i i i i l i i i i l i i
1848
KPMG’s Regional Automotive contacts
Automotive – Europe KPMG in Germany [email protected]
l
ii
[email protected] Tel: +1 313 230 3460
Andrew Thomson i i ific
i i
l ( )
Uwe Achterholt oba Cha r, Automot ve
uachterho [email protected]
Roland Schmid oba Execut ve, Automot ve
oba Sen or Market ng
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Publication date: December 2008
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