KPMG’s Global Auto Executive Survey 2010
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KPMG’s Global Auto Executive Survey 2010


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KPMG’s Global Auto Executive Survey
2010 was conducted at the end of a historic
year for the auto business. The intensity of
the crisis that engulfed the entire industry
can hardly be underestimated.



Published by
Published 07 June 2011
Reads 127
Language English
Document size 2 MB
A u t o m o t i v e
KPMG’s Global Auto Executive Survey 2010 Industry Concerns and Expectations to 2014
k p m g i n t e r n A t i o n A l
Chapter 1 Survey methodology 2 Executive summary 3 Introduction 4 The growth prospect  Executive view: volume automaker – Europe  Overcapacity is now critical  Emerging markets are becoming overbuilt 5 The performance angle  Executive view: mid-size automaker – US  No easy cost savings expected  Capital costs to remain high  M&A set to grow  Debt and technology needs will drive M&A 6 Product innovation and consumer change  Fuel efficiency and environment top of consumer concerns  Low-cost producers to win most market share  Hybrid technology rated clear leader  Executive view: large Tier 1 supplier – US  R&D will win most investment 7 Investing in new markets  Executive view: diversified supplier – emerging market  BRIC sales forecasts continue to grow  Smaller emerging markets to gain
Page 2 3 4 6 8 9 11 12 14 15 17 18 20 22 24 26 28 30 31 34 36 37 40
Dieter Becker Global Chair, Automotive KPMG ELLP
KPMG’s Global Auto Executive SurveyAnd there are huge technology challenges 2010 was conducted at the end of a historicto be met. Last year companies told year for the auto business. The intensity ofus that fuel efficiency and emissions the crisis that engulfed the entire industryimprovements were top of their agenda. can hardly be underestimated.year they are still top of their agenda.  This Last year we surveyed an industry that Meanwhile, companies face the challenge had been plunged, very suddenly, into of financing the cycle of innovation – and total uncertainty. As one of the large let us not forget that we are still in the automakers interviewed as part of this middle of a rapid innovation cycle – while year’s report said, “a year ago we were consumers feel they are poorer than in the middle of nowhere … anything before, and less inclined to spend. That, was possible.” say our respondents, means that companies are likely to have to compete on technology This crisis was in part a consequence and on cost. That is a tall order. of success. Auto products are better than they have ever been: with today’s Meeting that challenge inevitably means high levels of reliability and longevity, more change – more change in the structure many customers can defer the purchase and in the practices of the auto industry. of a new vehicle. So when confidence If anything is clear from what respondents collapsed on a global scale at the end are saying to us today, it is that change has of 2008, that is exactly what customers only just begun. did. Sales plummeted in almost every market, while financial conditions became intolerable even for companies with moderate levels of indebtedness. The destruction of large segments of the world’s auto industry – and other industries too – became a real possibility. As our survey records, the industry is already on the way out of that period of crisis. Confidence is higher, while growth and new investment are back on the agenda. But more striking is the record of auto industry caution that the survey depicts. We have come a long way, respondent companies are saying, but we have a lot further to go. In particular, we note that many companies are saying that overcapacity is still at very high levels respondents believe it is significantly higher than last year, despite a year of closures and bankruptcies – and the   consequence is that much of the expected restructuring of the industry may still lie in the future.
2KPMG Global Auto Executive Survey 2010
Chapter 1: Survey methodology
KPMG’s Global Auto ExecutiveEach year we ask executives to describe last year’s survey a number of questions In Survey 2010 is the 11th consecutivethemselves and their companies. In earlier restricted to regional companies. were annual survey of senior global autoerlippsuriscdes kamotua  dna sreier as Tier 1, Tt ehibgnev ssmlena 2iT d3 re lla survey all compainsew re efoeferthd ope rtpoitunot yser dnop ot r ueshts yneIv tneserp executives carried out by KPMGcompanies participated. However, the questions, irrespective of the region in International. This year the survey is more extensive than in previousltsus  iTh. ree traudereh saqdaee ed sampl yxeapdn argaeltny iwnocmrpeaashie ncg cdhi ftwihelpmas egral a ngdinf  otyulco  fa erhttare sppli3 suier of T years: 200 respondents from 24 at countries took part in the surveybase tSU1$00m ecsso  fillion) us ptinneir reap  .oyceivtrrosuitgh  otuzhercfues utehntc isei  nxe herevunvey (wit the sur between mid-September and early Some questions elicited no response frommeant that in last year’s survey no respondents November 2009, including respondents; therefore total results somechose to describe themselves as Tier 3 companies in the Americas, Asia be less than 100 percent. maysuppliers, and results from Tier 2 and Tier 3 Pacific, Europe, Africa and thein data from earlier years weresuppliers Middle East. All survey questionsgrouped together. In the current survey relate to the coming five-yearKPMG restricted the survey to Tier 1 and period, extending to 2014, unlessTier 2 suppliers. In almost all cases this specifically stated otherwise.Tierrom ts fesulfor sn  irosmoap caryen--oaryet cerid stimrepilpp sre a 1 Tndr iesu2 – in only one case (noted in the text), comparative data from 2007 includes some results from Tier 3 suppliers.
Survey participants by job title
40% 6%
4% 3% 47%
Survey participants by company type
11.50% 38.50%
 CEO/President/Chairman Vehicle manufacturer  C-level Executive Tier 1 supplier  Busin s Unit Head/Functional Head Tier 2 supplier  Busi s Unit Function Management/ Leadership Team  Business Unit Functional Manager
Chapter 2: Executive Summary
Executive Summary3
Key results The performance angleAlternative propulsion technologies are Expectations of emerging market Profitability expectations have fallen. the key technological focus for companies. performance and auto investment Respondents believe best performers will Electric power ranks only just behind accumulation have strengthened be companies able to leverage the whole hybrid power developments and battery considerably. of the supply chain, with higher profits and fuel-cell approaches are ascribed expected of automakers, and the lowest almost equal priority. Overcapacity is still seen to be very high expectation for Tier 3 suppliers. over the five-year period in the Americas, Companies say they will direct most Europe and Japan; M&A activity is Companies expect financial conditions investment capital to technology and expected to be strong. to improve, but only moderately, with new model development. New plant conditions better for consumers than building is accorded very low priority. The long-term investment focus remains for companies. on new products and new technologies,New markets especially fuel efficiency. Expectations for M&A have risen, marginally, Companies are nearly unanimous in from an already high level in the preceding expecting emerging markets to build most The growth prospect capacity and to provide the automotiveyear, with the exception of the dealer All emerging economy regions are business, where after a year of closure most growth in automotive revenues. expected to contribute growth: not only and rationalization companies now see The majority of companies surveyed say Asia excluding Japan, but also Eastern M&A falling back. they intend to increase their investments Europe and Russia. in the BRICs. Companies expect to find fewer cost-saving Growth expectations for Western Europe opportunities in existing businesses. Expectations for both domestic and are low, and lower still for both Japan and export Chinese sales have increased. North America.Product innovation and consumer changeThe consensus view of companies on The industry still believes that overcapacity New products and new technologies have sales growth in Brazil, India and Russia in the established manufacturing “triad” – moved higher in the ranking of concerns is also strong, although Russian export North America, Europe and Japan – from an already high leading position. potential is not rated so highly. remains very high. Fuel efficiency and the environmental Beyond the BRICs companies expect Companies also have strong concerns profile of products continue to be strong demand growth and auto over the emergence of automotive considered by companies the most investment in South East Asia and overcapacity in the BRICs. Concern is significant consumer buying issues. in Eastern Europe. highest in Russia but companies also believe that the automotive industry Chinese and Indian brands remain in the Top-rated individual destinations for in Brazil will be overbuilt in the near to top three places in terms of expectation of auto investment beyond the BRICs medium term, and that China and India market share gain, but conviction is slightly are Ukraine, Thailand and Mexico. will also have significant overcapacity lower than last year. Two significant not much later. winners of market share competition are seen as Hyundai/Kia and VW. Companies in all three global regions cite exactly the same three vehicle types as top market share gainers (hybrids, other alternative-fuel vehicles and low-cost introduction cars).
4KPMG Global Auto Executive Survey 2010
Chapter 3: Introduction
Last year’s KPMG Global Auto Executive Survey reported on an industry falling into crisis. Sales were collapsing, growth expectations were swinging from positive to negative, investment schedules were being torn up, and for more than one large company, bankruptcy loomed. This year, we report on an industry that has confronted the crisis, and has just begun to emerge into a landscape of greater stability. In many ways the crisis was much worse than the gloomiest predictions. Bankruptcy became a reality for a number of large automakers, as demand fell further and faster than expected, and as the ability of indebted businesses to finance themselves simply evaporated.
Yet the worst was avoided. Exceptional government intervention helped to shield the industry from the worst of the fall in demand, and allowed some companies to begin to rebuild themselves behind the wall of temporary bankruptcy. Above all, the sudden loss of confidence in demand and growth in the big emerging economies was counteracted by an equally sudden resurgence, as it became clear that emerging world growth was much more resilient than pessimists feared. The stabilization and subsequent recovery of asset prices against a background of less volatile energy costs helped immeasurably.
But we are left with a world that has changed: a deep restructuring of the automotive industry has begun, and continues. One dimension of this has been a significant transfer of automotive technology to the emerging world. Existing producers with lower costs have seen their businesses strengthened. And with a global market that has clearly shrunk, many established producers are having to confront the fact that competition for sales is likely to be much, much tougher in the next few years than any time in the last two decades. As one European automaker interviewed for this report commented: “this last year has made us confront reality”.
6KPMG Global Auto Executive Survey 2010
Chapter 4: The growth prospect
The current survey shows that the gradual All emerging economy regions are On a regional basis, pessimism on reorientation of growth expectations away expected to contribute growth: not only revenues in the Americas is strongest from the mature economies and toward Asia (excluding Japan), but also Eastern in European and Asian companies. Asia and other significant emerging Europe and Russia. The balance of Companies in the Americas are slightly economies has passed a tipping point. expectations for Western Europe is now more positive both regarding their own Although previous surveys show that even between companies expecting region, and on growth prospects in Asia. companies have consistently been some decline and companies expecting forecasting a decline in the growth trend some improvement (most expect little for some years, the great majority of change), but the balance is negative for companies now locate all their significant both Japan and North America: more growth expectations for the next five companies now expect decline in those years in the emerging world. regions than expect improvement.
What are your forecasts for auto industry revenues in the following regions and countries? Growth expectations largely geared to Asia    Eastern Europe shows second biggest increase Biggest declines seen in North America and Japan
6.00% 23.50% 17.50% 15.50%
42.00% 76.00%28.00%
 Increase Stable
24.00% 19.00%
50.00% 52.50%
The growth prospect7
 What are your forecasts for auto industry revenues in the following regions and countries?* Companies in the Americas most optimistic on emerging economy growth rated lowest growth market by EMEA companiesJapan Broad regional consensus on high Eastern European and Asian growth
30.00%29.03% 26.67% 16.66% 19.36% 19.23% 18.34% 14.11%
48.71% 46.67% 45.16%
74.20% 69.23%
* Percentage of companies expecting improvements
23.08% 18.34%17.74%
North America Western Europe Japan Eastern Europe & Asia (excluding Central & South Middle East & Russia Japan) America Africa  Americas Europe, Middle East and Africa (EMEA) Asia Pacific (ASPAC)
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Executive view:volume automaker – Europe
This Europe-headquartered global“My confidence level has increased As for the global picture, I think the next  five years are going to see the industry si amuatonumfaakcteur riwnithangnilceas nitn  a challengedsignificantly in the last 12 months. A year to compete both on technology rtehgaino nevs eorf  tthhee g k weyo rtdlo ds  sasuacycse tshsal lit  s more elo  fonhwre e were in the middogy hnol otgeac.  eIwn octso  nadnniseb suN boes.suphl iaet  eagph  aelwl de vtaodni otuai ;yrtsustjut noe thn  iw ah thtdo ynkwee next challenge ahead of us, especially in CO2 product excellence. reduction where expectations are enormous.24 months would bring. Anything was possible. But now we have some clarity. And on the cost front there is no reason to expect our mature-economy consumers Consumer demand has recovered better to become very much wealthier over the than we expected a year ago. It is still next few years, so there is also going to be going to take a long time to recover fully, a strong focus on affordability. but the important thing is that recovery is predictable. The last year has shown us that the winners in tough situations are always I share the general faith in demand from the companies with strong products at the emerging markets. From the consumer affordable cost. If you have weak products point of view these markets are simply you are going to suffer even with a good better placed than the US or Europe or cost situation. That is irrespective Japan. In the past these economies were of segment or market” highly dependent on foreign direct investment for their growth, but now they are generating their own trade surpluses, they have growth that is not investment-dependent, and some of them are still benefiting from very low interest rates. So the emerging market economies will be fairly positive over the next one to two years. The question is, what does this mean for autos? We’ve seen a huge increase in demand over 2009, but for the near future I am more doubtful about auto demand. I don’t expect a collapse, but incentives like we have seen in China and Brazil cannot continue forever.
Overcapacity is now critical
The growth prospect9
For several years KPMG’s Global The result is one of the most striking in Those companies that do see overcapacity, Executive Auto Survey has asked the survey. After a year of unprecedented are more likely to rate the level of companies about their perceptions of change in the structure of the auto overcapacity higher in North America than overcapacity: the extent to which the industry, one in which automakers – elsewhere, with a consensus of around manufacturing capacity of the industry is including the large US manufacturers 25 percent overcapacity, although a overbuilt is a key determinant of profitability – and suppliers closed capacity around significant minority see higher levels – now and the likely path of restructuring the world, the industry still believes one in ten companies thinks overcapacity through mergers, acquisitions and that overcapacity in the established in North America is more than 40 percent, divestments in the coming five years. manufacturing “triad” – North America, for example. In the current survey these questions Europe and Japan – remains very high. were expanded to provide an insight into industry perceptions of regional Companies see more overcapacity in overcapacity. (It is worth noting that North America than in other regions, these questions on overcapacity relate but in all cases the majority sees to long-term capacity: companies were significant overcapacity. asked to rate levels of overcapacity over a whole business cycle, and not just overcapacity in relation to the current year’s market).
Is there automotive overcapacity in North America today? How much? North America seen as most overbuilt Perceptions of 20 percent plus overcapacity have risen strongly year-on-year
9.00%3.00% 37.50% 35.80% 88.00%
 Yes No  Don’t know
13.64% 10.22% 2.84% 1-10% 11-20% 21-30% 31-40% More than 40%