Global auto-survey-2010

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Global auto-survey-2010

  1. 1. Au to m ot i v eKPMG’s Global Auto ExecutiveSurvey 2010Industry Concerns and Expectations to 2014kpm g i nt e r n A t i o n A l
  2. 2. ContentsChapter Page1 Survey methodology 22 Executive summary 33 Introduction 44 The growth prospect 6 Executive view: volume automaker – Europe 8 Overcapacity is now critical 9 Emerging markets are becoming overbuilt 115 The performance angle 12 Executive view: mid-size automaker – US 14 No easy cost savings expected 15 Capital costs to remain high 17 M&A set to grow 18 Debt and technology needs will drive M&A 206 Product innovation and consumer change 22 Fuel efficiency and environment top of consumer concerns 24 Low-cost producers to win most market share 26 Hybrid technology rated clear leader 28 Executive view: large Tier 1 supplier – US 30 R&D will win most investment 317 Investing in new markets 34 Executive view: diversified supplier – emerging market 36 BRIC sales forecasts continue to grow 37 Smaller emerging markets to gain 40© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  3. 3. Foreword 1Foreword KPMG’s Global Auto Executive Survey And there are huge technology challenges 2010 was conducted at the end of a historic to be met. Last year companies told year for the auto business. The intensity of us that fuel efficiency and emissions the crisis that engulfed the entire industry improvements were top of their agenda. can hardly be underestimated. This year they are still top of their agenda. 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 thanDieter Becker in the middle of nowhere … anything before, and less inclined to spend. That,Global Chair, Automotive was possible.” say our respondents, means that companiesKPMG ELLP 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.© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  4. 4. 2 KPMG Global Auto Executive Survey 2010Chapter 1: Survey methodologyKPMG’s Global Auto Executive Each year we ask executives to describe In last year’s survey a number of questionsSurvey 2010 is the 11th consecutive themselves and their companies. In earlier were restricted to regional companies.annual survey of senior global auto surveys automakers and suppliers describing In the present survey all companies were themselves as Tier 1, Tier 2 and Tier 3 offered the opportunity to respond to allexecutives carried out by KPMG companies participated. However, the questions, irrespective of the region inInternational. This year the survey is increasing difficulty of finding a large which the company was headquartered.more extensive than in previous sample of Tier 3 suppliers that are of The result is a greatly expanded sampleyears: 200 respondents from 24 sufficient size to participate in the survey base throughout the current survey.countries took part in the survey (with revenues in excess of US$100 million)between mid-September and early meant that in last year’s survey no respondents Some questions elicited no response fromNovember 2009, including chose to describe themselves as Tier 3 some respondents; therefore total resultscompanies in the Americas, Asia suppliers, and results from Tier 2 and Tier 3 may be less than 100 percent.Pacific, Europe, Africa and the suppliers in data from earlier years wereMiddle East. All survey questions grouped together. In the current surveyrelate to the coming five-year KPMG restricted the survey to Tier 1 and Tier 2 suppliers. In almost all cases thisperiod, extending to 2014, unless permits direct year-on-year comparisonsspecifically stated otherwise. of results from Tier 1 and Tier 2 suppliers – in only one case (noted in the text), comparative data from 2007 includes some results from Tier 3 suppliers. Survey participants Survey participants by job title by company type 11.50% 4% 3% 38.50% 47% 40% 6% 50.00% CEO/President/Chairman Vehicle manufacturer C-level Executive Tier 1 supplier Business Unit Head/Functional Head Tier 2 supplier Vehicle Manufacturer Business Unit Function Management/ Tier 1 Supplier Leadership Team CEO/President/ChairmanManager Business Unit Functional C-level exe© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Business Unit Head/Functional HeadKPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, Business Unor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Business Unit Functional Manager
  5. 5. Executive Summary 3Chapter 2: Executive SummaryKey results The performance angle Alternative propulsion technologies areExpectations 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 behindaccumulation have strengthened be companies able to leverage the whole hybrid power developments and batteryconsiderably. 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 mostEurope and Japan; M&A activity is Companies expect financial conditions investment capital to technology andexpected 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 marketsespecially 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 mostThe growth prospect year, with the exception of the dealer automotive capacity and to provide theAll 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 sayAsia excluding Japan, but also Eastern M&A falling back. they intend to increase their investmentsEurope and Russia. in the BRICs. Companies expect to find fewer cost-savingGrowth expectations for Western Europe opportunities in existing businesses. Expectations for both domestic andare low, and lower still for both Japan and export Chinese sales have increased.North America. Product innovation and consumer change The consensus view of companies onThe industry still believes that overcapacity New products and new technologies have sales growth in Brazil, India and Russiain the established manufacturing “triad” – moved higher in the ranking of concerns is also strong, although Russian exportNorth 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 expectCompanies also have strong concerns profile of products continue to be strong demand growth and autoover the emergence of automotive considered by companies the most investment in South East Asia andovercapacity in the BRICs. Concern is significant consumer buying issues. in Eastern Europe.highest in Russia but companies alsobelieve that the automotive industry Chinese and Indian brands remain in the Top-rated individual destinations forin Brazil will be overbuilt in the near to top three places in terms of expectation of auto investment beyond the BRICsmedium 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 significantnot 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).© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  6. 6. 4 KPMG Global Auto Executive Survey 2010Chapter 3: IntroductionLast year’s KPMG Global Auto Executive Yet the worst was avoided. Exceptional But we are left with a world that hasSurvey reported on an industry falling into government intervention helped to shield changed: a deep restructuring of thecrisis. Sales were collapsing, growth the industry from the worst of the fall in automotive industry has begun, andexpectations were swinging from positive demand, and allowed some companies continues. One dimension of this hasto negative, investment schedules were to begin to rebuild themselves behind the been a significant transfer of automotivebeing torn up, and for more than one large wall of temporary bankruptcy. Above all, technology to the emerging world.company, bankruptcy loomed. the sudden loss of confidence in demand Existing producers with lower costs have and growth in the big emerging economies seen their businesses strengthened.This year, we report on an industry that was counteracted by an equally sudden And with a global market that has clearlyhas confronted the crisis, and has just resurgence, as it became clear that shrunk, many established producers arebegun to emerge into a landscape of emerging world growth was much more having to confront the fact that competitiongreater stability. In many ways the crisis resilient than pessimists feared. The for sales is likely to be much, muchwas much worse than the gloomiest stabilization and subsequent recovery of tougher in the next few years than anypredictions. Bankruptcy became a reality asset prices against a background of less time in the last two decades.for a number of large automakers, as volatile energy costs helped immeasurably.demand fell further and faster than As one European automaker interviewedexpected, and as the ability of indebted for this report commented: “this last yearbusinesses to finance themselves simply has made us confront reality”.evaporated.© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  7. 7. © 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  8. 8. 6 KPMG Global Auto Executive Survey 2010Chapter 4: The growth prospectThe current survey shows that the gradual All emerging economy regions are On a regional basis, pessimism onreorientation of growth expectations away expected to contribute growth: not only revenues in the Americas is strongestfrom 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 slightlyeconomies has passed a tipping point. expectations for Western Europe is now more positive both regarding their ownAlthough previous surveys show that even between companies expecting region, and on growth prospects in Asia.companies have consistently been some decline and companies expectingforecasting a decline in the growth trend some improvement (most expect littlefor some years, the great majority of change), but the balance Increase is negative for Stable Declinecompanies now locate all their significant both Japan and North America: moregrowth expectations for the next five companies now expect decline in thoseyears 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 ia ss n) ica Ru pa er & Ja Am pe pe ing ica ro a ro h ric Eu lud ut er Eu Af So Am xc rn n & er te (e l& rth st st es ia ra Ea Ea No W As nt n le Ce pa idd Ja M 6.00% 23.50% 24.00% 31.50% 17.50% 15.50% 27.00% 19.00% 42.00% 76.00% 28.00% 50.00% 52.50% 47.00% 44.50% 47.00% 36.00% 24.50% 21.50% 20.00% 19.00% Increase Stable Decline© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  9. 9. The growth prospect 7What are your forecasts for auto industry revenues in the following regions and countries?*• Companies in the Americas most optimistic on emerging economy growth * Percentage of companies expecting improvements• Japan rated lowest growth market by EMEA companies• Broad regional consensus on high Eastern European and Asian growth 86.67% 74.20% 69.23% 48.71% 46.67% 45.16% 41.66% 38.46% 30.00% 29.03% 26.67% 27.42% 27.42% 23.08% 19.36% 19.23% 18.34% 18.34% 17.74% 16.66% 14.11%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)© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. ASPAC EMEAKPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  10. 10. 8 KPMG Global Auto Executive Survey 2010Executive view: volume automaker – EuropeThis Europe-headquartered global “My confidence level has increased As for the global picture, I think the nextautomaker with significant significantly in the last 12 months. A year five years are going to see the industrymanufacturing and sales in all ago we were in the middle of nowhere – challenged to compete both on technology not just in the auto industry; it applied to all and on cost. In technology we have a hugeregions of the world says that more businesses. Nobody knew what the next challenge ahead of us, especially in CO2than ever the key to success is 24 months would bring. Anything was reduction where expectations are enormous.product excellence. 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.© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  11. 11. The growth prospect 9Overcapacity is now criticalFor 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 ofcompanies about their perceptions of change in the structure of the auto overcapacity higher in North America thanovercapacity: the extent to which the industry, one in which automakers – elsewhere, with a consensus of aroundmanufacturing capacity of the industry is including the large US manufacturers 25 percent overcapacity, although aoverbuilt 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 overcapacitythrough 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 insightinto industry perceptions of regional Companies see more overcapacity inovercapacity. (It is worth noting that North America than in other regions,these questions on overcapacity relate but in all cases the majority seesto long-term capacity: companies were significant overcapacity.asked to rate levels of overcapacity overa whole business cycle, and not justovercapacity in relation to the currentyear’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% 13.64% 10.22% 2.84% Yes 1-10% 11-20% 21-30% 31-40% More than 40% No DK/Refuse Yes No Don’t know© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  12. 12. 10 KPMG Global Auto Executive Survey 2010 Is there automotive overcapacity in Western Europe today? How much? 13.00% 6.50% 37.27% 80.50% 30.43% 18.01% 9.32% 4.97% Yes No 1-10% 11-20% 21-30% 31-40% More DK/Refuse than 40% Yes No Don’t know Is there automotive overcapacity in Japan today? How much? overcapacity Extent of 8.50% 16.50% 35.33% 75.00% 32.00% 17.33% 8.67% 6.67% Yes No 1-10% 11-20% 21-30% 31-40% More DK/Refuse than 40% Yes No Don’t know© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  13. 13. The growth prospect 11 Emerging markets are becoming overbuilt Given the high level of expectation of near-term capacities is highest in Russia, revenue growth in the BRICs and the where almost 12 percent of companies high level of expressed intentions to build think that overcapacity is already emerging investment in those economies, the fact and 19 percent believe it will emerge that companies also have strong concerns within two years. over the emergence of automotive overcapacity in the BRICs is striking. However, it is worth noting that it is not irrational for companies to plan investment Companies believe that the automotive in locations where they believe overcapacity industries in both Russia and Brazil will be is emerging: more efficient manufacturers overbuilt in the near to medium term, can always utilize fully their own investments and that China will also have significant and make profits in an overbuilt economy. overcapacity not much later. Concern over When do you expect overcapacity in the BRICs to become a serious issue? • Overcapacity not confined to ‘triad’ • Russia seen as most overbuilt in the short run • Brazil seen as most overbuilt in five year forecast ia il ina ss dia az Ru Ch Br Ins 23.24% 24.04% 13.64% 22.62%s 30.68% 30.99% 28.57% 43.27% 43.18% 29.76% 33.10% 27.88% 7.14% 5.63% 6.82% 11.9% 7.04% 2.88% 5.68% 1.92% Now 1-2 years 3-5 years 6-10 years >10 years © 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  14. 14. 12 KPMG Global Auto Executive Survey 2010Chapter 5: The performance angleWho will best be able to make profits companies believe that higher profits willagainst this background of falling revenue accrue to companies better able to leverageexpectations? Industry expectations of the whole of the supply chain, with higherprofitability by company type over the next profits expected of automakers, and thefive years are strikingly negative – especially lowest expectation for Tier 3 suppliers.when companies are asked about the On a regional basis, profitability correspondsprofitability of their own type of company. roughly to revenue expectations, with theOverall, it is unsurprising that in an era best outlook in ASPAC.expected to be highly competitive How profitable do you think the global automaking, supplier and dealer industries will be over the next five years? • Financial services seen as most profitable • Tier 3 suppliers expected to show lower profitability • Profitability expected to decrease along value chain 40.50% 33.00% 40.50% 44.50% 22.00% 31.50% 34.50% 39.50% 42.50% 36.50% 36.00% 38.50% 40.00% 27.50% 22.50% 18.50% 19.50% 14.50% Automakers Tier 1 Tier 2 Tier 3 Financial Dealers suppliers suppliers suppliers services Increase Stable Decline© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firmsStable Increase Decline are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  15. 15. The performance angle 13How profitable do you think the global automaking, supplierand dealer industries will be over the next five years?*• EMEA profitability expectations lowest * Percentage of companies expecting improvements• Across the whole value chain ASPAC expectations highest 51.61% 46.67% 32.26% 30.00% 30.64% 30.00% 27.42% 25.64% 25.81% 23.07% 23.34% 22.58% 21.67% 20.00% 17.95% 13.33% 10.26% 8.97% 8.97%Automakers Tier 1 suppliers Tier 2 suppliers Tier 3 suppliers Financial services Dealers Americas Europe, Middle East and Africa (EMEA) Asia Pacific (ASPAC)© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Americas EMEAKPMG International provides no client services. No member firmASPAC authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, has anynor*does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Percentage of companies expecting improvement
  16. 16. 14 KPMG Global Auto Executive Survey 2010Executive view: mid-size automaker – USThis subsidiary of a Japanese- “Over the last year my confidence level When the cash assistance scheme ended,owned global manufacturer remains has not improved much. Unfavorable sales plummeted. There just isn’t the naturalextremely cautious about long-term fundamentals in the market have been with demand in the market. So it is going to be us for some time now, but if anything it is a very difficult 12 months, at least. But wesales and profit prospects. getting harder for people to sustain their are going to have to grow our way out of it. spending. No, I’m not much more confident. Government can’t go on making sales for us. We have cut capacity. Perhaps not as much Growth is the challenge, and that means as we should have done. If it weren’t for investment is the challenge. When you look our contract with the United Auto Workers at the return on a dollar of investment in China we would have done a lot more. We have or in India, and you look at the return in the changed the product mix as well – the old big US, the US does not look attractive. So the SUV products, for example, are just not future is going to be all about operating more viable any more. Our competitive offers now efficiently. We just cannot afford to waste are in compact and crossover vehicles. money on anything inefficient. When we started developing small SUVs people thought we were crazy – but now we The winners from what has happened in are developing crossovers that are even 2009 will be primarily the Korean companies. smaller, and people understand what we are They have the lowest cost of production in doing. These are the cars people want. the US. That means they can profit in this very weak market. But Japanese companies The government assistance scheme in the also have low costs – lower than the US certainly had an impact, although of domestic US makers, even after all the course it was not as great as we might have restructuring. The Japanese also have the hoped. Whether a company benefits from a culture, the camaraderie and the dedication cash assistance program like that depends a on the factory floor. If the domestic US lot on the level of inventory it holds. We gave automakers cannot reproduce that, they up on the strategy of holding high inventory will never prosper.” and waiting for a miracle a long time ago – but when “cash-for-clunkers” came in, we just didn’t have the inventory. The Koreans on the other hand do hold very high inventories, so they had a home run.© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  17. 17. The performance angle 4/Beyond crisis: challenges and opportunities 15No easy cost savings expectedFalling expectations of both revenues and white-collar salaries is higher – this year’sprofitability over the next five years imply survey is the first in which companiesa continued intense concern with cost-saving have been asked to distinguish betweenopportunities. Yet in the current survey the wage and salary savings opportunities).overall picture is that company expectationsof finding cost-saving opportunities have On a regional basis (results not shownfallen somewhat: in particular, there is less in chart) ASPAC companies are moreexpectation of finding savings through likely to view new design technologies as aoverhead cost-reduction and supply chain cost-saving opportunity. Companies in theinnovation, and more interest in Americas are clearly more concerned thanimplementing advanced IT in design. other regions about salary costs and seeThere is a low expectation of finding this as a cost opportunity, while Europeansavings through cutting wage costs companies continue to focus more on(the opportunity for making savings in low-cost country sourcing.What are the cost-saving opportunities for auto manufacturers and suppliers?*• Cost focus shifts away from restructuring * Percentage of companies seeing cost-saving opportunities by year• Increasing number of companies believe supply chains are fully optimized• Computer modelling rated sharply higher 67.00% 65.00%62.00% 61.00% 59.00% 58.00% 57.00% 55.00% 50.00% 48.00% 47.00% 46.00% 46.00% 46.00% 43.00% 43.00% 38.00% 30.50% 29.00% 28.00% 27.00% 23.50% 21.50% x x x x x x x* Percentage of companies seeing cost saving opportunitiesProduct Low-cost Computer Overhead Supply Marketing Tax Salary Wage Health carematerials country modeling cost chain and sales efficiency costs costs/directinnovation sourcing reduction management labor 2009 2008 2007 X No data for 2008 X No data for 2007 2009 2008 2007 x No data for 2008 and 2007© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  18. 18. 16 KPMG Global Auto Executive Survey 2010What are the cost-saving opportunities for auto manufacturers and suppliers?* * Percentage of companies seeing• OEMs see higher cost saving opportunities cost-saving opportunities• Materials innovation, computer modeling and low-cost sourcing top opportunities for OEMs• Tier 2 suppliers most likely to cut labor costs• Wage and benefits cost opportunities rated low by most companies 68.83% 66.24% 65.21% 62.34% 60.00% 56.52% 54.00%51.95% 52.17% 51.00% 47.83% 48.05% 47.00% 45.00% 43.48% 43.48% 42.86% 39.13% 34.78% 33.00% 31.17% 29.00% 26.00% 25.00% 24.67% 23.00% 22.08% 18.19% 17.39% 7.09%Supply Tax Salary costs Wage costs/ Low cost Marketing Product Overhead Computer Healthcarechain efficiency direct labor country and sales materials cost modelingmanagement sourcing innovations reductions No data for 2008, 2007 OEMs Tier 1 suppliers Tier 2 suppliers Tier 1 suppliers OEMs Tier 2 suppliers© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such*authority to obligate or bind any membersaving opportunities Percentage of companies seeing cost firm. All rights reserved.
  19. 19. The performance angle 17Capital costs to remain highThe sudden contraction in late 2008 in the The chart shows company expectationsavailability of capital for consumers and of improvement. They expect thecompanies, and the increase in borrowing improvement to be less apparent incosts which remain high despite low policy corporate financing than in consumerinterest rates, have been key components financing, and European companies areof the auto business crisis of the last year. most pessimistic about an early returnIn the current survey, companies were to easy finance.asked for the first time how they expectedfinancial conditions for consumers andcompanies to evolve. How do you expect financial conditions to evolve in the next 12 months?* • Companies expecting financial improvement outnumber * Percentage of companies expecting improvement those expecting decline • EMEA companies most pessimistic on corporate financing 51.67% 41.94% 37.10% 34.62% 33.87% 33.34% 31.67% 32.06% 30.65% 25.64% 25.00% 14.10% Cost of capital Availability of capital Cost of consumer credit Availability of consumer credit Americas Europe, Middle East and Africa (EMEA) Asia Pacific (ASPAC) Americas EMEA ASPAC© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
  20. 20. 18 KPMG Global Auto Executive Survey 2010M&A set to growPerceptions of a continued high level of M&A is also expected in growth marketsovercapacity in the face of a diminished as well as in stagnant markets: companiesconsumer market imply continuing merger believe that the rate of M&A will not onlyand acquisition activity. The results in the be high in the Americas and Europe, butcurrent survey show that expectations for also in Eastern Europe and in Asia.M&A have risen, marginally, from an Companies appear to be telling us thatalready high level in the preceding year – M&A may be driven by high growth asalthough interestingly the one exception to well as by overcapacity in the maturethat rising expectation is in the dealer economies. Expectations for Japan arebusiness, where after a year of closure lower, but still highly significant givenand rationalization companies now see the historically low rate of M&A activityM&A falling back. in Japan. How will M&A in these types of companies develop over the next five years?* • Expectations of OEM M&A growth stay * Percentage of companies expecting increase at last year’s high levels • Increasing expectation of M&A growth for Tier 2 and Tier 3 suppliers • Only dealer M&A set to fall back 73.50% 72.00% 72.00% 71.00% 70.50% 64.00% 60.00% 56.00% 52.00% 52.00% 49.00% 48.50% 47.00% 43.00% x Automakers Tier 1 suppliers Tier 2 suppliers Tier 3 suppliers Dealers 2009 2008 2007 X No data for 2007© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. 2007 2008 x No data for member firm vis-à-vis third parties,KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other 2007 2009nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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