Kpmg's global_auto_executive_survey_2010

Au to m ot i v e

KPMG’s Global Auto Executive
Survey 2010
Industry Concerns and Expectations to 2014

kpm g i nt e r n A t i o n A l

Contents

Chapter Page
1 Survey methodology 2
2 Executive summary 3
3 Introduction 4
4 The growth prospect 6
Executive view: volume automaker – Europe 8
Overcapacity is now critical 9
Emerging markets are becoming overbuilt 11
5 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 20
6 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 31
7 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

Foreword 1

Foreword

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 than
Dieter Becker in the middle of nowhere … anything before, and less inclined to spend. That,
Global Chair, Automotive was possible.” say our respondents, means that companies
KPMG 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.

2 KPMG Global Auto Executive Survey 2010

Chapter 1: Survey methodology

KPMG’s Global Auto Executive Each year we ask executives to describe In last year’s survey a number of questions
Survey 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 all
executives carried out by KPMG
companies participated. However, the questions, irrespective of the region in
International. 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 sample
years: 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 from
November 2009, including chose to describe themselves as Tier 3 some respondents; therefore total results
companies 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 were
Middle East. All survey questions grouped together. In the current survey
relate to the coming five-year KPMG restricted the survey to Tier 1 and
Tier 2 suppliers. In almost all cases this
period, extending to 2014, unless
permits direct year-on-year comparisons
specifically 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
Business Unit Head/Functional Head Business U
Business Unit Functional Manager

Executive Summary 3

Chapter 2: Executive Summary

Key results The performance angle Alternative 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 year, with the exception of the dealer automotive capacity and to provide the
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 change The 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).


Chapter 3: Introduction

Last year’s KPMG Global Auto Executive Yet the worst was avoided. Exceptional But we are left with a world that has
Survey reported on an industry falling into government intervention helped to shield changed: a deep restructuring of the
crisis. Sales were collapsing, growth the industry from the worst of the fall in automotive industry has begun, and
expectations were swinging from positive demand, and allowed some companies continues. One dimension of this has
to negative, investment schedules were to begin to rebuild themselves behind the been a significant transfer of automotive
being 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 clearly
has confronted the crisis, and has just resurgence, as it became clear that shrunk, many established producers are
begun to emerge into a landscape of emerging world growth was much more having to confront the fact that competition
greater stability. In many ways the crisis resilient than pessimists feared. The for sales is likely to be much, much
was much worse than the gloomiest stabilization and subsequent recovery of tougher in the next few years than any
predictions. 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 interviewed
expected, and as the ability of indebted for this report commented: “this last year
businesses to finance themselves simply has made us confront reality”.
evaporated.


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
Increase Stable Decline
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
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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%


The growth prospect 7

What 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)

ASPAC
EMEA


Executive view: volume automaker – Europe

This Europe-headquartered global “My confidence level has increased As for the global picture, I think the next
automaker with significant significantly in the last 12 months. A year five years are going to see the industry
manufacturing 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 huge
regions of the world says that more
businesses. Nobody knew what the next challenge ahead of us, especially in CO2
than 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.


Overcapacity is now critical

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%

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


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

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


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

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s 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


Chapter 5: The performance angle

Who will best be able to make profits companies believe that higher profits will
against this background of falling revenue accrue to companies better able to leverage
expectations? Industry expectations of the whole of the supply chain, with higher
profitability by company type over the next profits expected of automakers, and the
five years are strikingly negative – especially lowest expectation for Tier 3 suppliers.
when companies are asked about the On a regional basis, profitability corresponds
profitability of their own type of company. roughly to revenue expectations, with the
Overall, 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


The performance angle 13

How profitable do you think the global automaking, supplier
and 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 EMEA ASPAC
* Percentage of companies expecting improvement


Executive view: mid-size automaker – US

This 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 natural
extremely 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 we
sales 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.

The performance angle
4/Beyond crisis: challenges and opportunities 15

No easy cost savings expected

Falling expectations of both revenues and white-collar salaries is higher – this year’s
profitability over the next five years imply survey is the first in which companies
a continued intense concern with cost-saving have been asked to distinguish between
opportunities. Yet in the current survey the wage and salary savings opportunities).
overall picture is that company expectations
of finding cost-saving opportunities have On a regional basis (results not shown
fallen somewhat: in particular, there is less in chart) ASPAC companies are more
expectation of finding savings through likely to view new design technologies as a
overhead cost-reduction and supply chain cost-saving opportunity. Companies in the
innovation, and more interest in Americas are clearly more concerned than
implementing advanced IT in design. other regions about salary costs and see
There is a low expectation of finding this as a cost opportunity, while European
savings 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 opportunities
Product Low-cost Computer Overhead Supply Marketing Tax Salary Wage Health care
materials country modeling cost chain and sales efficiency costs costs/direct
innovation 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


What 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 Healthcare
chain efficiency direct labor country and sales materials cost modeling
management sourcing innovations reductions

No data for 2008, 2007
OEMs Tier 1 suppliers Tier 2 suppliers
OEMs Tier 1 suppliers Tier 2 suppliers



Capital costs to remain high

The sudden contraction in late 2008 in the The chart shows company expectations
availability of capital for consumers and of improvement. They expect the
companies, and the increase in borrowing improvement to be less apparent in
costs which remain high despite low policy corporate financing than in consumer
interest rates, have been key components financing, and European companies are
of the auto business crisis of the last year. most pessimistic about an early return
In the current survey, companies were to easy finance.
asked for the first time how they expected
financial conditions for consumers and
companies 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 EMEA ASPAC


M&A set to grow

Perceptions of a continued high level of M&A is also expected in growth markets
overcapacity in the face of a diminished as well as in stagnant markets: companies
consumer market imply continuing merger believe that the rate of M&A will not only
and acquisition activity. The results in the be high in the Americas and Europe, but
current 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 that
already high level in the preceding year – M&A may be driven by high growth as
although interestingly the one exception to well as by overcapacity in the mature
that rising expectation is in the dealer economies. Expectations for Japan are
business, where after a year of closure lower, but still highly significant given
and rationalization companies now see the historically low rate of M&A activity
M&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

2007 2008 2009 x No data for 2007


Increase Remain the same Decrease

How will M&A in these regions develop over the next five years?

• High expectations of Eastern European and Asian M&A
• Less than one in ten companies expect M&A to decline anywhere ia
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8.50% 7.00%
5.00% 5.50%
6.50% 8.00%
28.00% 30.50% 28.00% 7.00%
30.50% 55.00%
57.00%
60.00%

64.00% 64.50%
62.00%
59.00%

35.00%
30.00%
25.50%

Increase Stay the same Decline


Debt and technology needs will drive M&A

Companies believe that a rising rate of technologies rise in companies’ ratings
M&A will be driven partly by crisis factors, of the drivers of M&A, while access to
and partly by the long-term imperative of raw materials is seen as less important
finding and developing new technology against a background of falling raw material
solutions for a changing market (the prices during 2009. Pension and labor
continued high stress that companies costs fall further from an already low
place upon new technology development position in companies’ ratings of
is explored further in chapter 6 of M&A drivers.
this survey). So both debt and new

What will drive M&A over the next five years?

• Indebtedness now seen as top driver of M&A
• All cost pressures now seen as less significant

95.00%

89.00%

84.00% 85.00%
82.00% 83.00% 83.00%
80.00%

74.00% 75.00%
73.00%

67.00%
65.00%

55.00% 54.50% 55.00%
53.00%

47.00%

33.00%
30.00%

x
Debt and risk of Access to new Access to new Raw materials and Labor cost Pension and Potential for
bankruptcy technologies and markets and cost pressures pressures health cost product synergies
products customers pressures
x No data for 2007
2009 2008 2007 X No data for 2007
2009 2008 2007


51.67%

What will drive M&A over the next five years from
a regional perspective?*
* The four largest regional
• Americas and EMEA level of global consensus disparities shown
on M&A drivers is high
• Americas companies more concerned with market access
• ASPAC more concerned with raw materials cost pressure

95.00%

90.00% 88.46%
87.18%
83.33% 83.33%

77.42%

72.58%
67.74%
66.13%

51.67%
47.44%

Access to new Access to new Raw materials Product synergies
technologies markets cost pressure

EMEA


Chapter 6: Product innovation and consumer change

When asked about their long-range Cost reduction has moved slightly lower, But there are differences – ASPAC
priorities, automotive companies have and, interestingly, in a reversal of trend companies are markedly more concerned
consistently told KPMG’s Global Auto environmental issues are now accorded than others with managing labor, and
Executive Survey that their highest-ranking slightly less weight than in last year’s markedly more concerned with product
concerns are with new technology and new survey, suggesting that companies believe quality (the proportion of ASPAC
products. That remained the case in the they have already made significant companies rating it “very important”
current survey: both new products and new environmental advances. Managing labor as against “moderately important” is
technologies have moved higher in the relations remains a low priority. high). ASPAC companies are also more
ranking of concerns from an already high concerned with pricing, while companies
leading position in last year’s survey. Regional results show very similar in the Americas and in Europe prefer to
patterns, suggesting as in earlier surveys prioritize total affordability.
that the broad shape of priorities remains
the same in all regions of the world: auto
companies tend to take a global view.

How important today are the following issues to the global auto industry?*
* Percentage of companies rating
• Companies are shifting focus from quality improvement to new products issues as important
• Total affordability and pricing seen as less important than innovation
• Environment falls in rating for first time in three years
96.00%
89.00%

90.00%
86.00%
84.50%

85.00%

85.00%
83.00%
82.00%
81.00%

80.50%
79.00%

74.50%

72.00%

72.00%
65.00%
64.00%

64.00%
63.00%

62.00%

59.00%
49.50%

49.50%

x
Developing Developing new Reducing Meeting Pricing and Improving Improving total Managing labor
new products technologies costs environmental sales incentives product quality affordability relations
demands

2009 2008 2007 X No data for 2007
2009 2008 2007 x No data for 2007

Product innovation and consumer change 23

How important today are the following
issues to the global auto industry?*
* The four largest regional
• Asian companies least concerned with total affordability, disparities shown
most concerned with quality
• EMEA companies give low rating to quality improvement
• Affordability a leading issue for companies in the Americas

C
s

PA
ica

AS
er
Am

C
PA

s
ica
AS
EA

er
EA

32.26%
EM

Am
EM

45.00%
s
ica

38.71%
C

er
PA

C

Am
PA
AS

33.33% 36.67%
39.74%
AS

EA
as

EM
ic

30.65% 26.67%
er

43.55%
Am

EA

30.77%
EM

28.33% 43.55%

26.92%

32.05%
30.00% 30.65%
28.33% 28.33%
25.81%
24.36%

17.95%
15.00%
11.29%
10.26%

Managing labor Improving total Pricing and sales Improving product
relations affordability incentives quality

Extremely Somewhat
Extremely Somewhat

Kpmg's global_auto_executive_survey_2010

Kpmg's global_auto_executive_survey_2010

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