Momentum auto exec-2009

Automotive

Momentum: KPMG’s Global Auto Executive Survey 2009 Industry concerns and expectations 2009-2013

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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


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.


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.


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


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?


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?


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)


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


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%


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?


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


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?


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)


2007 2008

Which of the following do you think are among the most important drivers

Key


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?


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


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?


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


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?


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)


most overcapacity

ASPAC

Note: ‘Yes’ percentages represented

Is there global overcapacity in the es see


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


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



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


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


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


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?


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


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)


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

95%

20 32.5 45 57.5 70 82.5 95


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.


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


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)


2007 2008

Key

92%

94% 91%

93%

55%

72% 52%

72%

60% 69%

66% 67%

52% 51%

40 50 60 70 80 90 100


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?


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?


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


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?


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?


3-5 years 6-10 years 10+ years

When will China sell a significant (ie, 1,000,000) number of cars in

Key

2008


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)


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.)


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?


30% 29%

30%

13%

9%

5%

3% 3%

1%

3%

8%

What are the most important trends in

Key


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


and 4/5 on a scale 1 means “not at all important” and 5 means “extremely important” for 2007


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


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


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.


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


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?


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



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?


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


0

25

20

15

10

5

20%

18%

14% 13%

11%

7% 7% 6%

5% 4%

2%

6%

five years?


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.


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?


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


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.


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?


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,


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?


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


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

kpmg.com

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

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Uwe Achterholt oba Cha r, Automot ve

uachterho [email protected]

Roland Schmid oba Execut ve, Automot ve

oba Sen or Market ng

The information contained herein is of a general nature and is not intended to address the circumstances of any particular nd dua or ent ty. A though we endeavor to prov de accurate and t me nformat on, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No-one should act upon such nformat on w thout appropr ate profess ona adv ce after a thorough exam nat on of the part cu ar s tuat on.

The views and opinions expressed herein are those of the interviewees and do not necessarily represent the views and opinions of KPMG International or KPMG member firms.

© 2008 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. Printed in the U.K.

KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

Designed by Roundel

Publication name: Momentum: KPMG’s Global Auto Executive Survey 2009

Publication number: RDL

Publication date: December 2008

Printed on recycled material

Dieter Becker

Te : +49 711 9060 41720

Jeff Dobbs Automot ve – U.S. KPMG n the U.S.

Automot ve – As a PacKPMG n Ch na [email protected] Te : +86 21 2212 2877

Momentum auto exec-2009

Documents

kpmg survey

survey methodology

survey participants

automotive companies

auto sales

global chair

global economy

executive summary