Global Auto Execs Anticipate Significant Drop in Market Share for U.S. Manufacturers, But Expect Restructuring to Make U.S. OEMs More Efficient and Competitive, KPMG Survey Finds

DETROIT, Jan. 8 -- Global automotive execs expect a significant decline in market share for United States vehicle manufacturers but continue to see U.S. OEMs becoming more efficient and competitive in the near term, according to the 10th annual global automotive survey by KPMG LLP, the U.S. audit, tax and advisory firm. Despite facing recessionary times and fighting overcapacity issues, automotive executives remain focused on manufacturing alternative fuel cars and the continued exploration of emerging markets for growth.

In the KPMG survey, based on interviews with 200 senior executives at vehicle manufacturers and suppliers worldwide, the executives, facing worldwide recessionary conditions had no read on profitability, with only 15 percent expecting profits to increase, 24 percent decline, and 46 percent indicating that profits are too volatile and unpredictable to forecast.

But in predicting market share winners over the next five years, they identified Toyota, Hyundai, Honda and Volkswagen as leaders, with General Motors, Ford and Chrysler on the low rung of market share expectations.

However, when asked if they felt U.S. OEMs were succeeding with their restructuring programs, for the second year in succession, the executives expressed that the OEMs are on a path to becoming more efficient and competitive. Fifty percent of the executives see the restructuring plans succeeding, with 43 percent neutral and six percent disagreeing. This is only somewhat lower than a year ago when 58 percent saw the OEMs succeeding and 10 percent disagreeing. And the majority, 57 percent, expect the restructuring to be completed before 2011, only somewhat down from 64 percent a year ago.

"Economic downturn aside, global execs remain fairly confident that U.S. OEMs are moving to a more competitive model," said Gary Silberg, National Advisory Automotive Industry leader for KPMG LLP. "And they expect the restructuring to be completed in the near term."

Having said that, Silberg cautions that the executives also see plenty of angst ahead. In fact, they see a dramatic increase in bankruptcies, with 77 percent seeing an increase in the next few years, up considerably from 36 percent a year ago. And also project significant increases in merger and alliance activity, especially with OEMs and Tier 1 suppliers. In fact, 75 percent of the execs see increases for OEMs, up substantially from 47 percent a year ago. "Merger and acquisition activity is being driven by potential for product synergies, access to new markets and customers and access to new technologies," said KPMG's Silberg. "And overcapacity continues to loom as an issue for the industry."

As to overcapacity, on average across regions 83 percent of the execs surveyed by KPMG feel that it is an issue. Fifty-nine percent feel that capacity needs to be reduced by 11-20 percent, 20 percent by 1-10 percent and 21 percent of respondents say by more than 21 percent.

Despite market chaos, overcapacity, and declining profits, Silberg feels that the distractions of the recession "haven't taken the executives' eyes from capitalizing on new emerging market opportunities and from focusing on fuel technologies." "There is a great deal of brainpower collectively being put into getting consumers into fuel efficient cars driven by new technologies," he said.

The KPMG survey asked the executives to identify the chief opportunities for the auto industry now and for the next three years, and 21 percent said alternative fuel cars, 19 percent the exploration of new markets, 17 percent said fuel efficient cars and 16 percent said developing new technologies.

Other than China and India, the markets or regions expected to see the greatest growth of consumer demand in the next three years include Eastern Europe (up from 4 percent last year to 43 percent) and Central and South America (up to 29 percent from 4 percent last year).

In the KPMG survey, conducted during late September and October 2008, the 200 executives interviewed represented vehicle manufacturers and suppliers in Canada, United States, United Kingdom, France, Germany, Sweden, India, China, South Korea, Japan, Thailand, Brazil, Mexico, Spain, Poland, Slovakia, Russia, Czech Republic, Italy, Switzerland, South Africa and Australia. KPMG has released an annual survey of automotive executives expressing their views on the state of the industry since 1999.

KPMG LLP, the audit, tax and advisory firm (http://www.us.kpmg.com/), is the U.S. member firm of KPMG International. KPMG International's member firms have 123,000 professionals, including more than 7,100 partners, in 145 countries.

  Contacts:   Kevin Beagley/Manuel Goncalves
              KPMG LLP
              Tel: (312) 665-5010/(201) 307-7735
              kbeagley@kpmg.com/
              mdgoncalves@kpmg.com