Global auto execs anticipate drop in market share for US makers

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. 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% expecting profits to increase, 24% decline, and 46% 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. 50% of the executives see the restructuring plans succeeding, with 43% neutral and 6% disagreeing. This is only somewhat lower than a year ago when 58% saw the OEMs succeeding and 10% disagreeing. And the majority, 57%, expect the restructuring to be completed before 2011, only somewhat down from 64% 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% seeing an increase in the next few years, up considerably from 36% a year ago. And also project significant increases in merger and alliance activity, especially with OEMs and Tier 1 suppliers. In fact, 75% of the execs see increases for OEMs, up substantially from 47% 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% of the execs surveyed by KPMG feel that it is an issue. 59% feel that capacity needs to be reduced by 11-20%, 20% by 1-10% and 21% of respondents say by more than 21%.

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% said alternative fuel cars, 19% the exploration of new markets, 17% said fuel efficient cars and 16% 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% last year to 43%) and Central and South America (up to 29% from 4% last year).

In the 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.

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