Arab Today, arab today auto executives are less optimistic
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Arab Today, arab today
Arab Today, arab today

Auto executives are less optimistic

Arab Today, arab today

Arab Today, arab today Auto executives are less optimistic

Detroit - Arabstoday

A new industry survey shows that automotive industry executives are less optimistic than they were three months ago about the economy, but remain mostly positive about 2012 business forecasts.Accounting and consulting firm KPMG began conducting the study this year and it conducted the surveys in July and October.The October survey found 42 percent of the executives polled expect the economy to improve in 2012 -- down from 58 percent in July, KPMG said in a report issued this week.Likewise, 73 percent don’t foresee a full economic recovery until the end of 2013 or later, up slightly from 71 percent who said the same in July.The survey measured the responses of 89 executives, more than half of whom work for institutions generating more than $10 billion of revenue annually, the firm said.“There’s a sense of this cautious optimism where they see this growth opportunity,” Gary Silberg, national auto industry leader for KPMG said. “And they’re willing to invest. All the CEOs I’ve talked to feel this way.KPMG conducts an annual global automotive survey every January, but this one was reserved to executives in the United States, said Manual Goncalves, spokesman for KPMG.“We’ll likely do a quarter over quarter survey going forward,” Goncalves said.Many of the executives, Silberg said, remain on edge about how government regulations -- such as the new CAFE standards proposed this week -- will impact their companies.KPMG found more regression regarding plans for hiring and capital spending in 2012, it said. The outlook is less optimistic than it had been for hiring and capital spending, too.Fifty percent of executives surveyed after September expected to add employees next year, as compared to 62 percent who said they would in July.A similar decline was found in projections for capital spending: in July, 71 percent expected to increase capital spending. Now, only 62 percent expect to do so.“One major finding of our most recent survey are the concerns that executives have over the macro economy,” Silberg said in a statement. “In addition to the uncertainty regarding the global economic environment, auto executives are challenged with intensified competition, pricing pressures and volatile commodity prices.”Manufacturing efficiencies, reducing overhead costs and restructuring existing operations were frequently selected as factors that would have the most positive impact on profitability, the report said.But some challenges remain with commodity costs, capacity and transparency.“Auto executives remain bullish, building on the momentum of the past two years and continue to invest heavily in new product development and product innovation,” Silberg said in the statement.“Companies are looking for suppliers they can trust and suppliers with the ability to ‘grow as we grow,’” he said.Silberg said auto executives feel good about the orders and numbers they’re seeing. As such, they remain optimistic about revenue increases for the coming year.Those surveyed believed new models and products -- as well as expansion into new geographic markets over the next three years -- will be key to increasing revenue.In fact, 77 percent of executives surveyed expected their companies to increase revenue – up from 72 percent three months earlier.“If you look at their balance sheets internally and you see the restructuring and the cash flow of these profits and the bottom line, it gives them confidence,” Silberg said. “It’s the confidence that’s generating cash funds.”Bullish on revenue despite pricing pressures, commodity prices; Product innovation, cost management and manufacturing efficiencies at top of exec agendas. In contrast to their previously upbeat views about the recovering economy, automotive industry executives have tempered their optimism and their plans for hiring and capital spending next year, according to a recent survey conducted by KPMG LLP, the audit, tax, and advisory firm.Conducted in advance of the Los Angeles Auto Show, the KPMG survey found that although automotive executives remain bullish on 2012 revenue projections, they indicate that cost management and restructuring initiatives remain priority areas on corporate agendas.In the KPMG Automotive Executive Survey, conducted in October, 42 percent expect the economy to improve in the year ahead and 73 percent don\'t foresee a full economic recovery until the end of 2013 or later. These are noted shifts from KPMG\'s executive survey, conducted in July, when 58 percent of executives expected an improved economy in 2012 and 71 percent predicted a full recovery before the end of 2013.In addition to tempered perceptions on the economy, from Q3 to Q4, the KPMG survey also found similar regression regarding plans for hiring and capital spending next year. Fifty percent of executives surveyed in Q4 expect to add employees next year (compared to 62% in Q3), and 62 percent expect to increase capital spending – a decline of nine percentage points compared with 71 percent in Q3.\"One major finding of our most recent survey are the concerns that executives have over the macro economy, in particular the potential contagion with a European slowdown and the implications on the U.S. economy,\" said Gary Silberg, national automotive industry leader for KPMG LLP. \"In addition to the uncertainty regarding the global economic environment, auto execs are challenged with intensified competition, pricing pressures and volatile commodity prices.\"Despite the economic environment and significant macro-economic factors, 77 percent of executives surveyed in Q4 expect their companies\' revenue to increase next year – up from 72 percent in Q3. \"Auto executives remain bullish, building on the momentum of the past two years and continue to invest heavily in new product development and product innovation,\" added Silberg.In fact, when asked what the biggest drivers of revenue growth would be over the next three years, executives most frequently cited \'new models/products\' and \'expansion into new geographic markets.\'According to KPMG\'s Silberg, while they remain focused on new products, the auto execs also indicate a renewed concern about costs and improving efficiencies. In fact, when asked about actions would have the most positive impact on profitability over the next three years, improving manufacturing efficiencies, reducing overhead costs, and restructuring existing operations were more frequently selected, up significantly compared to the Q3 survey.\"Auto companies have become much more efficient and can adjust accordingly,\" said Silberg. \"Cost management and operational efficiency have risen back to the forefront and the most intense scrutiny will likely be on the supply chain.\"According to KPMG\'s Q4 auto survey, the most significant challenges in the automotive supply chain, as indicated by automotive executives, are rising commodity costs, capacity, and transparency – all of which saw a significant increase in responses Q3 over Q4. Additionally, execs say the most significant opportunities for improvement in supply chain are better communication/supplier relationships, increased transparency throughout the supply chain, and accelerated innovation from suppliers.\"Companies are looking for suppliers they can trust, and suppliers with the ability to \'grow as we grow\',\" added Silberg. \"The recent events we\'ve witnessed with supply chain disruptions have opened everyone\'s eyes and have placed supply chain management initiatives squarely in the spotlight.\"The KPMG survey was conducted in October 2011 and reflects the responses of 89 senior executives in the auto industry. Based on revenue in the most recent fiscal year, 51 percent of respondents work for institutions with annual revenues exceeding $10 billion, 27 percent with annual revenues in the $1 billion to $10 billion range, and 22 percent with revenues in the $100 million to $1 billion rangeKPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (\"KPMG International.\") KPMG International\'s member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.

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