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
© 2010 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.
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
BusinessVehicle Manufacturer
Unit Function Management/ Tier 1 Supplier
Leadership Team
CEO/President/Chairman
Business Unit Functional Manager 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 Increase
is negative for Stable Decline
companies now locate all their significant both Japan and North America: more
growth expectations for the next five companies now expect decline in those
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
ia
ss
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ica
Ru
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&
Ja
Am
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ric
Eu
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Af
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Am
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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%
Increase Stable Decline
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
EMEAto obligate or bind KPMG International or any other member firm vis-à-vis third parties,
KPMG International provides no client services. No member firm has any authority
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? Extent
How much?of overcapacity
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
ia
il
ina
ss
dia
az
Ru
Ch
Br
In
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
Increase Stable Decline
© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network Increase
of independent firmsStable Decline
are affiliated with KPMG International.
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
KPMG International provides no client services. EMEA firmASPAC
AmericasNo member has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,
nor*does
Percentage of companies
KPMG International expecting
have improvement
any such authority to obligate or bind any member firm. All rights reserved.
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
4/Beyond crisis: challenges angle
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
Tier 1 suppliers OEMs
Tier 2 suppliers
nor does KPMG International have any such*authority
to obligate seeing
or bind any cost saving
member opportunities
firm. All rights reserved.
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 firms are affiliated
© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent EMEA ASPAC
with KPMG International.
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%
73.00%
72.00%
71.00%
70.50%
65.00%
60.00%
56.00%
52.00%
52.00%
51.00%
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
KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG2009
x Noany
International or data for 2007
other member firm vis-à-vis third parties,
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
ss
n)
ica
Ru
pa
er
Ja
pe
&
Am
pe
a
ing
ica
ro
ric
h
Eu
ro
er
lud
ut
Af
Eu
Am
So
rn
xc
&
te
(e
l&
st
er
rth
es
Ea
ia
st
ra
pa
W
No
As
Ea
nt
le
Ja
Ce
idd
M
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
© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG EMEA
network of independent firms are affiliated with KPMG International.
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 while environmental concerns continue companies are markedly more concerned
consistently told KPMG’s Global Auto to rise higher on the corporate agenda. than others with managing labor, and
Executive Survey that their highest-ranking Managing labor relations remains a low markedly more concerned with product
concerns are with new technology and new priority. quality (the proportion of ASPAC
products. That remained the case in the companies rating it “very important”
current survey: both new products and new Regional results show very similar as against “moderately important” is
technologies have moved higher in the patterns, suggesting as in earlier surveys high). ASPAC companies are also more
ranking of concerns from an already high that the broad shape of priorities remains concerned with pricing, while companies
leading position in last year’s survey. the same in all regions of the world: auto in the Americas and in Europe prefer to
companies tend to take a global view. prioritize total affordability.
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
96.00%
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%
69.00%
65.00%
64.00%
64.00%
63.00%
62.00%
59.00%
49.50%
49.50%
x
* Percentage of companies seeing cost saving opportunities
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

2008 2009
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%
as
ic
38.71%
C
er
PA
Am
PA
AS
33.33% 36.67%
39.74%
AS
EA
s
EM
ica
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
© 2010 KPMG International. KPMG International is a Swiss cooperative. Extremely

Member firms of the KPMG Somewhat
network of independent firms are affiliated with KPMG International.
Fuel efficiency and environment top of consumer concerns
In qualitative interviews which accompanied In the current survey fuel efficiency and the inclined to rate consumer preferences as
the preparation of the current survey, environmental profile of products continue “very important” than are companies in
companies repeatedly stated that they to be considered by companies the most other regions. The relatively low priority
believe that adaptation to changing significant consumer buying issues. But ascribed to telematics is consistent with
consumer demand will be an important on a regional basis it is clear that consumer results last year – globally, telematics
key to survival in the coming five years. concerns are believed to differ: the high received the highest number of “not
The survey questions on drivers of rating accorded to safety is due to ASPAC important” scores. Overall, the efficiency
consumer buying give an insight into companies citing this issue – and on of vehicles is believed to dominate
just how companies will do that. all issues ASPAC companies are more consumer concerns.
How important are these product issues to consumer

purchase decisions over the next five years?*
* Percentage of companies rating issues as
• Fuel efficiency top concern over last three years important (the top three issues shown)
• Companies think consumer concerns on
environment continue to rise
96.00%
93.50%
84.00%
80.50%
75.00%
72.00%
71.00% 70.00%
50.00%
Fuel efficiency Environmental Safety innovation

friendliness
2007
2009 2008
2008 20072009
© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of of

*Percentage thecompanies
KPMG network
ratingof independent
issue firms are affiliated with KPMG International.
as important
How important are these product issues to consumer purchase decisions over the next five years?*
* Percentage of companies rating
• Asian companies now rate styling, comfort and safety significantly higher than others issues as important
• Asian companies also most likely to rate environment as top consumer concern
• Fuel efficiency for all regions most important
95.00%
93.55%
92.31%
83.87%
80.77%
79.03%
76.67%
74.19%
70.00%
67.75%
65.39%
58.98%
56.45%
56.67%
50.00%
50.00%
45.00%
44.87%
40.00%
35.90%
33.33%
Safety innovation Environmental Ergonomics Fuel efficiency Enhanced vehicle Telematics/ Vehicle styling
friendliness and comfort lifespan personal assistance
services
Americas EMEA ASPAC
© 2010 KPMG International.*KPMG
International rating
is a Swiss issue as important
cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.
Low-cost producers to win most market share
Company expectations of market Two significant winners emerge Both Mercedes and BMW are also seen
share gain and loss have changed in in year-on-year comparisons: as better placed to win market share, both
significant ways. Chinese and Indian Hyundai/Kia is one – a result that may companies having defied expectations of
brands remain in the top three places in reflect the success of Korean automakers a collapse of premium vehicle sales.
terms of expectation of market share in profiting from government sales
gain, but conviction is slightly lower subsidies during 2009 – and VW is the
than in last year’s survey. Both Toyota second. Market share gain expectations
and Honda are expected to win market for the big three US makers remain low
share at a lower rate than in previous and Chrysler has fallen further, although
years, and there has been a fall in Fiat, now the key actor in Chrysler’s
expectation for Russian brands. Overall immediate future, is rated higher in terms
we note that the top six rated companies of market share prospects than in the
have either very strong cost or product previous year.
advantages, or both.
How will market share by company change in the next five years?
• Low cost makers in top three places

• Toyota and Honda fall in ratings for first time in three years
• VW seen as strongest European OEM, Ford as strongest US OEM
n
s
oe
an
or
ds
ss
ot
itr
en
ds
an
ia
ds
lM
t/C
i
s
/N
ag
de
i/K
an
br
an
i
eo
r
ult
ish
sw
ra
sle
ce
br
da
a
se
br
uji
ot
ne
ug
na
rd
nd
ub
lk
er
un
ry
n
ine
BM
y
u/F
ian
Fo
Fia
Ge
Re
Pe
dia
Vo
Ho
To
Ch
its
Hy
Ch
ss
ar
In
M
b
Ru
Su
6.50% 11.00% 10.00% 25.00% 15.00% 11.50% 26.00% 15.00% 27.50% 68.00% 72.50%
5.00% 10.50% 9.50% 42.50%
22.50% 35.00% 31.50%
13.00%
13.00% 14.50% 30.50% 36.50% 56.50%
49.00% 57.00%
78.50%
73.50% 72.50% 32.50% 44.00%
70.00% 53.50%
45.50%
38.00%
57.00%
37.50%
51.50%
40.50%
34.50%
30.50% 17.50%
29.00%
26.50% 18.00%
20.50%
17.50% 16.00%
16.00%
13.00%
7.50%
Increase Stay the same Decrease

Increase Remain the same Decrease
Expectations of the performance of sales

by vehicle type show a remarkable degree
of consensus: companies in all three
global regions cite exactly the same three
vehicle types as top performers (hybrids,
other alternative fuel vehicles and low-cost
introduction cars). Expectations of declining
sales performance are perhaps not
surprisingly focused on larger and more
inefficient vehicles, although it is notable
that companies in the Americas do not cite
luxury vehicles in their “bottom three”.
How will sales by vehicle type change in the next five years?*
* Regional best and worst performers
• Hybrids, alternative fuel and low cost vehicles lead in all regions
• Inefficient vehicles to lose most sales
les
les
les
hic
hic
hic
rs
rs
rs
ca
ca
ca
ve
ve
ve
ion
ion
ion
el
el
el
les
les
les
fu
fu
fu
ct
ct
ct
du
du
hic
hic
du
ive
ive
ive
hic
les
les
ro
ro
ro
ps
ps
ve
ve
ps
at
ps
at
at
ve
hic
hic
int
int
int
rn
rn
rn
ku
ku
ku
ku
el
el
el
lte
ve
lte
ve
lte
st
st
pic
pic
fu
fu
st
ns
pic
pic
fu
-co
-co
ra
-co
ra
ra
ry
va
ry
id
id
id
Vs
e
e
e
Vs
all
xu
he
xu
br
br
he
he
rg
rg
w
ini
br
w
rg
SU
Sm
SU
Hy
Hy
Lo
Lu
Lo
La
La
Lu
Lo
Hy
Ot
La
Ot
M
Ot
1.67% 1.28% 1.28% 1.61%

3.33% 3.23%
5.00% 5.13% 3.23%
68.33% 60.00% 45.00% 7.69% 16.67% 62.82% 60.00% 35.90%
10.00% 4.84% 17.74% 14.52% 32.26% 32.26% 24.19%
95.00% 10.00% 12.82%
91.03%
91.94%
88.33%
85.00%
82.05% 80.77%
79.03% 80.65%
27.42%
45.16% 37.10%
44.87%
38.33%
30.77%
48.39%
23.33%
24.36%
23.33%
29.03%
22.58%
16.75% 19.23% 19.23%
16.67%
12.82%
8.33%
Americas EMEA ASPAC

Americas EMEA ASPAC
Best Worst Best Worst Best Worst
Increase Stay the same Decrease

© 2010 KPMG International. KPMG International is a Swiss cooperative. Member firms of the KPMG network
Increase Remainof independent
same firms are affiliated with KPMG International.
Decrease
Hybrid technology rated clear leader
The primary importance that companies survey responses, and battery and
ascribe to vehicle efficiency and the fuel-cell approaches are ascribed almost
further development of alternative equal priority. Regional views of other
propulsion technologies is already alternatives are clearly influenced by
apparent from earlier questions in the regional issues, particularly the extent of
current survey, as well as from the installed fuel infrastructure; accordingly,
growing emphasis on these developments ethanol is rated low priority by EMEA
in year-on-year responses despite companies, while LPG is considered
relatively low sales (see next page). considerably less important in the
Electric power ranks only just behind Americas than elsewhere.
hybrid power developments in the current
How important are these alternative fuel technologies over the next five years?*
*Percentage of companies rating
• Strong global consensus on importance of hybrids and electric technologies technologies as important
• ASPAC companies rate solar power much higher than other regions
85.90%
85.00%
82.26%
68.34%
67.95%
67.74%
64.52%
63.34%
61.54%
61.29%
46.78%
46.67%
41.66%
41.94%
40.33%
34.62%
34.61%
23.07%
20.51%
20.00%
18.34%
Fuel-cell electric Battery electric Ethanol Biodiesel LPG/LNG Hybrid fuel Solar power
power power systems
© 2010 KPMG International. KPMGAmericas
International is a SwissASPAC
EMEA cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International.
* Percentage of companies rating technologies important
How many alternative fuel vehicles (not including hybrids) will be sold in 2010?*
*2008 sales approximately 1.5 million
11.50% 7.69% 19.35%

10.00% 1.28% 1.61%
17.95%
6.67% 7.69%
16.13%
13.33%
25.64%
24.19%
38.71%
55.00%
39.74%
Americas EMEA ASPAC
<1 million 1-1.5 million 1.5-2 million 2-2.5 million

>2.5 million Don’t know
How many hybrid vehicles will be sold in 2010?*

Fewer than 1 million 1 - 1.5 million 1.5 - 2 million
*2008 sales approximately 780,000
2 - 2.5 million More than 2.5 million Don’t know
Americas EMEA ASPAC
16.67%
12.82% 8.97%
1.67% 24.19% 1.61%
10.00%
10.26% 37.10%
43.33%
29.49%
17.74%
28.33%
38.46% 19.34%
* 2008 sales approximately 780,000

Americas EMEA ASPAC
<750,000 750,000-1 million 1-1.25 million 1.25-1.5 million

>1.5 million Don’t know
© 2010 KPMG International. KPMG

Fewer International
than 750,000 is a Swiss cooperative. Member firms of the KPMG network of independent
750,000 - 1firms
million are affiliated with KPMG International.
Greater than 1 million - 1.25 million Greater 1.25 million - 1.5 million
Executive view: large Tier 1 supplier – US
This large US supplier believes that “I am a little bit more optimistic than I was a Overall the industry still needs to cut
the industry has made progress year ago, but there are a lot of uncertainties. capacity. It is much easier to cut capacity
in 2009, but that more needs to in the US than it is in Europe, and that is
The US is only going to sell around 10 million one reason why the big three have all cut
be done.
cars this year. Whether the recovery we’ve capacity in the US. That is something they
seen during the second half of the year still have to do in Europe. The carmakers
is sustainable in 2010 is uncertain: will all need to continue moving European
the economy has not bottomed yet, and production to the East to cut costs, and
unemployment is still rising. Elsewhere, they will need to cut their production in
China is still growing, although that bubble Western Europe because there just won’t
may burst. India still has huge potential, be the sales for those plants.
although whether consumers have the
money to buy cars in volume we don’t yet I think the biggest winner over the last
know. And Europe I think may have a more year has been General Motors. And it has
difficult time next year than this, once the a pretty good model line-up now. As for
ending of the government incentive the others, Ford has had to borrow money
schemes hits home. But South America and that has damaged their finances.
will grow, and especially Brazil will grow. Chrysler still has to be turned around, and
it’s an open question whether Fiat can
My sense is that in the US people still do achieve that. I think European makers will
not understand how things are changing. suffer unless they can find more ways to
The automakers are very busy developing cut costs. Even Toyota has seen a fall in
smaller cars, but whether they are going US market share for the first time. Almost
to sell them to the US consumer is another everyone has suffered in some way.
matter: the mindset is not there, not yet.
For the US the question is all about demand.
We are working with a number of The potential for selling 16 or 17 million
companies on electric cars, hybrid-cars cars a year is there – the demographics
and super-economical vehicles. I think the are there. The only question is, will people
pure electric car as a mass-market product have the money to buy those cars? I don’t
is ten years away at least. For now, plug-in know the answer to that.”
hybrids have more potential. But in both
cases the economics of the vehicles are
unfavorable. For example, we are working
on a small electric vehicle, but it will still
have to cost around $40,000 – that’s an
expensive car. Even with hybrids, if you
do the math then they don’t really make
sense. People don’t buy them for economic
reasons, because as things stand you will
never get your money back in fuel savings.
It is hard to see that as a mass market
proposition.
R&D will win most investment
When companies were asked where they to invest, reflecting the concern of many border dealer expansion will be muted,
would direct investment capital, while new Tier 2 suppliers (supported by the results especially in the Americas and in EMEA.
technology and new model development on profitability earlier in this survey) that We also note companies’ expectation of
remained top priorities, companies also they need to invest to raise profitability. significant IT and training investment in
said they would spend more on marketing the dealer industry; this reinforces results
– but less on logistics and much less on The responses on dealer investment from KPMG’s study of the global dealer
new plants. The pattern of investment represent the views of manufacturers on industry published in early 2009, which
intentions for suppliers remains the same dealer businesses (dealers themselves found that dealers themselves believe
as in last year’s survey, but for suppliers were not participants in the survey). that the industry suffers from an IT and
too the reduction in expectation of new Companies believed that ASPAC dealers training deficit.
plant building is striking. Tier 2 suppliers will have a higher propensity to invest,
are expected to show a higher propensity and believed that domestic and cross-
Do you expect manufacturers to increase their investment

over the next two years?*
* Positive responses from
• Investment growth expectations of OEMs fall slightly manufacturers only
year-on-year
• Expectations of investment growth in innovation
remain high
93.00% 93.51% 93.00%
85.71%
55.84%
53.00%
49.00%
45.00% 44.16%
25.97%
New plants New models/ New Marketing and Logistics/

products technologies advertising distribution
2009 2008
Do you expect suppliers to increase their investment over the next two years?*
* Positive responses from suppliers only. 2008 results include
• Supplier expectations of innovation investment have grown some responses from Tier 3 suppliers
• Investment growth in new plants to fall by almost half
• Tier 2 suppliers expect to increase investments in marketing and advertising
r
r
lie
lie
lie
lie
pp
pp
pp
pp
r
r
lie
lie
lie
lie
su
su
su
su
pp
pp
pp
pp
2
su
su
su
su
r
Tie
Tie
Tie
Tie
1
2
r
r
Tie
Tie
Tie
Tie
r
lie
lie
lie
lie
pp
pp
pp
pp
su
su
su
su
95.65% 100.00%
1
2
r
r
Tie
Tie
Tie
Tie
93.00%
r
r
93.00%
lie
lie
lie
lie
89.00% 91.00% 91.00%
pp
pp
pp
pp
88.00%
su
su
su
su
82.61%
1
2
r
er
r
lie
lie
lie
r
li
Tie
Tie
Tie
Tie
pp
pp
pp
pp
su
su
su
su
1
2
r
r
Tie
Tie
Tie
Tie
70.00%
64.00% 64.00%
62.00%
59.00% 59.00%
57.00%
47.83%
44.00%
32.00%
30.43%
New plants New models/ New Marketing and Logistics/

products technologies advertising distribution
2009 2008
Do you expect dealers to increase their investment over the next two years?*
* Results from manufacturers and suppliers
• ASPAC companies see HR deficit as significant dealer issue
• All regions expect dealers to improve IT
22.58%
60.00%
EA
C
47.44%
ica
PA
EM
53.85%
er
AS
s
EA
C
ica
Am
PA
EM
er
AS
Am
77.42%
72.58%
66.67%
s
EA
C
ica
PA
EM
s
EA
er
AS
ica
PA
Am
EM
er
AS
Am
51.28%
46.77% 46.15%
43.55%
38.46% 38.33%
35.90%
31.67%
25.00%
Domestic expansion Cross-border expansion IT systems and HR training

and acquisitions and acquisitions communication
Yes
Yes No
Chapter 7: Investing in new markets
Companies are nearly unanimous in reflect companies’ revenue expectations:

expecting emerging markets to build most the strongest expectations are for revenues
automotive capacity and to provide the from China although a very small minority
most growth in automotive revenues. The of companies envisage revenue decline in
majority of companies say they intend to China. In India many more companies see
increase their investments in the BRICs moderate growth than see strong growth,
(Brazil, Russia, India and China). although no companies at all envisage
revenue falls. Moderate rather than strong
Of companies with existing investments in growth is also the majority expectation for
the BRICs, most say they will increase the Brazil. Russia is the outlier – while more
value of those investments (the number of than half of all investors have expectations
companies with existing investments that of moderate or strong growth, a significant
say they have no plans to change their level minority now anticipate a fall in revenues
of investment is negligible). Those results over five years.
North America (ie US & Canada) Over the next five years
Western which
Europe Japan
region of the world or country do

you think will build the most
Eastern Europe & Russia Asia excluding Japan Centra
Middle East & Africa manufacturing capacity?

Don’t know
2.50%
2.50%
1.00%
6.50%
1.00%
3.00%
10.00%
73.50%
North America (US & Canada)

Western Europe
Japan
Eastern Europe and Russia
Asia (excluding Japan)
Central & South America
Middle East & Africa
Don’t know
Investing in new markets 35
Do you plan to increase or

decrease your investment What are your revenue forecasts for the
in the BRICs? BRICs?
• Existing BRIC investors will increase • India and China seen as biggest growth markets
exposure • Significant minority see Russian decline
• Reduction of investment negligible
ia
ina
il
ss
dia
az
now
Ru
Ch
Br
In
ina
1.14% 2.38%
Ch
2.82% 0.70% 3.41%

16.35%
15.48%
te decline
2.00% 7.75% 29.55%
58.50% 46.48%
53.85% 25.00%
dia
In
/stable
ia
ss
Ru
53.41%
43.00% 0.50%
il
41.67%
az
Br
te improvement 2.00%
35.00%
42.25%
26.00%
mprovement 29.81%
15.48%
12.50%
Increase Decrease Strong improvement Moderate improvement

Neutral/stable Moderate decline
Don’t know
Executive view: diversified supplier – emerging market
This India-focused supplier, part “I am almost 100 percent more confident As we go into 2010 I can see a lot of M&A
of a group with sales of over half than I was at this time last year, and I am opportunities. Many companies outside
a billion US dollars and over 6,000 especially confident about the Indian market. of Asia are not in good shape, and we may
be able to buy them cheaply. The limiting
employees, says that automotive
The crisis certainly had a very negative factor is financing: banks have cut lending,
demand in emerging markets is effect on many of our customers. We saw and we will have to rely on internal sources
set to grow at breakneck speed. the worst effects in the commercial of capital.
vehicle market. Vehicle usage was down,
demand for new vehicles was down, and We would look for market share and for
it was very difficult for companies to technology. In commercial vehicles, for
finance new purchases. Private passenger example, we have the market share, but
car demand held up better: personal we are concerned that we don’t have
finances were more resilient than future technology. For passenger cars
company finances. we need market share.
We have cut output, but we did that by For the next five years our biggest
reducing staffing, a cut of somewhere challenges are going to be dealing with
between 20-30 percent. We have not a growing market. We have two or three
closed any facilities. And in the last main competitors in India, and we need
quarter of 2009 we stopped cutting to maintain market share as the market
manpower. It is quite likely that by the end grows. A key will be winning business
of the first quarter of 2010 all those job from the world’s main OEMs as they
cuts will be reversed. invest more in India.”
We have also cut costs by reducing the

number of processes we outsource,
things like powder coating and machining.
Our strategy has been to increase the
amount of value we add in-house.
BRIC sales forecasts continue to grow
In previous editions of this survey, When will China sell a significant number (1 million+ a year)
companies were asked to give specific of cars in other markets?
forecasts of domestic unit sales growth
ranges and export sales in China in five • Expectations of Chinese exports improve after falling last year
years’ time: the current survey extended 2009 2008
these questions to all of the BRIC markets.
28.90%
Expectations for both domestic and export

Chinese sales have increased. There has
18.00%
been an increase in expectation for the higher
82.00%
ranges of domestic sales to be achieved by
2014, except in the extreme high range of
18 million plus: we believe this indicates both
a growth in optimism on and knowledge of 71.10%
the Chinese market on the part of companies.
The proportion of companies expecting
export sales to pass one million within five
years has also increased dramatically.. 2009 2008
Within 5 years Beyond 5 years
What do you estimate will be the annual volume of unit sales in China by 2014?*
*2008 sales approximately 9.4 million cars and commercial vehicles
42.25%
30.00%
20.42% 20.00% 20.00%
13.38%
10.56%
10.00% 10.00% 10.00% 9.15%
1.41%
<10 million 10-12 million 12-14 million 14-16 million 16-18 million >18 million
2009 2008
The consensus views of companies on It should also be noted that investment

sales in Brazil, India and Russia are also intentions noted elsewhere in this
strikingly strong. Expectations of sales survey for India in particular do not seem
volumes in India are equivalent to a commensurate with sales expectations,
consensus that growth of 17 percent will suggesting that companies may be
be achieved annually. The consensus is for expecting to sell in India a significant
growth of around 30 percent over five proportion of vehicles manufactured
years in Brazil, and of around 40 percent elsewhere.
over five years in Russia (although it should
be noted that a significant minority think
Russian sales will be flat or even fall).
What do you estimate will be the annual What do you estimate will be the annual
volume of unit sales in India in 2014?* volume of unit sales in Brazil in 2014?*
*2008 sales approximately 2.3 million cars and commercial vehicles *2008 sales approximately 3.2 million cars and commercial vehicles
47.73%
47.12%
36.36%
25.96%
15.38%
11.54%
9.09%
4.55%
2-3 million 3-4 million 3-4 million 4-5 million

4-5 million >5 million 5-6 million >6 million
KPMGsales
*2008 International provides
approximately 2.3nomillion
client services. No membervehicles
cars and commercial firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties,
China
Expectations for the achievement of be achieved by Brazil within the five-year 31.50%
export sales of over one million rank in horizon. However companies do not
order India, Brazil and Russia. Over 50 believe that Russia is in that league: 2.82%
percent of companies think that level will almost two thirds of companies believe
be achieved by India within five years, and Russia will not sell more than one million 29.81%
42.25%
over 45 percent of companies think it will cars outside its borders within five years.
53.85%
46.48%
When will Brazil, Russia and India

What do you estimate will be the annual sell a significant number (1 million +
volume of unit sales in Russia in 2014?* a year) of cars in other markets?
16.35%
0.70% 3
*2008 sales approximately 2.8 million cars and commercial vehicles 7.75%
ia
il
ss
dia
az
Ru
Br
In
Beyond 5 years
47.12% 54.55% 63.10%
42.86%
Within 5 years
32.14%
52.88%
45.45%
36.90%
15.47%
7.14%
2-3 million 3-4 million Within 5 years Beyond 5 years

4-5 million >5 million
Smaller emerging markets to gain
For companies looking for new growth and EMEA companies on the latter.
markets, the BRICs are no longer the only However, ASPAC companies are shown
game in town. Companies in KPMG’s to be considerably more interested in
Global Auto Executive Survey say they Africa than any others, reflecting Asian
expect growth and auto investment in companies’ long-standing willingness to
many other growing economies, with the invest in economies that others may see
strongest expectations for Southeast Asia as marginal. Companies in both EMEA and
and for Eastern Europe, with ASPAC the Americas are more likely to expect
companies most focused on the former investment in the Middle East.
Not counting the BRICs which regions will attract most auto industry investment over the next five years?
• For all regions expectations of South East Asian investment highest
Americas EMEA ASPAC
35.00% 41.03% 22.58%

35.00%
6.67% 39.74%
6.41%
12.9%
23.33% 10.26% 51.61%

4.84%
1.61%
Americas EMEA ASPAC
Eastern Europe including Ukraine Central and South America including Mexico Middle East including North Africa
Africa excluding North Africa Southeast Asia
Eastern Europe including Ukraine Central and South America including Mexico
nor does KPMG International have any such
Middle authority
East including toAfrica
North obligate or bind any member firm. All rights reserved. Africa excluding North Africa
It is striking that when asked which Malaysia over Thailand, and ASPAC
individual countries outside the BRICs will companies prefer Vietnam slightly over
attract auto investment in the coming five Malaysia). In the Middle East Morocco was
years there are clear winners: Ukraine is the clear leader in investment expectations,
seen as the outstanding East European albeit on a low base of companies responding.
destination (although on regional basis In South and Central America, Mexico
Americas and EMEA favor Poland); Thailand emerges – unsurprisingly given its
is the outstanding destination in Southeast significance as a manufacturing base for US
Asia (although on a regional basis both companies – as the outstanding destination.
ASPAC and EMEA companies prefer
Which emerging economies will attract most auto investment over the next five years?*
*Top five investment destinations
• Biggest existing manufacturing countries to attract most new investment
ico
ex
M
71.05%
d
an
ine
ail
ra
Th
Uk
ia
ys
ala
34.68%
M
d
na
33.00%
lan
ina
et
ia
Po
an
nt
Vi
c
ge
m
bli
Ro
Ar
pu
sia
25.81%
Re
ne
22.00% 22.58%
do
h
y
ec
ar
In
ng
Cz
18.00% 18.42%
es
Hu
ile
la
pin
ue
Ch
ilip
ez
ia
12.1%
liv
Ph
n
Ve
Bo
10.00%
8.00%
6.58%
3.23% 1.32%
2.63%
Eastern Europe Southeast Asia Central and South America

South East Asia
Eastern Europe Central & Sth America
kpmg.com
Global Automotive contacts Regional Automotive contacts
Dieter Becker ASPAC

Global Chair, Automotive Chang Soo Lee
KPMG ELLP Samjong KPMG in Korea
T: +49 711 9060 41720 T: +82 (2) 2112 0600
E: dieterbecker@kpmg.com E: changsoolee@kr.kpmg.com
Stephanie Goering The Americas

Global Executive, Automotive Gary Silberg
KPMG ELLP KPMG in the US
T: +49 711 9060 41271 T: +1 312 665 1916
E: sgoering@kpmg.com E: gsilberg@kpmg.com
EMA
Dieter Becker
KPMG ELLP
T: +49 711 9060 41720
E: dieterbecker@kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular © 2010 KPMG International Cooperative (“KPMG
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such International”), a Swiss entity. Member firms of the KPMG
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 network of independent firms are affiliated with KPMG
such information without appropriate professional advice after a thorough examination of the particular situation. International. KPMG International provides no client services.
No member firm has any authority to obligate or bind KPMG
The views and opinions expressed herein are those of the interviewees and do not necessarily represent the views and International or any other member firm vis-à-vis third parties,
opinions of KPMG International or KPMG member firms. nor does KPMG International have any such authority to
obligate or bind any member firm. All rights reserved.
KPMG and the KPMG logo are registered trademarks of

KPMG International Cooperative (“KPMG International”),
a Swiss entity.
Designed by Roundel
Publication name: KPMG’s Global Auto Executive Survey
2010
Publication number: 912007
Publication date: December 2009
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Au to m ot i v e

KPMG’s Global Auto Executive

As our survey records, the industry is

But more striking is the record of auto

Chapter 1: Survey methodology

Survey participants Survey participants

CEO/President/Chairman Vehicle manufacturer

Chapter 2: Executive Summary

Key results The performance angle Alternative propulsion technologies are

Companies in all three global regions cite

Chapter 4: The growth prospect

What are your forecasts for auto industry revenues

• Growth expectations largely geared to Asia

6.00% 23.50% 24.00% 31.50%

Increase Stable Decline

Executive view: volume automaker – Europe

So the emerging market economies will

Overcapacity is now critical

Is there automotive overcapacity

• North America seen as most overbuilt

Yes 1-10% 11-20% 21-30% 31-40% More

Is there automotive overcapacity

Is there automotive overcapacity

Emerging markets are becoming overbuilt

Given the high level of expectation of near-term capacities is highest in Russia,

When do you expect overcapacity in the BRICs

• Overcapacity not confined to ‘triad’

s 23.24% 24.04% 13.64% 22.62%

Now 1-2 years 3-5 years

Chapter 5: The performance angle

How profitable do you think the global automaking, supplier

• Financial services seen as most profitable

Automakers Tier 1 Tier 2 Tier 3 Financial Dealers

Increase Stable Decline

How profitable do you think the global automaking, supplier

• EMEA profitability expectations lowest * Percentage of companies

Executive view: mid-size automaker – US

No easy cost savings expected

• Cost focus shifts away from restructuring * Percentage of companies seeing

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

No data for 2008, 2007

Capital costs to remain high

How do you expect financial conditions

• Companies expecting financial improvement outnumber * Percentage of companies

Cost of capital Availability of capital Cost of consumer credit Availability of

M&A set to grow

Perceptions of a continued high level of M&A is also expected in growth markets

How will M&A in these types of companies develop

• Expectations of OEM M&A growth stay * Percentage of companies

2009 2008 2007 X No data for 2007

Increase Remain the same Decrease

• High expectations of Eastern European and Asian M&A

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

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

• Indebtedness now seen as top driver of M&A

55.00% 54.50% 55.00%

Access to new Access to new Raw materials Product synergies

Chapter 6: Product innovation and consumer change

2009 2008 2007 X No data for 2007

How important today are the following

Managing labor Improving total Pricing and sales Improving product

• North America seen as most overbuilt

• Companies expecting financial improvement outnumber * Percentage of companies