Executives see little North America growth

January 04, 2007|Associated Press

DETROIT -- Auto executives worldwide expect slower North American sales growth and more parts supplier bankruptcies during the next five years, according to a survey taken by the auditing and consulting firm KPMG LLP.

They also see high fuel prices permanently etched in consumers' minds, sending them away from trucks and sport utility vehicles to hybrids and low-cost cars, and that doesn't bode well for Detroit's Big Three, according to the survey to be released today.

But despite continued restructuring and too much production capacity worldwide, many of the 150 senior industry executives surveyed by the company said they also are at least mildly optimistic about profits as they identify cheaper ways to produce parts and new sources of revenue, according to the survey.

"They seem to be more optimistic that there's going to be strategies and creative ways to do that," said Daron Gifford, KPMG's national automotive industry leader.

The executives polled were from vehicle manufacturers as well as parts makers from North America, Great Britain, France, Germany, Sweden, India, China, Korea, and Japan, KPMG said.

Eighty-three percent expect increased market share for hybrids, while 75 percent predicted increased sales of low-cost cars as fuel efficiency becomes the top driver of automotive purchases, according to the survey.

Fifty-six percent of the executives predicted more bankruptcies in the next five years as the industry continues to shake out weaker companies, while 31 percent said bankruptcies would remain the same as this year.

The executives think that Asian brands will continue to grow worldwide during the next five years at the expense of U S brands. Seventy-one percent said the market share of the North American brands would decline worldwide during the next five years as demand for cars in developing markets continues to grow.

They also predict that Chinese brands will start to capture a significant share of the worldwide market, and that U S brands are not positioned as well to sell vehicles in emerging markets .

"There's not a lot of growth anticipated among American brands in particular," said Betsy Meter, a partner with KPMG.