BIRMINGHAM, England - Automotive suppliers continue to lead assemblers and dealers in profitability, according to PricewaterhouseCoopers in a new survey of the global auto industry.
But that profitability, the worldwide accounting firm cautions, will come under tremendous pressure in coming years as the industry continues to consolidate into fewer and bigger players.
According to Steve Utting, PwC auto analyst, component suppliers posted an average return on assets of 15.8 percent in the last full year for which data are available. (Some companies report on a calendar basis, others on differing fiscal bases.)
That compares with 11.6 percent for vehicle makers and 10 percent for dealerships.
'Components manufacturers focused on components or entire systems consistently achieve great-er financial returns than those with unfocused strategies,' Utting said.
'But unfocused component suppliers have average returns ... only marginally greater than their cost of funding,' he said.
The report cautions that overcapacity, coupled with inefficiencies in the supply and distribu- tion chains, costs the auto indus- try $30 billion a year in lost profit.
As companies strive to stamp out waste, Europe is likely to become the 'industry's global battleground' for mergers, takeovers, plant closures and job losses, the report warns.
As the industry consolidates, the survey notes, component manufacturers are trying to integrate either vertically, by investment in the development of a wider product offering, or horizontally, by becoming a specialist.
It urges parts makers to decide quickly what activities they wish to own, what can be done through joint ventures and what they need to outsource.