DETROIT -- Despite higher sales and mostly positive forecasts for recovery, automaker and supplier executives are still unsure of the U.S. auto industry's stability, a recent online survey conducted by Booz & Co. found.
Two-thirds of respondents said restructuring during the economic downturn did not sufficiently address the industry's structural weaknesses, the management consulting firm said in a statement this week.
"Although there has been significant improvement in both product strategy and operations as a result of the restructuring, there is still a lot of work to do," said Booz & Co. partner Scott Corwin. "Many of the practices that got the industry into trouble could re-emerge, particularly if vehicle production exceeds real market demand."
Of the executives surveyed, 30 percent said they expected the failure of an auto manufacturer within the next two years. Among suppliers, 60 percent said they were actively seeking acquisitions.
An uncertain future
While automotive forecasters are estimating that U.S. vehicle sales will surpass 16 million units by 2015, those surveyed estimated a much lower 14.5 million in sales by then. Last year, light-vehicle sales rose to 11.6 million from a 27-year low of 10.4 million in 2009, according to the Automotive News Data Center.
Even as they estimated lower sales compared with analyst projections, the automaker and supplier executives forecast mostly positive growth for their own companies: 30 percent of suppliers and 25 percent of automakers said they anticipate their companies' revenue growth rate to exceed 15 percent this year. Overall, 80 percent of respondents said they expect to gain market share in the next three years.
Booz & Co. conducted the survey before the March 11 Japanese earthquake that is still disrupting supply chains around the world.
In addition, 89 percent of automaker and 87 percent of supplier respondents predicted that within three to 10 years, Chinese automakers' products will reach quality parity with vehicles sold in the United States. Most automaker executives cited increasing competition as their biggest challenge going forward.
Some of this competition could come with the adoption of electric, diesel and hybrid powertrain systems. About 75 percent of respondents said they expected alternative powertrains to be less than 20 percent of all powertrains sold by 2020.
No single technology was forecast to dominate, suggesting that a variety of powertrains will compete for a small share of the overall market, Booz & Co. analysts said.
In January and February, Booz & Co. surveyed 201 managers, directors, vice presidents, executive vice presidents and top-level employees at 40 automakers and Tier 1 and Tier 2 suppliers. Respondents included 53 automaker executives, 133 Tier 1 executives and 15 Tier 2 executives. Of the companies represented, about 71 percent were based in North America, 16 percent in Asia and 12 percent in Europe.
Keys to success
In order to gauge long-term industry goals, Booz & Co. asked executives what they felt were the most important components to continued recovery.
Automaker respondents cited greater discipline in vehicle production and pricing, as well as continued emphasis on better products.
"Auto manufacturers are watching their competitors closely to see if their basis for competing is through product excellence and technological innovation or if they will resort to aggressive pricing to gain share," Corwin said. "And there is concern about the impact of the overall economy and when there will be an increase in consumer spending to fuel sales growth."
Supplier respondents cited competitive costs, better quality r&d and supporting automakers globally.
"Though most suppliers survived the downturn, only a very few have captured the advantaged position necessary to win long term and earn a fair return on their invested capital," said Booz & Co. principal Brian Collie. "Only through innovation in cost or performance, helping to create end-user demand, or establishing themselves as the supplier best positioned to solve an OEM's problems will suppliers be able to get on a path to achieving long-term viability."