CNN/Money  
graphic
News > Companies
graphic
Auto execs gloomy
Survey finds strong profit recovery not expected until 2005; Big Three losing ground.
January 2, 2003: 8:35 AM EST

NEW YORK (CNN/Money) - Auto executives are more pessimistic than they were a year ago about a return to the strong profits and record sales of 2000, and have pushed back their expectations for an industry-wide recovery by a year or two, according to a survey.

The survey of 100 executives by accounting and consulting firm KPMG LLP found that 30 percent now expect it will be 2005 before the industry returns to 2000 profit levels against only 7 percent who thought so in similar survey a year ago. The earlier survey also found 36 percent expected profits to return in 2003, and 24 percent expected profits to rebound by next year.

"It's obvious from the survey findings that the executives no longer see profitability rebounding any time soon – both as a result of the economic downturn and of consumers' expectations for rebates, special pricing and other financial arrangements," said Brian Ambrose, national industry director of KPMG's Automotive practice.

In addition, slightly more than half the executives surveyed expect the global market share of the Big Three automakers to shrink over the next five years, while only 11 percent expect market share gains by General Motors Corp. (GM: Research, Estimates), Ford Motor Co. (F: Research, Estimates) and DaimlerChrysler AG (DCX: Research, Estimates). While that's about the same percentage predicting a market share decline as a year ago, the percent seeing a market share gain has dropped sharply.

"It's not at all surprising to see executives cite a continuing decline in market share," Ambrose said. "Asian and European brands have been successful at bringing the right product to the market quickly while being flexible in their manufacturing processes to respond to changes in demand."

The survey found executives split on further increase in incentives to woo buyers, with only 48 percent expecting incentives to increase in the next five years. A year ago, 63 percent were looking for increased incentives. The zero-percent financing, which most of the industry followed GM in offering in the fall of 2001 in the wake of Sept. 11, returned this past summer and has continued on many models since.

"Over the past 12 months the industry has been focusing much of its attention on zero percent financing and discounts," said Ambrose. "I truly believe that the message the American brands have been delivering is one of pricing and not new product innovation."

The executives also see far less customer brand loyalty in the current environment, with only 19 percent expecting to see an increase in loyalty in the next five years, compared with the third who expected increased loyalty in the previous survey.

"Clearly, the days of brand-loyal consumers are declining rapidly," said Ambrose. "Today's customers are smart and, through the Internet, can access a wealth of information to help them make decisions. In short, consumers want the best car for their dollars and have no qualms about shopping around to find it."

About 85 percent of executives see labor costs increasing over the next five years, but only 16 percent believe unions are going to be stronger. This is significant considering that the Big Three all have contracts with the United Autoworkers union set to expire in 2003. Even if there are not significant gains by the unions in the coming negotiations, and increased pension and retiree health-care costs could hit auto industry profits, according to Ambrose.

"Producing automobiles continues to be a very labor-intensive process, and over the next five years a growing number of retirees will become a drain on the more established manufacturers," he said.  Top of page




  More on NEWS
JPMorgan dramatically slashes Tesla's stock price forecast
Greece is finally done with its epic bailout binge
Europe is preparing another crackdown on Big Tech
  TODAY'S TOP STORIES
7 things to know before the bell
SoftBank and Toyota want driverless cars to change the world
Aston Martin falls 5% in its London IPO




graphic graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.