US Auto Industry Set For Resurgence in 2004

05 January 2004

America's car manufacturers are on course for a boom in 2004, predicts the Detroit office of audit and management consultancy KPMG. But profit levels similar to those achieved in 1999-2000 are still two years away, the firm foresees.

The beancounter's annual study of the US auto industry polled one hundred senior managers at the motor city's major carmakers and parts manufacturers.

The executive consensus expects a surge of Asia-centric mergers and acquisitions in the year ahead -- but boomtime profit levels are not expected to return until 2006, indicating a more cautious attitude among the Detroit honchos who last year foresaw this happy event in 2005.

Comments the national industry director of KPMG's automotive practice, Brian Ambrose: "In a down economy, our survey has found executives always pushing profitability a few years out, and this year is no different. But what executives are telling us this year is that they have seen the worst and that the industry is poised for a rebound."

Although the general note appears to be one of optimism, the executives surveyed were downbeat that US brands will stem the erosion of their global market share over the next five year. On the upside, however, opportunities are seen for US car sales in Asia.

Asked whether they agreed with the statement that Asia will become "a major source of growth", 90% affirmed that they did so -- a significant increase on last year's 66%.

At the same time, senior executives are cooling toward the strategic alliances so popular of late -- "losing their taste", as KPMG's Ambrose put it. "With improving economic conditions, we're seeing auto companies increase their tolerance for risk-taking, which includes seeking acquisitions," he said.

Data sourced from: Financial Times; additional content by WARC staff