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Executives expect auto profits to rise

Executives expect auto profits to rise
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First Published: Wed, Jan 09 2008. 12 08 AM IST
Updated: Wed, Jan 09 2008. 12 08 AM IST
Southfield (Michigan): Auto makers and suppliers worldwide are growing more optimistic about profitability, according to a KPMG Llp. survey released on Tuesday, with 26% of the participants expecting profits to rise in the next five years.
In 2005 and 2006, only 16% of those surveyed predicted such an increase.
New labour contracts at US auto makers, restructuring that has included plant closings and layoffs in North America, and growth in emerging markets have helped the outlook, said Daron Gifford, head of the Detroit-based automotive practice at KPMG, the tax, auditing and consulting firm that conducted the study.
“Globally, we think it’s going to be a pretty good year,” Gifford said in a phone interview.
It also showed that fewer firms expected profits to fall. Of the 113 senior executives from auto makers and suppliers surveyed, about 14% said profits would decline, compared with 19% in 2006.
Participants in the study, conducted annually since 1999, included 39 executives based in the US, 10 in Germany, 10 in India, nine in Sweden, eight in the UK, and seven in China.
Gifford said the executives are expecting growth from Asia, especially China and India, to make up for declining US sales that are predicted to hit their lowest point in a decade in 2008.
“The emerging-market area is growing faster than what we’ve seen in the past, due to growing populations and certainly wealth in those countries,” Betsy Meter, a KPMG partner, said.
China may see sales of vehicles exceed 16 million in the next five years, matching or exceeding the US market, should Chinese economic growth continue at its current pace, 24% of the executives surveyed indicated.
Among emerging markets outside China, India will show the greatest increase in consumer demand, 72% of executives said.
About 36% of those surveyed in 2007 predicted more bankruptcy filings, compared with 56% in 2006.
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First Published: Wed, Jan 09 2008. 12 08 AM IST