Understanding the health of your supplier: Is your company fueled with working capital?

While the worst of the economic crisis may be behind us, major risks for all participants in the automotive value chain lie ahead, even if demand recovers. For this reason, suppliers, OEMs, investors and creditors should consider further focus on liquidity issues. They could benefit from understanding the industry patterns for each relevant sub segment, including capital requirements driven both by working capital and by future CAPEX needs, which may have to increase to pre-crisis levels in order to keep up with the technological progress of the industry. Simply understanding the numbers may not be enough, though. Automotive players also should consider having access to sound forecasting that helps anticipate changes in demand. Combining financial benchmarking with an integrated forecasting methodology can provide a sound analytical basis for decision-making.

Players that survive the crisis and the initial phase of an upswing with a solid liquidity cushion may have the financial flexibility to benefit from the recovery afterwards and the opportunity to gain a considerable competitive advantage.

For more information, please contact any of the individuals listed on the back of the publication.