Powertrain systems suppliers at core of current M&A wave
(Detroit, MI)—September 25, 2012—PwC’s global automotive management consulting practice today released “Consolidation in the Global Automotive Supply Industry 2012” the firm’s fifth annual study of the global state of the automotive supplier market. The expanded 2012 study includes 700 automotive suppliers with aggregate revenues of $2.8 trillion in 2011 from Brazil, China, Europe, India, North America, Japan, and South Korea.
With global automotive production markets growing (except for Western Europe) and undervalued automotive supply assets, merger and acquisition (M&A) activity is anticipated to remain at a near record high in 2012, with about 270 automotive supplier deals globally. The study reveals that European automotive suppliers are the key targets of automotive supplier M&A activity for the second consecutive year.
“During the last 12 months, global auto suppliers, particularly from North America and China, have been targeting European competitors, predominately in powertrain subsystems,” said Dietmar Ostermann, PwC’s global automotive advisory leader and an author of the study. “Auto executives should take a harder look at how the industry will continue to change, as leading suppliers will be expected to support global OEM platforms and participate in China’s large and continuously growing auto market, by serving both global JV OEMs and domestic Chinese automakers.”
PwC's study also discusses which suppliers are likely to accelerate in the current market by making acquisitions or divesting non core assets, and which suppliers may still require financial assistance or restructuring. PwC’s 2012 list of top 25 potential consolidators within the top Global 100 suppliers showcases 14 North American companies and only five European suppliers. Ten of those top 25 consolidators are powertrain suppliers. PwC evaluated each of the most likely consolidators on their “buyer score,” a measure of their financial and operational ability to acquire other suppliers, as well as on their “buyer attitude,” a measure of their willingness to make acquisitions.
Another key finding of the 2012 study is that European, North American, Japanese and South Korean automotive suppliers have not returned to pre-crises capital investment (capex) levels. Capex as a percent of sales was 5.1 percent for the top Global 100 suppliers in 2008, dipped to an all-time low of 3.6 percent in 2010, and only recovered to 4.1 percent in 2011. Chinese suppliers have increased their capex spending from 7.1 percent to 10.5 percent in the same timeframe.
According to PwC's Ostermann, “When working with our OEM clients on supply chain issues, we hear that supplier capacity in many markets outside of Europe is tight, particularly in North America. North American automotive suppliers are not investing in more capacity in the home market, but rather in emerging markets like China. This continuous North American capacity shortage represents a potential opportunity for a number of suppliers prepared to selectively invest in the U.S. market. ”
For a copy of the Consolidation in the Global Automotive Supply Industry 2012 study, visit www.pwc.com/auto.
About PwC’s Global Automotive Management Consulting Practice
PwC’s automotive management consulting practice is creating a competitive advantage for its clients by changing the way companies operate. PwC’s management consultants work with senior automotive executives to help develop and implement innovative operational strategies that deliver breakthrough results. The practice is a leader in operational strategy, supply chain, product development, strategic sourcing, and manufacturing. PwC has automotive resources in every automotive market around the world. For more information, visit www.pwc.com.
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