While Automotive Industry Shows Signs of Recovery, OEMs and Suppliers Confirm Challenges Are Ahead By Way of Raw Material Costs, Natural Disasters and Emerging Technologies
DETROIT—The automotive industry is showing signs of recovery, but automotive executives still see a number of challenges in the year ahead, according to the 2012 Dykema Automotive Institute Survey: Industry Challenges. The survey was unveiled today at Dykema’s Automotive Institute Forum in Detroit.
Measuring the attitudes and perspectives of executives at OEMs and suppliers, the survey reveals that with the financial crisis and recession continuing to wane, an overwhelming 93 percent of respondents have experienced an increase in demand for their vehicles, parts and services in the past year. As a result, 77 percent of those surveyed have made substantive changes to handle the influx.
With that in mind, while 43 percent of respondents confirmed their companies did not move forward with an acquisition in the past year, largely due to valuations, 56 percent of respondents seem prepared to do more M&A in the coming year, saying they plan to move forward with an acquisition.
Despite the optimistic forecast, more than a third of respondents (39 percent) believe that raw material costs will pose the greatest challenge to their company’s supply chains in the coming year. While this is the main concern among those surveyed, 21percent of respondents also listed banks’ limited financial lending to auto companies as an additional cause for concern.
“For the auto industry, these are interesting times. Every major company has gone through tremendous upheaval and dealt with changes to every aspect of its operations,” said Aleks Miziolek, Director of Dykema’s Automotive Industry Group. “The survey shows that while the automotive industry is emerging strongly from the depths of the global recession, there are many challenges still on the horizon for automotive executives that may impact the long term success of the industry.”
The DAI survey also gave insight into the industry’s view on emerging technologies. While companies are investing more in innovations designed to make cars safer, more than half of OEMs said distracted drivers present the biggest liability issue with connected vehicle technologies. Privacy is also a major concern, with 52 percent of respondents identifying the unauthorized use of data as a key privacy issue. Meanwhile, a quarter of the industry representatives surveyed worry that consumers could reject technology, such as vehicle tracking, due to privacy concerns.
Added Miziolek, “With market forecasting presenting an increasingly difficult challenge for our industry, we believe that our survey results will help inform both OEMs and suppliers in such key areas as supply chain management, privacy and data security issues tied to connected vehicle technology, class action litigation, regulatory issues and mergers and acquisitions (M&A) .”
According to Dykema, the survey yielded a number of other prominent conclusions, including:
- Class actions remain a real source for concern, particularly for OEMs, due to their potential to adversely affect an automotive company’s brands, corporate reputation and bottom line. Twenty-two percent of respondents, most of them OEMs, report an increase in class action lawsuits in the past two years. In addition, 58 percent of those surveyed confirmed their organizations have taken steps in the past two years to try to reduce their exposure to class action litigation.
- The top legislative issue for 30 percent of automotive companies is energy and environmental legislation. 26 percent say the main issue is transportation legislation, followed by tax reform (15 percent).
- Raw material costs pose the greatest challenge ahead to supply chains, according to 39 percent of respondents. Meanwhile, 21 percent of respondents list banks’ limited financial lending to auto companies as the biggest challenge, while 19 percent reference financially troubled suppliers. Only 13 percent of respondents overall say labor union issues are the primary challenge.
- The auto industry is not fully prepared for another natural disaster. In the wake of the March 2011 tsunami that hit Japan, the Evonik fire and other recent natural disasters that have impacted the automotive supply chain drastically, 41 percent of respondents stated they have not instituted crisis management teams to be used under Force Majeure.
In July 2012, Dykema distributed the survey via e-mail to a group of senior executives and advisors in the automotive industry including CEOs, CFOs and other company officers.
For a copy of the full results of the survey, please contact one of the following listed individuals, or click here:
- Terri Reiskin (Class Action Litigation and Products)
- Fred Fresard (Class Action Litigation and Products)
- Mike Stolarski (Intellectual Property)
- Eric Fingerhut (Intellectual Property)
- Andy Buczek (Legislative)
- Rick McDonald (Conflict Minerals)
- Sheryl Toby (Supplier Issues)
- Paul Laurenza (Connected Vehicles and NHTSA)
- Aleks Miziolek (Mergers & Acquisitions)
With more than 85 years of experience representing companies in the automotive industry, Dykema has one of the most extensive automotive legal practices in the United States. Dykema lawyers regularly represent automotive companies headquartered throughout the world. The Dykema Automotive Industry Group professionals counsel automakers and suppliers in important industry areas such as antitrust, securities, collaboration, cross- border mergers and acquisitions, as well as in a broad array of automobile product liability, commercial and supply chain management litigation, and in class action litigation in the most challenging jurisdictions, and before the U.S. Department of Transportation and other federal and state departments and agencies. For more information on Dykema’s Automotive Industry Group, please visit http://www.dykema.com/services-industries-automotive-industry-group.html.