A Stunning, High-Speed Recovery for European and North American Auto Suppliers as EBITDA Skyrockets, According to Annual PRTM Global Auto Supplier Study

WALTHAM, MA--WAugust 12, 2011: hile most auto suppliers traveled a bumpy road during the last two years, European and North American auto suppliers increased EBITDA from 2009 to 2010 by 76% and 68%, respectively, and North American suppliers emerged as the most likely global consolidators in 2011. These findings are part of global management consulting firm PRTM's annual auto supply study: "Consolidation in the Global Automotive Supply Industry 2011". The study analyzes 565 suppliers, including the top 100 global players, with combined revenues of $2.24 trillion from Europe, North America, Japan, South Korea, China, Brazil, and India.

“There's no room anymore for a $100 million supplier”

After undergoing the biggest downturn in history, worldwide automobile sales will likely hit a new record in 2011, driven by China's relentless growth and the US recovery. According to the PRTM study, North American suppliers, in particular, have been significantly increasing acquisitions. Accounting for 36% of all deals so far in 2011, North American suppliers now comprise 11 of the 19 most likely global consolidators. These include ITW, Cummins, Magna, PPG, Lear, DuPont, JCI, Eaton, Timken, Dow and Tyco. The most distressed companies, meanwhile, have been smaller European suppliers; as of May, 44% of all auto supplier acquisition targets have been European. Seven of the top 10 acquisition targets in the last 12 months have been German.

Three of the Global 100 suppliers are now Chinese, and Chinese Supplier's EBITDA grew 40% CAGR during the past five years. Since 2008, China's auto industry has almost doubled and should continue to grow 12% to 15% yearly. Sales in Western Europe, however, remain depressed. The 2011 earthquake and tsunami in Japan not only impacted Japanese automakers -- Japanese OEM output fell 20% to 40% over the past six months - but also Japanese suppliers.

Shift from Surviving to Thriving Requires New Supplier Business Models

With the continued recovery, auto suppliers worldwide must adapt to a changing market. New requirements include dealing with OEM's increasingly global platforms; learning how to compete in China for business with global joint venture OEMs as well as consolidating domestic Chinese vehicle manufacturers; and defending territory against an increasingly more capable and highly profitable Chinese auto supply base eager to penetrate Western markets.

"There's no room anymore for a $100 million supplier," says Dietmar Ostermann, PRTM partner and one of the study's authors. "You must be able to supply a Toyota Camry or Ford Focus platform that spans five continents." He continued, "As vehicle demand and production rise rapidly in China, Brazil, India, and Russia, auto suppliers will have to adapt--by modifying product offerings to meet customers' needs, right-sizing capacity in high cost countries, and expanding product development capabilities and production in these future markets."

With only two Chapter 11 cases in 2011, U.S. bankruptcies have slowed significantly. Meanwhile, PRTM expects up to 250 auto supplier M&A deals in 2011-near the 2007 high of 276, despite the recent US credit downgrade.

About PRTM

Since 1976, PRTM has created a competitive advantage for its clients by changing the way companies operate. PRTM management consultants work with senior executives to develop and implement innovative operational strategies that deliver breakthrough results. The firm is a leader in operational strategy, supply chain, product development, and customer value management. PRTM has 18 offices worldwide and serves major industry and global public sectors.