Global Vehicle Suppliers Saw 25 Percent Drop in Financial Performance in 2001, According to Sixth Annual A.T. Kearney Study

SOUTHFIELD, Mich., June 18 -- The financial performance of vehicle supply companies decreased 25 percent in 2001 as suppliers were stung by a 3.7 percent decrease in global vehicle production, according to the sixth annual analysis of financial performance at 66 global vehicle suppliers by consulting firm A.T. Kearney, a subsidiary of EDS.

The A.T. Kearney study, which analyzed cash flow return on invested capital (CFRIC), found that average performance of North American vehicle suppliers decreased by 28 percent. The average CFRIC of Japanese vehicle supply firms was off 3 percent and European suppliers were down 32 percent. CFRIC is a comprehensive metric of overall financial performance based on cash flow generated relative to the capital invested to generate that cash flow.

"The financial performance of North American suppliers, though down in 2001, continues to exceed the financial returns of S&P 500 companies in 2001 and over the past three-year period," said John Hoffecker, vice president and leader of A.T. Kearney's vehicle industry practice.

A.T. Kearney's sixth annual analysis of the global vehicle supply industry examined the financial performance and strategic activities of 66 vehicle supply companies, 17 vehicle manufacturers, 14 dealer groups and 11 aftermarket retail concerns.

In addition, the cash margins (cash-in divided by sales) of Japanese suppliers averaged 9.7 percent in 2001, the first year Japanese suppliers have lead the category during the six years of the study. The cash margins of European firms averaged 8.5 percent, down 4.2 percentage points from 2000, and North American companies' cash margins averaged 7.7 percent in 2001, down 2.5 percentage points from the previous year.

"Although the Japanese suppliers did relatively well last year compared to 2000, European and North American vehicle supply firms still financially outperform them overall. From a global perspective, the vehicle supply industry reflected a downturn in CFRIC that was evident across all industries," said Hoffecker.

"Some suppliers are continuing to perform well despite the downturn. Among the best practices that set these firms apart are strategic sourcing initiatives, lean asset structuring and careful analysis of make-versus-buy decisions," said Hoffecker.

Additional findings in A.T. Kearney's study of automotive industry performance included:

During the last 10 years, OEMs have produced higher shareholder returns than their suppliers in every region of the world. In 2001, the dealer and aftermarket segments of the industry outperformed automakers and suppliers in key metrics, including CFRIC and total shareholder return. Only glass, interiors and diesel engine sectors of the global vehicle supply industry have achieved positive total shareholder returns over the past three years. High debt and low liquidity continue to pose major challenges for over one-third of Tier 1 suppliers studied. Global acquisition activity continues to decline worldwide, with the largest drop occurring in North America. "Although acquisition activity is down, a significant 'inventory' of segment divestitures exist across the supplier industry and private equity investors are very active in the market," said Hoffecker. According to the A.T. Kearney study, the top 10 best financial performing vehicle suppliers in the world, based on 2001 CFRIC, were:

2001 1. American Axle (US) 16.5 percent 2. Wagon (UK) 14.8 percent 3. Johnson Controls (US) 14.6 percent 4. Linamar (CAN) 14.2 percent 5. Magna (CAN) 14.0 percent 6. Lear (US) 14.0 percent 7. Superior (US) 11.9 percent 8. Dura (US) 11.5 percent 9. Autoliv (SWEDEN) 11.2 percent 10. Keihin (JAPAN) 11.0 percent

North American Average 8.9 percent Europe Average 8.2 percent Japan Average 6.8 percent Overall Average 8.1 percent

About A.T. Kearney

A.T. Kearney ( www.atkearney.com ) is one of the world's largest and fastest-growing management consulting firms. With a global presence that includes more than 60 offices in 37 countries, spanning major and emerging markets, A.T. Kearney provides strategic, operational, organizational and technology consulting and executive search services to the world's leading companies. A.T. Kearney is the high-value management consulting subsidiary of global services leader EDS.

About EDS

EDS, the leading global services company, provides strategy, implementation, business transformation and operational solutions for clients managing the business and technology complexities of the digital economy. EDS brings together the world's best technologies to address critical client business imperatives. It helps clients eliminate boundaries, collaborate in new ways, establish their customers' trust and continuously seek improvement. EDS, with its management consulting subsidiary, A.T. Kearney, serves the world's leading companies and governments in 60 countries. EDS reported revenues of $21.5 billion in 2001. The company's stock is traded on the New York Stock Exchange and the London Stock Exchange. Learn more at eds.com .