Auto Executives Expect Michigan to Remain a Strong Center for Automotive Engineering, KPMG Survey Finds

DETROIT, Jan. 7, 2005 -- Michigan's investment climate may be unclear, but the state will continue to strengthen as an automotive engineering center, according to 50 North American auto industry executives surveyed recently by KPMG LLP, the audit, tax and advisory services firm.

According to the results, 30 percent of the executives surveyed said they expect the investment climate in Michigan to improve over the next five years, while 30 percent expect it to remain the same, and 30 percent expect it to worsen. Looking back over the past five years, 30 percent of the executives surveyed said Michigan's investment climate had remained the same, and 44 percent felt it had worsened. Only 14 percent said that the investment climate had improved.

"As the survey highlights, high labor costs and a sluggish economy have had an impact on the growth of new business," said Jeff Dobbs, Managing Partner for KPMG in Detroit. "It is somewhat gratifying to see the executives expressing more optimism for investments in Michigan going forward, coming at a time when automakers are heavily focused on investment opportunities in China."

Of the executives surveyed, 52 percent said the most important criteria for doing business in Michigan is a growing economy. Twenty-six percent said tax incentives are the most important criteria. Sixteen percent said a skilled labor pool is the most important criteria.

Despite the mixed investment climate outlook, executives expect the state to remain a strong engineering center. Forty-four percent of the executives said they expect to see an increase in the building of new engineering facilities, while just 10 percent expect a decrease in the number of new facilities.

"Michigan has established itself and continues to establish itself as a leader in automotive technology and innovation, said KPMG's Dobbs. "Couple this with the expectation for increased engineering facilities expansion, and the state is on course to continue to attract and retain top professionals in engineering, technology, finance and management."

In reviewing the most important automotive product innovations, auto executives surveyed, in priority order, pointed to fuel-cell technology, safety innovations, telematics and engine management systems. Furthermore, 63 percent felt that the new product development cycle will decrease dramatically in the next five years, and 64 percent of the executives felt that new technologies would be one of the most important issues impacting a consumer's purchase decision in the next five years.

The survey of North American automotive executives on the Michigan investment climate was conducted in October and November, 2004 as part of KPMG's sixth annual survey of global executives, which identifies important trends in the global automotive industry, including implications for manufacturers and consumers. The poll included the opinions of OEM executives and suppliers.

A separate KPMG poll completed last month of Detroit-area executives, representing companies of various sizes and a range of industries, found that they expect a significant pick-up in business performance in the year ahead. Of 98 senior executives, 20 percent said their company performed much better in the past year, and 30 percent indicated that the performance was somewhat better. Looking to the year ahead, 32 percent said their company's performance will be "much better," while 49 percent said it will be "somewhat better."

"Detroit area executives are predicting a significant rise in business performance, and our region may expect to benefit as a result," said KPMG's Dobbs. "What they are telling us is heartening. They're quite confident about their own business prospects, and that could help propel an eventual rebound of overall economic conditions."

KPMG LLP is the audit, tax and advisory firm that has maintained a continuous commitment throughout its history to providing leadership, integrity and quality. The Big Four firm with the strongest growth record over the past decade, KPMG turns knowledge into value for the benefit of its clients, people, communities and the capital markets. Its professionals work together to provide clients access to global support, industry insights, and a multidisciplinary range of services. KPMG LLP (http://www.us.kpmg.com/) is the U.S. member firm of KPMG International. KPMG International's member firms have nearly 100,000 professionals, including 6,800 partners, in 148 countries.