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January 19, 2009
Auto Executives Commit to Green Technologies to Lead Industry Back to Profitability
    by Robert Kropp

Annual KPMG survey finds increased interest among auto executives in alternative fuel technologies, with a newfound focus on electric cars.

The tenth consecutive annual KPM G Global Auto Executive Survey was carried out by KPMG, a global network of financial and consulting services firms, at a time when the industry's traditional optimism has been deferred, if not abandoned.

Anticipating that consumers will be more discriminating in their purchases, the survey found that for consumers, fuel efficiency is now more important than even product quality. As a result, respondents consider fuel efficiency improvements, alternative fuel technologies and environmental pressures to be the most influential trends.

Asked to rate the importance of automotive product innovations over the next five years, auto executives expressed strong support for hybrid systems, up to 91% from 79% last year. And they moved electric and battery to a clear number two, up to 82% from 60%. Fuel cell technology rounded out the top three trends in innovation with 76%.

Asked to identify opportunities for the auto industry for the next three years, 21% of respondents said alternative fuel cars, 19% said the exploration of new markets, 17% said fuel efficient cars and 16% said developing new technologies.

The majority of executives surveyed expect companies to see little or no profitability, and even losses, over the next five years. A significant decline in market share for US manufacturers is expected as well. In contrast to last year's survey, respondents now expect bankruptcies to increase, especially among Tier 1 suppliers. Tier 1 suppliers are companies that make products specifically for one of the name-brand car manufacturers.

But when asked how cost savings would be realized in such an environment, most respondents expect innovation in manufacturing processes and materials technology to be more important than direct overhead cost reductions. While funds for marketing and advertising, as well as for investment in new plants, were expected to drop, more than 90% of respondents expected investment in technological innovation to remain high.

The KPMG survey is based on interviews with 200 senior executives at vehicle manufacturers and suppliers worldwide. Publication coincided with this month's Detroit Auto Show, where the customary glitz has been replaced by sober displays of alternative fuel cars, with a new emphasis on electric cars.

There were reports from the Auto Show that executives of Detroit's Big 3 have been warned not to be photographed holding glasses of champagne.


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