A new survey has found that auto industry suppliers are being squeezed by lower production volumes, rising material prices and price pressures from vehicle manufacturers.
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Roland Berger Strategy Consultants and Rothschild Investment bank found that many suppliers expected to report lower earnings this year. In their report, Global Automotive Supplier Study, they found the situation would be worsened by the current financial market crisis and weakening vehicle markets as many companies had not been sufficiently prepared.
The study, in its third year, analysed 40 global automotive suppliers, and their financial reports from 2001 to 2007. It found that despite rising raw material costs, profitability in the sector was stable in 2007 with medium-sized firms in western Europe and Japan actually managing to improve performance.
Industry-wide earnings before interest and tax (EBIT) were calculated at 5.4% of turnover and return on capital (ROCE) at 11.9%, one percentage point up on a year ago.
However, the situation did not look so good for 2008 or 2009. EBIT margins were forecast to be below 5% this year and, for 2009, the report’s authors predicted a fall to 4%.
