Current status of the US supplier industry

advertisement
An industry in cruise
control – What's next
for US suppliers?
Thoughts on the current state of the
industry…
Detroit – March 2014
Contents
A
The firefighting seems over –
In a post-recession world, US suppliers have strengthened their
operational and financial position
B
But: Angst instead of aspiration –
The industry is focusing on short-term window dressing rather than
sustainable value generation
C
At the crossroads –
Successful and steep recovery is slowing down,
future growth opportunities are limited
D
Shifting gears –
The CEO agenda: Redirecting reserves to strategic investments,
while being agile in reacting to external shocks
2014-03-27-US Supplier Study I 2014_revised.pptx
2
During the recovery, US suppliers experienced a fast and steep
recovery with record margins and solid operational performance
Income statement indicators
Revenue growth [2007=100]
EBIT margin [%]
222
8.3
7.5
6.3
110
6.2
109
100
98
2007 2008 2009 2010 2011 2012 2013
Source: Capital IQ, Roland Berger
2007 2008 2009 2010 2011 2012 2013
2014-03-27-US Supplier Study I 2014_revised.pptx
3
Significantly improved financial health through deleveraging and
increased liquidity – huge cash reserves available
Balance sheet positions
Net debt/book equity [%]
Current ratio [%]
158
154
100
140
138
27
25
25
14
2007 2008 2009 2010 2011 2012 2013
Source: Capital IQ, Roland Berger
2007 2008 2009 2010 2011 2012 2013
2014-03-27-US Supplier Study I 2014_revised.pptx
4
Consequently, US suppliers have seen their valuations improving
considerably
Market cap growth index by region [2007=100]
342
222
199
106
100
2007
2008
Source: ThomsonOne, Roland Berger
2009
2010
2011
2012
2013
> Market caps have
exceeded prerecession levels
> Increasing investor
sentiment that
uncertainty and
volatility have gone
down
> The view is that the
market is leveling
off to pre-recession,
mature-market
valuations
2014
2014-03-27-US Supplier Study I 2014_revised.pptx
5
But: US stock performance has been aided by financial
engineering such as repurchases and dividends
Global supplier spend [USD bn]
Stock repurchases
Dividends
CAPEX
53.5
52.5
42.9
37.4
8.6
1.8
1.0
2010
7.3
4.3
7.4
5.2
2.5
2011
2012
Window dressing…
2013
9.7
9.0
7.3
7.2
2.1
2.3
1.9
2011
2012
2013
5.7
4.2
7.4
5.2
1.5
2010
6.9
10.5
11.3
10.0
2010
2011
2012
2013
…rather than
sustainable investment
US suppliers
Source: Capital IQ, Roland Berger
2014-03-27-US Supplier Study I 2014_revised.pptx
6
At the crossroads: Successful and steep recovery is slowing
down, growth opportunities are limited
The road ahead is getting rougher…
1
…Market itself does not support continuous
top-quartile growth anymore
2
…Environment in core markets is getting
increasingly complex and uncertainty is
growing
3
…Volatility in macroeconomic outlook
remains high, external shocks are more
frequent
Source: Roland Berger
2014-03-27-US Supplier Study I 2014_revised.pptx
7
North American light vehicle production is expected to level off,
providing slower growth than at post-recession levels
North American light vehicle production [m units]
Stability
Recession
-24.6%
-1.9%
Recovery
Forecast
+17.2%
+1.7%
17.2
16.2
> High growth rates in
recent years were
due to the recovery
of the market
17.4
> With North
American
production leveling
off, US suppliers
cannot expect to
create substantial
value by just
growing with the
market
8.6
2001
2003
2005
2007
2009
2011
2013
2015F
2017F
x.x% - CAGR for the respective period
Source: IHS, Roland Berger
2014-03-27-US Supplier Study I 2014_revised.pptx
8
In major global and BRIC markets, production will slow
significantly – No real growth driver in sight
Global light vehicle production [m units]
17.9
Stability
Recession
+0.7%
-11.7%
-14.3%
+2.6%
12.6
+24.7%
+20.9%
2.2
1.5
1.0
+5.1%
+8.3%
+6.2%
2001
2003
-34.4%
2005
2007
x.x% - CAGR for the respective period
1) EU-27 plus Norway and Switzerland; 2) Japan and Korea
Source: IHS, Roland Berger
2009
> European light
vehicle production
28.1
is experiencing
+7.6%
only slow
turnaround in
1)
2014 – pre-crisis
+12.5%
levels will not be
18.1
+3.4%
+1.8%
reached until
2)
2020
+5.0%
-3.1%
> Production growth
11.9
in emerging
markets slower
than before crisis
> Production growth
+3.7%
-0.3%
3.3
in Brazil has
2.3
continuously
+31.9%
+4.1%
slowed down
2011 2013F 2015F 2017F
since 2000 –
negative growth
expected
for 2014
2014-03-27-US Supplier
Study I 2014_revised.pptx
Recovery
Forecast
9
With limited financial resources, suppliers have to cope with an
increasingly complex environment…
Number of light vehicle SOPs 2011-2016
> SOP European models (MB C-Class, VW
Golf, Ford Transit)
> Several US models with multiple
production locations (e.g. Ford F-150,
GMC Sierra, Chevrolet Silverado)
177
20
29
222
28
37
219
29
27
61
55
Forecast
307
36
295
66
63
263
32
43
47
63
70
141
123
114
2014
2015
2016
67
57
71
2011
Source: IHS, Roland Berger
96
108
2012
2013
> All regions will see
higher level of new
product launches in
the coming years,
increasing
complexity also on
the supplier side
> Number of SOPs in
North American
plants will more than
double in 2014
> South America will
see large number of
new vehicle
launches in 2016
2014-03-27-US Supplier Study I 2014_revised.pptx
10
… and a high level of uncertainty
Example: 2020 global sales volume forecasts for alternative powertrains
Pure BEV
~11 m (10%) Carlos Ghosn
March 2011
~9 m (8%) BCG high,
Fraunhofer low
~7.5 m (7%) Frost & Sullivan
Hybrids/PHEV
10 m (9%) McKinsey opt.,
MIT, Deutsche Bank
9 m (8%) Gartner high
Natural gas
3.2 m (3%) Pike
~6.5m (6%) BCG low
~6.5m (6%) BCG low
~5 m (5%) Poth, RB high
~4 m (4%) Deutsche Bank
~2 m (2%) J.D. Power, IEA
~1 m (1%) RB estimate
~1 m (1%) Avicenne Energy
<1 m (<1%) IHS
Source: Roland Berger
5.4 m (5.2%) RB estimate
5 m (5%) Gartner low
4.7m (5%) IHS
4 m (4%) Bosch
1.6 m (1.5%) HIS
1.5 m (1.5%) Avicenne Energy
1 m (1%) McKinsey cons.
~1 m (1%) RB estimate
2014-03-27-US Supplier Study I 2014_revised.pptx
11
In addition, macro-economic outlook remains highly volatile
Europe
Collapse of the
Euro zone?
China
Slower growth in
China a new reality?
> Most likely scenario is > Politics-fueled
"no change"
investment boom
likely to restart after
> But: Devastating
change in
effects could hit the
leadership…
industry
> …but on a lower level
and with different
focus and mix
Source: Roland Berger
Brazil
Russia
Back to times of high
currency volatility?
Unclear future with
Crimea crisis?
> Fed's tapering puts
Brazil's currency
volatility back in the
spotlight
> Bleak outlook as
consumer confidence
continues to decline
> Currency pressures
from US tapering
leads to record
central bank
interventions
> Crimea crisis and
Western sanctions
could hurt the
industry
2014-03-27-US Supplier Study I 2014_revised.pptx
12
Shifting gears: US suppliers need to redirect reserves to strategic
investment to successfully navigate the road ahead
US supply base has successfully recovered
> The
from the crisis
industry is operating with profitable margins,
> The
generating cash and healthy balance sheets
Market growth is slowing down and the
> But:
environment is getting more and more volatile
a consequence, the road is getting rougher,
> Asvaluations
will come down – starting already in
2014
players are likely to become potential
> Many
takeover candidates
the US supplier industry needs to shift
> Therefore,
gears and redirect reserves towards sustainable
value generation
Source: Roland Berger
2014-03-27-US Supplier Study I 2014_revised.pptx
13
Top-quartile suppliers realize continuous and profitable growth
well ahead of the market
Financial performance of global suppliers by quartile [2007=100]
Revenues growth [2007=100, CAGR %]
ROIC [%]
145 Top 25%
14 Top 25%
116 LV market
106 Middle 50%
9
Middle 50%
5
Bottom 25%
100
92
2006 2008 2010 2012 2014
Source: Capital IQ, Roland Berger
Bottom 25%
2007 2008 2009 2010 2011 2012 2013
2014-03-27-US Supplier Study I 2014_revised.pptx
14
The CEO agenda for the supplier industry…
>
>
>
Drive sustainable growth by actively
investing excess cash – M&A is a viable
option for suppliers to close the strategic gap
Permanent stress testing of growth strategies
and active risk management is crucial to cope
with a highly volatile and uncertain environment
On the operational side, risks of exposure in emerging
markets need to be addressed on an ongoing basis
2014-03-27-US Supplier Study I 2014_revised.pptx
15
When you're fumbling
around, that's the
moment where
opportunity and disaster
are close at hand.
But if you can push it
to opportunity,
you'll get something
really special.
–Bruce Springsteen
2014-03-27-US Supplier Study I 2014_revised.pptx
16
Your contact in North America
Thomas F.
Wendt
Partner
Detroit/Chicago
+1 248.729.5000
[email protected]
2014-03-27-US Supplier Study I 2014_revised.pptx
17
Download
Related flashcards

Credit

13 cards

Banking

30 cards

Finance

16 cards

Finance ministries

62 cards

House of Medici

36 cards

Create Flashcards