DETROIT – With a recovery taking longer than expected, leading automotive companies are becoming less optimistic about the global economy and are waiting for a sustained recovery before taking action, according to Ernst & Young’s (E&Y) sixth Capital Confidence Barometer for the automotive industry.
 
Only 19 percent of the 188 automotive executives surveyed said they expected to pursue an acquisition in the next 12 months, compared with almost 40 percent a year ago. This is the lowest figure in the history of the Capital Confidence Barometer, E&Y says. Executives in North America are leading the way, however, with 27 percent expected to acquire, compared with 25 percent in Western Europe and just 6 percent in Asia Pacific. This compares with 40 percent, 32 percent and 7 percent, respectively, last year.
 
Conducted by the Economist Intelligence Unit, Ernst & Young’s Capital Confidence Barometer is a bi-annual survey of senior executives from large companies around the world. The automotive subset of the findings gauges corporate confidence in the economic outlook and identifies boardroom trends and practices based on the way companies manage their capital agenda.
 
“While credit availability is improving and corporate cash balances remain high, the study is proof that confidence is only slowly rising following a prolonged period of macroeconomic instability,” said Jim Carter, Americas Automotive Transaction Advisory Leader for Ernst & Young. “Continuous market volatility, regional issues like the Eurozone crisis, and the potential slowing growth in emerging markets has dampened the appetite for deal making.”
 
Those who report plans to pursue an acquisition in the next 12 months, however, note they are mostly driven by the need to gain share in new or existing markets.  
 
Another key difference from what was identified in the previous (April 2012) Capital Confidence Barometer is that executives are markedly less optimistic that the economy is improving. One-fifth think that the economy is declining, compared with 13 percent in April. Only 22 percent say that they plan to maintain or increase the size of their current workforce in the next 12 months, down from 45 percent in April.
 
Growth continues to be the key driver in the industry as 43 percent of executives report it as their primary focus, declining from 89 percent in April 2011.
 
“With production volume growth slowing after the rapid rebound that followed the recession, companies are now beginning to shift their focus on reducing costs, improving efficiency and optimizing capital,” said Carter.
 
Other highlights from the survey:
 
· 90 percent of respondents cite the Eurozone crisis as affecting their business
 
· 22 percent view the economy as improving compared to 58 percent in April
 
· During the next 12 months, 16 percent see divestments as likely in their organization
 
· In the next 12 months, 26 percent plan to refinance loans or debt obligations
 
For more information on Ernst & Young’s Capital Confidence Barometer for the automotive industry, click here, or to learn more about the company’s Global Automotive Center, visit www.ey.com/automotive.