Innovation critical to long term survival say auto industry CEOs according to PricewaterhouseCoopers survey

Published at 09:58 AM on 03 February 2009

According to the recently published Global CEO Survey by PricewaterhouseCoopers in which 62 auto CEOs took part, 92% recognise that innovation is a critical ingredient for long-term survival. The key challenge currently facing auto industry CEOs is how to balance the pressing demands of the here and now with the need to create a business that can thrive in future years.

A clear understanding of what customers want is essential with 95% of auto CEOs citing customer information as key, 58% saying they would like more information about customer preferences with only 14% currently receiving adequate information.

Steve D’Arcy, global auto leader, PricewaterhouseCoopers, commented:

"Innovation requires substantial long-term investments, which are difficult to make when a company is struggling with its very existence. It also requires knowing consumers inside out."

Thirty-seven percent of automotive CEOs around the world believe that increased product penetration into existing markets is the key to turning around the auto industry. This year's results indicate a reversal from last year, where 34% favoured new product development and 15% better market penetration.

Forty percent of automotive CEOs believe that structural changes to the business model in their industry will have a positive impact on their operations and on the industry's overall competitiveness. Many of the industry leaders have announced plans to cut production significantly; indeed, the PricewaterhouseCoopers Auto Institute predicts that the number of vehicles manufactured in 2009 will be just 59.4 million – 13% less than in 2008.

The global economic downturn has forced automakers to re-evaluate their business models, which could put automotive suppliers and dealers at risk. Survey results indicate that not all automotive CEOs have fully comprehended the implications that the economic situation may have on their supply chains. Some 38% are concerned about the security of their supply chain as a potential threat to business growth over the long-term, while 81% identify efficient sourcing and supply chain management as a key source of competitive advantage.

Steve D’Arcy, global auto leader, PricewaterhouseCoopers, commented:

"Automakers need to understand and manage the risks embedded in the intricate network of suppliers. Troubled suppliers pose a real risk to every car producer and their suppliers. The current economic environment makes it critical for automotive companies to know the potential threats to their business."

The survey also found that 94% of CEOs feel that access to and retention of key talent to achieve long-term success is critical. They are less concerned about finding new employees with the right skills than with holding onto existing employees and cultivating their intellectual capital.

The trend towards flexible manufacturing will translate into fewer jobs on the assembly line and not surprisingly, 39% of respondents expect to reduce the number of employees in the next 12 months.

The survey results show that 73% of automotive CEOs agree that a new global climate deal is important or critical, and 70% feel clearer communication about the threats and scope of climate change is required.

Automotive companies have initiated sustainability studies and policies to better understand climate change issues and greenhouse gas impacts on the environment. As a result, companies are finding innovative approaches to vehicle design, safety, and advanced-technologies to lessen their carbon footprint. They are taking big steps to help sustain the environment for future generations.

The automotive industry will help play a role in addressing the business implications of climate change by finding solutions to reduce their impacts on the environment.

Steve D’Arcy, global auto leader, PricewaterhouseCoopers, commented:

"Automakers need to 'right-size' and re-evaluate their business models to succeed long-term. The good news is that people will still buy cars around the world. Automakers will have to consider how they go to market in the future to meet consumer demand."

Notes to Editors:

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For more information contact:

Elaine Bailey
Consumer and Industrial Products & Services PR Senior Manager 
Tel:020 7212 5133 
Mobile:07834 318 350 


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