Automotive Suppliers Must Accelerate Toward “Oligopoly” Not Broad M&A Strategy, Suggests New Accenture Supplier Index

Detroit, September 11, 2001 – The rash of automotive supplier mega-mergers and acquisitions during the last three years has failed to help these companies achieve their goals for increased margins, according to the Accenture Global Supplier Index (GSI). Now, as the frenzy of larger M&A deals has subsided – from a global peak of US $94 billion in 1998 to $55 billion in 2000 – suppliers must make smarter deals faster and consolidate around their leading segments, such as interiors or powertrain.

The Accenture GSI, which measures the health and performance of 20 large, publicly traded companies, provides insights into the current challenges of the auto supplier industry. To reflect the continuing globalization of the industry, Accenture has expanded the 2001 Supplier Index – the third since its inception – to include global companies, rather than focusing solely on North American companies.

The GSI, which is calculated by totaling three, equally weighted operating metrics for the 20 suppliers, includes a rolling four-quarter average growth rate, return on assets (ROA) and return on sales (ROS) indexed to 1994. The most recent findings include the following:

“The trend of the Global Supplier Index indicates the industry is caught in an unstable environment – or value squeeze – created by the lowest car prices in two decades, increasing demands from OEMs to lower prices and pressure on suppliers to assume more capital risk. In the future, we expect to see only two or three suppliers survive within each industry segment,” said Randy Barba, partner in the Accenture Automotive industry group.

GKN and Faurecia in Europe and Tower in North America top the 2001 Global Supplier Index.

“Our Global Supplier Index suggests that suppliers have an opportunity to accelerate their M&A synergies and reverse the decline in ROA, but a turnaround won’t be easy,” said Barba. “Companies must take three key steps. First, they must focus on achieving operating excellence around core capabilities. Second, they must outsource non-core capabilities. Finally, they must concentrate on acquisitions and divestitures to achieve market dominance. The companies that implement these changes will emerge as the industry leaders.”

About Accenture
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