Auto show season is in full swing in North America and, for the first time in more than a year, OEM and supplier CEOs from around the world are starting to express cautious optimism about 2010.
That change in tone, following 2009's "survival by any means necessary" mindset, is refreshing to hear. However, it is important to understand a broad-based economic recovery and sharply higher sales volumes will not necessarily drive that improved outlook.
Rather, in North America, we are seeing the impact of inventory replenishment and the deep cuts in capacity, overhead, and manpower.
As Mike Wall points out in this issue of CSM Insights, many OEM and supplier companies are now reporting production break-even points of 9.5-10.0 million units. With CSM's current North American light vehicle production forecast for 2010 standing at 10.8 million units, many companies should see a return to solid profitability.
Yet there remains a lingering concern about the general health of the supply chain, particularly among Tier 2 and Tier 3 companies. The big issues for them are credit availability, which is simply not available from many banks, the high cost of alternative financing, and the prospect of higher commodity costs driven by the global recovery.
Western Europe, by contrast, will suffer from a post-scrappage hangover, although the premium segment will be surprising bright spot. In an article penned by Björn Hütter, senior analyst, European Vehicle Production Forecasts, he discusses how premium manufacturer production will recover earlier than total European output. In fact, while CSM forecasts a moderate contraction of total European production in 2010, car output of premium brands is expected to grow by 6 percent.
Also in this issue, Charlie Chesbrough provides new analysis of a U.S.-market risk that we have been discussing for some time: the potential disconnect between what OEMs must build to meet fuel economy and CO2 emissions rules and what consumers really want to buy in a low fuel price market. This disconnect has happened before, with negative consequences for profitability and jobs, and stakeholders in the industry should guard against it happening again.
Of course, helping you manage risk is only part of what CSM can deliver. Our analysts and advisory teams have a proven record of finding growth opportunities and helping companies embrace them. Paul Haelterman, vice president, Global Advisory Services, discusses some of these opportunities in his contribution to CSM Insights: a Brazilian airbag market that is poised to grow by 700 percent by 2016, and a U.S. safety electronics market that will nearly double in size by 2030. It is the ability to tap into fast-growing markets like these that makes the auto business one of the most dynamic.
In closing, I would like to say how much I appreciate all of your great feedback on our new AutoBase 4.0 toolset and thank you once again for your continued support of CSM Worldwide. We look forward to helping you leverage the optimistic outlook!
Regards,
Craig Cather
President & CEO
