February 8, 2005

Automotive CEOs warn low cost competition is key threat

Detroit, Michigan – CEOs of automotive companies see low-cost competition as the biggest threat to the future of their sector, according to the Eighth Annual PricewaterhouseCoopers Global CEO Survey. 73 percent of CEOs believe such competition will threaten the revenue growth of their company over the next 12 months.

Of all the sectors canvassed in the survey, automotive was the most concerned by the threat of low-cost competition. It is also the most concerned by the detrimental impact of losing key talent. Oil pricing is seen as the third greatest threat, while inflation emerges as one of the least important.

On a more positive note, the survey also found there has been significant expansion in many automotive companies. Sixty-six percent have accelerated expansion plans, 63 percent have increased research and development and 50 percent have opened new plants or offices.

Stephen D’Arcy, PricewaterhouseCoopers Global Automotive Leader, said: “The survey indicates there has been a high level of development and expansion in the automotive sector. When balanced with the widespread concern over low cost competition it can be interpreted as a cause for some concern. However, the best automotive companies are putting methods in place to capitalize on the enormous opportunity presented by low cost and rapidly growing economies.”

In terms of development opportunities in specific global territories, China is viewed as by far the most popular, with India taking the second spot.

The automotive sector had the highest response to offshoring non-core business functions, with 49 percent saying they are doing this currently. Seventy-five percent said offshoring helps reduce their costs and 52 percent believe it enhances shareholder value.

The survey is drawn from interviews with over 1,300 CEOs globally, and was released on January 25th at the World Economic Forum at Davos by Global CEO of PricewaterhouseCoopers Sam DiPiazza. A copy of the full PricewaterhouseCoopers Global CEO Survey can be downloaded at www.pwc.com/globalceosurvey.

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