Execs see more auto industry woes

Survey: Leaders see bankruptcy filing in '06, automaker consolidation by '08.

By Chris Isidore, CNNMoney.com senior writer

January 4, 2006: 9:10 AM EST

NEW YORK (CNNMoney.com) - A survey of top auto executives around the globe released Wednesday found that three out of four are expecting another major bankruptcy -- like parts maker Delphi -- in the sector this year, and just more than half expect one of the major automakers will disappear through consolidation by 2008.

The survey of 140 senior executives at vehicle manufacturers and automotive suppliers by KPMG LLP, the U.S. accounting and advisory firm, found that 76 percent answered "Yes" when asked "Do you think any major (automakers) or suppliers will file for bankruptcy in the next year?"

It was the first time the bankruptcy question had been asked in KPMG's annual survey.

The survey also found that 51 percent expect consolidation will remove one of the major automakers sometime in the next three years. The previous year's survey found only 35 percent were looking for consolidation to take out one of the automakers.

The survey was conducted in October and November, and KPMG couldn't say how many of those responding answered the question before Delphi Corp. the world's largest auto parts maker, filed for bankruptcy court protection Oct. 8.

But since Delphi's bankruptcy, speculation has swirled that General Motors Corp. (Research) might be forced to follow its former parts unit into bankruptcy, even though GM executives have repeatedly denied they have such plans. GM spun off Delphi in 1999, and it faces up to $12 billion in contract obligations to its former employees at the auto parts maker.

GM could also find its own production line idled if the United Auto Workers were to strike Delphi in response to management's demands for deep cuts in wages and benefits. Delphi management has threatened to go to bankruptcy court to void labor deals without an agreement on cost cuts.

Both GM and Ford Motor Co. (Research) will lose billions on their core automotive operations in 2005, and both are planning steep cuts in capacity to stem losses, although Ford has yet to give details of its plans.

The KPMG survey did not address which companies might be forced to file bankruptcy or lose their independent status through consolidation. Betsy Meter, a partner with KPMG's auto group, wouldn't speculate on the chances of bankruptcy or consolidation either.

"Each of these companies is taking action to restructure, but I think if you've got a crystal ball you could predict what's going to happen," she said. "It's anyone guess how it works out."

The survey also saw a rough profit picture ahead, especially for the North American auto industry. Only 10 percent of those surveyed expect the profit outlook "will generally rise," while about 15 percent said they expect the profit outlook will generally decline.

Another 21 percent thought it would remain little changed from current conditions, and just over 50 percent expect its profitability to be volatile and unpredictable in North America. The survey asked about the outlook for both automakers and their suppliers.

LA 2006: Ford VP: “we lost our way”

Mark Fields, Ford*Executive Vice*President and*President of the Americas, delivered a speech to the Motor Press Guild during the opening of the Greater Los Angeles Auto Show today. Fields said the economy made 2005 a turbulent year for American carmakers, but he admits, “it goes beyond economics.” In short, “we lost our way. We lost touch with our customers.” But Fields is confident Ford’s new policy of “bold design and innovation” will enable it to recover from its past mistakes. “Americans really do want to buy American brands, as long as they are competitive with the imports,” he said. “We know this, because it’s already working in some segments today. Again, look at the success of the Ford Fusion […] Or the Ford Mustang […] Or the F-Series pickup.” He also said Toyota is “desperately trying to cast itself as an American brand.,” a sign that “the market potential is huge” for American cars. He further stated that it’s time to start looking at the “Big Six” automakers as a whole. Fields was clear 2006 most certainly will not be the “year of the truck” as GM has said. He also said the ultimatum he issued at Mazda while it was struggling applies today to Ford and GM: “change or die.” Additionally, Fields drew parallels between Ford’s recovery plan and the recoveries of Apple Computer and Motorola. More highlights from Fields’ speech are available after the jump…

Fields likened Ford’s situation today to that of Apple Computer or Motorola in the past. “I’d point you to the latest Interbrand ranking of the companies that are building their brand images, and their fortunes: E-Bay, Apple, Motorola. Guess what? Apple and Motorola had been written off less than a decade ago, just like the American auto industry. The headlines were grim.”

Chevrolet was the best-selling brand in the U.S. market in 2005, outpacing Ford for the first time in 19 years, General Motors Corp. said Wednesday. But that was where the good news ended for GM and other U.S. automakers, who continued to lose ground to foreign rivals.