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Auto industry could lead U.S. economic recovery: survey

By Reuters
Monday, August 1, 2011 7:50 EDT
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DETROIT (Reuters) – The auto industry could lead an economic recovery in the United States, according to a recent survey by audit, tax and advisory firm KPMG.

Auto executives plan to do more hiring and more capital spending than executives in any other sector in the next year, according to the survey.

Sixty-two percent of auto executives said they expect to hire people in the coming year, compared with an average of only 52 percent of executives across all sectors. Similarly, 71 percent of autos executives said they expect to increase their capital spending in the coming year compared with an average of 59 percent of all executives.

Two years after the end of the U.S. recession, unemployment remains above 9 percent, U.S. consumer confidence hit a near two and a half-year low earlier this month and the U.S. government reached a last-minute deal late Sunday to avoid a U.S. debt crisis. All this has raised questions about the speed and strength of a U.S. recovery.

The U.S. auto industry was hit hard during the financial crisis, which saw both General Motors Co and Chrysler seek bankruptcy protection and government bailouts. It was hit again in March when an earthquake, tsunami and nuclear crisis in Japan disrupted the supply chain.

While the sector is improving — U.S. July auto sales are expected to hit an annual rate of around 12 million vehicles, an improvement over May and June — that figure still lags the 17 million-plus number sold in 2000.

A full recovery could take years, but the next 12 months could see an improvement, according to the survey.

Seventy-two percent of the autos executives surveyed said they expect their revenue to increase in the coming year. North America is still seen as the most important market, but more revenue is expected to come from other markets including China and South America. New models and products, acquisitions and joint ventures are also expected to add to revenue.

Fifty-five percent of those surveyed expect to make an acquisition in the coming year; 5 percent expect to sell. Access to new markets, technologies and products is expected to drive the M&A activity.

The auto sector survey, which included the responses of 100 autos executives, was conducted in June. KPMG is releasing the results of its other sector surveys separately.

(Reporting by Clare Baldwin; Editing by Matt Driskill)

Source: Reuters US Online Report Business News

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