LOS ANGELES -

Shifting away from a more positive outlook on the economic recovery, auto executives aren’t quite as optimistic as before and have pulled back hiring and capital spending plans for 2012, according to a recent KPMG survey conducted in advance of the Los Angeles Auto Show.

The KPMG Automotive Executive Survey, which was conducted in October, found that although auto exces remain bullish on 2012 revenue projections, they indicate that cost management and restructuring initiatives remain priority areas on corporate agendas.

In fact, 42 percent expect the economy to improve in the year ahead, and 73 percent don’t foresee a full economic recovery until the end of 2013 or later.

These results are noted shifts from KPMG’s executive survey conducted in July when 58 percent of executives expected an improved economy in 2012, and 71 percent predicted a full recovery before the end of 2013.

Regression in Hiring, Capital Spending Plans

In addition to tempered perceptions on the economy, from the third quarter to the fourth quarter, the KPMG survey also revealed similar regression regarding plans for hiring and capital spending next year. 

KPMG indicated that 50 percent of executives surveyed in the fourth quarter expect to add employees next year — compared to 62 percent in the third quarter.

The audit, tax, and advisory firm also mentioned 62 percent of survey participants expect to increase capital spending — a decline of nine percentage points compared with 71 percent in third quarter

“One major finding of our most recent survey are the concerns that executives have over the macro economy, in particular the potential contagion with a European slowdown and the implications on  the U.S. economy,” explained Gary Silberg, national automotive industry leader for KPMG.

“In addition to the uncertainty regarding the global economic environment, auto execs are challenged with intensified competition, pricing pressures and volatile commodity prices,” Silberg continued.

Despite the economic environment and significant macro-economic factors, 77 percent of executives surveyed in the fourth quarter expect their companies’ revenue to increase next year — up from 72 percent in third quarter.

“Auto executives remain bullish, building on the momentum of the past two years and continue to invest heavily in new product development and product innovation,” Silberg noted. 

In fact, when asked what the biggest drivers of revenue growth would be over the next three years, executives most frequently cited “new models/products” and “expansion into new geographic markets.”

According to Silberg, while they remain focused on new products, the auto execs also indicate a renewed concern about costs and improving efficiencies.

When asked about actions  would have the most positive impact on profitability over the next three years, improving manufacturing efficiencies, reducing overhead costs and restructuring existing operations were more frequently selected, up significantly compared to the third-quarter survey. 

“Auto companies have become much more efficient and can adjust accordingly,” Silberg said.

“Cost management and operational efficiency have risen back to the forefront, and the most intense scrutiny will likely be on the supply chain,” he added.

According to KPMG’s fourth-quarter auto survey, the most significant challenges in the automotive supply chain as indicated by executives questioned are rising commodity costs, capacity, and transparency — all of which saw a significant increase in responses in the third quarter over the fourth quarter.

Additionally, execs say the most significant opportunities for improvement in supply chain are better communication/supplier relationships, increased transparency throughout the supply chain and accelerated innovation from suppliers.

“Companies are looking for suppliers they can trust and suppliers with the ability to ‘grow as we grow,’” Silberg stated.

“The recent events we’ve witnessed with supply chain disruptions have opened everyone’s eyes and have placed supply chain management initiatives squarely in the spotlight,” he concluded.