How to navigate the turbulent waters of the automotive crisis

How to navigate the turbulent waters of the automotive crisis December 2008 Automotive crisis_2008-12_RLA.pptx The current crisis is a threat for the automotive industry and offers attractive opportunities at the same time – Act now CURRENT SITUATION NEED FOR ACTION > The significant downturn in the global > Create awareness of the current crisis economy affects both developed and within the management and outline emerging markets potential scenarios > The automotive industry was already > Revise planning for 2009 and beyond in a difficult situation (structural crisis, according to the scenarios, and test all overcapacities, technology leaps), and business plan assumptions for validity thus is hit even faster and harder by > Define a comprehensive action plan: the current crisis now short-term actions to secure results and > Concerning the impact of the crisis, we mid-term actions to proactively utilize have identified three possible growth opportunities scenarios – recovery, recession, > Establish common understanding of the depression (p. 7) situation within your management team, > A sustainable economic recovery is not define clear roles & responsibilities and expected in the short run react as flexible as possible Source: Roland Berger Automotive crisis_2008-12_RLA.pptx 2 Contents Page A. Current economic outlook 4 B. Implications for the automotive industry B I li ti f th t ti i d t 9 C. How to navigate through the crisis 18 D. Roland Berger can support you 26 © 2008 Roland Berger Strategy Consultants GmbH Automotive crisis_2008-12_RLA.pptx 3 A. A Current economic outlook Automotive crisis_2008-12_RLA.pptx 4 The global economy under stress – Current crisis has a significant impact on 2009 growth and expected market development "Fear stalks the world’s economies – "The CIS states are likely to be hit by Fears of a severe recession gripped the global financial crisis more than financial markets as dire US unemployment any other developing countries" countries figures helped drive long-term interest rates (Russia Today, Nov. 8, 2008) to record lows." (Financial Times, Nov. 20, 2008) "Economic recovery not expected before late 2009 – Situation remains "World's worst financial crisis since uncertain"; IMF projections for GDP World War II – Very turbulent and growth rates: Germany: -0.8%, Euro difficult episode." (J.-C. Trichet, ECB area: -0.5%, US: -0.7%, world: 2.2% president; Bloomberg, Nov. 19, 2008) "Automotive industry esp. affected: "Rescue packages and economic Worst crisis since 1973 – Experts programs to counter recession will cost see largest downturn since 1973, up to EUR 1.2 trillion globally." duration until 2010 expected." (Wirtschaftswoche, Nov. 17, (Wirtschaftswoche Nov 17 2008) (manager magazin, Oct. 18, 2008) ( i O t 18 "Asian nations brace for economic "Big Three automakers warn that the crisis" – Expected to take major hit from collapse of the auto industry could drop in exports and foreign investment lead to the loss of 3 million jobs in (Washington Times, Nov. 20, 2008) the US." (LA Times, Nov. 20, 2008) Source: Press Automotive crisis_2008-12_RLA.pptx 5 The financial crisis and global economic downturn have already severely affected business and consumer expectations in 2008 OECD Business Confidence Indicator 2008 104 103 102 > Dramatic drop in business 101 confidence, reflecting fid fl ti expected impact of financial 100 crisis 99 Δ JAN/ 98 OCT > Consumer confidence in some Germany -6% countries at the lowest levels 97 in decades 96 Euro area -7% 7% 95 > Significant decline in business Total1) -5% 94 investments and consumption USA -5% expected for 2009 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 1) Includes 29 countries; excl. Brazil, India, China, Russia Source: OECD; Roland Berger analysis Automotive crisis_2008-12_RLA.pptx 6 The situation remains uncertain – Companies need to be prepared for all possible scenarios Global economic impact of the financial crisis (Nov. 2008) PARAMETERS SCENARIO 1: SCENARIO 2: SCENARIO 3: RAPID RECOVERY RECESSION DEPRESSION Crisis duration > 6-12 months > 1-2 years > 3-5 years Crisis nature > One-dimensional crisis > Two-dimensional crisis (financial ( > Three-dimensional crisis (financial crisis) + real economic crisis) (financial + real economic + systemic crisis) Policy influence > Rescue packages will stabilize > Rescue packages/economic > Government intervention will matters, encourage confidence programs can help to a limited have little effect extent Effects on national > Very limited effects on > Sharp rise in unemployment, > Soaring unemployment, defla- economies unemployment, inflation, inflation will fall, people will save tion of economy, protectionist consumer confidence more tendencies and social tensions Effects on business > Liquidity and financing problems > Collapse of sales and profits > Wave of insolvencies arise but can be resolved > Many insolvencies and > Chaotic business conditions restructuring cases > Collapse of economy Industries a ected dust es affected > Primarily financial secto a y a c a sector > Most industries a ec ed (e e os dus es affected (emer- > Virtually all industries in all ua y a dust es a affected ging markets to a lesser extent), regions worldwide affected incl. financial, automotive, retail, etc. Source: Roland Berger Automotive crisis_2008-12_RLA.