Trends in Global Commercial Vehicle Industry

Trends in Global Commercial Vehicle Industry The zombie economy preparing for an uncertain future EUROFORUM-Conference Jost Kamenik, Managing Consultant, PA Consulting Group Munich, 23. March 2011 Setting the “Zombie” scene … The effects of recession continue to be wide-ranging, having impacted almost all economic instances heavily with only very limited room to manoeuvre Losses in financial system Zombie 1. “Finance” exceed $ 3.4 trillion – with half of this still to come! Annus horribilis for automotive industry Top-KPIs: Ability of governments to Zombie • € 1.000 bn. revenue 2. “Governments” continue borrowing at these levels is limited. • € 22 bn. accumulated losses • 2,4 mio. direct staff • € 44 bn. Invest for R&D Financial crisis has Zombie created millions of zombie 3. “Consumers” consumers, unwilling to Reactions: spend, unable to borrow. • approx. € 10 bn. „Abwrackprämien“ • US: $ 50 bn. support for GM only Many companies have more Zombie debt than they can 4. “Companies” comfortably service, limiting ability for future invest. Source: The Zombie Economy: Preparing for an uncertain future, PA Global Benchmark Study 2009 © PA Knowledge Limited 2010. Page 2 CV sector remains in crisis mode … Despite recent improvements in CV markets, overall market situation remains to be significantly behind pre-crisis performance Financial Results 1.-3. Quarter 2008 versus 1.-3. Quarter 2010 Comments - in million Euro - Profit before • After market breakdown in 2009, Sales Tax ROS global market for commercial vehicles remains to be flat 1.-3. Q 1.-3. Q 1.-3. Q 1.-3. Q 1.-3. Q 1.-3. Q • Exception is South America where 2008 2010 2008 2010 2008 2010 Scania as well as MAN Latin America managed to grow Scania 6.884 5.706 1.067 898 15,35% 15,57% substantially • Achievements in profitability are MAN 7.915 5.191 871 73 10,99% 1,02% especially related to ongoing cost reduction schemes, workforce MAN Americas 0 2.372 0 258 n.a. 10,83% adjustments and optimized working capital Daimler Trucks 21.019 17.159 1.521 930 7,19% 5,19% • In consequence, commercial vehicle Volvo Trucks 15.320 12.220 1.220 679 7,88% 5,49% sector is still heavily exposed to crisis and does see only for selected Paccar 8.000 4.701 763 219 9,53% 4,60% OEM a light at the end of the tunnel IVECO 8.434 5.769 647 130 7,64% 2,16% CV markets remain in post-crisis mode! *Source: PA Global Benchmark Analysis 2011 © PA Knowledge Limited 2009. Page 3 Alternative future scenarios … PA’s predicted “Zombie Economy” has proven to be right Sales Development USA Sales Development Europe Sales Development Japan - Trucks > 6 tons in ‘000 units - - Trucks > 6 tons in ‘000 units - - Trucks > 6 tons in ‘000 units - 600 600 600 500 500 500 400 400 400 300 300 300 200 200 200 100 100 100 2007 2008 2009 2010 2015 2007 2008 2009 2010 2015 2007 2008 2009 2010 2015 Simple recession “Zombie World” Double dip • The impact of recession is massive with collapse of sales between 30% in the US and 60% in Europe and Japan • To reach sales levels experienced in 2007, strong market pick-up rates are required over the next years • Based on previously described “Zombie Scenario”, we strongly recommend to allow a more pessimistic view • In consequence, even if a business was well-designed and well-positioned before the recession this is no guarantee for survival anymore Current market-pick up is regionally focused and significantly behind required growth rate *Source: J.D. Power; PA Global Benchmark Analysis 2011 © PA Knowledge Limited 2009. Page 4 Strategic hot-spots … While first recovery comes from South America, this market will not remain to be a hot-spot in the future due to its limited size Market Development per Region and Segment Comments - relative spread of distribution in 2015 ff.