Innovation critical to long term survival say auto industry CEOs

According to the recentlypublished Annual Global CEO Survey by PricewaterhouseCoopers (PwC) inwhich 62 auto CEOs took part, 92% recognize that innovation is acritical ingredient for long-term survival. The key challenge currentlyfacing auto industry CEOs is how to balance the pressing demands of thehere and now with the need to create a business that can thrive infuture years.

A clear understanding ofwhat customers want is essential with 95% of auto CEOs citing customerinformation as key, 58% saying they would like more information aboutcustomer preferences with only 14% currently receiving adequateinformation.

“Innovation requiressubstantial long-term investments, which are difficult to make when acompany is struggling with its very existence. It also requires knowingconsumers inside out,” says Mark Walters, PwC Canada’s AutomotivePractice Leader.

Thirty-seven percent ofautomotive CEOs around the world believe that increased productpenetration into existing markets is the key to turning around the autoindustry. This year’s results indicate a reversal from last year, where34% favoured new product development and 15% better market penetration.

Fortypercent of automotive CEOs believe that structural changes to thebusiness model in their industry will have a positive impact on theiroperations and on the industry’s overall competitiveness. Many of theindustry leaders have announced plans to cut production significantly;indeed, the PricewaterhouseCoopers Auto Institute predicts that thenumber of vehicles manufactured in 2009 will be just 59.4 million – 13%less than in 2008.

The global economicdownturn has forced automakers to re-evaluate their business models,which could put automotive suppliers and dealers at risk. Surveyresults indicate that not all automotive CEOs have fully comprehendedthe implications that the economic situation may have on their supplychains. Some 38% are concerned about the security of their supply chainas a potential threat to business growth over the long-term, while 81%identify efficient sourcing and supply chain management as a key sourceof competitive advantage.

“Automakersneed to understand and manage the risks embedded in the intricatenetwork of suppliers. Troubled suppliers pose a real risk to every carproducer and their suppliers. The current economic environment makes itcritical for automotive companies to know the potential threats totheir business,” comments Walters.

Thesurvey also found that 94% of CEOs feel that access to and retention ofkey talent to achieve long-term success is critical. They are lessconcerned about finding new employees with the right skills than withholding onto existing employees and cultivating their intellectualcapital.