Supplier Outlook Improves in 2011, Study Says
Tom Murphy Ward's AutoWorld, Jun 1, 2009 12:00 PM

Assuming Sales Falling this Year to about 10 million vehicles in the U.S., consulting firm A.T. Kearney expects 13 million units of pent-up demand over the past two years to drive a recovery that should allow most large suppliers to achieve profitability in 2011.

That's not to say getting to 2011 will be easy. Dozens more suppliers will end up bankrupt, insolvent or consolidated, Daniel Cheng, partner and vice president of A.T. Kearney's North American automotive practice, tells journalists.

Cheng says the firm's 13th annual industry report finds that without intervention, the 75 largest global Tier 1 suppliers surveyed will lose $23.7 billion in 2009 from their North American operations and burn through their entire cash balance — about $13.4 billion.

Even though suppliers have been restructuring, the study finds too much capacity for current market needs.

It all sounds pretty depressing, but Cheng finds hopeful signs. “I think there are very few people who think we will go through a sustained period of very low sales of 10 million units (in the U.S.) for the next five years,” he says.

In A.T. Kearney's worst-case scenario, U.S. sales rise from 9.8 million units this year to 14.6 million in 2013. In the best case, assuming the economy recovers faster than anticipated, the study forecasts U.S. sales reaching 17.5 million units by 2012.