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1Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
OESA AUTOMOTIVE SUPPLIER BAROMETERQ2 2019
CAPITAL MARKETS & INNOVATION
2Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Executive Summary
Supplier Barometer Index (SBI)
SBI Score = 35;
unchanged from Q1 level
The outlook remains in deep negative
territory, 15 points below the neutral
threshold of 50, remaining at the
lowest level since 2009. Accelerating
trade tensions and poor vehicle sales
of programs supplied continue to
weigh on the outlook of supplier
executives across firms of all sizes.
Trade policy is identified as
the greatest industry threat,
followed closely by poor
vehicle sales.
Trade policy remains the
greatest industry threat, as the
threat of proposed 232 tariffs on
autos and auto parts remains
on the table.
Using 2018 as a base, most
suppliers are planning for
decreases in capital
expenditures in 2019 and
2021.
Suppliers with between $151
and $500 million in revenue will
be making the largest
decreases in capex.
Suppliers indicate that
sustained production levels
of 17-20 million units are
required before needing to
add capacity to operations.
These production levels are in
line with what was stated in Q2
last year, however the
distribution of responses is a bit
more broad.
Growing capital needs are
being allocated to support
robust product innovation
investments.
Some 55% of supplier
respondents plan for higher
innovation investments in 2019.
Generally speaking the need for
additional capital declined in
comparison to last year.
3Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Executive Summary
Eighty-five percent (median)
of suppliers prefer to
purchase new equipment
rather than used.
Technology, availability and
quality drive the decision to buy
new.
Fifteen percent of
respondents have, over the
past year, significantly
altered their capital structure.
Availability of commercial loans
and lines of credit are expected
to tighten over the coming year.
The greatest of confidence in
accessing capital is for use in
plant and equipment
investment, while confidence in
accessing capital deteriorated
sharply for inventory financing,
M&A opportunities, and off-
shore manufacturing
opportunities.
Fifty-seven percent of
suppliers are very confident
that their company will move
ahead and implement the
needed capital investment to
meet their 2019/2020 demand
requirements.
Sales and production volumes,
customer program launches,
technology direction and
political decisions are all
concern for delayed or hindered
investment plans.
The majority of supplier
capital strategies support
open innovation.
74% of supplier respondents
indicate their capital planning
process helps them achieve
their innovation objectives by
leveraging external partners to
accelerate innovation and
learning.
Asia Pacific and North
America are expected to be
capex growth regions, while
South America and Europe
will contract.
Firms across all revenue streams
are funding their capital needs
primarily through free cash flows
Firms with greater than $500 million
in revenue have the heaviest cash
flow position in their weighted
average cost of capital in
comparison to firms smaller in size.
4Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
SUPPLIER OUTLOOK
5Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
SBI Score = 53; drops 4 points from the Q1 level of 57
Tax reform supports optimism while trade and declining sales drive pessimism
35
20
30
40
50
60
70
80
Ja
n-2
009
Ja
n-2
010
Ja
n-2
011
Ja
n-2
012
Ja
n-2
013
Ja
n-2
014
Ja
n-2
015
Ja
n-2
016
Ja
n-2
017
Ja
n-2
018
Ja
n-2
019
Euro
Crisis
Begins
Japan
Tsunami/
Grexit Crisis
US
Fiscal
Cliff
Lehman
Collapse
0%
20%
40%
60%
80%
Sig
nific
an
tly m
ore
optim
istic
So
mew
ha
t m
ore
optim
istic
Un
ch
ang
ed
So
mew
ha
t m
ore
pessim
istic
Sig
nific
an
tly m
ore
pessim
istic
Q1 2019 Q2 2019
99 responses
Describe the general twelve month outlook for your business. Over the past three months, has your opinion become…?
Current Supplier Outlook (Share of Respondents) Supplier Barometer Index: (SBI and 6m Average)
SBI Score = 35; unchanged from Q1 and remaining the lowest level since 2009
Tariffs and weaker demand contribute to pessimism
OESA Supplier Barometer: Q2 2019 Results
6Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
SBI Score = 53; drops 4 points from the Q1 level of 57
Tax reform supports optimism while trade and declining sales drive pessimism
>$1
billion
9% 7%14% 17%
18%
17%6%
17% 14%7% 6%
29%33%
27%42%
40%
24%
25%21%
11%21%
57%50% 45% 42%
40% 71% 50%57%
75%68%
13%8% 7% 7% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Significantly more pessimistic
Somewhat more pessimistic
Unchanged
Somewhat more optimistic
Significantly more optimistic
39.3 41.7 47.7 43.8 36.7 33.8 37.5 35.7 29.5 31.6
<$50
million$50-$150
million
$501 million –
$1 billion
Quarterly
SBI ∆
$151-$500
million
Regardless of revenue size, responses continue to reflect a high level of pessimism;
Smaller firms were slightly more optimistic in comparison to large firms, but remain pessimistic on net
OESA Supplier Barometer: Q2 2019 Results By Revenue
Describe the general twelve month outlook for your business. Over the past three months, has your opinion become..?
Mar. May Mar. May Mar. May Mar. May Mar. May
7Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
SBI Score = 53; drops 4 points from the Q1 level of 57
Tax reform supports optimism while trade and declining sales drive pessimism
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Changes in government trade policy
Poor sales of vehicles in programs supplied
Weakness in the U.S. Economy
Inability to address internal labor constraints
Implementation of new government regulations
Likelihood of higher interest rates
Terrorism or some type of international event
Inability to fulfill customer volumes
1=Greatest threat 2 3 4 5 6 7 8 9 10=Smallest threat
Average
Rating
2.9
3.9
4.4
5.5
5.4
6.0
6.7
7.4
3.6
4.3
4.5
5.3
5.4
5.5
6.6
7.1
Feb.May
Trade policy remains the greatest industry threat, at 2.9 in the second quarter, down sharply from Q1
Poor sales of programs supplied was identified as the second largest threat at 3.9
OESA Supplier Barometer: Industry Threats
What are the greatest threats to the industry over the next 12 months?
8Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
SBI Score = 53; drops 4 points from the Q1 level of 57
Tax reform supports optimism while trade and declining sales drive pessimism
0% 20% 40% 60% 80% 100%
Proposed section 232 tariffs on autos and auto parts
Section 232 tariffs on steel and aluminum
Section 301 tariffs on China imports
Changes in USMCA policy
Changes to other FTA's
1=Greatest threat 2 3 4 5=Least Threatening
Average
Rating
2.1
2.4
2.4
2.9
3.4
The threat of proposed section 232 tariffs on autos and auto parts is the most threatening aspect of changes to
government trade policy, followed by 232 tariffs on steel and aluminum
OESA Supplier Barometer: Industry ThreatsChanges in trade policy has been identified as the leading threat to the industry for the past 5 quarters.
Please rate the following changes to government trade policy from 1-5 (1=Most threatening, 5=Least threatening).
9Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
CAPITAL MARKETS & INNOVATION
10Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Lower Quartile Value Median Value Upper Quartile Value
2019 2018 2015 2019 2018 2015 2019 2018 2015
Plant square footage
to existing facilities
17.0
million17.5
million
17.5
million
17.5
million18.0
million
18.0
million
18.0
million19.0
million
19.0
million
Plant square footage
through new facilities
17.5
million18.0
million
17.0
million
18.3
million19.0
million
17.5
million
20.0
million20.0
million
18.0
million
Equipment beyond
normal replacement
17.0
million17.5
million
17.0
million
17.5
million18.0
million
17.5
million
18.0
million19.0
million
18.0
million
Salary headcount
beyond normal
attrition levels
17.0
million17.0
millionNA
17.5
million18.0
millionNA
18.0
million18.4
millionNA
North America Vehicle Production
All else equal, what sustained level of NA production is required before your company needs to add?
11Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
13%
11%
11%
42%
36%
32%
30%
33%
33%
23%
44%
10%
14%
32%
24%
6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Product Innovation Investment
Merger & Acquisition Opportunities
Capital Investments
General Working Capital
Significantly Increased Somewhat Increased Basically Unchanged Somewhat Decreased Significantly Decreased
Comments:
• Electrification needs more review
• Many new products being developed
• Some cutting back already started
• Shifting capital needs from legacy, core assets towards innovative/new
capabilities
• Based on current market dynamics, potential for multiple compression
for M&A targets
• NPI high priority
• More capital investments in the previous year simply because there
was a new factory and this year there is no new factory spending to
the same scale.
• Innovation investment increasing to address electrification.
• Spending on Product Innovation as we prepare for a slowing
volume/production
Capital Needs
For your next fiscal year, how do you see your capital needs changing for the following requirements, compared to current year?
12Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
2019
2021
2019
2021
2019
2021
2019
2021
0% 20% 40% 60% 80% 100%
More than 20% Increase
16%-20% Increase
11%-15% Increase
6%-10% Increase
1%-5% Increase
No change
1%-5% Decrease
6%-10% Decrease
11%-15% Decrease
16%-20% Decrease
More than 20% Decrease
Estimate of Percent Increase over 2018 Base
All respondent Companies
By Company Revenue
<$151 million
$151-$500 million
>$500 million
Capital Required
To better understand the capital needed to support the number of new program launches and production volume in North America,
please estimate the change in capital expenditures using 2018 as the base year.
13Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
15
10
5
4
4
3
3
3
2
2
0 10 20
Technology
Availability
Reliability/Quality
Require Specialty Equipment
Policy is to only buy new
Cost
Productivity
Lead times
Customer Requirements
Economic Uncertainty
% of spend being allocated to purchase new equipment
Lower
Quartile
Value
Median
Value
Upper
Quartile
Value
May 2019 75.0 85.0 100.0
May 2018 75.0 90.0 100.0
September 2014 75.0 82.5 100.0
% of spend being allocated to purchase used equipment
Lower
Quartile
Value
Median
Value
Upper
Quartile
Value
May 2019 0 17.5 25.0
May 2018 0 10.0 21.3
September 2014 5.0 20.0 38.8
New Versus Used EquipmentFor your equipment capital expenditures budgeted in the next fiscal
year, estimate what percent of spend you are allocating to the
purchase of new vs. used equipment.
What market issues are driving your decision to buy new versus
used?
Responses
14Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
In the last 12 months, have you significantly altered your company’s capital structure?
If yes, what were the most significant sources of new funds?
Yes15%
No85%
0 2 4 6 8 10
Bank Loan
Private Equity
Additional Equity from…
Mezzanine Lender
Bonds
Other Debt
Other Equity
Other
Number of responses
Other sources identified:
• Retained Earnings - cash
Changing Capital Structure
Comments:• Invested 10% of 2018 revenue in new capital
in 2019
• Received new business requiring capital
investment
• Reduced from 5% to 3.5%
• In an effort to improve cash flow we are
making major reductions globally.
• one small acquisition
• We are a recent carve out of on OE
company.
• Still owned by a private equity company.
• We have a very low capital budget relative to
sales.
15Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Percent of respondents0% 20% 40% 60% 80% 100%
Maximum Size of Credit Line
Cost of Credit Line
Maximum Size of Commercial Loans
Commercial Loan Interest Rates
Commercial Loan Covenants
Changes in terms by Revenue Overall <$151 Million $151-$500 Million >$500 Million
Maximum Size of Credit Line -0.11 -0.19 0.00 -0.11
Cost of Credit Line -0.21 -0.29 -0.19 -0.16
Maximum Size of Commercial Loans -0.10 -0.05 -0.06 -0.14
Commercial Loan Interest Rates -0.29 -0.29 -0.31 -0.26
Commercial Loan Covenants -0.05 0.10 0.00 -0.14
*Weighted Value
2=Ease Considerably
1=Ease Somewhat
0=Remain Same
-1=Tighten Somewhat
-2=Tighten Considerably
Commercial Loans and Lines of Credit
Considering your lead commercial bank, over the next 12 months,
how do you anticipate the terms of your commercial loan or credit line applications changing?
16Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
0% 20% 40% 60% 80% 100%
Plant and Equipment Investment
Tooling
Accounts Payable Financing
Inventory Financing
Other Working Capital Needs
Product Innovation Investment
Merger & Acquisition Opportunities
Off-Shore Manufacturing Operations
U.S. Re-shoring ManufacturingOperations
Very Confident Somewhat Confident Neutral Somewhat Doubtful Very Doubtful
4.17
4.14
3.96
3.92
3.89
3.83
3.58
3.43
3.32
% of Respondents
4.20
4.24
4.14
4.32
3.72
3.60
3.96
4.20
3.68
Wt. Value*
*Weighted Value
5=Very Confident,
1=Very Doubtful
20182019
Access to CapitalOver the next 12 months, how confident are you that you will be able to access
required levels of capital at appropriate costs for the following uses?
17Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Level of Confidence
in Accessing CapitalOverall <$151 Million
$151-$500
Million>$500 Million
Plant and Equipment Investment 4.17 4.09 4.59 4.04
Tooling 4.14 3.95 4.47 4.09
Accounts Payable Financing 3.96 3.77 4.41 3.78
Inventory Financing 3.92 3.82 4.41 3.84
Other Working Capital Needs 3.89 3.77 4.29 3.78
Product Innovation Investment 3.83 3.14 3.59 3.49
Merger & Acquisition Opportunities 3.58 3.52 4.00 3.93
Off-Shore Manufacturing Operations 3.43 3.05 3.47 3.40
U.S. Re-shoring Manufacturing Operations 3.32 3.57 3.76 3.51
*Weighted Value
5=Very Confident,
1=Very Doubtful
Access to CapitalOver the next 12 months, how confident are you that you will be able to access
required levels of capital at appropriate costs for the following uses?
18Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Over the next 12 months, indicate whether the following sources
of funds will increase/decrease/remain the same in importance on your balance sheet?
0% 20% 40% 60% 80% 100%
Additional Equity from Others
Bank Loans (term or revolver)
Bonds
Private Equity
Mezzanine Financing
Overall Debt
Overall Equity
Increase Remain the Same Decrease Not Applicable
% of Respondents
*Weighted Value
1=Increase, 0=Same, -1=Decrease
Wt. Value*
20182019
0.07
-0.01
0.00
0.11
-0.10
-0.12
0.31
Sources of Capital
0.03
-0.05
-0.04
0.05
0.01
NA
NA
19Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
*Weighted Value
1=Increase, 0=Same, -1=Decrease
Change in Sources of Funds Overall <$151 Million $151-$500
Million>$500 Million
Private Equity 0.11 0.25 0.10 0.08
Additional Equity from Others 0.07 0.14 0.10 0.04
Bonds 0.00 0.00 0.00 0.00
Bank Loans (term or revolver) -0.01 0.11 -0.07 -0.05
Mezzanine Financing -0.10 -0.20 0.00 -0.08
Overall Debt -0.12 0.10 -0.19 -0.18
Overall Equity 0.31 0.45 0.20 0.29
Over the next 12 months, indicate whether the following sources
of funds will increase/decrease/remain the same in importance on your balance sheet?
Sources of Capital by Company Revenue
20Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
How confident are you that your company will move ahead and implement
the needed capital investment to meet your 2019/2020 demand requirements?
60%
28%
8%
4%
76%
17% 6%
1%
2014
for 2015/2016
2015
for 2016/2017
71%
20%
4%
5%
2018
for 2018/2019
Very confident
(>75%)57%
Somewhat confident (50-75%)
27%
Slightly confident
(<50%)11%
Not applicable, we are not
planning for increased capital
expenditure investments
5%
Capital Planning
21Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Comments:
• Currently in favorable cash flow situation, with positive net working capital and without borrowing, with great liquidity etc.
• Funding all from free cash flow
• All Capex for programs are funded from Free Cash. Some Capex for innovation products are funded thru lines of credit (i.e.
2021-2012 SOP).
• We will do some short term borrowing beyond free-cash levels.
What percent of your capital needs do you estimate you will fund from free cash flow?
Capital Planning
2018 Budgeted2019 Estimated
2018 Budgeted2019 Estimated
2018 Budgeted2019 Estimated
2018 Budgeted2019 Estimated
0% 20% 40% 60% 80% 100%
0%-15%
16%-30%
31%-45%
46%-60%
61%-75%
More than 75%
All respondent Companies
By Company Revenue
<$151 million
$151-$500 million
>$500 million
22Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
28%
21%
38%
6%
57%
33%
43%
26%
15%
46%
19%
68%
0% 20% 40% 60% 80% 100%
Regional cap ex investmentwill grow greater than theregional share of corporatesales
Regional cap ex investmentwill grow equal to theregional share of corporatesales
Regional cap ex investmentwill grow slower than theregional share of corporatesales
N America –
Capital Expenditures
Asia/Pacific -
Capital Expenditures
S America -
Capital Expenditures
Europe -
Capital Expenditures
Looking at your current global footprint, for each of the following regions,
how do you anticipate your regional cap ex investment levels shifting over the next five years?
Capital Planning
23Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
Well behind industry6%
Slightly behind
industry22%
On pace with industry
35%
Slightly ahead of industry
27%
Leading the industry
10%
Comments:
• Behind in one manufacturing area, slightly ahead in many others.
• ERP launch in process has negatively impacted innovation resource
availability
• Slightly behind, however added resources to be on pace.
• Ahead in some ways, but behind in others, so let's just say "on pace
with industry" here.
• We invest significantly in new technology
Given the dynamic pace of industry change, describe your firm’s pace of innovation.
Innovation
24Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
How well does your company's capital strategy enable your
organization to fully realize its innovation objectives?
Not at all8%
Minimal18%
Moderate39%
High26%
Very high9%
Not at all1%
Minimal14%
Moderate48%
High27%
Very high10%
To what extent does your company’s capital strategy support
dimensions of open innovation, which includes working with
external partners?
Capital Strategy
Comments:
• Innovation is accepted slowly by traditional OEM companies, however more accepted by the new EV and start up companies.
25Q2 2019 OESA AUTOMOTIVE SUPPLIER BAROMETER
The information and opinions contained in this report are for general information purposes. Comments are edited only for
spelling and may contain grammatical errors due to their verbatim nature. Responses to this survey are confidential.
Therefore, only aggregated results will be reported and individual responses will not be released or shared.
Antitrust Statement:
Respondents/participants should not contact competitors to discuss responses, or to discuss the issues dealt with in the
survey. It is an absolute imperative to consult legal counsel about any contacts with competitors. All pricing and other terms
of sale decisions and negotiating strategies should be handled on an individual company basis.
OESA Automotive Supplier Barometer is a survey of the top
executives of OESA regular member companies. The OESA
Automotive Supplier Barometer takes the pulse of the suppliers'
twelve month business sentiment. In addition, it provides a snapshot
of the industry commercial issues, business environment and
business strategies that influence the supplier industry.
www.oesa.org.
Survey Methodology
• Data collected May 10 - May 24 via invitation to online survey.
• Executives of OESA supplier companies.
• 99 survey responses were received.
Contacts
Mike Jackson
Executive Director
Strategy and Research
248.430.5954
Joe Zaciek
Manager
Research and Industry Analysis
248.430.5960
Larry Keyler
RSM Detroit Office Managing Partner
317.805.6205
Original Equipment Suppliers Association
25925 Telegraph Road
Suite 350
Southfield, Michigan 48033
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