While some suppliers have suffered due to changes in the auto industry, many of them have been able to boost their return on investment, a recent study by Roland Berger Strategy Consultants and the investment bank Rothschild shows. We examined more than 350 suppliers which gained an 11.7% average return on capital in 2005. European suppliers had even higher results, with 12.6%. These figures represent an almost three percentage point increase when compared to 2001.
Top performers know what spells “success.” Individual companies experienced the generally positive development within the industry to differing extents. In the period studied, the top performers grew roughly three times as fast as the low performers, with annual sales growth of 10.3% and 3.0%, respectively. Successful companies were also three times as profitable on average, with average return on capital employed (ROCE) of 16.3% vs. 5.7%. The gap between top and low performers has continued to widen over the past five years.
The differences between the two groups come down to a question of strategy, as evidenced in our study. There are twelve levers that top performers have exhibited in achieving their success:
Vehicle production is likely to increase further in key markets over the next few years. In the future, automakers will be prepared to pay more for products that help them differentiate themselves from other brands. There is still more room for suppliers to maneuver in terms of cutting costs and boosting profitability. By working to emulate the 12 golden rules, suppliers can succeed in this rewarding, if challenging, industry.