Automotive Capital Confidence Barometer

Growth

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Prioritization of growth has declined steeply from 89% in April 2011 to 43% in October 2012, as companies are choosing to focus on the fundamentals.

Compared with six months ago, our respondents report an increased focus on reducing costs, improving efficiency and optimizing capital. As automotive executives assess how to compete in an environment with lower expected growth, this shift in emphasis toward improving bottom-line performance and seeking out new ways to improve performance is understandable.

Nonetheless, growth still remains the number-one objective, with 43% reporting that growth is their primary focus. However, this is the lowest percentage of respondents citing growth as their top priority in the Automotive Capital Confidence Barometer’s history.

Those companies focused on growth tend to prioritize lower-risk organic strategies that are within their comfort zone. Rather than pursuing ambitious, transformational deals, they are hoping to deliver growth by exploiting technology to develop new products and markets, better executing in existing markets, changing the current mix of products and services and identifying new sales channels.

Which statement best describes your organization’s focus over the next 12 months?

In a climate of continued economic uncertainty, companies throttle back on growth and tend to preserve cash and deleverage. In our recent survey, only 39% plan to deploy excess cash toward organic growth, compared with 53% in April.

Returning cash to stakeholders — shareholders and creditors — is now the priority, with 34% of respondents planning to use excess cash to pay down debt, versus 19% in April. This provides further evidence that companies are focusing their attention on deleveraging and strengthening balance sheets in light of their concerns about the prospects for recovery.

If your company has excess cash to deploy, which of the following will be your focus over the next 12 months?

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