Environmental Regulation to Significantly Shape M&A and Strategic Relationships in the Global Automotive Industry

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DETROIT, March 18 /PRNewswire/ — Complex environmental regulations, combined with overcapacity and highly competitive global markets, should lead to increased mergers and acquisitions in the global automotive sector for years to come, according to a new study by KPMG LLP, the audit, tax and advisory firm.

In the white paper, “The Transformation of the Automotive Industry: The Environmental Regulation Effect,” KPMG analyzed environmental regulatory requirements and market dynamics across North America, Europe, Asia, and Latin America to estimate the likelihood of intra-region and inter-region transactions at a macro level around the globe.

“Although a large portion of the global automotive industry is still experiencing some levels of economic distress, the timing couldn’t be better for stronger companies with access to capital to assess potential targets,” said Gary Silberg, national automotive industry leader for KPMG LLP. “Automotive companies need to look beyond their short-term challenges and develop long-term strategies, such as rebalancing their product portfolios, shedding unprofitable assets, and investing in strategic growth areas.”

Key findings from the KPMG study include:

  • Given the variance of regulatory frameworks around the world and the lack of will to harmonize these into a single global standard, automotive companies may need to develop multi-pronged strategies to minimize risks and maximize returns.
  • Companies may need to consolidate regionally to rebalance their product portfolio in light of new fuel efficiency and emission standards, and to reduce costs. The availability of private capital and government incentives will influence these consolidations, such as the U.S. and the Chinese government’s funding/incentives related to clean technologies, along with the Green Car Initiative by the European Commission.
  • Given growth and technology opportunities, the most attractive M&A transactions appear to be between North America and Asia, followed by Europe and Asia, and North America and Europe. This trend is in line with recent cross-border mergers and alliances, but is expected to accelerate as companies seek more opportunities for horizontal and vertical integration.
  • Suppliers that emerge as preferred partners may be able to leverage their global scale to further reduce technology costs and thus increase their influence.
  • Asian companies with relatively higher growth rates, lower cost structures, and clean technology know-how may increasingly scoop up attractive assets from more mature markets, or acquire strategic assets abroad to enter those markets with new models.

“In the future, the hardest-hit OEMs and suppliers may be those with undifferentiated products that do not meet the demand for increased fuel economy or emission control,” Silberg added. “However, those companies that are savvy enough to reposition themselves today are most likely to benefit from a regulatory landscape that looks to be increasingly stringent in the future.”

For a copy of the full report, “The Transformation of the Automotive Industry: The Environmental Regulation Effect,” please visit: http://www.us.kpmg.com/services/content.asp?l1id=10&l2id=620&cid=3393

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative (“KPMG International.”) KPMG International’s member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.

Source: KPMG LLP

CONTACT: Jennifer Hurson, +1-201-307-8187, Jhurson@kpmg.com, or Kevin
Beagley, +1-312-665-5010, Kbeagley@kpmg.com, both of KPMG LLP

Web Site: http://www.us.kpmg.com/

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