FOCUS 17


T


he sixth straight year of falling demand for cars in Europe has put many manufacturers and their suppliers under huge pressure – annual volumes have decreased


. However, Steve Odell, Ford’s head of Europe has been recently quoted as saying that signs were “pointing to recovery” and that car sales will start to improve in Europe next year2


from around 18 million to circa 13 million vehicles1


.


Andrew Burn, KPMG Partner, also believes there are signs that demand may be stabilising, but says supply chain risks remain.


He comments, “OEMs have a justifi able reputation for managing their supply chains very successfully compared to other industries. The fall in demand for cars may have bottomed out and procurement departments, having been on


1


http://www.autonews. com/article/20130815/ ANE/130819956/ford-of-europe- sales-boss-sees-no-quick-end-to- price-wa


2


http://www.telegraph.co.uk/ fi nance/newsbysector/ industry/10175612/Ford-boss- says-European-car-decline-is- bottoming-out.html


red alert for the last two or three years, may be tempted to breathe a sigh of relief, confi dent that the level of risk is subsiding.


“However, previous recessions have shown that typically, signifi cantly more companies fail on the way out of a recession as on the way in. Consequently, we are entering a period when there is a danger of complacency leading to supplier risks not being identifi ed.


“When economic conditions and order books improve, suppliers can fail through misjudging what rate of growth is sustainable. Increasing the range of products being made or increasing working capital can result in cash running out. Suppliers have had to survive huge change in recent years but challenges remain. Further, poorly planned increases in activity where cash fl ow issues are not terminal, typically lead to supply chain disruption or quality issues.


“Of course, not all OEMs are faced with tackling issues associated with


falling levels of demand, Andrew continues, “Luxury car brands from mature markets which are favoured in China and other high-growth export markets have a very different set of supply chain risks to manage.


© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.


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