GE Capital has released a national survey of C-suite executives at middle market companies (ranging from $10 million - <$1 billion in sales). The survey, which is broken out by industry including automotive, examines opinions on financial performance, operational issues and the economic outlook.

KEY FINDINGS - The most significant insights to emerge from GE Capital’s survey of leaders of U.S. middle market firms include:

• The automotive sector of the middle market continues to thrive as the broader economy slowly recovers. The proportion of firms reporting year-over-year increases in revenue and employment is higher now than in March of this year.
• Employment in the sector is expected to pick up in the coming year with nearly half of firms expecting to add head count.
• Innovation is a key factor in the automotive industry with most firms deriving a significant amount of revenue from recently introduced products. There is evidence the importance of innovation in the industry will persist.
• An increasing cost structure has made it difficult for automotive firms to maintain margins, and many feel margins may stagnate over the coming year.

THE AUTOMOTIVE INDUSTRY

Average revenue of automotive firms surveyed = $110,590,000

• $10MM-$49.99MM: 60%
• $50MM-$99.99MM: 16%
• $100MM-$499.99MM: 21%
• $500MM-$999.99MM: 3%

Average number of employees = 596

• Full time salary: 59%
• Full time hourly: 27%
• Contract: 7%
• Part time: 7%

Most automotive firms in the middle market are either privately held, sole proprietorships or partnerships.

• Privately held: 51%
• Partnership: 13%
• Sole proprietorship: 18%
• Other:18%

ECONOMIC STRENGTH

Automotive firms are very confident in their local economies and also express optimism about the state of the U.S. economy. They are less confident in the global economic environment.

SENTIMENT GLOBAL ECONOMY U.S. ECONOMY LOCAL ECONOMY Extremely/very confident 18% 30% 57% Somewhat confident 46% 44% 25% Somewhat negative 24% 13% 9% Negative 12% 13% 9%

COMPANY PERFORMANCE

Year-over-year improvements in company performance continue to be extremely positive in the automotive industry. Revenue and employment comparisons to one year ago are even more positive now than they were in March of this year.

• Improved overall performance: 67% (compared to 68% in March 2014)
• Improved financial performance: 79% (compared to 62% in March 2014)
• Increased employment: 48% (compared to 41% in March 2014)

TOP BUSINESS CHALLENGES

Automotive firms continue to struggle to maintain margins due, in part, to an increasing cost structure. A majority expect to increase their prices in the coming year. Healthcare costs and the uncertainty of future government policies are also concerns.

Top three concerns:

• The cost of healthcare
• Ability to maintain margins
• Uncertainty of government action

INDUSTRY-SPECIFIC QUESTIONS 

• Innovation is a key component of the automotive industry with nearly 60% of firms deriving 10% or more of their revenue from products introduced in the past three years
• Two-thirds believe recently introduced products will account for an even greater share of company revenue in the coming year
• Most automotive firms believe OEM supplier bidding will become more competitive
• Automotive firms believe light vehicle sales will continue to rise

STATE OF INDUSTRY AND PIPELINE

The proportion of middle-market automotive firms expecting to add head count in the coming year is up from six months ago. The employment outlook for the coming year is exceptionally optimistic with expected average year-over-year growth of 4.8%.

• Improved: 49% (compared to 34% in March 2014)
• Same: 46% (compared to 61% in March 2014)
• Down: 5% (compared to 5% in March 2014)
• Mean total growth: 4.8%

Optimism in the automotive industry is driven by an expectation of industry expansion and increases in the new order pipeline. As a result, firms are investing in their future.47% believe the sector will expand in the year ahead

• 60% expect the automotive industry to expand in the coming year
• 44% say the new order pipeline has increased since last year
• Capital expenditures are greater this year than last year at 61% of firms

Margin growth is an area of concern in the automotive industry with fewer business leaders expecting increasing margins. On average, margins are expected to decrease slightly over the next 12 months.

• Same: 44% (compared to 33% in March 2014)
• Increase: 42% (compared to 58% in March 2014)
• Decline: 14% (compared to 9% in March 2014)
• Mean total growth: -1.8%

ABOUT THE SURVEY

GE Capital surveyed 60 companies in the automotive industry to ascertain their views on the global and U.S. economies and their outlook on a variety of important economic, industry and business-level issues, including growth expectations and financing needs. The decision-makers who were surveyed represent middle-market companies with revenue ranging from $10 million to $1 billion.

For more information on automotive, visit gecapital.com/auto.

The full GE Capital U.S. CXO Industry Economic Outlook Survey covers the following industries:

• Commercial aerospace
• Food & beverage
• Construction/contractors
• Construction dealers
• Fleet
• Healthcare services & healthcare products
• Retail
• Telecom & media
• Trucking

For information on these additional industries, visit gecapital.com/cxosurvey.

ABOUT GE CAPITAL, AMERICAS

GE Capital, Americas is a leading provider of loans and leases to mid-market businesses in the U.S., Canada and Mexico. We make it easier for companies to purchase or lease equipment; manage vehicle fleets, acquire businesses, and otherwise grow and thrive in the changing marketplace because we understand the industries we finance. As part of GE, we also deliver more than money. Our customers benefit from direct access to more than 100 years of successful innovation and resources from GE to help them become smarter, faster and more efficient. Visit www.gecapital.com/americas.

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