July 20, 2012 / 4:09 AM / 5 years ago

Auto companies to add jobs, expand plants: survey

(Reuters) - Auto companies will hire more people and expand plants over the next year to keep up with increasing consumer demand for vehicles to replace aging cars and trucks, according to a report released on Friday.

Despite worries about declining demand in Europe caused by the debt crisis and pressures on vehicle pricing, U.S. auto executives surveyed by advisory firm KPMG are bullish about their companies’ prospects.

“The survey results clearly demonstrate a U.S. automotive industry that is regaining confidence,” Gary Silberg, KPMG’s national auto industry leader, said in a statement.

“Even though the overall economic recovery remains weak, that is not the case in automotive where pent-up demand for vehicles in the U.S. is expected to carry over for years,” he added. “As a result, auto companies and suppliers are ramping up their hiring and production activities, and investing heavily in new products and facility expansion.”

Industry executives have said demand for new cars and trucks should continue to drive sales as the average age of vehicles on U.S. roads is at an all-time high of almost 11 years.

Nearly three-quarters of the executives polled said their companies will continue to hire in the coming year, up significantly from the 62 percent in the 2011 survey, according to KPMG.

Almost a quarter said their companies will increase the number of employees by more than 7 percent. Twenty-one percent said personnel would increase by 4 to 6 percent, while 28 percent said the increase would be 1 to 3 percent.

In addition, 67 percent of those polled said their companies have significant cash and almost the same number said they would invest that cash before the end of the year, KPMG said. Seventy-three percent said they would increase capital spending over the next year, with the highest priority on new products or services and expanding factories.

In another use of that cash, almost half of those surveyed said their companies will be involved in a merger or acquisition, KPMG said.

Nevertheless, the executives surveyed are not predicting an overall economic turnaround for years, KPMG said. More than 80 percent predicted the U.S. economy will remain flat or see only moderate improvement next year, with 60 percent saying a full recovery would not happen until 2014 or later.

Nearly three-quarters of the executives surveyed expect the weak European auto market to continue for another 18 months, including 15 percent who said the slowdown will linger for more than three years, KPMG said.

But 63 percent of executives in the survey said North America was their primary growth market, followed by China (44 percent) and South America (30 percent), KPMG said.

In addition to pricing pressures and energy prices as barriers to growth, KPMG said executives also cited a lack of qualified labor.

“We are hearing from U.S. automakers that they are poised for growth, but are struggling with their ability to find the right people,” Silberg said. “This is becoming an increasing cause for concern, not just for auto companies, but for many companies in the manufacturing sector.”

Reporting By Ben Klayman in Detroit, editing by Dave Zimmerman

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