A global management consulting firm says a number of North American automobile supplier companies have distinguished themselves by delivering leading financial performance in one of the world’s most competitive industries. A.T. Kearney, a division of EDS, conducted a global study that focused on the financial and industry performance of 54 vehicle suppliers and additional analysis of 17 automakers, 22 dealer groups and 17 aftermarket retailers. Eight North American auto suppliers were ranked among the world’s top 10, based on the companies’ cash flow return on investment (CFROI), which averaged at least 12%, or double the average of all other vehicle suppliers analyzed in the report. CFROI is a comprehensive measure of overall economic performance. It is driven by cash margins and asset turnover and measures the amount of cash that a company can extract from the total cash invested in its assets. “The leading players in the segment have managed to provide high value to customers while generating above average cash flows from their total investment in assets. What’s really impressive is that this is in comparison to all industries, not just the automotive sector,” said John Hoffecker, vice president and leader of A.T. Kearney’s automotive consulting practice. “The companies leading the pack in our study have shown that they are able to provide the world’s automakers with extremely reliable products and services, take on more design and engineering responsibility, accept increased liability for warranty claims, absorb significant cost reductions across the board and still deliver strong financials,” Hoffecker said. The fifth annual study by A.T. Kearney also noted the following elements affecting auto suppliers and manufacturers worldwide: — Mergers and acquisitions in the sector have declined almost 70% since the high-water mark established in 1999. According to Hoffecker, most of the major deals involving Tier One suppliers have been consummated, but a new wave of activity involving Tier Two, Three and Four suppliers is becoming evident. — Suppliers will continue to face margin pressures as auto manufacturers require additional cost reductions and arrangements for more sharing of warranty claims. — Plagued by increasing debt-to-equity ratios and negative cash flows, Japanese suppliers are restructuring their tightly knit Keiretsu systems. — Intense competition has yielded unprecedented levels of quality and reliability in passenger cars and light trucks around the world. This will continue to drive innovation and collaboration on both sides, further redefining the industry’s core strategic and operational fundamentals. — Interdependency between suppliers and manufacturers will increase, with additional reduction of the global supply base, more suppliers taking equity interests in production facilities and the creation of very closely integrated partnerships. “Accelerating improvement programs to deliver faster and larger results is what sets the leaders apart. One thing is certain, consumers around the world will be the main beneficiaries, as the auto industry continues to re-invent itself,” said Hoffecker.