Based in London, Aleksandra has extensive cross-sector holistic turnaround and transformation experience, and most recently has led redesigns in the automotive sector. She has also been a part of a restructuring team of a major UK bank, and an operating partner in private equity. 

Debtwire: Let’s start with the big picture. The auto sector has been on one of its longest-running growth streaks, but that looks to be coming to an end. What are the main drivers slowing the auto market?

Aleksandra Bozic: We have not seen the slowdown yet really, but there is a combination of drivers behind the expectation. Macroeconomic factors are one, and then there are auto-specific early indicators, and these are different regionally. China is sensitive to trade policy, tax, and emissions. In the US, there are indications of weakening consumer confidence, and a sense of an oversold auto market—over the past 10 years, auto financing levels have increased three times faster than the median household income—increasing incentives are not generating additional sales. In Europe the situation is more benign: there is some consumer reluctance connected to the overall macro factors and driven by emissions regulation. The expected decline may not be as significant as some say. We may see single-digit drops of 5 to 10%. China is expected to stabilize at growth levels of 3%, and we expect premium and SUV segments to stay resilient.

Debtwire: The coming slowdown in the auto sector coincides with several transformational shifts such as the rise in electric vehicles (EVs), digitisation, and autonomous driving. How are these going to impact OEMs?

Aleksandra Bozic: They are going to make it a supremely complex environment in which to operate. In a downturn, any industry with high operating leverage is going to have challenges. But in the case of automakers we also have technology changes and the requirement to invest in them, emergence of new business models and rules of competition, and uncertainty around trade policies. All of that combined is complex…and it will affect the entire supply chain. What does that mean for OEMs in the near  term? Of course there will be an impact on margins. Why? Today we have manufacturing overcapacity and misaligned demand. Going forward we will also see a mix change  toward hybrids and EV, and those have different margin profiles than ICE vehicles due to higher material (battery) costs. We expect a higher need for  cash, to implement restructuring and also invest into new technology. Lastly, we will see a change in labour profile as the industry will need different skillsets with the shift to EVs.

Debtwire:  What is the impact on supply chains? Are there risks? 

Aleksandra Bozic: The change will impact everyone: Tier 1 suppliers, Tier 2 suppliers, but also dealerships due to the evolving profile of aftermarket care. Who is at most risk? Strictly speaking, undiversified suppliers of components of internal combustion engines (ICE) and associated systems. But even then, it is not clear-cut. For example, we recently worked with a European supplier of high-precision engine parts that defaulted on its covenants. Banks were nervous. It turned out, though, when we looked into specifics, their market was 95% OEMs, but the OEMs were not interested in putting further investment into developing these parts. As such, the company in question had a positive outlook. We will not be seeing many new entrants; however, the transition period may be a great opportunity for some suppliers. It’s a complex universe.

Debtwire:  How are or how should OEMs be repositioning themselves to ride out the downturn and benefit from the changes?

Aleksandra Bozic: They have to act now, and we see that happening. Nearly all the OEMs have announced major restructuring programmes. They’re doing what they must, which is to cut structural costs, simplify offerings and become more agile. However, they must also bear in mind the long-term perspective, and invest in technology. This is what makes this expected downturn different from others. You can’t just cut costs. You need a very strong strategy for the coming changes, and a flexible structure to carry it out. 

For more information on how to prepare for a downturn, download BCG's report here.  

Aleksandra Bozic Partner & Associate Director Boston Consulting Group

Aleksandra Bozic is a Partner and Associate Director in the London office of The Boston Consulting Group (BCG). She has over 20 years of hands-on involvement in rapid transformation, value creation, turnaround and restructuring of international corporations and private equity-owned businesses.

Her extensive, cross-sector experience includes leading holistic turnarounds and the re-design of a global automotive OEM, as well as cost reduction programmes, cross-geography treasury management and carve outs.

Aleks spent six years working in Private Equity and Banking where she was responsible for driving financial and operational improvements. Prior to that she spent eight years at AlixPartners.

Aleks has an MBA from INSEAD and a Bachelor of Applied Science and Engineering, University of Toronto.