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2013 Dykema Automotive Institute Survey: Industry Challenges

OEMs and Suppliers Confirm Data Privacy and Navigating Complicated Bribery Laws Top the List of Global Compliance Concerns When Doing Business Overseas

November 14, 2013

As the automotive industry continues to move towards globalization, original equipment manufacturers (OEMs) and automotive suppliers face a number of complex legal issues across the world that may affect the productivity of their organizations and their bottom line, according to the 2013 Dykema Automotive Institute Survey: Industry Challenges.

Measuring the attitudes and perspectives of executives at OEMs and suppliers, the survey reveals that data privacy was chosen as the top legal challenge that U.S. automotive executives face when doing business overseas. With that in mind, the survey found that only about a quarter of respondents report their companies employ in-house experts who concentrate on privacy and security changes, while the majority of them do not. Indeed, 74 percent of respondents said their companies do not employ a chief privacy officer or other senior manager with “privacy” in his or her job title.

Navigating the complicated corporate bribery laws when doing business overseas was another notable challenge referenced by survey respondents, particularly as it relates to doing business in China. While U.S. OEMs and suppliers continue to expand into China to take advantage of its growing automotive marketplace, the country’s reputation for corruption in both the private sector and government business has not gone unnoticed. A wide majority of respondents chose China as posing the greatest compliance risk when doing business overseas.

“Following the financial crisis and recession, the automotive industry has taken strides over the last five years to reinvent itself,” said Aleks Miziolek, director of Dykema’s Automotive Industry Group. “The survey shows that while this transformation has put automotive companies in a strong position to compete globally, there are several key legal and compliance challenges—by  data privacy, corporate bribery and international tax laws, to name just a few—that leave them at risk of liability.”

The survey also revealed legal issues not yet on automotive executives’ radars. Although automotive collaborations often raise legal and operational questions ranging from antitrust issues to the challenges that arise when collaborating with competitors, automakers are increasingly teaming up with competitors to share costs and brainpower as fuel efficiency and environmental requirements get tougher. Specifically, 44 percent of OEMs and 49 percent of suppliers plan to enter into a collaboration in the next 12 months. The desire to fund technological advancements was the top reason given for inspiring OEMs to collaborate, while the desire to expand into foreign markets was the top reason chosen by suppliers.

“Only automotive companies that are ahead of the game in addressing legal risks will truly remain competitive and prosper in the future,” added Miziolek. “We believe the findings of our survey present important opportunities for OEMs and suppliers to gain a better understanding of the top legal challenges facing their companies. Chief among these are matters regarding environmental compliance, intellectual property, corporate bribery laws, litigation, data privacy, international tax, regulatory issues and mergers and acquisitions (M&A). It’s only by understanding these realms—and developing proactive solutions to them—that automotive companies can ensure that their organizations remain at the forefront of this global industry moving forward.”

According to Dykema, the survey yielded a number of other prominent conclusions, including:

  • Court disputes. Litigation remains a top legal concern for automotive companies with some areas of litigation seeing more activity than others. Supply chain litigation (52 percent), IP litigation (46 percent) and warranty litigation (39 percent) were the top three types of litigation faced by respondents’ companies over the last year.
  • Counterfeit goods. Although the U.S. automotive industry witnesses an estimated $12 billion per year in trade of counterfeit automotive parts, only half of respondents have taken specific steps against counterfeiting, including customs enforcement and litigation, to protect their brand, and only a few plan to do so in the next year. While there are a number of steps a company can implement to fight against counterfeiting, this is an area of concern that is not getting needed industry attention.
  • Compliance deadlines. Respondents ranked conflict minerals lowest in terms of global compliance concerns. However, automotive manufacturers are seriously addressing near-term compliance deadlines to meet the standards of the Conflict Minerals Act (a rule that requires public companies to publicly disclose whether the sourcing of conflict minerals in their products benefited armed groups responsible for human rights violations). Sixty-eight percent of respondents would consider not sourcing a supplier if it indicated products contained or likely contained conflict minerals, and 64 percent would consider not sourcing a supplier if it did not comply with a conflict minerals request. At the same time, the response to the survey question regarding the percentage of their Conflict Mineral Act compliant suppliers reveals many suppliers are still not compliant and/or the OEMs do not yet know whether their suppliers are compliant. 

In July 2013, Dykema distributed the survey via e-mail to a group of senior executives and advisors in the automotive industry including CEOs, CFOs and other company officers.

With more than 75 years of experience representing companies in the automotive industry, Dykema has one of the most extensive automotive legal practices in the U.S. Dykema lawyers regularly represent automotive companies headquartered throughout the world. The attorneys counsel suppliers and OEMs in multi-million-dollar mergers and acquisitions, in a broad array of automobile product liability, commercial and supply chain management litigation, in class action litigation in the most challenging jurisdictions, and before the U.S. Department of Transportation and other federal and state departments and agencies.

To download a copy of the 2013 Dykema Automotive Institute Survey: Industry Challenges, click here. For more information on Dykema's Automotive Industry Group, click here.