ANSR Hackett Grp., Inc.(The) (MM)

In the face of bankruptcy filings, lagging sales and rising raw-material prices, the 20 largest US automotive suppliers are nevertheless ignoring up to $7.6 billion in cash opportunity, according to new research from Hackett-REL, part of The Hackett Group Answerthink, Inc. (NASDAQ:ANSR). The opportunity comes in the form of excess working capital tied up in invoices paid late by customers, suppliers being paid too early and inventory lying unsold on warehouse shelves. Results of the Hackett-REL benchmark study and comparative analysis, "Fine-Tuning for Optimum Cash and Cost Performance," also determined that the top 17 European automotive suppliers are similarly overlooking up to $9 billion in cash, which is frozen in excess working capital. On average, US auto suppliers significantly outperform their European counterparts, showing 37% lower net working capital ratios. But some of this gap, and the strong working capital performance by several US auto suppliers that are already in or near bankruptcy, is likely to have been driven by special assistance programs from US automakers, and may disappear in 2006. Taken as a whole, the global auto parts supply industry could have as much as $16.6 billion in cash unnecessarily tied up in working capital. This significant number, however, is likely to be a conservative assessment, according to Hackett-REL, as it does not take into account the excess working capital of the many privately held European automotive parts companies. In addition, Hackett-REL estimates that auto suppliers could see significant bottom-line benefits from reductions in administrative and operating expenses associated with working capital optimization. US auto suppliers could reduce operating costs by over $700 million, while European auto suppliers could see gains of up to $480 million. These improvements could have a direct impact on improving earnings before interest and tax (EBIT). "The cash-strapped US auto suppliers are missing an exceptional opportunity here, leaving billions of cash on the table," noted Hackett-REL Global Practice Leader Stephen Payne. "Even as some of the industry's largest companies reorganize under bankruptcy rules and fight pitched battles over employee wages and pensions, they are overlooking money that is literally right there trapped on their balance sheets which could have a significant impact on their overall liquidity. It's tough to understand how companies could ignore this, since in some cases it could keep them from shutting their doors permanently." According to Hackett-REL Senior Analyst Marc Loneux, "Working capital that is 'liberated' from balance sheets through such tested working capital methods as improved collection, better logistics, supply chain optimization and more efficient buying will always be the cheapest source of capital for corporations. This is a particularly important opportunity in light of a challenging business environment, which is being exacerbated by rising interest rates." To see the full version of this research, please register at the following link: http://www.thehackettgroup.com/insights/twc0406. More information on The Hackett Group is available: by phone at (770) 225-7300; by e-mail at info@thehackettgroup.com; or on the Web at http://www.thehackettgroup.com. About The Hackett Group The Hackett Group (http://www.TheHackettGroup.com), a strategic advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking and business transformation services that empirically define and enable world-class enterprise performance. Through the acquisition of REL Consultancy Group, a global leader in generating cash improvement from working capital, we offer Hackett-REL Total Working Capital services to liberate cash flow from operations through improved working capital, reduced costs and increased service quality. Hackett-REL has helped clients in more than 60 countries free up over $25 billion through working capital improvements in the last 10 years alone. Only The Hackett Group empirically defines world-class performance in sales, general and administrative (SG&A) and supply chain activities with analysis gained through 3,500 benchmark studies over 14 years at 2,000 of the world's leading companies. Our clients comprise 96 percent of the Dow Jones Industrials, 77 percent of the Fortune 100 and 92 percent of the Dow Jones Global Titans Index.