DETROIT — Armed with growing revenues, strong balance sheets and the need to keep up with growing demand, U.S. auto executives expect to boost domestic headcount and expand facilities in the coming year, according to a recent survey by KPMG LLP, the audit, tax, and advisory firm. Despite their overall bullishness, executives cite some significant challenges ahead, including persistent pricing pressures, a growing gap in qualified labor, and the ongoing European sales slowdown.

In the “2012 KPMG Automotive Industry Outlook” survey, two-thirds say they've added personnel over the last year, and nearly three-quarters (72 percent) say their companies will continue to hire more domestic employees in the coming year — up significantly from 62 percent in KPMG's 2011 survey.

Additionally, 23 percent of execs predict their companies' will increase personnel by more than 7 percent, while 21 percent predict the range will be 4 to 6 percent, and 28 percent expect 1 to 3 percent headcount growth. Interestingly, when asked to predict when their company's U.S. headcount would return to pre-recession levels, nearly a third (32 percent) said they are already at pre-recession levels, or will be by the end of 2012.

"The survey results clearly demonstrate a U.S. automotive industry that is regaining confidence," said Gary Silberg, national automotive industry leader for KPMG LLP. "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. As a result, auto companies and suppliers are ramping up their hiring and production activities, and investing heavily in new products and facility expansion."

Silberg further noted that the industry has significant cash on hand "and companies are intent on putting it to use." In fact, 67 percent of the execs indicated that their companies' have significant cash on the balance sheet, and 64 percent say they'll invest that cash before the end of the year. Additionally, 73 percent say their company will increase capital spending over the next year, with the highest-priority in investment in new product or services and expanding facilities.

"This investment follows market success," Silberg said. "Revenues are higher and execs feel confident that revenues will grow stronger still." Seventy-six percent said revenues are up from last year, and 83 percent expect revenues will continue to rise next year.

Another key area for investment will be mergers and acquisition. In fact, 47 percent of the auto executives surveyed by KPMG say it is likely that their company will be involved in a merger or acquisition as a buyer, while 10 percent say they'll be sellers. Executives indicate the key drivers behind the M&A activity over the next year will be access to new markets and customers, and access to new technologies and products.

"The improved cash position allows U.S. auto manufacturers to be more aggressive to drive growth and product innovation, and sets the stage for an active M&A environment,” Silberg said. “In the survey, company execs also indicated a greater ability to get financing."

While auto executives express optimism about company revenue, growth, and hiring plans, they do so "against the backdrop of a tough economy," said Silberg. "They are not projecting an economic turnaround for years."

In fact, 82 percent of respondents to the KPMG survey predict the U.S. economy will remain flat or see only moderate improvement next year, with 60 percent saying a full economic recovery won't happen until 2014 or later.

Beyond the economy, auto manufacturers continue to point to growth barriers such as pricing pressures and energy prices. One of the most noted shifts in the 2012 survey findings was that the number of executives who cited the lack of a qualified workforce as the most significant growth barrier nearly doubled — from 10 percent in 2011 to 19 percent in 2012.

"We are hearing from U.S. automakers that they are poised for growth, but are struggling with their ability to find the right people with the right technical skill sets for jobs they are looking to fill," Silberg noted. "This is becoming an increasing cause for concern, not just for auto companies, but for many companies in the manufacturing sector. It remains to be seen how companies will fill the gap."

Automakers are also faced with slow European vehicle sales, which nearly three-quarters (73 percent) of executives surveyed predict it will continue for at least another 18 months, including 15 percent who say the slowdown will linger for more than three years. Almost a third of execs (32 percent) say the European slowdown has had a moderate to significant impact on their companies' profits, and 49 percent the impact on profitability thus far has only be seen. Surprisingly, 19 percent say sluggish European sales have had no impact at all on their profits.

"We were surprised to see so many execs say the European slowdown has had only minimal impact on their profits, especially when you consider how global the industry is," Silberg said.

However, executives indicate that their companies are taking steps to minimize the impact of the European slowdown, including restructuring European operations (46 percent), cost mitigation (43 percent), capacity rationalization (40 percent), changing distribution strategies and channels (23 percent), and making cutback outside Europe to compensate (10 percent).

According to the KPMG survey, concerns about potential tax reform also exist for auto executives. Sixty-eight percent of respondents say the introduction of a Value Added Tax (VAT) would negatively impact the auto industry, and 88 percent think the U.S. corporate tax rate should be reduced from its current 35 percent rate.