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Jun 21, 2015



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  • 1. Eastern Automotive Summit October 19, 2006 The Global Automotive Outlook: Strategic Trends & Implications

2. Presentation Outline

  • The automotive outlook
    • North America
    • Global
    • Strategic and tactical issues
  • Shifts: OEMs and segments
    • Winners and losers
  • Contribution to growth
  • Key drivers, enablers and constraints
    • Brand positioning and momentum
    • Energy
    • Strategic investment
    • The path to growth/recovery
  • Other issues
    • Alliances
    • Delphi
  • Summary, conclusions and implications

3. North American Automotive Outlook 4. Outlook Scorecard* Key NAFTA Drivers

  • 2006-2007
  • Business environment
    • Economic growth 2.5-3.0%/yr. overall
    • Employment growth slow pickup; productivity growth
    • Inflation increasing pressure 2.7-3.1%
    • Interest rates slow adjustments
    • Energy improvement but risk remains
    • Government regulations emphasis on fuel economy, emissions
  • Automotive environment
    • Ownership & operating cost incentives slow
    • Vehicle demand moderately high volume without economic, energy, political crises

* Expected performance by factor assessed by color and time of evaluation: GREEN (good);YELLOW (moderate); RED (bad) Source: AutomotiveCompass 5. Mid-term North American Auto Outlook:Light Vehicle Production Volume

  • Mid-term, 2010-12
  • 17.2-17.5 million planning volume range, reflecting .
    • Healthy economic growth in the mid-term
      • Real GDP up 3.0-3.5%/yr
        • Supporting employment and income growth
      • Inflation advancing at 2.7-3.3%/yr
    • Growth in driving age population
      • Immigration driven
      • US and Canada driving age population growing at 1.0-1.5%/yr
    • Substitution effects: imports replaced by domestic production
      • Europe - Euro pressure
      • Asia - domestic content; credibility; political support; labor stability
      • North America gaining an export base - BMW, VW, Mercedes-Benz

Source: AutomotiveCompass 6. Oil Prices 12 months tracking Updated 10/11/06

  • 2006-07 planning range $60-80/bbl
  • Risks: supply disruptions - hurricanes, war, terrorism

7. NAFTA Auto Outlook: Production Light Vehicle Production Volume in 000s, 2002-2010 Source: AutomotiveCompass 8. NAFTA Auto Outlook: Production Light Vehicle Production Share (%), 2002-2010 Source: AutomotiveCompass 9. Segment Definitions: Cars and Light Trucks Source: AutomotiveCompass Cargo vehicle over 6,000lbs GVWR LVN Usually car-based and FWD van MVN Primarily American, SUV over 6,000lbs GVWR LSV Truck-based SUV under 6,000lbs GVWR MSV Usually car-based (FWD-based) SUV SSV Primarily American, pickup over 6,000lbs GVWR LPU Truck-based pickup under 6,000lbs GVWR MPU Sporty vehicle not meeting "F" category definition S Exotic and ultra-luxury cars, regardless of size. Chiefly a pricing category F "Near luxury" or "large car" E "Executive car," known as "mid-sized" in the U.S. D Typical "compact" vehicles, principally family cars in Europe and Asia C "Supermini" classification, regarded as "minicompacts" in the US B Description Segment 10. Segment Shift: Cars Source: AutomotiveCompass North American Market Share by Product Segment 11. Segment Shift: Light Trucks North American Market Share by Product Segment Source: AutomotiveCompass 12. Segment Shift: Big Pickups & Small Cars

  • Pickups stabilize
    • Functionality and competitiveness
    • Added PU capacity & products will drive a content and price war
  • Small cars grow
    • Energy pressure and competitiveness
    • Strong entries battle it out with content and price European-type market development

North AmericanMarket Share Source: AutomotiveCompass 13. Segment Shift: SUVs vs Crossovers North American Market Share by Product Segment Source: AutomotiveCompass 14. Market Share shift in 2001-2012: Big 3 Domestics North American Market Share by OEM Brands Source: AutomotiveCompass 15. Market Share shift in 2001-2012: Big 3 Transplants North American Market Share by OEM Brands Source: AutomotiveCompass 16. GM Overview

  • The sleeping giant is awake
    • Period of denial over?
    • Gaining momentum
    • Needs sustained positive results to maintain credibility and control
    • Stock price up sharply up almost 75% since April 2006
  • Gaining traction
    • New products
      • 2 strong products in the global top ten (GMT900, Delta2)
      • Other strong platforms: Epsilon2, Theta, Lambda, Zeta
      • Strongest product line-up in decades emerging
    • Improving cost structure
    • Delphi situation improving
  • Risks
    • Cash squeeze
    • Proxy fight for control
    • Union cooperation
    • Delphi
    • Execution - sustained speed and agility

17. GM Stock Price Up almost 75% since April! Oct `04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 40 30 20 Oct 06 18. Delphi Update

  • Delphi & GM near a pact to avoid strike
    • GM to subsidize Delphi wages
    • GM to guarantee business to Delphi
    • Supply disruptions likely to be avoided
  • Risks
    • Creditors fear their claims will be swamped by those from GM
    • Terms for capital infusion from investors
    • Struggle for control: strategic investors vs. financial investors

19. Threats of Private Capital

  • Financial investors have much to gain
    • Where business are drastically reorganized (pensions, health care, underperforming assets) AND someone else pays the bill
      • BUT, some of the driving factors in other industries (for example, steel) are not present in the auto industry
    • Tactical advantage?
      • Capturing low-cost control of re-emerging businesses may have a relatively quick payback for financial investors
  • Strategic investors vs. financial investors
    • Potential difficulty for OEMs, and ultimately for suppliers, concerned about stability and long-term investing in the business
    • Funding of strategic investment (= long-term commitment)
      • New products (to sell more cars) vs. new processes (to increase productivity, quality and lower cost)
    • At odds with goals and needs of financial investors (= short-term gains)
    • Holding OEMs hostage?

20. Global Automotive Outlook 21. Global Overview

  • The global automotive outlook
    • Global automotive productionexpected to grow by almost 20%to approx. 72 million light vehicles in 2010
    • Toyota emerges as the largest OEM, passing GM in 2008
      • Product, manufacturing, cost, branding strengths
      • Increased global competition
    • Some traditional OEMs are trailing losing share
      • Product, manufacturing, cost weaknesses
      • But some level of recovery is expected
    • Asia (China, S.Korea, Thailand, India) and Eastern Europe will account for 75% of the growth in automotive production
    • Excess capacity remains a serious concern (Asia, Western Europe)

22. Winners & Losers: 2005-2010