Dan LangdonPresident East Penn Manufacturing Co., Inc.

Current President BCI

Battery Council International

• Regulatory Legislation• Global Implications• Election Year Implications• North America Industrial Battery Forecast &

Data• North America SLI Battery Forecast &

Marketing Data• Effects on Distributors• Battery Council International

Agenda

Regulatory Legislation

Now with Ohio: Pb Battery Recycling Laws - April 2008Now with Ohio: Pb Battery Recycling Laws - April 2008

BCI Model

Disposal Ban

Recycling Laws

Recycling

• 97% of all battery lead is recycled• Compared to:

– 55% of aluminum soft drink and beer cans

– 45% of newspapers

– 26% of glass bottles

– 26% of tires

Recycling

• The typical new lead-acid battery contains 60 to 80 percent recycled lead and plastic.

Air Transportation Safety

• Continues to be a concern– FAA now has 95 “incidents” on its list

– Biggest focus is lithium/lithium ions

– Most recent incident involved nonspillable lead-acid batteries shipped by manufacturer

• Average FAA penalty now $80,000• New battery transportation rule to be

proposed this summer

National Ambient Air Quality Standard for Lead (NAAQS)

• 1976 – Lead added to list of criteria pollutants

• 1978 – Primary and secondary NAAQS set• 1.5 µg/m3, quarterly average

• May 2008 – Proposed revision rule due • September 2008 – Final rule • September 2011 – States must amend their

regulations (SIPs). This probably means new permit restrictions.

Change in Emissions Sources

• 2002 National Emissions Inventory (NEI) – ~1700 tons lead emitted per year

– From >12,000 point sources plus non-point, mobile

• NEI does NOT include near-roadway resuspension of soils/dust that may contain historically deposited lead– California study suggests this may contribute up to 8

times the emissions from stationary & mobile sources combined

Aviation Fuel 392Utility Boilers 221Industrial/Comm/Institutional Boilers & Process Heaters 191Iron and Steel Foundries 110Primary Lead Smelting 59Secondary Lead Smelting 46Mining 38Military Installations 33Municipal Waste Combustors 33Electric Arc Furnaces (EAF) 32Integrated Iron & Steel Mfg. 32Pressed & Blown Glass & Glassware Mfg. 32Lead Acid Battery Mfg. 25 Secondary Nonferrous Metals 23 Hazardous Waste Incineration 22Total (Includes Categories Not Listed Above) 1640

Emissions Sources

Climate Change Regulation

• Potentially the biggest Federal regulatory program since the New Deal

• “Cap and Trade” bills would require major emitters (factories) of greenhouse gases to obtain allowances– All electricity prices will go up … a lot

• May encourage off-shore production

Global Implications

Global Implications• European union directives on recycling• Registration, Evaluation and Authorization of

Chemicals (REACH)– Proof for demonstration for safe use of chemicals

• Continued consolidation in all segments of the channel everywhere

• Rising cost of raw materials• Cost of inventory ties up our capital• A global economy-outsourcing to China, India

and even Vietnam

China Issues

– Higher cost of oil feeds inflation in China - up to 15% annually

– Prices rising from much higher shipping rates• Cost of sending a 40 foot container from China to

the US West Coast soared 150% to $5,500 since 2000 (Source: CIBC World Markets)

China Issues

– The shift back to the US has started• The weaker dollar has made our products more

attractive• Little value in having millions of dollars in inventory

sitting in the middle of the Pacific Ocean• China elimination of VAT Refund is leveling the

playing field

Election Year Implications

From BCI Perspective

• Little real progress in Congress in 2008• Many oversight hearings• Few policy-oriented policymakers• Increase in legislation and regulation -

particularly in the environment

Election Outcome Implications

• Climate change legislation by Nov. 2009• Lieberman-Warner (originally called McCain-

Lieberman) bill

• Other environmental and occupational health initiatives by mid-year

• Basel ratification/TSCA amendments • E-waste mandate (new RCRA recycling title?)• Limitation on imports from some countries• Lead paint in housing legislation

Election Outcome Implications

• OSHA lead standard in 2010 or 2011• Imitation of European Union Directives by

2011

What About the Candidates

• Both candidates favor environmental protection

• Offshore and Alaska drilling will be major issue

• Vagueness about environmental issues other than climate change

• Obama offers specifics including emphasis on lead poisoning of children

• Transition papers and appointments will be key

111th Congress Could Be Huge

• Climate change legislation• Additional EPA regulation• Securities/Banking legislation• Federal regulation of insurance industry• Restrictive trade legislation

North America Industrial Battery Forecast & Data

Presented by Bob Cullen Vice President, Sales & Marketing Battery Products, Hollingsworth & Vose Company at BCI’s Annual Convention.

$751Motive

$744 Stationary

Total: $1.49 Billion

By Market Class ($ Millions)

2007 Industrial Battery Sales

49.8%

50.2%

Source: Battery Council International

Industrial Battery Trends

0

100

200

300

400

500

600

700

1998 2000 2002 2004 2006 2008

OEM Non-OEM

$ (millions)

Source: Battery Council International

Actual 2007

Forecast 2008

8% (4%)

Industrial Truck

U.S. Motive Power Trends

• Fork Lifts– Battery Market increased by 8%; (20% due to

lead)

– 2007/8 Equipment spending slows dramatically

– US Economy becoming a Service vs. Manufacturing Society

U.S. Motive Power Trends

• Forklifts (cont’d)– US Warehouses need more Forklifts than

Manufacturing plants

– Overall Market Conditions• Replacement market is helping • 2008 expected to be a down year

Industrial Battery Market Summary

• Motive Power– Actual Motive Power increased sales by 8% in

2007- down 6-8% when Lead prices deducted

– Motive forecasted to decrease by (4%) in 2008

– BCI Forecast - Motive down (9%)

North America SLI Battery Forecast & Marketing Data

Adjusted for non-reporting companies,includes additional sales & export shipments

OEM

22.2

24.4

20.1

10

14

18

22

26

2001 2003 2005 2007

million units

– =

Replacement

98.7

93.9

84.6

75

80

85

90

95

100

105

2001 2003 2005 2007

million units

North America SLI Shipments

Source: Battery Council International

U.S. / North American OE Battery Shipments

Source: Battery Council International

OE SLI Battery Market

0

5

10

15

20

25

30

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

Millions of units

U.S. / North American Replacement Battery Shipments

Source: Battery Council International

Replacement SLI Battery Market

40

50

60

70

80

90

100

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

Millions of units

North American SLI Battery Shipments Percentage

82.6% 81.2% 82.0% 82.4% 83.1%

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007

Replacement OEM

Percent of Total

Source: Battery Council International

North American SLI Battery Forecast

112.1 117.9 122.4 129.8118.8

0

25

50

75

100

125

150

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Replacement OEM Total

million units

Source: Battery Council International - Daramic Staff

0102030405060708090

100110120130

2003 2004 2005 2006 2007 2008 2012

Millions of units

OE Repl

2.0% 4.5% 0.2% 1.0%

-1.8%

6.0%

CAGR 2008-2012OE: 0.4%, Replacement: 1.7%

Total: 1.5%

FORCAST

North American SLI BatteryForecast Percent Change

Source: Battery Council International

2007 SLI Replacement Shipments by Segments

2.4%

9.7%65.2%

6.5%0.6%

5.8% 4.0%

0.4% 5.5%

Passenger Car & Light Truck Heavy Duty Commercial Marine/RV

Special Tractor General Utility Golf Car & Floor Scrubber

Military Types Power Sport Other

Source: Battery Council International

*2004–07, no earlier data

SLI Battery Shipment Trends by Application

CAGR 2001–07 OEM ReplacementLight Vehicle -2.3% 0.1%

Heavy Duty -3.3% 5.2%

General Utility -4.9% 1.6%

Golf Car/

Floor Scrubber 4.1% 7.8%

Marine/RV 1.3% 3.1%

Motorcycle/

PowerSport* 10.6% 10.7%

Total 0.1% 1.7%

Source: Battery Council International

9.79% 0.50%0.14%

1.80%

22.41%

19.22%

0.03%0.96%

0.99%

27.73%

16.42%

Gas & Oil Co. Tire & Rubber Co.

Mass Merchandisers (Department & Discount Stores) Mass Merchandisers (Auto Chains)

Mass Merchandisers (Other) Fleet Operations

Government Vehicle & Equipment Mfg.

Parts Distributors Battery Specialists

Other

SLI Replacement Shipmentsby Channel of Distribution

Source: Battery Council International

2007

The Top Five Reasons for Purchasing Particular Battery

Does not total to 100% due to multiple answers

PerformanceClaims

BrandName

RecommendationsLowestPrice

Other

54% 53% 42% 41%28%

Source: Aftermarket Business June 2008 issue

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Professional Service (DIFM) Do-It-Yourself (DIY) Sales

Size of the Automotive Aftermarket

(Values in Millions of Consumer Dollars)

* 3.9%Compounded

AnnualGrowth Rate

Figures represent consumer expenditures in current retail dollars (i.e., inflation added) and do not include warranty work.

Source: AAIA - 2008

Installing The Battery

Aftermarket Business 5th Annual Consumer Attitude Study June 2001

DIY - 48%DIFM - 52%

DIY - 55%DIFM - 45%

Aftermarket Business 12th Annual Consumer Attitude Study June 2008

US Trade Data Lead-Acid Batteries

Source: US ITC Trade Data Web, downloaded 27Mar08

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Exports Imports

million units

*GVW 1-8

2007 Total scrappage rate at 5.2%

US Vehicles Scrappage Rates

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

1970 1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007

Cars Trucks* All Vehicles

Source; 2007 R.L. Polk & Co.

Median Age of U.S. Carsand Light Trucks

**GVW 1-3

In 2007, the percentage of the car population 11 years of age and older was 41.3%, compared to 40.9% in 2006. For light trucks, this percentage was 29.5% in 2007 and 29.2% in 2006.

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

Age

Cars Light Trucks*

Source; 2007 R.L. Polk & Co.

Age of Vehicle When Purchasing A Battery

3%

32%34%

31%

<1 Years 2-5 Years 6-9 Years >10 Years

Source: Aftermarket Business June 2008 issue

U.S. Vehicle Registration

237.1235.2231.9

224.9221.7

200205210215220225230235240245250

2003 2004 2005 2006 2007

Mill

ions

Source; 2007 R.L. Polk & Co.

Hybrid RegisteredVehicle Information

280,792

354,545

145,194

85,81643,311

18,6280

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2001 2002 2003 2004 2005 2006

Source; 2007 R.L. Polk & Co.

Hybrid Vehicle Registration Market Share by OE Manufacturer

Lexus10.5%

Ford6.7%

Mercury0.8%

Toyota 63.2%

Honda18.8%

Source; 2007 R.L. Polk & Co.

Number of Hybrid VehicleLaunches by Nameplate

8

27

40

16

53320

10

20

30

40

50

2001 2002 2003 2004 2005 2006 2007 2008

Source; 2007 R.L. Polk & Co.

66 - 815 – 2050 - 60Battery capacity (Ah)

>2001443612Battery voltage (V)

EV Drive

Motor assist

Engine start

Regen. Braking

FullMediumMild-Micro-

66 - 815 – 2050 - 60Battery capacity (Ah)

>2001443612Battery voltage (V)

EV Drive

Motor assist

Engine start

Regen. Braking

FullMediumMild-Micro-

HEVs and Functions

(Hybrid Electric Vehicle)

Achieved 100k miles Driving without Conditioning charge @ Jan.15, 2008, Similar performance with Ni-MH Module Drivability, Durability, Fuel Economy, CO2 Emission

ALABC Project - UltraBattery

UltraBattery

Test Results 3 EUCAR Profiles

UltraBattery Benefits

• Overcame the weak point of conventional lead-acid battery

• Suppressed NAM sulfation• Superior charge acceptance• Excellent durability @ HR-PSOC (partial state

of charge)• Meets or exceeds the targets of:

– Power - Available Energy - Cold Cranking

– Self Discharge

Summary

• Overall demand for lead acid batteries remains stable with only a modest increase in 2008 before returning to historical levels.

• OEM is foreseen to continue its decline for the next couple of years, particularly with the uncertainty of our economy.

• One must still keep a watchful eye towards Asia while looking for opportunities in Europe due to the increasing gap in the Euro to US dollar.

Effects on Distributors

How All This Affects Distributors• Price of lead, fuel and other metals directly affect

cost of manufacturing and distributing a battery• Increased legislation and regulation both here and

abroad will increase manufacturing costs • Environmental and recycling also affects

everyone in the channel of distribution• New advances in lead technology make this (lead)

technology affordable and competitive• Battery Specialists can help customers by

reducing inventory and distribution

BCI 2008 Membership

• 21 new members-262 in total. • 35 Manufacturers• 102 Suppliers• 106 Marketers• 9 Associate Members• 10 Mutiple Members• Since 1998 (10 year) BCI membership has

grown 50%!

BCI Membership

Stable, trustworthy, resourceful, 84 year-old trade

association seeks long term relationship with battery

companies. While others may come and go, BCI is still

thriving after 84 years. With a dedicated volunteer

management team and professional staff, it’s no wonder so

many of our members have been with us since the beginning.

WANTED

Battery Council International

• We invite all EBG members to become more active in BCI

• Sign up for a committee• Attend our annual conference and Power

Mart Trade Fair• Read our bulletins and newsletters• Call or email us your questions, suggestions

and concerns

Battery Council International

• This is a responsible industry.• This is a safe industry.• This is a recycling and environmentally

friendly industry.

SPREAD THE WORD!

Thank-you!