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Join. Engage. Advance.
Join. Engage. Advance.
CHIEF EXECUTIVE OFFICER COUNCILMay 3, 2016
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WELCOME
Julie A. Fream
President and Chief Executive Officer, OESA
2
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AGENDA
3
11:45 a.m. Registration and Buffet Luncheon
12:45 p.m. Welcome and Introductions
• Housekeeping – September 21, November 1 – Proposed December 6 or December 9
• Upcoming Events
• Remaining 2016 CEO Council meeting dates
1 p.m. The North American Outlook: The Gathering Clouds,
Charlie Chesbrough, Director of Industry Analysis & Senior Principal Economist, IHS Automotive
2 p.m. YLC3 Talent Committee Status Report
3 p.m. The Future of Mobility, the Impact to Suppliers, and the Changing Process for Driving Innovation,
Neal Ganguli, Director, Deloitte Consulting LLP
Jason Coffman, Principal, Deloitte Consulting LLP
4 p.m. The CEO Roundtable: An Open Dialogue on Key Issues facing Automotive Industry CEO’s,
Sheldon Klein, Shareholder, Butzel Long
5 p.m. Adjourn
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ANTI-TRUST GUIDELINES
• Approved agenda for each meeting. Stick to the agenda.
• Complete and accurate minutes.
• Business conducted at formal meetings--no rump sessions.
• No agreements, discussions or understandings concerning:
• Prices, discounts, terms or conditions of sale
• Profits, margins, cost data
• Market shares, sales territory, markets
• Selection, rejection, termination of customers or suppliers
• Restricting territories, markets, or customers
• Any matter inconsistent with the exercise of independent business judgment in pricing of
services and products, dealing with customers and suppliers, and choosing markets in
which to compete
4
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HOUSEKEEPING
• OESA Wi-Fi:
Network: OESAguest
Password: oesaGuests!
• Restrooms: Located through the glass doors in the hallway
on the left (just before the elevators)
• Refreshments: Located in the back of the room or in the
café refrigerator; please help yourself!
5
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UPCOMING EVENTS
6
May 17-18 MEMA 2016 Legislative Summit
Mandarin Oriental Hotel, RFK Stadium, Washington, DC
Jun. 2 Cyberliability
The Townsend Hotel, Birmingham, Mich.
Jun. 23 AlixPartners Meeting
The Townsend Hotel, Birmingham, Mich.
Oct. 12 OESA Terms & Conditions Meeting (Save the Date)
MSU Management Education Center, Troy, Mich.
Nov. 2 OESA Annual Conference (Save the Date)
COBO Center, Detroit, Mich.
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OESA MEMBERS-ONLY OEM TOWN HALLS
7
May 4 Nissan Town Hall Meeting
Suburban Collection Showplace, Novi, Mich.
Jul. 20 Toyota Town Hall Meeting (Save the Date)
The Inn at St. John’s, Plymouth, Mich.
Oct. 4 FCA (Save the Date)
COBO Center, Detroit, Mich.
Oct. 13 Honda Town Hall Meeting (Save the Date)
Burton Manor, Livonia, Mich.
Dec. 2 Ford Town Hall Meeting (Save the Date)
Ford Headquarters, Dearborn, Mich.
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PRESENTATION
8
Charlie Chesbrough, Director of Industry
Analysis & Senior Principal Economist,
IHS Automotive
© 2016 IHS
Presentation
ihs.com
IHS AUTOMOTIVE
United States
Economic and Automotive Outlook
Clouds on the Horizon
May 2016
Charles ChesbroughSenior Principal Economist and Director of Industry Analysis
IHS Automotive - Detroit
© 2016 IHS
Contents
• Introduction
• Global and US Economic Outlook
• Implications for the US Automotive Market
• Appendix
10
© 2016 IHS
Introduction
Charles Chesbrough
Senior Principal Economist and Director of Industry Analysis
IHS Automotive
Charles joined IHS in 2006 and is responsible for developing and integrating statistical models and economic scenarios into IHS global automotive forecasts. Charles represents IHS forecasts and research to organizations, clients and media, and as a speaker at various professional seminars and international industry events.
Prior to IHS, Charles worked for Ford Motor Company's marketing strategy group as well as two technology start-up companies and two market research firms. He began his career as a floor trader at the Chicago Board of Trade.
Charles earned a bachelor’s degree in economics from the College of Business at Michigan State University and a master’s degree in applied economics from the University of Illinois at Chicago. He returned to Michigan State University and completed courses for the economics PhD program.
Charles has won many economic forecasting accuracy awards and is a board member and former President of the Detroit Association for Business Economics and member of the National Association for Business Economics.
11
© 2016 IHS
Contents
• Introduction
• Global and US Economic Outlook
• Implications for the US Automotive Market
• Appendix
12
© 2016 IHS 1313
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World UnitedStates
Japan Eurozone Brazil Russia India China
2015 2016 2017 Avg 2018-2023
GDP Growth Rate %
Source: IHS Economics
World Average
2016 = 2.6%
World: Economic Growth RatesEmerging market slowdown having global implications
© 2016 IHS
-15
-10
-5
0
5
10
15
China India Japan Russia United States Brazil Eurozone Germany
World: Industrial ProductionWeakness widespread - impacting commodity prices
March
2016
Source: IHS Economics, 3 month average of annual percentage change, historical actual and current estimate
Industrial Production (annual change, %, 2013-2016)
© 2016 IHS
0
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4
6
8
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14
China Japan Russia UnitedStates
Brazil Eurozone Germany
World: Unemployment RateMost labor markets tightening; Russia/Brazil feeling impact of recession
March
2016
Source: IHS Economics, monthly, in percent, historical actuals and current estimate
Unemployment Rate (%, 2013-2016)
© 2016 IHS 16
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1.4
1.6
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2.2
2.4
2.6
China India Japan Russia Brazil Euro United Kingdom
April
2016
Source: IHS Economics, monthly exchange rate vs US$, indexed to rate in January 2013
World: Exchange RatesDollar making huge gains against most currencies – as intended
January
2013
Local vs US$, (indexed, January 2013=1)
© 2016 IHS 17
World: Crude Oil Price ForecastGradual increase expected as weak global economy improves
$0
$25
$50
$75
$100
$125
$150
2000 2005 2010 2015 2020 2025
Current US$ Constant US$
Source: IHS Economics
Brent Blend Crude Oil Price ($/barrel)
Price near bottom, rises as global economy improves;
some disruption as suppliers return to market
• Crude Oil price has fallen dramatically since
2014 levels of $120 – now trading near $40.
• Price bottom expected this spring as
production adjustments are incorporated into
the market – Iran now adding over 500k
barrels to daily supply
• Price expected to rise over mid-term as
recovery in emerging markets, strong demand
in W Europe and N America, leads to
increase in demand growth; expected to
outpace supply gains over the next decade.
• Spot price expected to reach pre-crash levels,
but constant price remains relatively low –
only reaches $100/barrel by 2025 in today’s
value.
• Price recovery over the mid-term will be
volatile, impacted by Oil Producers returning
to market as profitable levels return – jagged
as supply rises and price adjusts.
• Low oil supports a robust global vehicle
market – sales lifted by more money in
everyone’s pockets; manufacturers and
consumers.
© 2016 IHS 18
World: Automotive Materials Cost IndexFalling commodity prices reducing production costs – profit margins strengthening
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
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AMCI commodity basket:
Steel
Aluminium
Plastic Resins
Rubber
Glass
Iron
-51% since
2011
Source: IHS Automotive Material Cost Index of combined commodities, monthly data
Material Costs in Typical 3500lb US Vehicle
• IHS’ Automotive Materials Cost Index has
fallen 51% since 2011 – like all commodities
recently, too much supply and weak industrial
demand driving down price.
• Material input costs are near $1000, down from
$2100 five years ago, a savings of over $1100
per vehicle - expected to remain low over mid-
term but AMCI will rise as global economy
improves.
• Global economy’s recent slow growth providing
manufacturing cost savings – expected to
continue through 2018, rising with emerging
markets strengthening.
• Vehicle profit margins for manufacturers should
be relatively strong – allowing more pricing
flexibility for OEMs and Suppliers.
• Low oil and material prices support a robust
global market over near-term: vehicle sales
lifted by more money in everyone’s pockets,
manufacturers and consumers
• Stronger economic conditions will lead to
higher commodity prices by the end of the
decade – margins to weaken.
© 2016 IHS 19
US: Economic SummaryImproving US economy will keep vehicle market on positive growth path
• Real GDP – Economic signals mixed; Consumer confidence and many
sectors improving, but strong dollar hurting trade. Growth weaker this
year: 2.1%, improving next year towards 3% before declining.
• Monetary Policy – FED expected to continue to raise interest rates,
weak global conditions causing delays. US labor market key; do rising
wages support tightening?
• Fiscal Policy – Spending will rise in 2016 thanks to recent budget
deal, contributing to growth for first time in years; adds stability.
• Consumption – Real consumer spending improving – stronger labor
markets, falling energy prices and improved household balance sheets
all contributing.
• Housing – Plenty of recovery left to go, Housing Starts only at 2/3 of
pre-crash averages. Sector will gain momentum as household
formation and labor markets improve.
• Employment – Job creation averaging above 200,000 per month -
conditions should lead to robust wage growth - not yet due to weak
participation rates.
• Foreign Trade – Strong dollar is hurting trade balances, a drag on the
US economy through 2018. Recent yuan devaluation, coupled with
already weak euro and yen, will impact OEM sourcing decisions.
• Investment – Strong profits, stock prices, suggest business fixed
investment will accelerate; low oil prices are a “surprise” cost savings,
but within the oil sector a major pullback is occurring.
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Real GDP Growth (%)
Source: IHS Economics
© 2016 IHS
US: Purchasing Manager IndexesEconomy facing dichotomy – services relatively strong, trade impacting manufacturing
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65
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Manufacturing index Nonmanufacturing index
Source: Institute for Supply Management, monthly survey data
Co
ntr
ac
tin
g
Ex
pa
nd
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ISM Purchasing Indexes (monthly, 50 = neutral)
Services (non-manufacturing) much stronger
than Manufacturing;
Both starting to recover from recent declines
© 2016 IHS 21
$1,320
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Student Loans Outstanding Annual Growth
Total Student Loans Outstanding (millions US$)
US: Student Loan DebtExplosion in debt likely hindering vehicle sales among younger buyers
Source: Federal Reserve, Student Loans Outstanding
Now over 1.3 trillion $,
up 175% over last decade
Annual Growth
Growth rate declining,
still very high
© 2016 IHS
US: Housing Starts ForecastLots of recovery left to go, but growth will slow after next year
-50%
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Single-Family Multi-Family Growth Rate
22
Housing Starts (millions) Annual Growth (Total)
Growth rate slows significantly
by 2018; Multi-Family
construction gaining importance
1.2 million
Starts in 2016
© 2016 IHS 23
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Median, Existing Houses Median, New Houses
Median Home Sale Price (thousand US$)
US: Home PricesNew houses above pre-crash levels while existing homes near par
Source: IHS Economics, current quarterly forecast
Existing Home prices now
above pre-recession peaks;
New Home prices much
higher – demand strong, new
construction supply low
© 2016 IHS 2424
US: Labor Market WagesGrowth rates remain far below long-term averages – FED watching closely
$21.37
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
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Average Earnings $/hr - L Annual Change 3m avg - R
Average Hourly Earnings
Source: Dept of Labor, BLS Unemployment Report, Production/Nonsupervisory employees, seasonal/monthly
Annual Change
Wage growth weak;
FED watching closely
as inflation spark
Average Annual
Wage Growth
1986-2009: 3.2%
2010-2016 2.1%
© 2016 IHS 2525
Source: US Department of Labor
US: Wage Rate Growth ObstaclesParticipation at 38 year lows – limited skills likely keeping some workers away
56
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No High School Diploma
Some College
HS Graduate
College Graduate
Labor Force Participation Rate % Unemployment Rate % by Education Level
Participation now increasing
from 38 year lows – limited
skills still keeping folks away?
Source: US Department of Labor, Percent Working or Looking
© 2016 IHS 2626
Source: IHS Economics, US Department of Labor
US: Labor Market ConditionsFalling unemployment now; history suggests a new direction approaching
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Unemployment Rate (%)
Source: Dept of Labor, BLS Unemployment Report, Production/Nonsupervisory employees, seasonal/monthly
Historic
Average
© 2016 IHS 27
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Federal Funds%
10-Year Treasury%
30 yr Mortgage%
Effective Federal Funds Rate (%, overnight)
US: Key Interest RatesFED monetary policy to tighten further – global weakness may delay
Source: IHS Economics, current quarterly forecast
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Interest Rate Forecasts (%)
FED raised rates during 1970s
inflation, then lowered 1980-
2015 to spur growth – never
raised to create growth
Global weakness, US labor
wage growth will impact rate
increase decisions
Cost of borrowing to rise across
economy – vehicle affordability to
weaken. Vehicle sales response?
© 2016 IHS
Contents
• Introduction
• Global and US Economic Outlook
• Implications for the US Automotive Market
• Status of Demand
• Appendix
28
© 2016 IHS 29
US: Status of Automotive Market Consumer buying desire remains high; stronger wages will improve ability
• Buying Conditions Favorable – confidence increasing, job creation consistent, wages improving albeit slowly,
credit conditions strong, low gas prices, and lots high tech products.
• Strong Demand – Modest pull-back in March’s selling rate (16.5 million) from the recent 17+ pace over last
quarter, and 18+ pace last fall, but expected to gain steam as weather and economy improves.
• Low Oil Prices - Helping consumer spending, and autos in particular, but oil volatility may make consumer
skeptical thus moderating potential gains.
• Material Costs Low – Manufacturing cost pressures will remain low over near-term due to weak commodity
prices globally.
• Housing Recovery – Housing Starts only at 2/3 of pre-crash averages. Sector will gain momentum as labor
markets improve and credit standards ease.
• Employment – Job creation strong and expected to continue. Housing market has much more recovery to
come which will help sales through jobs and wealth.
• New Products – Number of new/refreshed nameplates to increase over near-term, will bring buyers into
showrooms.
• Strong OEM Margins – transaction prices high, material costs low; lots of room to increase incentives to
support sales slump.
• Credit Available – rates low, availability may be changing, lengthening loan maturity is an issue.
• Sales Cycle Changing – growth rate slowing, pent-up demand spent and wants based demand replacing
needs based. Loyalty to brands becoming more important than ever.
© 2016 IHS
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1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Total Car Light Truck
US: Light Vehicle Sales SAARCars passed by Light Trucks again – trend to continue
30
“Keep America
Rolling” “Employee Pricing
For All”
“Cash For
Clunkers”
Monthly Sales (SAAR, millions)
Source: IHS Automotive, Seasonally Adjustment, monthly light vehicle data
Light Trucks driving sales,
outpacing cars – current
CUV popularity similar to
SUV craze of 2000s
© 2016 IHS 31
US: Housing Starts and Light Vehicle SalesSectors recovering at different speeds; housing has a long way to go
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Housing Starts - L LV Sales - R
Sources: IHS Automotive, Light Vehicle Sales SAAR, Department of Commerce
Housing Starts (thousands,12m avg) Light Vehicle Sales (millions,12m avg)
Housing Starts recovery
lagging while Light Vehicles
are back: V recovery
Upside potential from
Housing will support strong
job creation, Lt Truck market
Housing Bubble
© 2016 IHS 32
US: Consumer Sentiment and Light Vehicle SalesOptimism improving rapidly; still far below pre-2001 levels
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Consumer Sentiment - L LV Sales - R
Incentives
Bubble
Sources: IHS Automotive, Light Vehicle SAAR, University of Michigan sentiment survey, 1966=100
Consumer Sentiment (12m avg) Light Vehicle Sales (millions,12m avg)
Labor agreements of early 2000s
contributed to “Incentive Bubble”
price discount strategy: Real
demand fell, but Detroit 3 UAW
contracts required labor be paid,
utilized or not, less loss to employ
large discounts support sales
© 2016 IHS
US: Oil Price Impact on StatesRecent price shock impacting oil producing states’ light vehicle demand
33
Oil States’ Share of Nation – All Vehicles
9.0%
9.2%
9.4%
9.6%
9.8%
10.0%
10.2%
10.4%
10.6%
10.8%
2010 2011 2012 2013 2014 2015
8.0%
8.2%
8.4%
8.6%
8.8%
9.0%
9.2%
9.4%
9.6%
9.8%
2010 2011 2012 2013 2014 2015
Oil States’ Share of Nation – Luxury Only
Oil States’ Share of Nation – Pick Ups Only
16.0%
16.2%
16.4%
16.6%
16.8%
17.0%
17.2%
17.4%
17.6%
17.8%
18.0%
2010 2011 2012 2013 2014 2015
Annual Change in Registrations
0%
5%
10%
15%
20%
25%
2011 2012 2013 2014 2015
Oil States
Rest of Nation
Sources: IHS Automotive, Oil Producing States=Texas, Wyoming, Alaska, North Dakota, New Mexico
© 2016 IHS
Contents
• Introduction
• Global and US Economic Outlook
• Implications for the US Automotive Market
• Buying Conditions
• Appendix
34
© 2016 IHS
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Consumption Rate - L LV Sales - R
Source: Consumption Rate=1-Savings Rate, Department of Commerce
Consumption Rate (%,12m avg) Light Vehicle Sales (millions,12m avg)
Correlation = 0.61
Prior 2010 = 0.66
Post 2010 = 0.30
US: Consumption and Light Vehicle SalesDivergence in recent years – Savings less important
Inflated Demand
easy credit, housing bubble
© 2016 IHS 36
14%
16%
18%
20%
22%
24%
26%
2010 2011 2012 2013 2014 2015 2016
Lease Share Fleet Share
Lease and Fleet Share of New Registrations
US: Lease and Fleet Penetration Leasing increasing as OEMs utilize to gain share and leverage loyalty
Source: IHS Automotive, GVW<10K, Light Vehicle Registrations Data – January 2016
Leasing remains strong in 2016;
Fleet share rising may be early warning
© 2016 IHS
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Loans Outstanding - L Annual Change - R
US: Auto Credit Availability At record levels; recent growth remains relatively strong and stable
37
Total Motor Vehicle Loans Outstanding and Securitized (billions $)
Source: Quarterly Data, Federal Reserve Bank
Annual Change (%)
© 2016 IHS 38
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Direct (Bank) Loans Indirect (Dealer) Loans
Delinquency Rate (%, Accounts 30 days past due)
US: Auto Loan Delinquency Rates – Accounts Past Due
Credit quality strong - remains at record lows
Source: American Banker Association Survey
Auto loan 40 year
Averages
© 2016 IHS 39
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US: New Auto Financing Low rates and long terms support robust vehicle market
Source: Federal Reserve Bank, commercial bank 48 month loan rate,
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Interest Rate 48 month loan (percent) US Average Loan Length (months)
Source: Federal Reserve Bank, New Car Loans at Finance Companies
© 2016 IHS 40
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Stronger Demand for Auto Loans
Tighter Standards for Auto Loans
Net
Res
po
nd
en
ts “
Ye
s”, in
pe
rce
nt
US: Auto Loan AvailabilityBanker survey suggests market may be cooling; demand falling, restrictions rise
Sources: Federal Reserve, Federal Reserve Loan Officer Survey, 4 quarter average
$27,986
$24,500
$25,000
$25,500
$26,000
$26,500
$27,000
$27,500
$28,000
$28,500
201
1
201
2
201
3
201
4
201
5
201
6
US Average Amount Financed Auto Loan Availability
For a 4%, 5 year loan of $28K,
each 1% increase in rates
adds $13 to monthly payment,
or about $800 total.
FED rate increases may add
$2,000+ over near-term
© 2016 IHS 41
7.5m
10.3m
4
6
8
10
12
14
16
18
20
196
7
196
9
197
1
197
3
197
5
197
7
197
9
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
201
7
201
9
202
1
202
3
Pre-Crash
40 year trend:
+140k annually
41
US: Light Vehicle Sales ForecastSales cycle peak approaching; return to previous long-term trend level possible
Annual Sales (millions)
Source: IHS Automotive, current light vehicles sales forecast
16.5m
Peak 2017
18.2m 17.8m
17.4m
Car – sales flat now, rises
with slower economy, new
product, greater affordability
Lt Truck – peaks in 2018,
weaker housing, higher gas,
regulation all force decline
Market peaks in 2017 – weaker buying
conditions, slower job creation, rising
oil prices start next cycle
Some return to cars likely by 2023
© 2016 IHS 4242
Source: IHS Automotive
• Higher Interest Rates – monthly payments increase; forces shift to lower cost vehicles.
• High Transaction Prices – Rising faster than consumers’ incomes; a high perch to fall from
in the next down cycle.
• Oil Prices Rising – Higher ownership costs hits spending and confidence, consumer
behavior and vehicle preferences impacted.
• Government Regulations – OEM efforts to meet EPA standards likely to impact vehicle
pricing.
• Recovery Phase Changing - Household formation/Housing growth rates slow, less job
creation – particularly in Midwest and Northeast.
• Weaker OEM Margins – Higher material costs, higher borrowing cost; incentive support.
Market more competitive – loyalty importance rising.
• Urban Mobility Changes – Uber/technology/social media all impacting the need and desire
for vehicle ownership.
• Region Changing – Strong fundamentals a regional market of 20m+ annually through the
decade. Production moving to Mexico, now source of sales growth while US/Canada slow.
US: After The PeakWeaker buying conditions, higher ownership costs slow market
© 2016 IHS
Contents
• Introduction
• Global and US Economic Outlook
• Implications for the US Automotive Market
• Appendix
• Long-term concerns
43
© 2016 IHS 44
© 2016 IHS 45
78.9
20
30
40
50
60
70
80
90
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
New Buyers
Used Buyers
All
Average Length of Ownership (months)
US: Consumer Behavior ChangingConsumers “investing”: keeping vehicles longer and using them less
Source: IHS Automotive, Light Vehicle Registrations Data
4
5
6
7
8
9
10
11
12
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
197
0
197
5
198
0
198
5
199
0
199
5
200
0
200
5
201
0
201
5
Miles Traveled - L
Miles Per Person - R
Source: Dept. of Transportation
Miles Traveled (trillions) Per Person Usage (000s)
Usage remains muted since
recession – just starting recovery
© 2016 IHS 46
9.0
9.5
10.0
10.5
11.0
11.5
12.0
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
CAR LIGHT TRUCK TOTAL
Vehicle Age in Years
US: Average Vehicle Age in VIOVehicle fleet age continuing to rise; replacement demand will suffer
Source: IHS Automotive, Light Vehicle Registrations Data
© 2016 IHS
US: Motor Vehicle PenetrationAmerica loves cars – does the romance continue?
0
100
200
300
400
500
600
700
800
900
190
0
191
0
192
0
193
0
194
0
195
0
196
0
197
0
198
0
199
0
200
0
201
0
202
0
Sources: IHS Automotive, U.S. Department of Transportation, Federal Highway Administration Statistics, LV+HV
Motor Vehicles in Use Per 1000 People
Great Depression
World War 2
Great Recession
Gulf War INo One Two 3+
vehicles vehicle vehicles vehicles1960 21.5% 56.9% 19.0% 2.5%
1970 17.5% 47.7% 29.3% 5.5%
1980 12.9% 35.5% 34.0% 17.5%
1990 11.5% 33.7% 37.4% 17.3%
2000 9.4% 33.8% 38.6% 18.3%
2010 9.1% 33.8% 37.6% 19.5%
US Census Household Ownership Survey ?
Disruptive
Technology
Shared/Autonomous Technologies –
Friend or Foe?
Ownership Impact:
If 10% of households changed categories,
ownership reverts to 1980 levels – no car
households rise by 5 million
© 2016 IHS 48
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
2020 2025 2030 2035
Level 4 - No Driver Needed Level 5 - No Driver Controls % New LV Sales
Millions of Capable Vehicles Sold
World: Autonomous Vehicles ForecastAre driverless vehicles a friend to the industry? Ownership less, but accessibility high
Source: IHS Automotive Estimates
Autonomous Share of Global LV Sales (%)
New Opportunities from New Consumers• World population = 7bn: Licensed drivers = 1bn (15%),
Unlicensed drivers = 6bn (85%) –many more potential users
• Big savings from shared ownership; cost per mile will fall
• Scrappage rate much higher from usage
• Many AVs will be inexpensive, shared, no frills “taxis”
Vehicles per household will fall – how much is the key question?
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PRESENTATION
49
YLC3 Talent Committee Status Report
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YOUNG LEADERSHIP COUNCIL 3
Talent Committee Update
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Issue
Industry leaders consider talent retention to be
a priority issue in the automotive supplier sector
EXECUTIVE SUMMARY
51
POSITIVES / LEADING PRACTICES
More than 2/3rd of survey respondents indicate
high likelihood of staying
Leadership and career progression through
positive impact to industry, company and self
a key success driver
Challenging and rewarding workplace while
maintaining work-life balance a retention
catalyst
Misalignment between career position
aspirations and related opportunities
Stagnant role and responsibilities in
foreseeable future
Lack of communication between employees
and their immediate managers
NEGATIVES / RETENTION ISSUES
Talent retention survey findings not unique to the automotive supplier industry;
capitalize on leading practices and target addressable retention issues
Approach
Survey based methodology adopted to
understand and validate talent retention, leading
practices and recommended path forward
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TALENT RETENTION INITIATIVE OVERVIEW
52
Explore and expose industry cultural issues affecting talent retention in the automotive
supplier industryMission Statement
Assessment Approach
Assessed automotive supplier industry retention issues by surveying OESA’s Young Leadership Council (past and
present) and representatives identified by the CEO, SMEP and HR Councils
Survey Summary
Designed and conducted a 30 question retention survey
Tested survey results against initial hypotheses for industry retention issues
Received a total of 286 responses (~40% YLC members)
Retention Survey Synopsis
Assesses retention issues impacting the automotive
supplier industry
Retention Issues focused on ‘high potential’
employees
Outlines the primary issues and leading retention
practices
Provides a high level set of recommendations
What the initiative IS
Initiative does not encompass talent acquisition
Does not address talent issues among associates that
are not identified as ‘high potentials’
Does not provide visibility of issues and leading
practices by company to maintain anonymity
Effectiveness of recommendations not included
What the initiative IS NOT
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of respondents average
6 to 15 years of experience50%
SURVEY DEMOGRAPHICS OVERVIEW
53
40% YLC members
286survey respondents
of respondents with
Bachelors degree or above85%
Retention horizon:
2 – 5 years
Likelihood of staying:
Greater than 75%
Lower than 74%
HIGH
LOW
Focus Points
Public and Privately held companies
equally represented
44% Publicly traded
56% Privately owned
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KEY TAKEAWAYS
54
Results gender and
YLC membership agnostic
68% of the respondents indicated
HIGHlikelihood of staying
43% If leaving current employer
would leave automotive
32% respondents indicated
LOW likelihood of staying
65% If leaving current employer
would leave automotive
Likelihood of staying
in the next 2 – 5 years286
survey respondents
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ISSUES: MANAGEMENT COMMUNICATION
55
25%Lack of clear and open communication
of respondents indicated
29%do not see a career path at current employer
of respondents
“Establishing open communication and a good relationship with employees allows
them to voice opinions and concerns. When you can do this, you feel like you have
support from the company.”
- Interview participant
“I have found as I progress in my career that I
have fewer career path conversations with my
direct manager(s).”
“I have been told that there is a career plan
for me however it is not communicated.“
“Sometimes I just feel as though I am
alone and trying carve out my own career
path.”
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ISSUES: PATH TO INCREASED RESPONSIBILITY
56
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
95-100% 75-94% 50-74% 25-49% 6-24% 0-5%
No, I don’t see a path to increased responsibilities in the next 2 – 5 years
Yes, I see a path to increased responsibilities in the next 2 – 5 years
Perception of increased responsibility in 2 – 5 year horizon highest among those who indicate high likelihood of staying
Limited path to increased responsibility among those who indicate low likelihood of staying
A small number of associates who indicate high likelihood of staying don’t see a clear path of increased responsibilities
A large percent of employees that indicate a low likelihood of staying don’t see a path of increased responsibility
Key Takeaways
High likelihood of staying Low likelihood of staying
High likelihood
of staying
Low likelihood
of staying
Yes, I see a path to increased responsibilities
No, I don’t see a path to increased responsibilities
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ISSUES: CAREER PROGRESSION
57
CEO Other Exec(Head of
Prod.Devel,CIO, CFO)
SeniorManagement(VP, Director)
Management(Manager,Supervisor)
Domainexpert/ Techexpert/ Functexpert/ Indivcontributor
CEO Other Exec(Head of
Prod.Devel,CIO, CFO)
SeniorManagement(VP, Director)
Management(Manager,Supervisor)
Domain expert/Tech expert/Funct expert/
Indivcontributor
Career progression is a key success factor when considering employee retention
Overall perception of level achievable versus desired career level is aligned except for senior executive roles
Larger disparity in perceived versus desired career level among associates who indicate LOW likelihood of staying with
current employer in the next 2 – 5 years
Key Takeaways
High likelihood of staying
68% of respondents
Low likelihood of staying
32% of respondents
Perceived ability to achieve career level
Desired career level In interviews conducted, one respondent believed so strongly in career
progression, he developed his own career path with management. This
also reinforces to his management that he is a ‘high potential’ associate.
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ISSUES: DEVELOPMENT PROGRAMS
58
Low likelihood of staying
High likelihood of staying
Education Opportunities and/orreimbursement
Rotational Programs Management Development Programs Other Programs for High PotentialEmployees
Respondents whose companies have a formal management development program are 7% more likely to stay at their
current employer than the survey average (75% vs 68%)
77% of respondents indicating high likelihood of staying indicate management development programs compared to 58%
of those indicating low likelihood of staying
Key Takeaways
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ISSUES: CULTURE MOTIVATORS
59
Least motivating factor for those wanting to leave is Management and Lifestyle
of respondents23%with LOW likelihood of staying
Indicated that primary deterrents are
management and lifestyle
“Environment is very aggressive and the future looks like it is more challenging
(do more with less) and it's hard to motivate teams under such aggressive
environments.”
JOIN. ENGAGE. ADVANCE. 60
RETENTION THROUGH COMPANY CULTURE
Identifying Culture Deterrents
Work environment stressful, lacks leadership
and poor communication with employees
Functional silo based organization and lack
of trust
Closed culture, lack of coaching and
motivated by the bottom line
Promoting Positive Culture
Encouraging, entrepreneurial approach with
friendly competition
Open communication and trusting environment
Enhanced team oriented culture with
importance given to work life balance
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LEADING PRACTICES: COMMUNICATION
61
67%Open and clear communication
of respondents indicated
71%See a career path at their current employer
of respondents
“Active coaching and discussions at least
monthly…very supportive.”
“My direct manager has a mindset of
developing his associates and makes a
point to assign tasks relevant to this
goal.”
Key Takeaway: Actively engaging in career discussions with employees in periodic
intervals can promote retention.
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LEADING PRACTICES: CAREER ADVANCEMENT
62
75% of respondents with
likelihood of staying
HIGH
Controllable factors Non-controllable factors
Likely to have family members in
the area
Motivated by opportunity for
career advancement and learning
and development
Have a favorable outlook for
increased responsibility in the
next 2 – 5 years
Indicated
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TAKEAWAYS AND RECOMMENDATIONS
63
Key Takeaways Recommendations
Increased disparity in desired versus perceived
attainable career level necessitates better alignment
of career aspirations with opportunities
Understand misalignment between desired and
perceived career opportunities
Promote formal and informal mentoring between
‘high potentials’ and senior executives
Leadership communications with employees has
positive impact on retention; limited communication
indicated as key driver for voluntary attrition
Promote open, clear and frequent communication in
town hall and small group settings
Identify and engage in career discussions with ‘high
potentials’ on a regular basis
Career progression with increased responsibility
and the ability to influence impact in the industry is a
primary influencer to improved retention
Invest in small group or one-on-one meetings to
discuss career progression
Support associates in developing a roadmap with
increased responsibilities
Positive, open and entrepreneurial company
culture is essential to retaining ‘high potential’
associates
Assess perception of company culture by breaking
down organization into smaller groups
Foster culture with commitment to trust, teamwork
and competitive spirit
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THANK YOU FOR YOUR TIME
64
YLC Talent Committee
Laura Johnson, Attorney, Butzel Long
Raj Iyer, Manager, Mergers & Acquisitions, Deloitte Consulting LLP
Paul Delfin, Senior Sales Manager, DENSO International America
Christy Roadknight, Account Manager, Eaton
Bob Busch, Account Manager, Lacks Enterprises, Inc.
John Back, Director Purchasing, Mann+Hummel USA, Inc.
Brian Dwornick, Manager, Customers Projects, Mubea NA, Inc.
Lindsey Dluzynski, Sales Manager, NGK Spark Plugs (USA), Inc.
Jeremy Cellarius, Skill Team Leader, AVL North America, Inc.
Pete Lakso, Director of Sales, North America, BorgWarner, Inc.
Leslie Bednarz, Global Director, Advanced Supply Chain, Inteva Products
Eric Fryer, Financial Analyst, KSR International
Rodrigo Diaz, USA/CAN Business Development Manager, Nemak
Rob Erfurt, Vice President, Program Management and Product Engineering, Pittsburgh Glass Works LLC
Luke Hugel, Chief of Staff, Office of the President, Robert Busch LLC
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PRESENTATION
65
Neal Ganguli, Director, Deloitte Consulting LLP
Jason Coffman, Principal, Deloitte Consulting LLP
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MEMBER ROUNDTABLE
Sheldon Klein, Shareholder, Butzel Long
• Recent Auto Supply Chain Contract Cases
• Whistleblower Developments
66
Recent Auto Supply Chain
Contract CasesSheldon Klein 248.258.1414 [email protected]
BRC RUBBER & PLASTICS, INCORPORATED v.
CONTINENTAL CARBON COMPANY,
• Facts– BRC buys carbon black from CCC for automotive rubber.
• Contract: "It is the intent of this agreement that CCC agrees to sell to BRC
approximately 1.8 million pounds black annually."
• CCC declined to supply > 1.8 MM lb; BRC demanded requirements
• Held: No promise, so no enforceable contract. -- “Nothing . . . convinces us that the
agreement required BRC to buy carbon black from Continental.”
• Takeaway – If you mean requirements, say requirements and promise to buy them.
• Reason – a contract w/o a quantity promise is unenforceable.
JD Norman Industries, Inc. v.
Metaldyne, LLC ,
• Metaldyne exclusive supplier of connector rods
• JDN alleges Metaldyne threatened supply cutoff if JDN enforced contractually agreed upon price downs and sued for breach
• Metaldyne responded by cutting off supply based on “late payments” of 1-2 days
• JDN seeks prelim. Inj.
• Holding: (1) late payments not material; (2) Prelim. Inj. Granted: supply chain consequences are irreparable and JDN should not be required to pay ransom.
• Takeaway: Don’t assume that you can’t get a preliminary injunction
AUTOMOTIVE MEXICO BODY SYSTEMS, v. PITTSBURGH
GLASS WORKS, LLC,
• Facts: Requirements contract for PGW to supply 100% of AMBS’ specialty glass
• PGW has capacity problem and refuses to fill 100% req’ts. AMBS seeks preliminary injunction.
• Prel. Inj. denied, for lack of irreparable harm:
– One month OEM line shutdown not irreparable
– At first hearing, AMBS said OEM assembly lines would shut down, but it didn’t happen
– PGW offers substitute product, but not adequate for 1 customer (VW)
• Takeaway: Don’t assume you will get a Preliminary Injunction
Whistleblower
DevelopmentsSheldon Klein 248.258.1414 [email protected]
MAP-21 – NEW DEVELOPMENTS
MAP 21 (Sec. 31307)
• 2012 Anti-Retaliation statute for OEM and Supplier
employees
• Prohibits:
– any adverse action;
– against employees
– by OEMs and suppliers
– for engaging in “Protected Conduct”
• DOL/OSHA has enforcement authority
Protected Conduct
• In connection with any defect, non-compliance or
reporting violation
– Providing info to the employer or DOT or
– filing a proceeding or
– testifying (or assisting another in testifying); or
• Objecting to or refusing to participate in any FMVSS
or other NHTSA violation
• Note—also prohibits “anticipatory retaliation”.
New (3/16/16) MAP-21 Interim Rules
• Effective immediately, but
• 60 day comment period (EXPIRES IN 10 DAYS)• Retaliation prohibited if Employee had subjectively and objectively
reasonable basis for believing violation occurred, even if incorrect
• Complaint process:– Employee has 180 days from learning of retaliation to file complaint with
DOL
– OSHA then has 60 days to determines if “reasonable cause” to believe that protected activity was a “contributing factor” to adverse action
– Employer may rebut OSHA conclusion with “clear and convincing” evidence that it would have taken the same action w/o protected activity.
Interim Rules: Relief
• If reasonable cause, OSHA must order “appropriate
relief,” to make complainant whole, such as
– Preliminary reinstatement,
– Affirmative action to abate the violation,
– Back pay with interest,
– Compensatory damages, and
– Reasonable attorney and expert witness fees, and costs.
Interim Rules: Relief from OSHA
Determination
• Employer may appeal administratively but
– if OSHA ordered reinstatement, not stayed by appeal
• Complex and multi-step administrative appeal
process
• Limited ultimate access to Court
• Settlement requires OSHA and Employee approval
Motor Vehicle Safety
Whistleblower Act of 2015
MVSWA – Adding a Bounty for Industry
Whistleblowers
• Financial reward for disclosing OEM or Supplier failure to report defects "likely to cause unreasonable risk of death or serious physical injury.“
• Elements:– Gov’t Action that recovers > $1MM
– Based on “original information” reported by to employee or contractor
• Original Information = (i) independent knowledge of WB; (ii) not otherwise known to gov’t; and (iii) not “exclusively derived” from gov’t action or press reports.
Whistleblower Rewards
• Between 10% and 30% of recovery
• Who and how much in discretion of Secretary
• BUT – No reward if OEM or Supplier has whistleblower
protection problem, unless the employee
“reasonably believed: that program was ineffective
or that information was already known to OEM or
supplier.
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MEETING WRAP UP – ADJOURN
81
Remaining Dates for 2016:
• September 21
• November 1 – proposed Dec. 6 or Dec. 9
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CLOSING REMARKS
82
Julie A. Fream, President and Chief Executive Officer