1

The Global Automotive Marketplace is Changing

The Global Automotive Marketplace is Changing

• Production growth in lower cost, high growth regions

• Market share shifts- North America Shifts- South America Outlook- Europe Restructuring- Growth in Asia Pacific

• Supplier financial stress• Supply Base is Changing • Vehicle trends including

- Weight reduction- Fewer platforms, more derivatives- Safety- Electronics

• Production growth in lower cost, high growth regions

• Market share shifts- North America Shifts- South America Outlook- Europe Restructuring- Growth in Asia Pacific

• Supplier financial stress• Supply Base is Changing • Vehicle trends including

- Weight reduction- Fewer platforms, more derivatives- Safety- Electronics

2

Challenges to North AmericanAutomotive Industry

Challenges to North AmericanAutomotive Industry

• Significant overcapacity in the industry, with fierce competition

• Rising costs for materials, energy and health care

• Continued Customer pressures for cost reduction

• Costs to expand to new growth regions in support of Customers

• Lower production volumes on key platforms due to lost market

• Significant overcapacity in the industry, with fierce competition

• Rising costs for materials, energy and health care

• Continued Customer pressures for cost reduction

• Costs to expand to new growth regions in support of Customers

• Lower production volumes on key platforms due to lost market

3

8

6

4

2

0

16%

12%

10%

8%

0%

Bill

ions

Perc

ent

1980 1990 2000 2020

Population Global Vehicle Parc

Sources: U.S. Census Bureau International Population Database, GM Global Market & Industry Analysis

12%

World Population and Global Vehicle Parc

4

60%of growth from 9

emerging markets

China South KoreaIndiaMexico

Brazil

PolandRussia

South Africa

Thailand

Automotive Growth Opportunity

5

Go GlobalGo Global

–Global Manufacturing–Global Sourcing

• Global Supplier database• Global, common purchasing tools and applications• Collaboration across global regions on key

commodities/initiatives• Global negotiations and contracts

Asia/ China Automotive Supply Chain is getting more important!

–Global Manufacturing–Global Sourcing

• Global Supplier database• Global, common purchasing tools and applications• Collaboration across global regions on key

commodities/initiatives• Global negotiations and contracts

Asia/ China Automotive Supply Chain is getting more important!

6

7Source: Eye for Transport, “Sourcing in low cost countries, 2006”

8Source: Eye for Transport, “Sourcing in low cost countries, 2006”

The Industry Increasingly Sources in Low Cost CountriesThe Industry Increasingly Sources in Low Cost Countries

9

Amount of Chinese Exported Auto Product & Auto Parts in Past Years

Amount of Chinese Exported Auto Product & Auto Parts in Past Years

0.00

50.00

100.00

150.00

200.00

250.00

300.00

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Exported auto product Exported auto parts

$100M

Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Auto Product 3.06 4.24 5.15 7.21 8.17 9.88 8.83 11.87 24.79 27.12 33.59 80.26 124.19 167.70 289.10

Auto Parts 1.24 1.72 2.46 3.76 3.82 4.47 4.89 7.07 11.25 16.32 16.61 54.20 79.46 98.89 121.20

Year

10

Amount of Chinese Exported Auto Product & World Total Auto Product in Past Years

Amount of Chinese Exported Auto Product & World Total Auto Product in Past Years

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1000.00

2004 2005 2006

China World

$Billion

Year 2004 2005 2006

Auto Product 124.19 167.70 289.10

Auto Parts 79.46 98.89 121.20

Year

11

2006 Auto parts export company make up2006 Auto parts export company make up

2005年中国汽车零部件出口额企业构成

Foreign

Investment

36%Private

Enterprise

46%

State Own

18%

Foreign

Investment

36%Private

Enterprise

46%

State Own

18%

12

Export structure of Chinese auto parts in 2006($10,000)

Export structure of Chinese auto parts in 2006($10,000)

Auto parts Export revenue Growth rate % Portion %Tire 451917.1 33.48 21.45

Electronics 362812.2 63.26 17.22Unidentif ied parts 285804.2 30.26 13.56

Wheel 226099.8 44.03 10.72Trailer & its component 163096.5 26.04 7.74

Body & body accessory 169315.1 120.2 8.04Brake and accessory 139388.4 28.72 6.61

Engine parts 141298.9 49.13 6.71Lighting & signal 44760.1 36.04 2.12

Glass 29366.7 18.08 1.39Clutch 24579.5 15.44 1.17

Non-Driving axle 19662.4 23.53 0.93Shock absorber 19037.2 31.96 0.9Steering system 14451.8 40.03 0.69

Transmission assembly 8145.4 78.45 0.39Driving axle assembly 4528.2 59.83 0.21

Air condition 2513.9 136.78 0.12Trailer chassis & air 675.2 166.66 0.03

Total 2107168.5 38.21

13

2006 auto parts export makeup2006 auto parts export makeup

Electronics,17.22%

Engine parts,6.71%

Wheel, 10.72% Unidentified parts,13.56%

Tire, 21.45%Others, 7.95%

Brake, 6.61%

Trailer, 7.74%

Body work, 8.04%

14

Logistic issuesLogistic issues

• Logistic cost is 3 times higher than Western countriesHigh percentage of Logistic cost in automobile industry:Japan 5% Europe & US 8% China 15%

Low percentage of third party Logistic mode:Japan 80% US 57% China 18%Cause: Supply chain is too long

• Low percentage of E-commerce: Low percentage of informationization: <50% suppliers implement ERP only ¼ suppliers can supply the goods in timeLow percentage of implementing EDI (Electronic Data Interchange) system--half of companies send the order through fax, while ¼ use email or telephone

• Logistic cost is 3 times higher than Western countriesHigh percentage of Logistic cost in automobile industry:Japan 5% Europe & US 8% China 15%

Low percentage of third party Logistic mode:Japan 80% US 57% China 18%Cause: Supply chain is too long

• Low percentage of E-commerce: Low percentage of informationization: <50% suppliers implement ERP only ¼ suppliers can supply the goods in timeLow percentage of implementing EDI (Electronic Data Interchange) system--half of companies send the order through fax, while ¼ use email or telephone

15

Innovative•Engineering competence

•Prototyping

•e-RFX know-how and web based tools

•Awareness of patents rights

Quality•World class quality

•Sub-quality management

•Approval process-know how

Deliver•Guaranteed raw material supply

•Production readiness techniques

•Run at rate

Price•Competitive price offer especially at landed price

•Active research for cost reduction

•Total cost of ownership

Key Factors for success

16

FORD Sourcing Objective

• Sourcing for Quality: To identify low risk manufacturing suppliers.

• Development/Launch: To develop Robust Quality Operating System through Lean /6 Sigma implementation and to Launch suppliers’products flawlessly through APQP.

• On-Going Improvement: To attain Q1 and to continuously eliminate Waste in total Value Chain.

17

MMOG/LE Self Assessment RequirementsMMOG/LE: All Suppliers shipping to USA, Canada and Mexico are required to complete the MMOG-LE self-assessment and submit scores to for DaimlerChrysler. This score will effect onsupplier rating in 2007. Pls go to Supplier Delivery Developmentweb site to see more details.

DCX Supply Chain Requirements

18

To meet OEM requirement

Suppliers Must Improve Quality

Meet ISO/TS 16949:2002 and get certification

To meet OEM requirement

Suppliers Must Improve Quality

Meet ISO/TS 16949:2002 and get certification

19

ISO/TS 16949:2000 includeISO/TS 16949:2000 include

• All the common requirements The particular requirements for automotive industry;

• Core tools: FMEA, MSA, APQP, PPAP, SPC, …• Customer specific requirements

– Special requirements for the parts (dimension, etc.);– The requirements of product delivery;– The habitual methods of the OEMs;– General procedure requirements;– Requirements of particular process (e.g. heat

treatment)

• All the common requirements The particular requirements for automotive industry;

• Core tools: FMEA, MSA, APQP, PPAP, SPC, …• Customer specific requirements

– Special requirements for the parts (dimension, etc.);– The requirements of product delivery;– The habitual methods of the OEMs;– General procedure requirements;– Requirements of particular process (e.g. heat

treatment)

20

MUST deliver auto parts in time

MMOG / LE (Material Management Operation

Guide/Logistic Evaluation)

21

AIAG is committed- To support its member Companies’needs in Asia Pacific.

- To support Asia auto industry to bridge its gap in the Global supply chain.

AIAG is committed- To support its member Companies’needs in Asia Pacific.

- To support Asia auto industry to bridge its gap in the Global supply chain.

22

Needs Assessment & Relationship Buildingin China

GMGM

JCIJCI

GoodyearGoodyear

DelphiDelphi VisteonVisteon

LearLear

BorgWarnerBorgWarner

FordFordDCXDCX

AIAGAIAGChinese Auto Suppliers

Chinese OEM (SAIC, Jeely, …

) Chinese Auto Suppliers

Chinese OEM (SAIC, Jeely, …

)

23

AIAG’s solution package to tackle issues in Chinese auto

industry

AIAG’s solution package to tackle issues in Chinese auto

industry

• Quality issues -------------------TS16949, Gap assessment, Heat treatment, EPS

• Supply chain issues------------MMOG, Lean manufacturing

• Informationazation issues---EDI

• Working condition issues ----working condition training

• Quality issues -------------------TS16949, Gap assessment, Heat treatment, EPS

• Supply chain issues------------MMOG, Lean manufacturing

• Informationazation issues---EDI

• Working condition issues ----working condition training

24

AIAGAIAG

QADMMOG/LE

training

QADMMOG/LE

training

PlexusQuality training

PlexusQuality training

OmnexLean

Manufacturing& Six Sigma

OmnexLean

Manufacturing& Six Sigma

CovisintEDI training

CovisintEDI training

ULSupplier

assessment,Heat treatment & Problem solving

training

ULSupplier

assessment,Heat treatment & Problem solving

training

IntertekWorking Condition

IntertekWorking Condition

AIAG China work with global training partners to provide consistent content....WORLDWIDE !

25

AIAG Training available in China AIAG Training available in China

Quality-Related CoursesCertification• RABQSA-Certified ISO 9001:2000 Lead

Auditor Training with AIAG ISO/TS 16949:2002 Supplier Auditor Certification

Non-Certification• Understanding ISO/TS 16949:2002• Fundamentals of Internal Quality Auditing

to ISO/TS 16949:2002• Advanced Product Quality Planning

(APQP) & Control Plan/Production Part Approval Process (PPAP)

• Failure Mode and Effects Analysis (FMEA)

• Statistical Process Control (SPC) (2nd Edition)

• Measurement Systems Analysis (MSA)

For more information including available course dates, contact Plexus China Co. in Shanghai at (86 21) 6867 1020 or Shenzhen at (86 755) 8161 5171. Visit www.plexuschina.com.cn or e-mail info_cn@plexuschina.com.cn.

Lean and Six Sigma CoursesNon-Certification• Lean Manufacturing Workshop• Lean for Executives and Champions• Lean Project Team Leadership• Lean Tools Overview for Practitioners OEE

TPM SMED MP• Understanding Workplace Organization – 5S• Value Stream Mapping (VSM) for Lean• Six Sigma for Executive and Leadership• Six Sigma Champion• Six Sigma Green Belt• Six Sigma Black Belt (Combined with Project)Note: All of above courses are available for on-

site training.

For more information including available course dates. Contact Omnex Shanghai Office at (86 21) 6267 8160, 6267 8360 or e-mail info-cn@omnex.com.

26

AIAG Training available in China (Con’t)AIAG Training available in China (Con’t)

Materials Management CoursesNon-Certification• Introduction to MMOG/LE• Using the Global MMOG/LE as a Continuous

Improvement Tool

For more information, including available course dates, contact QAD Shanghai Office at (86 21) 5047 8600 ext. 6528 or e-mail gcg@qad.com.

Working-Conditions training

For more information please contact Intertek at (86 21)6120 6565 ext. 5214 or 5524, e-mail viza.ye@intertek.com, j.j.chen@intertek.com.

Electronic Data Interchange (EDI) Course

For more information including available course dates, contact Compuware-Covisint China at (86 21) 62479222 ext. 205 or e-mail michael.zhu@compuware.com.

Heat Treatment System Assessment (HTSA) CourseEffective Problem Solving (EPS) guideline CourseGap Assessment

For more information including available For more information including available course dates, contact ULcourse dates, contact UL--CCIC Company CCIC Company Limited at (86 21) 5292 8665 or eLimited at (86 21) 5292 8665 or e--mail mail iso.sh.cn@cn.ul.com.

For course description and details, AIAG China Training Catalog can be viewed and downloaded at http://www.aiag.org/files/China_catalog.pdf.

27

AIAGP&MM

Council

AIAGP&MM

Council

DCXDCX FordFord GMGM DelphiDelphi VisteonVisteon LearLear JCIJCI

Initial AIAG China Procurement & Material Management Council Members

28

AIAG China P&MM Council Scope and Functions

In the area of logistics and material management relating to China automotive market, sourcing, import and export, the Council consists of major AIAG member companies who have strong interest and presence in China and will:

* Network and Exchange information; * Promote common standard, tool, guideline and best practice; * Identify and prioritize industry common issues, needs, and

trends; * Select and recommend tools, techniques, and methods; * Provide input and suggestion to AIAG Material Management

Steering Committee, and potentially work with P&MM working groups in US on common interest areas/ projects;

* Provide industry voice to Chinese government, other industries and organizations;

* Fulfill and enhance US antitrust law.

29

Top 10 countries for Chinese auto parts product export to in the first half of year 2007 (in billion dollars)

Top 10 countries for Chinese auto parts product export to in the first half of year 2007 (in billion dollars)

4.259

1.613

0.747 0.613 0.549 0.419 0.403 0.379 0.364 0.363

US

Japa

n

Kore

a

Russ

ia

Germ

any

Cana

daNe

ther

land

s UK

Ital

y

Iran

Expo

rt va

lue

(billi

on d

olla

rs)

4.259

1.613

0.747 0.613 0.549 0.419 0.403 0.379 0.364 0.363

US

Japa

n

Kore

a

Russ

ia

Germ

any

Cana

daNe

ther

land

s UK

Ital

y

Iran

Expo

rt va

lue

(billi

on d

olla

rs)