EQUITY RESEARCH

AUTOMOTIVE | FORD MOTOR COMPANY (F :US) | DECEMBER 2014

RECOMMENDATION

BUY
Target Price Potential Upside $ 17.51 % 4.85

Ford Motor Co.

All Lights are Green on the Path to Recovery

INVESTMENT CONCLUSIONS

2012 KEY FINANCIALS Sales Volume Revenues (bil.) EBITDA (bil.) Net Income (bil.) Employees EV/EBITDA 5 666 000 $ 134 252 $ 14 696 $ 5 665 171 000 x11.2

Ford will continue to gain market shares, notably in Asia-Pacific-Africa (APA) The ongoing shift in strategy already allowed the company to gain respectively +1.0 and +0.6 percentage point in the USA and China over the period 2008-2012. Ford having penetrated the Asian market later than its competitors, we expect its market shares in the Asia-Pacific-Africa (APA) region to further grow. Ford is asserting itself as a leader in the Connected and Electric Vehicles segments Fords pioneering R&D programs and partnerships with high-tech companies position it as leader in the automotive fastest growing segments: 60% of its vehicles sold embed connected system and the company is the world second electric car-maker. This positioning will drive both revenues and margins up.

STOCK PERFORMANCE
16.7

60% 40% 20% 0% -20% F:US S&P 500

Stable margins outlook, expected to remain constant at 17% Margins are estimated to benefit from South America breaking heaven this year and from the Europe business regaining profitability in 2015. They are however likely to be adversely impacted by the ongoing shift in product mix, with low-margin Small Vehicles increasing shares (e.g. +29% in North America in 2012).

Relevant Risk factors Ford has major ongoing investments in APA, which are aimed at capturing the forecasted growth of the region. Should Ford not be able to gain the expected market shares there, those assets could heavily burden the companys returns. Current valuation is already quite high in comparison with the industry characteristics and comparable companies.

Previous close Market Cap. (bil.) Shares Out. (mil.) Volume (90 days) 1-y return (F:US) (S&P 500) 12 EPS 12 P/E Beta 5-y div. yield 5-y T-bond yield

$ 16.70 $ 65.92 3 959.9 37 084 000 44.25 % 27.38% 1.48 10.54 1.76 3.00% 1.31%

Valuation Summary

Target Price Dividend Based Valuation $ 17,51 Free Cash Flow Valuation $ 17,51 Residual Income Valuation $ 17,51 Residual Income Market-to-Book Valuation$ 17,51 Average Value Per Share Current Share Price Potential Upside $ $ 17,51 16,56 5,76%
1

Analyst:
Thomas Wolff Automotive Industry World thomas.wolff@skema.edu

BUSINESS ANALYSIS PER REGION: PERFORMANCES AND FORECASTED TRENDS

In % of Total Sales - 2012

North America Last quarter earnings (Q3) revealed good performances from the North American market, with revenues rising by 11.8% to $21.7 billion and volume rising by 12.9% to 744000 vehicles compared with Q3 2012. Operating margin decreased from 12% to

63,1%

10.6% due to adverse product mix effects and because of favorable one-off items in Q3 2012s earnings.

Revenues CoGS SG&A Ope. Profit

2012a 2013e 2014e 2015e 79 900 81 836 84 472 87 351 (64 431) (65 845) (68 118) (70 597) (7 159) (7 316) (7 569) (7 844) 8 310 8 675 8 785 8 910

2013-2017 Trends This upward trend, driven by the Pick-Up and Small Vehicles segments, is likely to carry on thanks to strong macro-economic fundamentals: Positive trend of New Home Sales, with October up 25.4% compared with September, and 2.7% above consensus; Ageing fleet of vehicles likely to lead to important replacements.

% Margin

10,4%

10,6%

10,4%

10,2%

In % of Total Sales - 2012

Europe The ongoing restructuring of the European operations has begun to bear fruits, with a net loss in Q3 2013 that has decreased by 51.3% versus Q3 2012. In terms of

21,0%

production, the company is planning to reduce its production capacity by 18% through the disposal of 3 sites, which would properly resize the business to the local demand and which should generate annual savings of $500 million. It is also deepening its product range, with 25 new models to be launched over the next few years.

Revenues CoGS SG&A Ope. Profit

2012a 2013e 2014e 2015e 26 600 26 599 26 945 27 406 (25 520) (24 777) (24 615) (24 419) (2 836) (2 753) (2 735) (2 713) (1 756) (931) (404) 274

2013-2017 Trends With the stabilization of the economic environment and low-level interest rates over an extended period, volumes are rising again and Fords European business should regain profitability in 2015.

% Margin

-6,6%

-3,5%

-1,5%

1,0%

In % of Total Sales - 2012

7,8%

Asia/Pacific/Africa (APA) Ford is aggressively developing its activity in this region and should continue to gain market shares, notably in China, with the ongoing construction of 7 facilities, and the development of models specifically tailored for regions needs. APA is however facing important challenges. India, for example, is adversely impacted by the volatility of its currency, the rising interest rate and the lack of sustainable infrastructures, and is therefore delivering a growth that is below its potential.

Revenues CoGS SG&A Ope. Profit

2012a 2013e 2014e 2015e 10 000 10 569 11 207 11 915 (9 072) (9 226) (9 733) (10 295) (1 008) (1 025) (1 081) (1 144) (80) 317 392 477

2013-2017 Trends APA is, and is likely to remain, the fastest growing region for Ford. The ability of the ongoing investments in APA to be profitable will depend on the companys ability to generate sales and win market shares in the region.

% Margin

-0,8%

3,0%

3,5%

4,0%

In % of Total Sales - 2012

8,0%

South America Mainly driven by the sales of pickup in Brazil, South America is likely to breakeven this year. 2013-2017 Trends Even if some concerns are being raised regarding Brazils growth potential, the

Revenues CoGS SG&A Ope. Profit

2012a 2013e 2014e 2015e 10 100 10 441 10 846 11 265 (8 899) (9 115) (9 420) (9 733) (989) (1 013) (1 047) (1 081) 212 313 380 451

company is confident in continuing to steadily grow its sales and profits in the region.
2

% Margin

2,1%

3,0%

3,5%

4,0%

KEY RATIOS ANALYSIS

Profitability and Risk Ratios

Return On Assets: still room for improvement Europe production capacity ROA is currently benefiting from the companys global recovery but still remains slightly lower than the industry average, due to the companys important production overcapacity. Over the coming years, we expect ROA to further increase as it should be positively driven by:
1 617

(in thousands of vehicles)

1 972

(18%)

Pre restructuring

Post Restructuring

The ongoing European restructuring, which intends to close 3 sites and reduce significantly the regional production capacity; The development of Fords in APA, where new facilities are not yet profitable. The company plans to install a production capacity of 2.7 million vehicles, to be compared with the 1 million vehicles sold in the region in 2012.

Outlook:
2008-2012a Ford ROA 2012a Industry 4,97% Ford 4,42% 2017e Ford 4,69%

+7,5%

Return On Equity: over-performing but inflated by the capital structure Fords ROE is on average 50% higher than the industry, and two times higher than its ROE components closest competitors (GM and Toyota, 13.3% and 12,2% respectively). Fords ROE is however highly inflated by the companys high gearing (538,8% in 2012, cf. hereunder) , Capital Structure Leverage Operating performance which contribute to 20.2% of the 36.6%. When cancelling the effect of Fords capital 20,2%
16,4%

structure (and applying the industry average capital structure instead), the ROE falls to 16.4%, much lower than the industry but still slightly over GM and Toyota.

Outlook:
By 2017, we expect the ROE to further increase, driven by forecasted increasing and a similar capital structure.
2008-2012a Ford ROE 2012a Industry 24,25% Ford 36,58% 2017e Ford 40,92%

n/a

Solvency Profile: stable outlook with limited room for error Automotive Debt
14,3%

Fords high Gearing Ratio is essentially due to the important load of debt carried by Ford Credit, the financial services business of the company. The effective debt consumed by the Ford Automotive amounts to $15.8 million (as of Q3 2013), and intended to be reduced to $10 million by 2015. Thanks to a liquid Balance Sheet and to good operating performances (in Q3 2013, management has achieved its 7
th

consecutive profitable quarter), the companys

$15,8 bil. Convertibles Other US Gov. Debt

0,8 2,7 5,6

Altman Z Score remains in the grey zone, standing higher than the industry at 1.58.

Outlook:
$10 bil.
2 3

In the light of the forecasted operating performance and the stable liquidity profile of the company (see below), we expect Fords bankruptcy profile to remain stable.
2008-2012a Ford Gearing Ratio Z Score 2012a Industry 173,26% 1,40 Ford 538,83% 1,58 2017e Ford 545,22% 1,59

Public Debt

6,7

n/a +0,66

2013

2015

The company however has limited room for error, and its bankruptcy risk could rapidly Altman Z Score Sentivity
1.584 1.482

increase should the operating performance lower. The company should notably closely monitor its operating cash flows, which have not been able to keep up with the increase in liabilities over the past few years. This trend is
1.287

1.383

however expected to reverse during the coming years. Furthermore, after running a sensitivity analysis (see appendix page 18), we estimate that a decrease in sales of 10%, combined with slight decrease in EBIT due to a lower absorption of fixed costs, would have an impact of minus 0.1 on Fords Altman Z Score. Each additional decrease of 10% would have an additional negative impact of

Sales EBIT%

100% 8.5%

90% 8%

80% 7.5%

70% 7%

approximately 0.1.

Outlook:
2008-2012a Ford % OCF/Total Liabil. 2012a Industry 7,43% Ford 5,36% 2017e Ford 6,15%

-2,0%

Liquidity: strong and resilient Current Ratio/Business Unit

1,93 1 1,13

Ford is one of the most, if not the most, sustainable auto-maker with regards to its liquidity profile. The companys current ratio stands at 1.62, well above the industry average (1.15), and above all, its Quick Ratio stands at a comfortable 1.35, which tends illustrate Fords very short-term financial health. When putting those figures into perspective, we estimate that Ford Credit is the

1,62

Auto.

Credit

GROUP

biggest contributor with a Current Ratio of approximately 1.93. However, even on a stand-alone basis, the Automotive business Current Ratio remains higher than the industry, at 1.13, but its Quick Current then falls down to the industry level, at 0.89.

Quick Ratio/Business Unit

1,52 1 0,89 1,13

Fords liquid Balance Sheet also contributes to the companys strength toward bankruptcy. Sensitivity run on Altman Z Score suggest that should the companys Current Ratio falls to the average industry level, Z score would automatically fall from its current 1.58 to 1.19.

Outlook:
Auto. Credit GROUP

Considering the high correlation between the Automotive business and Ford Credits level of activity, we do not except any material change over the coming years.
2008-2012a Ford % Current Assets Current Ratio Quick Ratio 2012a Industry 46,93% 1,15 0,90 Ford 74,57% 1,62 1,35 2017e Ford 75,24% 1,63 1,36

-4,9% -0,12 -0,04

KEY RATIOS ANALYSIS

Operating Performance and Income Statement items

Sales breakdown/product - 2012
Large 27,6% Small 51,2%

Gross Profit and Operating Margin: stable outlook at 17% and 8% We estimate gross profit to remain around 17% for the coming years, at a similar level than the past 3 years on average. Margins should benefit from the restructuring of the European business, which it estimates will regain profitability in 2015, and from the South America business estimated to break even this year. On the other side, margins should be adversely impacted by the following items: Cost leadership war in mature markets, notably in Europe where the economic environment is burdening the sales, and in North America, those two regions accounting almost 45% of Fords revenues; Increasing share of EMCs, likely to consume low-margin products, in the companys revenue; Adverse effect of the product mix, which is turning toward low-margin small vehicles.

Medium 21,2%

Sales breakdown/product - 2018

Large 16%
Medium 19%

Small 65%

Besides those market drivers, we estimate that the companys industrial performance is likely not to improve substantially over the coming years. Indeed, we believe that the impact of Fords brands portfolio reshaping has already delivered its upside in terms of optimization of the manufacturing process.

CoGS (in % of annual revenues) 87% 85% 81% 83% 84%

Outlook
83% 83%

Both market and intrinsic drivers indicate that CoGS should remain at a stable level in percentage of revenues. Gross profits should therefore increase steadily with sales, from $23.8 billion this year to $27.9 billion by 2017.

08

09

10

11

12 13e 17e

Regarding SG&A, are also expect a stable outlook over the next coming years, as we estimate that the restructuring already impacted overhead costs.
2012a Revenues Automotive Cost of Sales Gross Profit 134 252 21 674 2013e 137 317 23 786 2014e 141 588 24 525 2015e 146 326 25 346 2016e 151 221 26 194 2017e 156 281 27 071 2018e 160 970 27 883

(112 578) (113 532) (117 063) (120 980) (125 027) (129 211) (133 087)

% Margin
SG&A Operating Profit

16,1%
(12 182) 9 492

17,3%
(12 460) 11 326

17,3%
(12 848) 11 678

17,3%
(13 278) 12 069

17,3%
(13 722) 12 472

17,3%
(14 181) 12 890

17,3%
(14 606) 13 276

% Margin

7,1%

8,2%

8,2%

8,2%

8,2%

8,2%

8,2%

Income Before Taxes As in the past, IBT over the next few years will be essentially impacted by the interest
Interest Expenses (in % of IBT) 52%

expenses due to the companys high indebtedness. Due to the recent upgrading by Standard & Poors, from BB+ to BBB-, interests should consume only one third of the operating profit going forward, to be compare with more than 50% in 2010. The Interest Coverage Ratio is therefore expected to stand at 3, i.e. much lower than the industry average of 14.3 (excluding outliers). As highlighted in the Solvency analysis of the company, Ford as limited room for error in its operating performance in order to remain able to face its financial obligations. In addition, considering those low level of ratios, some concerns are raised concerning the companys loan covenants, which are not made public.
2008-2012a Ford Interest Coverage 2012a Industry 14,30 Ford 3,02 2017e Ford 3,52

39% 40%

34% 34% 34%

33%

08

09

10

11

12 13e 17e

+3,40

STRATEGIC ANALYSIS

Development on new segments so far successful Connected Vehicles

Models proposing SYNC Focus Fiesta Escape/Kuga Lincoln Navigator TOTAL 1 036 683 657 564 403 841 9 069 3 451 299

Initiated in 2007 through a partnership with Microsoft, Ford pioneered the massdistribution in the Connected Vehicle segment. The in-car communication and entertainment system the two companies have jointly developed, SYNC, has been considerably spread among Fords models, from 7 models in 2008 to 19 in 2012. It is estimated that in 2012, 8.22 million connected vehicles have been sold, which would result in a potential market share of 30% to 40% for Ford on that segment. (No public data has been disclosed on the effective number of cars sold with SYNC). We estimate that Ford has a competitive advantage on that segment, and that sales of cars embedding SYNC (as an optional or standard feature) should further increase, through both increasing total sales and an increase in models proposing the service. Electric-/Hybrid-Vehicles In line with its global strategy of providing the customers the power of choice, Ford his

In % of 2012 sales

60,9%

Plug-in Hybrid Vehicles market shares (as of Q3 2013) 23,3%

involved into various aspect of Green Cars, with technologies ranging from hybrid, plug-in hybrid and electric vehicle. Going forward, we estimate that Fords intensive involvement into R&D and commercial initiatives will allow the company to further capture the growth of these segments and to increase its market shares. This assertion is strengthen by Fords current performance in the overall electric drive segment, with a market share reaching

6,2%

14.7% as of Q3 2013, up from 7.3% in 2012, making Ford the worlds second electric auto-maker behind Toyota. Ford is notably performing very well in the Plug-in Hybrid Vehicles segment, with market shares multiplied by 3.8 over the last 9 months.

2012

Q3 2013

Funding of operations through internal resources seems reasonable Capital Expenditures Capital Expenditures are estimated to gradually increase up to $7.5 billion in 2015/2016, which seems appropriate with regards to the following assertions: Production facilities in North America are getting closer to saturation, with a utilization rate coming close to 100%. Further investments may therefore be foreseen in order to increase the production capacity; Development in APA region requires important capital expenditures in terms of production facilities. Major investments are currently underway in India, and new facilities are on their way to be opened in Oceania; Deeper ranges of products and new segments requiring investments in R&D will call for further development.

In lights of the management ability to efficiently restructure the business (as witnessed by the past years recovery), we are confident in the companys ability to efficiently manage those investment, and we therefore expect them to provide additional sales and positively contribute to the margins. Supply Strategy and Working Capital In the light of the lasting economic crisis in Europe, which, through a decrease in vehicles sold of approximately 23% since 2007, put auto-parts suppliers into severe financial distress, Ford has initiated a plan to reduce its reliance on non-reliable suppliers.
6

The plan foresees to reduce the companys supplier base from 1260 to 750 providers approximately, and is also in line with the current resizing of the European operations. Even if this new supply strategy should provide the company with further bargaining power due to increasing orders towards the remaining suppliers, further details on the different categories of suppliers would be good to make sure the company is not putting itself in a situation of dependence. Considering the current cost leadership war in the automotive market, we took the assumption that an increase in bargaining power towards suppliers, combined with increasing volumes ordered, would be used to lower the purchasing price. We therefore expect global conditions (for both receivables and payables) and inventory management to remain similar as the past few years, which would result in the following Working Capital requirements:
2012a (82 338) (7 362) (16 451) 19 308 49 407 (37 436) 2013e (84 218) (7 424) (16 827) 19 233 50 535 (38 701) 2014e (86 837) (7 655) (17 350) 19 859 52 107 (39 877) 2015e (89 743) (7 911) (17 931) 20 527 53 851 (41 208) 2016e (92 745) (8 176) (18 530) 21 213 55 652 (42 587) 2017e (95 849) (8 450) (19 150) 21 923 57 514 (44 012) 2018e (98 724) (8 703) (19 725) 22 581 59 239 (45 332)

Accounts Receivables Inventories Other Assets Suppliers Other liab WC

%Sales
Change in WC

27,9%
n/a

28,2%
(1 265)

28,2%
(1 175)

28,2%
(1 332)

28,2%
(1 379)

28,2%
(1 425)

28,2%
(1 320)

VALUATION

Comparable Valuations

Fords current high valuation could slow down the upward trend Without calling into question our strategic analysis of the business and our positive view of Fords stock, we still believe that the companys current valuation is quite high, both in the light of its past performance and in comparison with the industry average. Fords current valuation indeed implies an EV/EBITDA multiple of x11.2, to be compared with the industry average EBITDA of 6.99. As a consequence, we expect Fords stock prices increase to be slowed down. The stock should however deliver its full potential should Ford be able to convert its strategy into concrete cash flows. The following Comparable Multiples reflect the companys current high valuation. Enterprise Value Multiple are though biased by the companys high gearing.

Enterprise Value Multiples

Comparables

Renault Volkwsagen Fiat Toyota Average

EV/Sales 0,72 0,79 0,18 1,37 0,76 $ 13 285 3 809 $ 3,49

EV/EBITDA 6,42 7,62 1,92 12,02 6,99 $ 13 396 3 809 $ 3,52

Implied Equity Value Shares Outstanding Value per share

Equity Value Multiples

P/E Ratio 6,25 3,13 13,54 16,00 9,73 $ 55 024 3 809 $ 14,45

Comparables

Renault Volkwsagen Fiat Toyota Average

Implied Equity Value Shares Outstanding Value per share

VALUATION

Intrinsic Valuations
Sum up of the Discounted Cash Flow assumptions Risk-free Rate 2,56% 1,76 5,73% 12,63% 3,60% -32,00% 4,76% 37,52% 62,48% 7,71%

10-year US T-Bond as of October 28, 2013 Average of Ford's10-year, 5-year and 1-year Beta Premium observed on S&P 500 as of October 1, 2013

Beta
10-year 5-year 1-year Average 2,01 1,96 1,30 1,76

Company Beta Market Risk Premium Cost Of Equity Pre-tax Cost of Debt Taxe Rate Post-tax Cost of Debt Weight of Equity Weight of Debt WACC

Interests paid, consistent with the company's rating Effective tax rate

Dividend Based Valuation

2013e Dividends Paid to Common Shareholders Less: Common Stock Issues Plus: Common Stock Repurchases Dividends to Common Equity 5 811 (457) 125 5 479 2014e 6 829 (624) 125 6 330 2015e 7 079 (688) 125 6 516 2016e 7 322 (711) 125 6 735 2017e 7 588 (732) 125 6 981 Continuing Value

7 033

Present Value Factors

PV Net Dividends

4 864

0,888

4 990

0,788

4 560

0,700

4 185

0,621

3 852

0,552

Sum of PV Net Dividends PV of Continuing Value Total

22 452 40 298 62 750

Adjust to midyear discounting

Total PV Dividends Shares Outstanding Estimated Value per Share Share Price as of December 6th, 2013 Percent difference

1,063
66 712 3 809 17,51 16,56 5,76%

Free Cash Flow Valuation

2013e Net Cash Flow from Operations +/(-) in Cash Required for Operations Net Cash Flow from Investing Net CFs from Debt Financing Net CFs into Financial Assets Net CFs - Pref. Stock and Minority Int. Free Cash Flow for Common Equity 9 637 (358) (5 925) 2 286 (161) 5 479 2014e 10 333 (498) (6 637) 3 121 11 6 330 2015e 10 834 (553) (7 218) 3 441 12 6 516 2016e 11 483 (571) (7 746) 3 557 12 6 735 2017e 12 174 (590) (8 275) 3 659 13 6 981 Continuing Value 7 710 (547) (3 775) 3 634 13 7 033 -

Present Value Factors

PV Free Cash Flows Sum of PV Free Cash Flows PV of Continuing Value Total

0,888
4 864 22 452 40 298 62 750

0,788
4 990

0,700
4 560

0,621
4 185

0,552
3 852

Adjust to midyear discounting

Total PV Free Cash Flows to Equity Shares Outstanding Estimated Value per Share Current share price Percent difference

66 712 3 809 17,51 16,56 5,76%

1,063

Residual Income Valuation

2013e Comprehensive Income Available for Common Shareholders Lagged Book Value of Common Shareholders' Equity (at t-1) Required Earnings Residual Income 6 268 15 947 2 014 4 254 2014e 6 647 16 736 2 114 4 533 2015e 6 877 17 053 2 154 4 723 2016e 7 113 17 415 2 199 4 914 2017e 7 358 17 793 2 247 5 111 Continuing Value 7 579 18 170 2 295 5 284

Present Value Factors

PV Residual Income Sum of PV Residual Income PV of Continuing Value Total Add: Beginning Book Value of Equity PV of Equity

3 777

0,888

3 574

0,788

3 306

0,700

3 054

0,621

2 820

0,552

16 530 30 273 46 803 15 947 62 750

Adjust to midyear discounting

Total PV of Equity Shares Outstanding Estimated Value per Share Current share price Percent difference

66 712 3 809 17,51 16,56 5,76%

1,063

10

Residual Income Valuation (Book To Market)

2013e Comprehensive Income Available for Common Shareholders Book Value of Common Shareholders' Equity (at t-1) Implied ROCE Residual ROCE Cumulative equity growth factor as of t-1 Residual ROE times cumulative growth 6 268 15 947 39,3% 26,7% 100,0% 26,7% 2014e 6 647 16 736 39,7% 27,1% 104,9% 28,4% 2015e 6 877 17 053 40,3% 27,7% 106,9% 29,6% 2016e 7 113 17 415 40,8% 28,2% 109,2% 30,8% 2017e 7 358 17 793 41,4% 28,7% 111,6% 32,0% Continuing Value 7 579 18 170 41,7% 29,1% 113,9% 33,1%

Present Value Factors

PV Residual ROCE times growth Sum of PV Residual ROCE times growth PV of Continuing Value Total PV Residual ROCE Add one for book value of equity at t-1 Sum

0,888
0,237 1,04 1,90 2,93 1,00 3,93

Adjust to mid-year discounting

Implied Market-to-Book Ratio Times Beginning Book Value of Equity Total PV of Equity Shares Outstanding Estimated Value per Share Current share price Percent difference

4,183 15 947 66 712 3 809 17,51 16,56 5,76%

1,063

Free Cash Flow for All Debt and Equity

2013e Net Cash Flow from Operations 9 637 Add back: Interest Expense after tax 2 603 Subtract: Interest Income after tax Decrease (Increase) in Cash Required for Operations (358) Free Cash Flow from Operations 11 882 Net Cash Flow from Investing (5 925) Add back: Net CFs into Financial Assets Free Cash Flows - All Debt and Equity 5 957 2014e 10 333 2 669 (498) 12 504 (6 637) 5 868 2015e 10 834 2 750 (553) 13 031 (7 218) 5 813 2016e 11 483 2 835 (571) 13 748 (7 746) 6 002 2017e 12 174 2 924 (590) 14 508 (8 275) 6 233 Continuing Value 7 710 3 012 (547) 10 174 (3 775) 6 399

Present Value Factors

PV Free Cash Flows Sum of PV Free Cash Flows PV of Continuing Value Total PV FCF to Equity and Debt Less: Value of Outstanding Debt Less: Value of Preferred Stock Plus: Value of Financial Assets PV of Equity

5 605

0,941

5 196

0,885

4 843

0,833

4 706

0,784

4 599

0,738

24 949 144 394 169 343 (105 058) 64 285

Adjust to midyear discounting

Total PV of Equity Shares Outstanding Estimated Value per Share Current share price Percent difference

66 300 3 809 17,41 16,56 5,11%

1,031

11

APPENDIX

Balance Sheet (Historic)

2007a

2008a 22 049 17 411 99 557 8 618 92 25 738 173 465 1 592 77 923 (49 358) 403 1 190 3 108 198 9 807 218 328

2009a 21 441 21 387 84 583 5 450 0 17 270 150 131 1 550 64 276 (39 498) 166 43 3 440 7 923 6 819 194 850

2010a 14 805 20 765 77 458 5 917 0 11 675 130 620 2 569 60 955 (37 776) 102 0 2 003 0 6 214 164 687

2011a 17 148 18 618 78 541 5 901 0 12 838 133 046 2 936 58 778 (36 407) 100 0 15 125 0 4 770 178 348

2012a 15 659 20 284 82 338 7 362 0 16 451 142 094 3 246 61 432 (36 490) 87 0 15 185 0 5 000 190 554

ASSETS
Cash and Cash Equivalents Marketable Securities Accounts Receivable - Net Inventories Other Current Assets Net investment in operating leases Current Assets Equity in net assets of affiliated companies Gross Property <Accumulated Depreciation> Amortizable Intangible Assets (net) Goodwill Deferred Tax Assets - Noncurrent Assets of discountinued operations Other Non-Current Assets (2) Total Assets 35 283 15 515 117 263 10 121 653 33 255 212 090 2 853 79 563 (43 324) 565 1 504 3 500 7 537 14 976 279 264

LIABILITIES & EQUITY

Payables Accrued liabilities and deferred revenue Notes Payable and Short Term Debt Current Liabilities Long Term Debt Deferred Income Taxes - Non curent Net liabilities of discountinued operations Total Liabilities Minority Interest Preferred Stock Common Stock + Paid in Capital Retained Earnings <Deficit> Accum. Other Comprehensive Income <Loss> <Treasury Stock> Common Shareholders' Equity Total Liabilities and Equities 20 832 74 738 28 275 123 845 140 255 3 034 5 081 272 215 1 421 0 7 856 (1 485) (558) (185) 5 628 279 264 14 772 63 386 21 759 99 917 132 437 2 035 55 234 444 1 195 0 9 100 (16 145) (10 085) (181) (17 311) 218 328 14 594 46 599 17 714 78 907 114 727 2 375 5 356 201 365 1 305 0 16 820 (13 599) (10 864) (177) (7 820) 194 850 16 362 43 844 15 456 75 662 88 532 1 135 0 165 329 31 0 20 841 (7 038) (14 313) (163) (673) 164 687 17 724 45 369 17 629 80 722 81 859 696 0 163 277 43 0 20 943 12 985 (18 734) (166) 15 028 178 348 19 308 49 407 19 131 87 846 85 927 470 0 174 243 364 0 21 016 18 077 (22 854) (292) 15 947 190 554

12

APPENDIX

Balance Sheet (Forecasts)

2013e

2014e 16 515 21 392 86 837 7 655 0 17 350 149 750 3 423 72 708 (45 792) 87 0 15 185 0 5 000 200 361

2015e 17 067 22 108 89 743 7 911 0 17 931 154 761 3 538 79 096 (51 065) 87 0 15 185 0 5 000 206 602

2016e 17 638 22 848 92 745 8 176 0 18 530 159 938 3 656 85 984 (56 797) 87 0 15 185 0 5 000 213 053

2017e 18 228 23 612 95 849 8 450 0 19 150 165 290 3 779 93 372 (63 022) 87 0 15 185 0 5 000 219 690

ASSETS
Cash and Cash Equivalents Marketable Securities Accounts Receivable - Net Inventories Other Current Assets Net investment in operating leases Current Assets Equity in net assets of affiliated companies Gross Property <Accumulated Depreciation> Amortizable Intangible Assets (net) Goodwill Deferred Tax Assets - Noncurrent Assets of discountinued operations Other Non-Current Assets (2) Total Assets 16 017 20 747 84 218 7 424 0 16 827 145 233 3 320 66 820 (40 945) 87 0 15 185 0 5 000 194 700

LIABILITIES & EQUITY

Payables Accrued liabilities and deferred revenue Notes Payable and Short Term Debt Current Liabilities Long Term Debt Deferred Income Taxes - Non curent Net liabilities of discountinued operations Total Liabilities Minority Interest Preferred Stock Common Stock + Paid in Capital Retained Earnings <Deficit> Accum. Other Comprehensive Income <Loss> <Treasury Stock> Common Shareholders' Equity Total Liabilities and Equities 19 233 50 535 19 547 89 315 87 797 480 0 177 592 372 0 21 473 18 534 (22 854) (417) 16 736 194 700 19 859 52 107 20 116 92 081 90 349 494 0 182 925 383 0 22 098 18 352 (22 854) (542) 17 053 200 361 20 527 53 851 20 742 95 119 93 164 510 0 188 793 395 0 22 786 18 150 (22 854) (667) 17 415 206 602 21 213 55 652 21 390 98 255 96 073 525 0 194 853 407 0 23 497 17 942 (22 854) (792) 17 793 213 053 21 923 57 514 22 056 101 493 99 065 542 0 201 101 420 0 24 229 17 712 (22 854) (917) 18 170 219 690

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APPENDIX

Income Statement (Historic)

2007a Total sales and revenues <Automotive cost of sales> Gross Profit <SG&A> Goodwill Impairment Operating Profit Interest Income <Interest Expense> Income <Loss> from Equity Affiliates Other Income or Gains <Other Expenses or Losses> Income before Tax <Income Tax Expense> <Minority Interest in Earnings> Income <Loss> from Discontinued Operations Net Income (computed) Other Comprehensive Income Items Comprehensive Income EBITDA 172 455 (142 587) 29 868 (21 169) (2 400) 6 299 1 161 (10 927) 389 0 (668) (3 746) 1 294 (312) 41 (2 723) (558) (3 281) 20 035

2008a 146 277 (127 103) 19 174 (21 430) 0 (2 256) 0 (10 437) 163 0 (1 874) (14 404) (63) (214) 9 (14 672) (9 527) (24 199) 17 902

2009a 118 308 (100 016) 18 292 (13 258) 0 5 034 5 288 (6 828) 10 552 (1 030) 3 026 (69) (245) 5 2 717 (779) 1 938 12 926

2010a 128 954 (104 451) 24 503 (11 909) 0 12 594 0 (6 514) 538 315 216 7 149 (592) 4 0 6 561 (3 449) 3 112 18 178

2011a 136 264 (113 345) 22 919 (11 578) 0 11 341 825 (4 431) 500 413 33 8 681 11 541 (9) 0 20 213 (4 421) 15 792 15 597

2012a 134 252 (112 578) 21 674 (12 182) 0 9 492 1 185 (3 828) 588 369 (86) 7 720 (2 056) 1 0 5 665 (4 120) 1 545 14 696

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APPENDIX

Income Statement (Forecasts)

2013e Total sales and revenues <Automotive cost of sales> Gross Profit <SG&A> Goodwill Impairment Operating Profit Interest Income <Interest Expense> Income <Loss> from Equity Affiliates Other Income or Gains <Other Expenses or Losses> Income before Tax <Income Tax Expense> <Minority Interest in Earnings> Income <Loss> from Discontinued Operations Net Income (computed) Other Comprehensive Income Items Comprehensive Income EBITDA 137 317 (113 532) 23 786 (12 460) 0 11 326 1 185 (3 828) 492 377 (88) 9 465 (3 029) 1 0 6 437 0 6 437 15 780

2014e 141 588 (117 063) 24 525 (12 848) 0 11 678 1 217 (3 925) 506 389 (91) 9 774 (3 128) 1 0 6 647 0 6 647 16 525

2015e 146 326 (120 980) 25 346 (13 278) 0 12 069 1 256 (4 044) 522 402 (94) 10 112 (3 236) 1 0 6 877 0 6 877 17 342

2016e 151 221 (125 027) 26 194 (13 722) 0 12 472 1 298 (4 170) 540 416 (97) 10 459 (3 347) 1 0 7 113 0 7 113 18 205

2017e 156 281 (129 211) 27 071 (14 181) 0 12 890 1 342 (4 300) 558 430 (100) 10 819 (3 462) 1 0 7 358 0 7 358 19 114

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APPENDIX

Cash Flows (Historic)

2007a Net Income Add back D&A Expenses Add back Stock-Based Compensation Deferred Income Taxes <Income from Equity Affiliates, net of Div> <Increase> Decrease in Accounts Receivable <Increase> Decrease in Inventories Increase <Decrease> in Accounts Payable Other Addbacks to Net Income Other Operating Cash Flows Net CF from Operations (2 723) 13 736 76 (5 477) (175) 45 371 1 348 668 9 205 17 074 1 236 (6 022) 7 237 0 (9 475) 541 (6 483) 919 0 33 113 (39 431) 250 (31) 0 (62) (5 242) 1 014 26 6 389

2008a (14 672) 20 158 35 1 954 60 1 091 (358) (12 647) 1 874 2 326 (179) 6 854 (6 696) (2 708) 2 533 (2 501) (625) (3 143) 0 (5 120) 42 163 (46 299) 756 0 0 (604) (9 104) (808) 0 (13 234)

2009a 2 717 7 892 29 (804) (6) 2 244 2 333 (1 803) 1 030 2 410 16 042 382 (4 561) (3 856) 478 14 403 (377) 6 469 0 (5 935) 45 990 (61 894) 2 450 0 0 (3 570) (22 959) 470 (630) (608)

2010a 6 561 5 584 34 (216) (198) 765 (903) (704) 34 520 11 477 1 318 (4 092) 927 (37) 8 884 (92) 6 908 0 (1 754) 30 821 (47 625) 1 339 0 0 (7 202) (24 421) (53) 0 (6 089)

2011a 20 213 4 256 171 (11 071) (169) (927) (367) (680) (33) (1 609) 9 784 333 (4 293) 2 072 353 (1 902) 396 (3 041) 2 841 0 35 921 (43 095) 0 0 0 92 (4 241) (159) 0 2 343

2012a 5 665 5 204 140 1 989 0 (1 622) (1 401) 485 92 (1 507) 9 045 66 (5 488) (1 386) (737) (6 875) 130 (14 290) 1 208 0 32 436 (29 210) 0 (125) (763) 159 3 705 51 0 (1 489)

Proceeds from Sales of Property, Plant, and Equipment <Property, Plant, and Equipment Acquired> <Increase> Decrease in Marketable Securities Settlement Of Derivatives eeds of retail and other finance receivables and operating leases Other Investment Transactions (2) Net CF from Investing Activities Increase in Short-Term Borrowing <Decrease in Short-Term Borrowing> Increase in Long-Term Borrowing <Decrease in Long-Term Borrowing> Issue of Capital Stock <Share Repurchases - Treasury Stock> <Dividend Payments> Other Financing Transactions (1) Net CF from Financing Activities Effects of exchange rate changes on cash Other cash flows Net Change in Cash

16

APPENDIX

Cash Flows (Forecasts)

2013e Net Income Add back D&AExpense (net) <Increase> Decrease in Receivables - Net <Increase> Decrease in Inventories <Increase> Decrease in Other Curr. Assets (1) Increase <Decrease> in A/P - Trade Increase <Decrease> in Current Accrued Liab. Net Change in Deferred Tax Assets/Liab. Net Cash Flows from Operations <Increase> Decrease in PPE at cost <Increase> Decrease in Marketable Securities <Increase> Decrease in Investment Securities Net Cash Flows from Investing Activities Increase <Decrease> in Short-Term Debt Increase <Decrease> in Long-Term Debt +/(-) Minority Interest and Preferred Stock +/(-) in Common Stock + Paid in Capital Increase <Decrease> in Treasury Stock Dividends Net Cash Flows from Financing Activities Net Change in Cash 6 437 4 455 (1 880) (62) (376) (75) 1 128 10 9 637 (5 388) (463) (74) (5 925) 416 1 870 8 457 (125) (5 980) (3 354) 358

2014e 6 647 4 847 (2 619) (231) (523) 626 1 572 14 10 333 (5 888) (645) (103) (6 637) 568 2 553 11 624 (125) (6 829) (3 198) 498

2015e 6 877 5 273 (2 906) (256) (581) 668 1 744 15 10 834 (6 388) (716) (115) (7 218) 627 2 814 12 688 (125) (7 079) (3 063) 553

2016e 7 113 5 732 (3 002) (265) (600) 687 1 801 16 11 483 (6 888) (740) (118) (7 746) 648 2 909 12 711 (125) (7 322) (3 166) 571

2017e 7 358 6 225 (3 103) (274) (620) 710 1 862 16 12 174 (7 388) (764) (122) (8 275) 666 2 993 13 732 (125) (7 588) (3 309) 590

17

APPENDIX

Sensitivity Analysis (Altman Z Score)

Sales vs. EBIT Margin

Sales sensitivity (in % of 2012 revenues)

1,582 6% 6,5% 7,0% 7,5% 8,0% 8,5% 9,0% 9,5% 10,0% 40% 1,018 1,022 1,027 1,032 1,036 1,041 1,046 1,050 1,055 50% 1,102 1,108 1,114 1,119 1,125 1,131 1,137 1,143 1,149 60% 1,186 1,193 1,200 1,207 1,214 1,221 1,228 1,235 1,242 70% 1,271 1,279 1,287 1,295 1,303 1,312 1,320 1,328 1,336 80% 1,355 1,365 1,374 1,383 1,392 1,402 1,411 1,420 1,430 90% 1,440 1,450 1,461 1,471 1,482 1,492 1,502 1,513 1,523 100% 1,524 1,536 1,547 1,559 1,571 1,582 1,594 1,605 1,617 110% 1,608 1,621 1,634 1,647 1,660 1,672 1,685 1,698 1,711 120% 1,693 1,707 1,721 1,735 1,749 1,763 1,777 1,791 1,804 130% 1,777 1,792 1,807 1,823 1,838 1,853 1,868 1,883 1,898 140% 1,862 1,878 1,894 1,910 1,927 1,943 1,959 1,976 1,992 150% 1,946 1,964 1,981 1,998 2,016 2,033 2,051 2,068 2,086 160% 2,030 2,049 2,068 2,086 2,105 2,123 2,142 2,161 2,179

EBIT Margin

Current Ratio vs. EBIT Margin

EBIT Margin

1,582 6% 6,5% 7,0% 7,5% 8,0% 8,5% 9,0% 9,5% 10,0%

0,80 1,072 1,083 1,095 1,107 1,118 1,130 1,142 1,153 1,165

0,90 1,127 1,139 1,150 1,162 1,174 1,185 1,197 1,208 1,220

1,00 1,182 1,194 1,206 1,217 1,229 1,241 1,252 1,264 1,275

1,10 1,238 1,249 1,261 1,273 1,284 1,296 1,308 1,319 1,331

1,20 1,293 1,305 1,316 1,328 1,340 1,351 1,363 1,374 1,386

1,30 1,348 1,360 1,372 1,383 1,395 1,407 1,418 1,430 1,441

Current Ratio
1,40 1,404 1,415 1,427 1,439 1,450 1,462 1,473 1,485 1,497

1,50 1,459 1,471 1,482 1,494 1,506 1,517 1,529 1,540 1,552

1,60 1,514 1,526 1,538 1,549 1,561 1,572 1,584 1,596 1,607

1,62 1,524 1,536 1,547 1,559 1,571 1,582 1,594 1,605 1,617

1,70 1,570 1,581 1,593 1,605 1,616 1,628 1,639 1,651 1,663

1,80 1,625 1,637 1,648 1,660 1,671 1,683 1,695 1,706 1,718

1,90 1,680 1,692 1,704 1,715 1,727 1,738 1,750 1,762 1,773

18