Global Automotive Supplier Study

Short version

September 2011

Management summary
> Driven by booming car sales, the global automotive supplier industry achieved record profitability in 2010 (6.2% EBIT margin on global average) > However, financial performance of suppliers differs heavily depending on headquarter region, company size and product focus. European suppliers achieved an EBIT margin of almost 7%, while North American and Japanese suppliers remain below global average Small and medium-sized suppliers have significantly improved their profitability compared to precrisis levels Chassis focused suppliers achieved the highest profitability, while Interior and Electric suppliers remain below average > Revenue outlooks for 2011 full-year and for 2012 are relatively stable. Also profitability is expected to stay at a reasonable level, but drop below 6% EBIT margin on a global average > Besides keeping profitability at a high level and ensuring real global delivery capability, suppliers need to put an even stronger focus on product innovation. Only suppliers who can differentiate themselves from competition via superior product functionality will be able to sustainably achieve EBIT margins in the range of 6% and above. Most other suppliers will get further pushed into the commodity corner, where their profit will be locked-in at a 3-4% level
Source: Roland Berger/Lazard Global Automotive Supplier Study 2011_SHORT_final.pptx 2

Driven by booming car sales, the global automotive supplier industry achieved record profitability in 2010
Key supplier performance indicators 2000-2010 (n = ~600 suppliers)
Revenue growth [2000=100]
162 154 148 136 125 129 114 100 103 108 3.1 5.3 4.2 5.2 5.1 5.7 4.7 156 8.4 8.3 7.2 9.3 10.1 8.8 8.1

EBIT margin1) [%]

ROCE2) [%]
11.1

6.2

4.7

5.0
2.5

1.1
2000 2002 2004 2006 2008 2010 2000
2002 2004 2006

1.6
2010 2000

2.0
2002 2004 2006

2008

2008

2010

1) EBIT after restructuring items

2) EBIT after restructuring items/capital employed

Global Automotive Supplier Study 2011_SHORT_final.pptx 3

Source: Company information; Roland Berger/Lazard

However, financial performance of suppliers differs heavily depending on region, company size and product focus
Profitability trends in the global automotive supplier industry
REGION COMPANY SIZE PRODUCT FOCUS

1
> European suppliers improved average EBIT margin to ~7% > Chinese and Korean suppliers achieved double-digit EBIT margins

2
> Small/mid-sized suppliers (below 1bn EUR revenues) achieved highest profitability

3
> Chassis and Exterior focused suppliers with strongest margin improvements > Powertrain and Tire suppliers still above average

> Nafta suppliers improved, but still have the lowest profitability
> Japanese suppliers also below average
Source: Roland Berger/Lazard

> Suppliers with >10 bn EUR revenues show lowest profitability levels

> Interior and Electric/ Infotainment suppliers significantly below average around the world
Global Automotive Supplier Study 2011_SHORT_final.pptx 4

REGION

European suppliers achieved an EBIT margin of almost 7%, while North American and Japanese suppliers remain below global average
Supplier EBIT profitability by headquarter region 2010 vs. 2007
Europe
Change 2010 vs. 2007 [%-pts.] +0.4

NAFTA
+1.0

Japan
-0.4

China
+2.4 11.5 9.1

Korea
+3.0

Rest of Asia
+0.4

WORLD
+0.5

8.8 5.8

9.5

9.9

6.5

6.9 4.3

6.0 3.3

5.6

5.7

6.2

EBIT1) margin [%]

2007 2010
1) EBIT after restructuring items
Source: Company information; Roland Berger/Lazard

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

Global Automotive Supplier Study 2011_SHORT_final.pptx

SIZE

Small and medium-sized suppliers have significantly improved their profitability compared to pre-crisis levels
Supplier EBIT profitability by company size 2010 vs. 2007
<0.5 bn
Change 2010 vs. 2007 [%-pts.] +1.1

0.5-1.0 bn
+2.2

1.0-2.5 bn
+0.6

2.5-5.0 bn
+0.6

5.0-10.0 bn
+1.2

>10.0 bn
0.0

ALL
+0.5

7.3 6.2 5.1 5.1 5.9

6.5 5.5

6.1

6.7 5.5

5.9

5.9

5.7

6.2

EBIT1) margin [%]

2007 2010
1) EBIT after restructuring items
Source: Company information; Roland Berger/Lazard

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

Global Automotive Supplier Study 2011_SHORT_final.pptx

PRODUCT FOCUS

Chassis focused suppliers achieved the highest profitability, while Interior and Electric suppliers remain below average
Supplier EBIT profitability by product focus 2010 vs. 2007
Powertrain
Change 2010 vs. 2007 [%-pts.] -0.3

Chassis
+1.1

Exterior
+2.3

Tires
-0.1

Interior
+0.6

Electric/info. ALL
-0.5 +0.5

7.8 6.9 6.6 6.7 5.1

7.4

6.7

6.6 4.4 5.0 5.3 5.7 4.8

6.2

EBIT1) margin [%]

2007 2010
1) EBIT after restructuring items
Source: Company information; Roland Berger/Lazard

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

2007 2010

Global Automotive Supplier Study 2011_SHORT_final.pptx

The 2008/2009 crisis has further broadened the gap between Top and Low performers in the supplier industry
Global supplier performance 2000-20101)
Revenue growth [2000=100]
247 218 193 166 255 239

ROCE [%]
17.1 TOP 8.3 6.3 LOW 4.3
112

207

TOP

11.7

14.0 13.1 13.6 13.0 12.9

15.2

9.8

136
100 106 94 120

6.7 4.1 3.7 0.8 2.3 -0.2 -5.6 2.9 -1.5

2.7

LOW
99 74 90

96

99

102

99

104

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1) Top = Top quartile, Low = Bottom quartile Industry average
Source: Company information; Roland Berger/Lazard

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Global Automotive Supplier Study 2011_SHORT_final.pptx

Our forecast for 2011 full-year financial performance: global average profitability is expected to drop below 6% EBIT
Key supplier performance indicators 2000-2011e
Revenue growth [2000=100]
162 154 148 136 125 114 108 129 5.3 4.2 4.7 5.2 5.1 4.7

EBIT margin1) [%]

ROCE2) [%]
10.1 8.8 8.1 11.1 ~10

~160 156 8.4

5.7 8.3 7.2

9.3

6.2 ~5.5
5.0

103 100

3.1

1.1

1.6

2.0

2.5

00 01 02 03 04 05 06 07 08 09 10 11 Positive drivers:

00 01 02 03 04 05 06 07 08 09 10 11 Negative drivers:

00 01 02 03 04 05 06 07 08 09 10 11

> Still very good sales in BRIC markets > Stable mature markets
2) EBIT after restructuring items/capital employed

> Cool-down in China > OEM price pressure back to pre-crisis levels > Increased raw material prices

1) EBIT after restructuring items

Source: Company information; Roland Berger/Lazard

Global Automotive Supplier Study 2011_SHORT_final.pptx

The general industry framework for automotive suppliers will remain challenging
Trends shaping the supplier industry in the future
Car buyers
Regional shift Price sensitivity Reduced price level

OEMs
Additional cost saving measures Localization of production (to sales markets) Overcapacity/ restructuring (triad) Increased price pressure Increased technological complexity New opportunities

SUPPLIERS

Raw material markets

Provider consolidation

Legislation
CO2 reduction
Emission reduction Safety regulations Additional cost

Further increased MARGIN PRESSURE and stronger need for differentiation via INNOVATION

Rising demand (from other industries) Increasing prices

Capital markets
High volatility of capital markets
Loss of confidence of investors Increasing capital costs

Source: Roland Berger/Lazard

Global Automotive Supplier Study 2011_SHORT_final.pptx

10

This presentation was prepared by Lazard & Co. GmbH ("Lazard") and Roland Berger Strategy Consultants ("RBSC") exclusively for the benefit and internal use of our clients and solely as a basis for discussion of certain topics related to the automotive supplier industry described herein. This presentation is strictly confidential and may not be reproduced, summarized or disclosed, in whole or in part, without the prior written authorization both of Lazard and RBSC, and by accepting this presentation you hereby agree to be bound by the restrictions contained herein. This presentation is based on publicly available information which have not been independently verified by Lazard or RBSC. Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct. None of Lazard, any of its affiliates, or any of its direct or indirect shareholders, or any of its or their respective members, employees or agents nor RBSC provide any guarantee or warranty (express or implied) or assumes any responsibility with respect to the authenticity, origin, validity, accuracy or completeness of the information and data contained herein or assumes any obligation for damages, losses or costs (including, without limitation, any direct or consequential losses) resulting from any errors or omissions in this presentation. The economic valuations contained in this presentation are necessarily based on current market conditions, which may change significantly over a short period of time. Changes and events occurring after the date hereof may, therefore, affect the validity of the conclusions contained in this presentation and nor Lazard nor RBSC assume any obligation to update and/or revise this presentation or the information and data upon which it has been based.