The Automotive Technology Roadmap Report

Published by AutoBusiness
2 St. Pauls Street Stamford, PE9 2BE United Kingdom Tel: +44 1780 481712 Fax: +44 1780 482383 Internet: http://www.autobusiness.co.uk E-mail: info@autobusiness.co.uk

About the Publisher AutoBusiness is a business research company focussed on automotive supply base issues. We aim to provide accurate and timely information about emerging trends in the sector. Our clients include all the major automotive manufacturers and over 250 of the worlds leading suppliers. We are pleased to be partners to some of the leading financial and business service providers to the sector. In addition, we have recently launched a monthly research program. SupplierBusiness.com is a journal for senior executives in the automotive supply industry, which focuses on key issues and indicators for supplier finance, marketing, purchasing and new product development from a strategic perspective. If you would like to find out more please visit our website www.supplierbusiness.com.

AutoBusiness, 2004 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, AutoBusiness. Contributors to this report include William Kimberley and Colin Whitbread. Additional perspectives contributed by Ricardo. Production by Toni Hanks. All dollar amounts are in US dollars unless stated otherwise. m = millions bn = billions trn = trillions

Contents
Introduction 1

Chapter One: Body and Systems

The body structure Advanced Lighting Technology Safety Interior systems Electronics

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13 24 37 59 64

Chapter Two: Chassis

Introduction Steering Suspension Brakes Vehicle Stability Systems Wheels and tyres Four-wheel drive (4WD) The future for chassis design

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79 79 86 92 96 97 99 105

Chapter Three: Powertrain

Introduction Sulphur Gasoline Engine Technology Diesel Engine Technology Alternative fuels Fuel cell vehicles

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109 113 115 132 148 160

Chapter Four: Transmissions

Introduction Transmission types

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175 178

Company profiles
Aichi Steel Aisin Seiki American Axle and Manufacturing ArvinMeritor Autoliv AVL DiTEST Ballard Behr Benteler Bosch Brembo Continental Corus Dana Delphi Denso Dow Automotive Drxlmaier Eaton Emitec Faurecia Federal-Mogul Gentex GKN Hella IEE IMPCO Johnson Controls Knorr-Bremse Koyo Seiko Lear Lotus Engineering Magna Steyr Mahle Mann+Hummel Motorola MTS Systems NSK Philips Prodrive Ricardo Siemens VDO Automotive Tenneco ThyssenKrupp TI Automotive TRW Automotive Valeo Visteon Wagon ZF

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193 197 203 207 213 219 221 225 229 233 239 243 251 255 263 271 279 283 287 291 295 301 307 311 315 321 325 329 335 339 343 349 353 357 363 367 373 377 383 387 391 395 401 407 413 419 427 435 441 447

Figures and tables

Figure 1: Factors Squeezing Profitability Figure 2: Key Criteria for Successful R&D Figure 3: The Road to Profitable Innovation Figure 4: Understanding and Assessing Technology Drivers Figure 5: Impact of new technology and innovation on R&D and Structure Figure 6: Organisation Benchmark Figure 7: Mercedes-Benz/Hella active light system (1) Figure 8: Mercedes-Benz/Hella active light system (2) Figure 9: Hellas swivelling light module Figure 10: Visteons advanced front lighting unit Figure 11: Hellas LED headlamp Figure 12: Visteons LED rear light cluster Figure 13: Hellas variable intensity LED rear light clusters Figure 14: Autolivs inflatable curtain Figure 15: Autolivs inflatable tube Figure 16: Autolivs adaptive front airbags Figure 17: Delphis passive occupant detection system Figure 18: Hellas advanced lane recognition system Figure 19: Evolution of vehicle control systems Figure 20: Visteons driver awareness system Figure 21: Autolivs pedestrian protection system (1) Figure 22: Autolivs pedestrian protection system (2) Figure 23: Estimated number of microprocessors in a vehicle Figure 24: Processing power increases to 2005 Figure 25: Evolution of vehicle functionality Figure 26: Components of an active steering system Figure 27: Active steering system components Figure 28: Variable ratio steering Figure 29: Continentals air suspension system Figure 30: Boschs yaw torque compensation system Figure 31: AWD systems balance required Figure 32: Lifestyle AWD wagons and performance AWD vehicles Figure 33: Attributes of SUVs and crossover vehicles Figure 34: Urban road transport NOx emissions, 1990-2015 Figure 35: World Fuel Consumption Targets vs. Time Figure 36: Ricardo VECTIS CFD Simulation of the GDI Process Figure 37: Cost /Benefit Trade-off for Engine Technologies Figure 38: Effect of diesel engine downsizing on fuel consumption Figure 39: SiemensVDOs piezo injector Figure 40: Simple twin boost turbocharging Figure 41: Boschs diesel particulate filter Figure 42: Toyotas 2004 Prius hybrid passenger car Figure 43: Operation of the Toyota Prius Figure 44: Mercedes-Benzs fuel cell project car Figure 45: Ballards fuel cell stack Figure 46: Ford fuel cell components Figure 47: Fords Focus fuel cell vehicle Figure 48: Transmission technologies and trends Figure 49: Transmission developments Figure 50: Mercedes-Benzs 7G-TRONIC automatic transmission Figure 51: Torotraks series 3a transmission Figure 52: Timeline of transmission trends Table 1: Road User Fatalities as a Percentage of all Fatalities (%) Table 2: Percentage of women reporting seat belt discomfort by cause (%) Table 3: 14V versus alternative architectures Table 4: Permitted emissions for cars by class Table 5: Comparison of fuel cell technologies 2 3 5 6 8 9 25 26 27 29 29 30 32 38 38 39 42 43 47 47 51 51 64 65 66 83 84 85 90 96 99 102 102 110 110 119 131 132 138 141 142 155 156 162 164 164 171 175 176 181 187 190 37 40 75 111 160

Introduction

Introduction
Automotive Technology: Innovating for Profit
Ricardo Perspective
With automakers struggling to achieve acceptable profitability and faced with increasingly stringent legislative requirements and challenging market conditions, new approaches must be explored to manage the cost and impact of new technologies while reducing costs. In order to succeed, current approaches to R&D must be challenged and a new business model for innovation applied. This has implications for the way in which all players in the automotive industry should respond.

Innovate or die
The pressures currently faced by automotive manufacturers and their suppliers are at historically unprecedented levels. In an industry where customer demand and the emergence of new technology is providing customers with increasing choice and enabling automakers to provide an explosion both in the range and feature content of new products offered, it is something of a paradox that with a few notable exceptions OEMs and their suppliers are struggling to achieve acceptable profitability and returns to their shareholders. The imperative to innovate or die has long been the mantra of popular business texts. The English philosopher Francis Bacon in his essay Of Innovation originally expressed it as long as 400 years ago. To survive, let alone prosper in this highly competitive climate, automotive OEMs need to manage the processes of technology development and deployment in an integrated manner within the context of a business model for product development which takes into account the dynamics of the new technologies and the new possibilities they provide for customers, OEMs and suppliers in all parts of the product life cycle. Innovation for innovations sake is no substitute for a rational and commercially oriented strategy and, with R&D budgets already strained, plus the impact of new innovation on life cycle costs, urgent and focussed action is required. In this introduction, some of the latest thinking on the subject is presented together with examples of industry best practice. This is distilled into a range of process improvements and tools that may be implemented by OEMs aiming to improve both R&D effectiveness and financial performance. The approach described challenges widely held modern myths of automotive R&D and shows how correctly planned and executed technology portfolios can be developed and managed in a more strategic manner, to maximise return on investment and improve profitability.

Profitability on the critical list

Profitability is under pressure from all quarters and, for many OEMs, this lifeblood is slipping away. Manufacturing overcapacity in the major international markets of North America and Europe places an increased overhead burden on every vehicle produced; even in the leanest of enterprises capacity utilisation is a critical factor influencing the cost of unit production. In addition to this, the market place itself presents new challenges as consumers demand greater value for money from their vehicle purchases. AutoBusiness Ltd 1

Automotive Technology Roadmap The major OEMs have responded with everything from dealer incentives to the deployment of new technologies to increase the feature base of their products. This trend has been most apparent in electronic systems and control technologies, which already account for 20% of the value of the average light vehicle, a proportion that looks set to continue growing. To maintain or increase market share, OEMs continue to extend the range of models offered, developing new market niches, increasing product differentiation and stretching brands into new segments. As an illustration of the extent of this phenomenon, in the five years to 2002 the number of models badged under the BMW, Mercedes-Benz and Peugeot brands increased respectively by 22%, 36% and 51%. This explosion of product offering and competitive pressure to reduce time to market further increases the demands on R&D. As if these commercially derived pressures were not already enough, they are further compounded by the increasingly strict legislative requirements for vehicle emissions and fuel efficiency as well as safety performance.

Figure 1: Factors Squeezing Profitability

Underlying economic conditions

Demanding customers Product proliferation Manufacturing capacity

Cost of development

PROFITABILITY

Cost of technology

Product differentiation Intense competition

Ricardo plc 2003

Reduced time to market

Source: Ricardo

The consequence of the above is that the R&D resource of the major OEMs is being increasingly overstretched and is not always aligned to the demands of the new technologies. Available opportunities to incorporate new chassis, powertrain, driveline, safety, emissions, driver support and on-board telematics and infotainment technologies in new vehicles abound. Few are obligatory and even emissions technologies typically present a choice of engineering solutions. Not all are created equal in terms of commercial appeal; very few will entice customers to pay a premium price for their vehicle purchase. Against these challenges and opportunities it is critical to put in place new approaches for the screening, development and deployment of new technologies and innovations. Without this, sustainable profitability may never return.

Key benchmarks of success for R&D

Ricardo has identified a number of key success criteria for successful R&D drawn from the results of a best practice study (published April 2003) based on interviews with the R&D directors of leading OEMs. The criteria identified enable the best OEMs to align R&D processes in such a way as to improve financial performance. A robust platform strategy should be adopted which delivers the product differentiation sought by the consumer while maximising cross-platform commonality. This can significantly reduce cost of additional models and can extend to the trading of manufactured components and systems between OEMs. Specific innovation in design and technology on a new product can help to underscore its differentiation in the market, but this must be aimed at identified customer values and requirements if any tangible margin benefit is to be generated. The

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Introduction processes of product planning must be rigidly adhered to at all stages; programme slippage means lost revenue and erosion of market position.

Figure 2: Key Criteria for Successful R&D

Key Success Criteria Maximum differentiation at minimal additional cost The emphasis is on maximising commonality and reaping the financial benefits of diversity A robust product planning process Up front honesty and accountability for all vehicle cost and volume targets! Must be first to market Slippage means lost revenues and margin erosion Design and Technology Innovation Used to differentiate product and increase revenue quality A clear technology evaluation, planning and deployment process Realising value from investment in technology, minimising costs of non differentiating investments A robust and relevant product development and launch process Real and not a paper chase. Applied throughout the supply chain

Source: Ricardo

The objectives for new programmes must be clear, honestly set and account for and deliver realistic vehicle performance and cost targets without sacrificing functionality. Customer segments targeted by the new product must be thoroughly understood and researched; the product must hit the right buttons with its intended purchasers if any price premium is to be maintained. Finally, even if the OEM gets all else right, it is essential that the product development and launch process is robustly implemented and integrated throughout the complete supply chain and that the full impact on the life cycle costs of the vehicle are identified and managed.

Setting new boundary conditions for R&D

Before attempting to address the key criteria set out above, OEMs wishing to improve their financial performance need to challenge many of the existing issues that set the boundaries of performance for automotive R&D.

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Automotive Technology Roadmap

Boundary condition no.1: Innovation is not a science

This of course is completely untrue; the process of technology creation, evaluation, acquisition, development and deployment is a discipline that should be core to any successful OEM. A range of tools and techniques exists to screen and evaluate, nurture and ensure timely deployment of new technologies. The process of innovation is a cornerstone of successful products and a profitable business. It can and should be measured and controlled without stifling profitability. Effective innovation is crucial to delivering product diversity and revenue quality.

Boundary condition no.2: Product development is difficult to control

Poorly managed product programs of the past and the threat of late introduction are always a reason for reducing the discipline of the product development process. The most successful OEMs treat product development as if it were a production process and subject it to similarly rigorous management and control. Effective product development means a focus upon the right product features, front leading of design and measuring product development efficiency in the same way factory measures to production would be applied.

Boundary condition no.3: Technology comes in $1,000 bolt-on chunks

Managed ineffectively or using inappropriate selection criteria, this would of course be true. However, if proper processes are implemented for the screening, acquisition and implementation of new technologies, those incorporated should be value-enhancing or at worst, cost-neutral. It is important that the cost drivers in new technologies are understood, that their introduction is mapped and managed appropriately, and wherever possible that additional benefit is leveraged by addressing multiple customer values (for example as in the case of CO2 emissions-reducing technologies that may improve the driving experience).

Boundary condition no.4: Cost reduction is achieved through a series of initiatives

While it can of course be achieved through a series of discrete initiatives, it is unlikely to be as successful or enduring as if it would be if treated as an on-going process of life cycle cost management. With so many new technologies incorporated in todays new vehicles, it is essential that the cost challenges presented be understood. This is especially true with the increasing importance of control and electronics in vehicles. Design needs to be driven from functionality and functionality must be considered over the complete product life cycle.

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Introduction

Must do and can do enhancements

It is not just the overall evolution of a product solution that requires an OEM to follow a defined process, it is also essential that OEMs and tier 1s implement and follow an Innovation Process. This requires an organisation to implement processes that can support that organisations innovation capability and the development of technology evaluation tools. The overall objective of the innovation process is to enable the prioritisation of those technologies that have the greatest financial value to the customer.

Figure 3: The Road to Profitable Innovation: the innovation process requires processes that can support an organisations innovation capability and the development of technology evaluation tools.
The objective of an innovation process is to evaluate and prioritise technologies w h ich h ave financial value to the customer. It is the effective management of resources / organisational structure to that enab les these technologies to reach the market

Understanding of Technology /Customer Needs and Brand

Evaluation and Deplo y ment of technology

Supporting Processes / Organisational Structure

Understand the av ailable technology options Understand customer needs Understand how key technologies align with the desired brand message

Prioritise usable technology Dev elop the technology business case Dev elop technology deploy ment plans ov er a short/medium and long term planning horizon Determine how any new technologies will cascade across brands

Dev elop technology deploy ment metrics and gov ernance process Establish suitable technology budgets Agree and establish f unding method for ensuring that technologies are implemented into v ehicle programs

Source: Ricardo

The most important first stage in the innovation process is to understand the technology needs of your customers. This involves not only the need to understand the product and technology needs of your target customers but also an understanding of all the technology options that are available both today and in the future. It is also important to understand how the available technology options align with the brand message that you wish to promote. To support this process stage, technology drivers need to be clearly understood and innovation assessed from both a financial and technical risk perspective. There are three key stages required to evaluate the right technologies and hence set the development strategy and these are: 1. 2. 3. Research the technology drivers Create technology and product roadmaps Evaluate the technologies and set the development strategy

This approach is outlined in Figure 4.

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Automotive Technology Roadmap

Figure 4: Understanding and Assessing Technology Drivers: Technology drivers need to be understood and innovation assessed on a financial and technical risk basis
1 Research the drivers 2 Create technology and product roadmaps 3 Evaluate technologies and set development strategy

Technology driv ers need to be mapped ov er time and f or the different market places to understand the f inancial and technical risks inv olv ed Technology roadmaps need to considered f or each product ov er time to understand when diff erent technologies can be deploy ed and into which product sectors Technology acquisition plans need to be dev eloped f or areas in which current weaknesses exist Interactions between the dev eloping technologies f or all parts of the product need to be considered so that technologies can be implemented using common parts or processes A clear understanding of how the f inancial costs associated with new technology dev elopment need to be well def ined so that technologies are not deleted in a late eff ort to reduce product costs

Once cost drivers are understood, new technology can be systematically introduced
Source: Ricardo

One of the most important distinctions to be made by an OEM considering new automotive technologies will be between those associated with legal requirements and those aimed at enhancing customer value through improved functionality. For the former, implementation is mandatory (at least in terms of a class of solution) and as they are largely invisible or of minimal perceived value to the customer; there is limited scope for product differentiation or brand premium. Implementation timing is usually specified externally by legislative schedule and there is no first mover advantage. The most effective OEMs will thus implement a business model aimed at delivering the required result for minimal investment. This may lead to the acquisition of external technology or to partnerships with others; within the constraints of acceptable quality, cost and timing, the OEM must seek to deliver the required technology within its product at minimal cost. As a result, the major process improvement focus on R&D of legally mandated technologies and innovations should be upon cost reduction and achievement of specific engineering performance targets. Unlike legally mandated technologies, the implementation of those aimed at enhancing customer value is entirely at the discretion of the OEM. These technologies will be aimed at enhancing the feature base of the vehicle and may have the benefit of differentiating the product from competitors, reinforcing its brand values, allowing for premium pricing, and very possibly providing significant first mover advantage. The best OEMs will seek to evaluate the business plan return for such innovations, balancing the investment required against the value generated for customers. In areas that are critical to their brand they may instead develop and exploit in-house competencies. While R&D effort will be no less focused than that for legally mandated technologies, the fundamental measure of success will be in the improvement of revenue quality arising from the investment in the new features delivered to the customer. As such, when considering can do features OEMs must ask themselves not whether they have the requisite technology but, instead, whether they can deliver it to customers in the form of a credible business proposition.

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Introduction

A new business model for innovation management

The most successful OEMs are recognising the impact of new technology and the innovation process on their approach to R&D and their organisational structure. These OEMs are taking a comprehensive approach to the management of innovation and technology within product development, defining a completely new business model that embraces the processes of concept development through to warranty management in an integrated manner. Figure 5 overleaf provides examples of the impact on OEMs of new technology introductions. In doing so they recognise that innovation is the single most crucial stage in the delivery of profitable products. In addition it is crucial that an OEMs product development organisation is aligned with the technology delivery requirements of the business. As shown in the organisational benchmark example represented in Figure 6 (see page 9), it is not just the organisation either that is important, the skills and personalities of the individuals involved is also a crucial element in the successful delivery of leading edge innovations. Having decided which technologies and innovations will form part of the new vehicle, however, the product development processes itself needs to be updated to accommodate those features in an appropriate manner. The implementation of appropriate innovation metrics is a key step. Finally as a fundamental part of the product development process, the true life cycle costs of technology must be considered at all levels throughout the OEM and its supply chain. To achieve this, a holistic and proactive approach to warranty processes is required. For customers, there is already a growing expectation of zero defects, reflected in a general increase from one-year to three-year warranty periods and with the prospect of moving to five years in the near future. The impact of disruptive technologies on managed warranty processes will need to be incorporated right from the planning stage. Supplier relationships will need to be updated in parallel with the overhaul of product development processes, improving financial tracking and sharing lifetime risk and cost exposure. Within the aftermarket too, tight control of the quality and cost of parts, labour and administration will be necessary. Perhaps most beneficial of all, this approach should eliminate the financially costly and brand-damaging campaign charges which have been so common in recent automotive history.

Implications for OEM senior management

If the impact of the new business model for automotive product development set out in this introduction is profound for those working in R&D, the implications are much wider for senior management. The reinvigorated focus of the sales and marketing director must be upon the translation of brand DNA into clear direction for new model programs, and on the development of new product development processes that will deliver this. The impact of new technologies on customer satisfaction must be fully understood, and their value on revenue quality and option pricing addressed. For the product development director, a new commercial orientation is required in the management of innovation evaluation, validation and deployment. Development budgets and resources will need to be altered to reflect the new reality. Technology roadmaps that identify cost drivers as well as candidate solutions will be part of the decision making tool kit, both in evaluating new programs and killing off technology projects which run late and whose premium value declines with time.

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Automotive Technology Roadmap

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Introduction

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Automotive Technology Roadmap

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Body and Systems

Chapter One
Body and systems

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Automotive Technology Roadmap

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Body and Systems

The body structure

Aerodynamics
It has been estimated that between 70-80% of the aerodynamic performance of a vehicle is sealed very early in the development process when its overall dimensions are decided. There are some ten dimensions that are determinant such as height, rear track, overhang, clearance and the rear passenger head room, that are all part of the first proposal that is submitted to the principal engineering teams. Key considerations are as follows.

Front bumper located as low as possible to prevent air from passing under the car. Design specifications sometimes prevent this being carried out. Air intake To minimise the negative impact of air intakes on the drag coefficient, Cd, they need to be placed as close as possible to the licence plate, the area where air pressure is highest. Wings Smooth and curved, with a minimum of protuberances, like the side of a boat. Close attention paid to shut-lines as they interfere with the air flow. Windscreen A step that the air has to ascend when the car is in motion. To make this easier, windscreens are now curved, rounded and joined to the side windows in such a way as to avoid any breaks or protuberances that will disturb airflow. Wheel trims As smooth as possible with the least possible apertures, but enough to cool down the brakes. Underbody Suspension, exhaust system, spare wheel housings, fuel tank volume all interfere with air flow. Many OEMs are attempting to design underbodies with a smooth continuous shape so air can flow under them without encountering obstacles. Rear zone The rear of the car is more important than the front. Low-pressure zones that arise in the wake structure of a vehicle exercise greater drag than the high-pressure zones in front. Great attention is paid to the joint between the roof and the rear screen so that the separation of airflow occurs in an optimised way. The golden rule for the rear window is to avoid having a slope of between 25 and 40, a configuration that is at the origin of vortex phenomenon. Roof A continuous link between front and rear without a break. Its join with the windscreen must offer the least possible wind resistance. Vehicle attitude To direct as much air as possible over the car rather than under it. Roof-rack The worst possible accessory in terms of aerodynamics.

A great deal of attention was paid to the aerodynamics of a car in the 1980s with the Audi 100 setting a benchmark Cd of 0.28. The lowest claimed Cd for a mass-production car was 0.26 for the Opel /Vauxhall Calibra although the Honda Insight claims 0.25. While great attention is paid to keeping body shapes as aerodynamic as possible, with values of around 0.28 being the norm, little attention is now given to reducing this figure any further. However, there has been one tool that has aided designers in keeping the aerodynamic values of a car in check and that is computational fluid dynamics (CFD). On the whole, this has been a development that has been widely used in the motorsports industry, especially Formula One, but it has spread across to the automotive sector. CFD is a numerical simulation used to display the flow around or through a vehicle, and what it brings to the motorsports industry is the ability to conduct testing on the computer very early AutoBusiness Ltd 13

Automotive Technology Roadmap on in a new vehicle program. For example, different geometry and engine variations can be evaluated on a particular project quickly without the need for physical testing. A few of the more obvious benefits that CFD offers are: reductions in time; cost cuts; and engineers are able to make informed decisions during the preliminary stages of development, as well as playing a pivotal role in improving the vehicle itself. Computer simulation also has the benefit of delivering continuity between scale models of different sizes. Moving from one scale to another, there are often small differences that interfere with measurements and have to be corrected. However, on a computer, moving from 25:1 to 1:1 scale is a simple matter. While the wind tunnel remains a vital tool for the aerodynamic development of vehicles, CFD unquestionably has a bright future, not just in the motorsports arena but in automotive engineering as a whole. In ten years time there will be 10,000 times more computing power for the dollar. This in turn will enable the simulation of turbulence more directly and accurately. It will therefore become a truly virtual reality simulation where all of the elements within the vehicle can be simulated on the computer. Suppliers of this specialist software include CD adapco, Engenuity and Fluent Europe.

Body concepts
Over the last few years, a key industry buzzword has been platform. Meaning different things to different OEMs, it is generally understood to mean the floorpan of the car, the suspension mounting points and, in some case, the fuel tank location. It determines a vehicles basic size and links the driveline and suspension components. However, the same platform, unlike a chassis, can have different lengths. It has therefore become more viable than ever before to create different vehicles off the same platform while still keeping marque identity. This is not to be confused with so-called brand engineering of 30 or more years ago where one model was shared between two or more brands with only minor cosmetic alterations defining the difference. Cost savings associated with common platforms, common modules and e-procurement have led to a proliferation of niche models. Nearly every manufacturer has expanded its model offerings in the last 15 years. For example, Mercedes-Benz had five models in 1986: the S, C and E-Class, the Gelandewagen and the SL. Since then it has added the A-Class, C-sportscoupe, CL, CLK, SLK and M-Class under its own name. It has also created the Smart, of which there is a city car, a convertible and a roadster with further expansion of the range in development. However, when it comes to the key marques in the DaimlerChrysler stable - Mercedes-Benz, Chrysler and Mitsubishi - the only sharing likely to take place is in out of sight systems such as the common electrical architecture that will be shared between the next-generation EClass and Chryslers new LX large car in 2004 or 2005. This network will allow MercedesBenz, Chrysler and Mitsubishi cars to share engines, axles, transmissions, braking systems, traction control and navigation systems and enable greater use of plug-and-play items across the ranges without harming any of the individual images, especially that of Mercedes-Benz. The Chrysler Sebring and Dodge Stratus, for example, take their platform and powertrains from Mitsubishis Galant and Eclipse. DaimlerChrysler has already said that Chrysler is to build and install Mercedes-Benz transmissions in its vehicles starting in 2004. It marks the first component sharing since the companies merged in 1998, assembling the rear-wheel drive, automatic transmission for less than half the typical $1bn it takes to develop a new transmission. It will be installed in unidentified Chrysler, Dodge and Jeep vehicles sold in the US with possible models being the Jeep Cherokee and Dodge Durango SUVs Mercedes-Benz will also build more than 40,000 four and five-cylinder diesel engines a year for the Grand Cherokees and Chrysler PT Cruisers sold in Europe, marking the first use of a 14 AutoBusiness Ltd

Body and Systems Mercedes-Benz engine in a vehicle other than a Mercedes-Benz. Other shared parts include axles and steering columns that analysts expect to occur heavily on the next-generation Grand Cherokee and M-Class SUVs due in 2004. 2003 was the year that saw the arrival of the German built Chrysler Crossfire that blends American styling with underbody hardware Mercedes-Benz its chassis and powertrain come from the Mercedes-Benz SLK. It is the Volkswagen Group that is considered the world leader in platform consolidation, having just four platforms for all Volkswagen, Audi, SEAT and Skoda cars compared to 16 in 1993. It also has led to a 70% sharing of parts. In Europe, though, there has been a reaction to this platform sharing policy with many buyers tending to purchase the less expensive SEAT and Skoda variants. This has led to a review of the policy and a move to a component-sharing strategy to allow greater differentiation between the brands. Volkswagen is therefore focusing on 11 key modules, including engines and transmissions, brakes, axles and fuel systems, with a target of completely moving away from platform sharing in 2005. PSA Peugeot-Citron is currently oriented towards 51 common systems, including engines, transmissions, steering, climate control systems, seat frames, brakes, radio, navigation and other telematics systems. Such common cross-platform systems will represent 30% of a vehicles production cost in 2004, says company president Jean-Martin Folz, by which time 85% of PSA production will be based on just three platforms. Blending common systems and a platform strategy will keep development costs stable at around 3bn a year, even as it launches 25 new models between 2001 and 2004. The Peugeot 307 illustrates the savings possible. PSA spent 655m to develop the PF2 platform on which the model is based, with 442m specifically being spent on developing the variations of the 307. Altogether, the whole project cost around 1.1bn. However, PSA could then develop the Citron C4 for another 442m through not having to duplicate the platform development expense. Thus, one car can be developed for 1.1bn, but two cars for 1.5bn. If the PF1 platform has the same cost structure, it will save even more, as it will have four models the Citron C3 and Pluriel and the Peugeot 206 and 107 sharing the cost of platform development. This strategy allows the group to expand its range of products into new niches without the costs formerly associated with such expansion. There are, however, dangers associated with this policy. It can lead to: capacity shortage in one plant and empty lines in another when two models from the same manufacturer clash; the mix of increased model variants and shortening lifecycles leads to smaller lifetime volumes for model-specific car parts; buyers opting for the cheaper version of the same car but under a different brand name; and pioneering new market segments can be very costly.

Generally, though, platform sharing is seen to work, with the OEMs benefiting from the process that should see average production volume per platform increase 30% by 2010. It will also see the disappearance of a number of purely North American platforms as they become global ones, although specialist ones, such as full-size pick-ups, are likely to remain unique to that region. The biggest potential winners from this platform sharing strategy are the big tier one suppliers, such as Johnson Controls, Bosch, Delphi, Visteon, Denso, Lear, Magna International, Valeo and Yazaki. They all have a global footprint and the financial and human resources to gain ground from smaller local/regional suppliers.

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Automotive Technology Roadmap

Corner modules
A massive growth area for component manufacturers is that for axles and, especially corner modules usually incorporating the suspension, springs, brakes, bearings, steering components, and where appropriate, driveshaft components. To the manufacturer, the benefits of outsourcing major components or assemblies to a supplier can be considerable. In fact, many of the major tier one component manufacturers ZF, Delphi, Bosch, TRW Automotive, Tenneco Automotive and even Michelin are already supplying corner modules to vehicle manufacturers on a global basis.

Materials
The principal driving force behind material selection for the car today is weight followed by cost. However, with vehicle end-of-life considerations becoming increasingly important to car manufacturers, recycling is forcing its way up the agenda, although other issues such as manufacturing capabilities and impact performance are also taken into account. Fundamentally, the majority of new cars continue to be made of steel. Not only is this a material with known properties, it is also one to which nearly all car plants are geared up to. The capital costs in moving away from steel are huge, added to which, the improvement in the quality of steel has improved enormously in the last five to 10 years through initiatives such as UltraLight Steel Auto Body (ULSAB). This is a multi-phase study to demonstrate steels capability to reduce substantially the weight of a vehicles body structure and, at the same time, ensure safety with improved comfort and driving performance, all at affordable cost. It involves a consortium of 35 leading steel producers from 18 countries around the world. Tangible investments by the steel industry in the UltraLight initiatives totalled US$41m at the end of May 2002. In addition, there has been significantly internalised investment probably even more than the external spend through the direct involvement and technical input from the member companies. These prior studies and the industrys measurable dollar investments are: UltraLight Steel Auto Body (ULSAB) project completed in 1998 UltraLight Steel Auto Closures (ULSAC) project completed in 2000 UltraLight Steel Auto Suspension (ULSAS) project completed in 2001 ULSAB-Advanced Vehicle Concepts (ULSAB-AVC) project completed in 2002 $22m $6m $2m $10m

Launched in 1999, the ULSAB-Advanced Vehicle Concepts (AVC) was a two-year $10m programme built on the ULSAB programme to address the toughest automotive safety standards that were anticipated for 2004. Two important programme drivers were the EUCAR and PNGV projects. The EUCAR project characterises the European manufacturers approach to new technologies for automotive development, while the erstwhile PNGV project represented the US Partnership for a New Generation of Vehicles. These two projects provided references for setting the ULSAB-AVC targets, which is why the programme focused on popular European C-class (which includes the Opel Astra, Volkswagen Golf, Ford Focus, Fiat Stilo, Toyota Corolla, Honda Civic, Renault Megane, Peugeot 307 and Citron Xsara) and the larger North American mid-size PNGV-class vehicle. Significantly, the designs were conceived with an emphasis on developing a common platform covering both classes of vehicle. The ULSAB-AVC concepts also employ steel processing technologies, such as tailor welded blanks and tube hydroforming, which will further help the optimisation of future car designs with fewer components. Tailor blanking, a technology established in the 1990s in parallel with 16 AutoBusiness Ltd

Body and Systems the roll out of previous steel industry initiatives for the body-in-white and closures, accounts for nearly 40% of the ULSAB-AVC body structures. While this is more than three times that found in vehicles currently, there is a continued strong uptake of this process by leading carmakers and sheet steel component manufacturers. The steel industry anticipates that the new hydroforming process, which comprises more than 20% of the ULSAB-AVC concepts, and the new tailored tube processes that account for around 6%, will be similarly well received and widely adopted by carmakers. However, despite the almost universal acceptance of steel as the material of choice, there are some in the automotive industry who believe that it may not be so straightforward in the future. At the DaimlerChrysler Innovation Symposium held in Stuttgart towards the end of 2000, Professor Werner Pollman, director of research and technology and DaimlerChryslers chief environmental officer, gave a presentation of lightweight materials in which he predicted that the age of steel is over. In tomorrows world he asserted that conventional steel bodies will be giving way to new and better ideas.

Conserving fuel through lightweight construction The decisive factor in designing drive systems and reducing fuel consumption is the weight of the vehicle. For every 100 kilograms that is pruned off a vehicles weight, approximately 0.2 to 0.4 litres of fuel per 100 kilometres can be saved depending on the type of engine. It is estimated that a 30% reduction in vehicle weight over the next ten years will directly lead to a saving of 1.6 litres of fuel per 100 kilometres. Lightweight construction of vehicles is therefore a top priority with all car manufacturers. One of the most important core technologies at DaimlerChrysler, for example, is that of developing materials and production technologies for future models. Components made of these new high-tech materials high-strength steels, aluminium, magnesium, ceramics and carbonreinforced plastics are up to 60% lighter than those made of conventional steel, the use of which will decline substantially.

Aluminium, magnesium and hybrid construction If car manufacturers are to move away from steel in the construction of their cars, the general view is that it will be to aluminium. In 1955 ago, the average North American and European vehicle contained only 20-25 kg of aluminium. By 1999 it was nearly five times that amount at 100 kg. Predictions vary on how high this figure will climb, but forecasts indicate that the market will reach an average of 150 kg of aluminium per vehicle in North America and somewhat more in Europe by 2009. According to Alcan Automotives research, annual demand for aluminium in cars and lightweight trucks is expected to grow from 5.8 million metric tons to 10.5 million metric tons by 2010. By this time, it also predicts that aluminium will achieve market penetration rates of at least 50% for the engine block development sector, 25% for body panels and 20% for chassis and suspension parts. However, in order for aluminium to conquer steel, there would need to be a total overhaul of the car design, development and production process. A move that will not only be extremely expensive and time consuming, but will also result in many engineers having to be re-trained, and develop new skills entirely focused for the production of aluminium bodied cars and not the steel counterpart. Jaguar Cars has been through this process with its 2003 XJ saloon, as it opted for aluminium as the primary material despite it leading to major change in the manufacturing process. Unlike the Audi A8s spaceframe structure, with its array of castings, extrusions and pressings, though, the XJ uses conventional stamped parts and assemblies joined by, amongst others, self-piercing rivets. Nothing on this scale had been attempted by Jaguar before, but the benefits were a 200 kg weight reduction. To tackle the issues of stamping aluminium skin and other panels, Jaguar and Ford encouraged a new joint venture company, Polynorm Stadco, to create a new stamping facility AutoBusiness Ltd 17

Automotive Technology Roadmap within Jaguars Castle Bromwich site. Two new press lines were purchased from Schuler in Germany. Polynorm has considerable expertise in stamping aluminium it produced the tools to produce the bonnet for the current Laguna at Renaults plant in Sandouville while Stadco of Shrewsbury in the UK is already a preferred Ford supplier of steel pressings. Stadco and Polynorm, together with Ford, are partners in Body Systems Brazil (BSB), a company created to make complete steel bodyshells for the Brazilian version of the Ford Fiesta. So, Polynorm and Stadco were already partners before the Castle Bromwich venture. Jaguar used Alcans aluminium vehicle technology (AVT) to design a stamped sheet structure that is 40% lighter than an equivalent steel body and 60% stiffer than the previous XJ. Additionally, all the closures bonnets, doors and boot lids and the wings are also produced in aluminium. For Alcan, the new XJ represented the culmination of two decades of automotive R&D, much of it in partnership with Jaguar. Alcans automotive specialists worked alongside Jaguars engineers and designers to provide assistance from initial design, through prototype development, right up to vehicle manufacturing. As lead aluminium supplier, Alcan also supplies aluminium blanks directly to the stamping presses at Castle Bromwich. The blanks are produced with a specialist surface treatment at Alcans plant in Nachterstedt, Germany. Despite the commitment of Jaguar and Audi, aluminium has not yet proven itself in absolute volume production as it is a difficult material to press. With its lack of spring back, aluminium requires different treatments affecting every aspect of the process from crucial die design through to handling. Apart from the reciprocating motion of the press, almost everything else is different. Even the press motion has to be precisely controlled. Not even the tiniest fragment of lint, dirt, grease or dust must come near the presses. This is difficult to achieve in a large press line where even the smallest dust particles show up on aluminium sheets. To put the use of aluminium in perspective, it is worth looking at the revised Mercedes-Benz E-Class launched in early 2002 that heralded the first use of aluminium in a large-scale series production by this carmaker. It was seen as a groundbreaking step by many aluminium manufacturers, but the lightweight material still only accounted for 10% of the total bodyshell compared to 37% an increase of 20% of high-strength steels. Some 52% of the vehicle is regular steel, indicating that steel continues to play the dominant role in the automotive industry. The one area where aluminium does look set to replace steel as the material of choice is the bonnet in order to comply with pedestrian safety legislation. Another candidate for future lightweight design is magnesium. Even today it is possible to manufacture key engine components like the crankcase, cylinder head and the oil pan out of magnesium or magnesium composites. In casing components, magnesium allows for a weight reduction of up to 25% compared to aluminium and 50% compared to grey cast-iron. In relation to the entire engine weight, these numbers are 12% and 22%, respectively. The specific gravity of magnesium is 1.8 compared with 2.7 for aluminium and 7.8 for steel. However, there is a price penalty of around 50% over aluminium. However, new materials must achieve even more than meeting rising expectations in terms of safety, comfort and quality at an affordable price. Their use will be practical only if they are also environmentally sound. For its ecological balance sheet, for example, DaimlerChrysler considers, among other things, the energy consumed in manufacture, the vehicles service life, recyclability and resource consumption. From this perspective, it soon becomes obvious under which conditions the ecological benefit of using lightweight materials pays off. A car body of pure aluminium, for example, must be driven as far as 500,000 kilometres before the energy used in producing this metal is offset. DaimlerChrysler utilises each of the many available materials wherever it offers the greatest benefits, and where it best suits the components functions. This approach has given rise to a new type of hybrid design in which individual parts of the same component for example of the body consist of different materials. 18 AutoBusiness Ltd

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The first time DaimlerChrysler used this hybrid construction on a large scale was in the body of the Mercedes-Benz CL. In this vehicle, steel is used in components such as the roof pillars and longitudinal and cross-members that are subject to high stress in crash situations. Aluminium is employed for large-surface parts such as the bonnet, roof, rear panel and rear wing. Magnesium is used on the inner door panels and plastics in secondary components such as the boot lid, shock absorbers and front wing. The end result was the new CL having better stiffness values throughout the body, higher crash properties and a reduction in weight of the body-in-white by 50 kg and an overall weight reduction of 340 kg compared to the predecessor model. This approach is leading to a design using mixed material structures that are even more finely tuned to the functions of individual components. In this class of mixed materials design, individual parts do not consist of a single material but of various materials. The advantage is that the material used can be optimised to the function of the part using new simulation software to determine which material should be used in what proportion, and where and where not in a component. The goal is to enable design engineers virtually to select for each component an appropriate, economical and environmentally sound material that will then be used in its manufacture. The next step is to allow the engineer to verify whether the manufactured component will also meet all specifications with respect, for example, to crash behaviour. Sufficiently advanced simulation software may even allow predictions regarding the condition of the material after it has been processed to make the component. One advantage of this approach is that it allows multiple optimising loops before a prototype is actually built. Initially, the processing of the material into the component is simulated on the computer. If the simulation reveals problem areas during the manufacturing process for example through excessive heating then the material at the problem spot can be individually attuned to the manufacturing process. Conversely it could also be possible to eliminate the problem by adapting the manufacturing process to the properties of the material. Unlike the costly prototyping process, simulation makes it possible to check out many variations of combining different materials and production processes. If engineers detect flaws in the component during the subsequent virtual component testing, they can again adapt the material, this time to the functions the component must perform in the vehicle. A highly stressed plastic component, for example, could be virtually reinforced with a metallic implant. Or a metal component can be strengthened where appropriate by local use of an alloy.

Plastics According to BASF, polyamide components polyoxymethylene (POM), polybutylene terephthalate (PBT) and polyether sulfone (PES) now rank third for automotive construction materials in Europe, behind polyolefins and polyurethanes. The polyamide components of the current BMW 3 Series, for example, comprise 22 kg of a total 162 kg of plastics incorporated into it, and the number of new applications overall points to a likely future annual growth rate of 8% or more. The BMW 7 Series launched in 2001 features a number of innovative plastic components including the worlds first plastic oil sump for transmission systems. The new automatic transmission system from the Friedrichshafen-based gear specialist ZF Getriebe, uses Bayers glass fibre-reinforced polyamide Durethan. It had previously not been thought possible to manufacture such components using plastic due to the extreme requirements for protection against stones, tightness of the flanges and structural rigidity. Hence this development is seen as a significant landmark and it is likely that polyamide will replace metal in this area in the future. Much of the current plastics research is focused on hybrid technology, thermoplastics, nanocomposites, and the new field of biotechnology. BASF is investing 700m in this sector over a ten-year period to develop crops that can handle difficult weather conditions, produce AutoBusiness Ltd 19

Automotive Technology Roadmap higher yields or contain greater amounts of vitamins. Thermoplastics are used extensively in the automotive industry for their heat resistance, dimensional stability, impact resistance, toughness and ease of colouring properties. At a trade show in 2000, BASF presented an alternative to painting thermoplastics the film back-moulding technology or paintless film moulding system (PFM-System). The technology, which offers significant cost advantages, has now been developed to include both unreinforced and reinforced thermoplastics based on syterene copolymers and their blends. BASF demonstrated a year later how large-surface-area film back-moulded components are produced under practical conditions to give a class-A quality. Materials used for a cars interior are subject to extremely stringent requirements, both technical and aesthetic. In the past, extensive use has been made of PVC and PVC/ABS, but these are gradually being replaced with polyurethanes (PU) that are regarded by many as the materials of the future. BASF subsidiary Elastogran has been collaborating with the German company Heidel to develop novel PU systems alongside what is known as the skin moulding process. The process uses Elastofoam 14639/101, a two-component PU system. Because it can be integrated into existing production lines for back foaming of PU instrument panels and PU door linings, it offers a particularly convenient method of producing complete modules. The viscosity of the liquid components is so low the thickness of the skins produced can be 0.53.0 mm. A wide variety of surface structures can be reproduced in multi colours and, unlike films made from PVC or polyolefin, the moulded skins do not require further shaping once they have been produced, so the risk of warpage is removed. Elastogran, with its partners Heidel and Sommer Allibert/Faurecia has manufactured a number of test products, among them a complete door lining for the Mercedes-Benz C-Class and the dashboard for a Volkswagen Bora. It is now looking to develop larger-area side linings for high-quality buses and trucks. The use of composites for internal door structures and behind metal skins is another prime focus of attention. There is a general trend towards the use of polypropylenes because of recycling issues. The result is the production of whole cassettes one-piece mouldings with fixings for door handles, door locks, speakers etc. Also structural beams for side impact are being investigated. These offer the benefits of lightness and strength and are more energy absorbent.

Hybrid technology Bayer is currently working with its partners on the development of hybrid modules for doors, supports for instrument panels and seats. In the future, it says, everything will reach the assembly line as complete structural components. Modularisation is opening up a whole range of applications for hybrid technology. A sector of concentrated development, hybrid technology brings together the advantages of different types of material in a single product. Traditional hybrid structures combine metals with plastics, but nowadays many hybrid components comprise different plastics. Individual parts are being manufactured using various materials that can be optimised to the function of that part. With hybrid composite moulding the plastic composite can be inserted at a localised area to enhance a function. The area where the performance is not needed is made using conventional injection or compression moulding using the same tool. In this way the functionality is maintained where it is needed with the added benefit of part integration. Hybrid technology offers significant safety advantages, as well as cost and assembly benefits. By using hybrid technology the way a car collapses on impact can be better controlled and the safest, most cost-effective interior/exterior design can be developed.

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Body and Systems A current commercial application of hybrid technology is to be found in the front-end design of the Nissan Altima, where Bayers polyamide, Durethan, is combined with metal to increase strength and reduce weight. Several new metal/plastic hybrid applications are expected in 2004 automotive designs. Bayer is already applying the hybrid technology to instrument panels, steering columns, centre stacks, chassis components and integrated seats, some of which will be commercial in the next generation of vehicles. Under the bonnet, Bayer is focusing on developing engine oil pans, filter housings, valve corners and air intake manifolds, all of which are ideal for nylon. At BASF the global production of inlet manifolds made from polyamide reached 18m in 2002. The market penetration figure for plastic inlet systems is expected to grow even further to reach 85% by 2005, with slightly lower levels of 70% and 60% respectively in NAFTA and Japan.

SMC Sheet moulding compound (SMC) is a plastics material that is more normally associated with truck panels where a Class-A finish has been deemed to be less important than cost and weight reduction. However, in the recent past, manufacturing processes have caught up so that now it is beginning to be applied to car panels. For example, it can be found on the deck lid of the Mercedes-Benz CL and is used on the front wings and rear tailgate of the Renault Vel Satis. Rather than use Noryl, a plastic the French carmaker helped invent for wings on earlier cars, it selected SMC as it has the same thermal expansion characteristics as steel, so making it possible to maintain a 2-3 mm precision between body parts, a visible sign of quality. It was used on the tailgate as the exterior was not possible as a one-piece steel part. Compared to steel for the same volume of vehicles, 50,000 per year, the investment for the deck lid was divided by three, and at 19.6 kg it saved 10 kg. SMC was selected for the deck lid of the CL as it allowed design freedom and the possibility to integrate antenna systems. However, it had to undergo rigorous development before it was acceptable to DaimlerChrysler and resulted in the Triple C programme for compound, characterisation and consistency. It involved DMC Composite Resins of Switzerland (resin supply), Menzolit-Fibron of Germany (SMC material), and Peguform of France (moulding). The project made 10,000 deck lids and 80 tons of SMC material, and engineers collected 5m data points along the process trail, such as the temperature and humidity during transportation and storage of raw materials. DSM resins are also used in the front panel of the Ford Transit, where it replaced 12 steel parts and some thermoplastic parts on the inside, while maintaining a Class-A finish on the outside. Owens Corning, which develops glass fibres for composite materials, has developed a process used by General Motors for the pick-up truck bed of its Chevrolet Silverado. The glass fibres are formed into the shape of the part, putting extra reinforcement where necessary, and the resin is added at the moulding stage. The end result is a 50% cost saving versus steel, 50 kg weight savings and a better build quality because there are no seals or joints. Additionally, the part does not rust or dent and there is no scratched paint. Composite spoilers are also rapidly becoming popular design items and are can now be found amongst others on various BMW models, such as the X5, as well as on the all-new Range Rover launched in 2002. Engineers like SMC because it weighs less than steel, and buyers like it because it costs less than aluminium. However, because some designs cannot be made in steel, it is hard to determine the exact weight savings, and because volume is a key ingredient of price sheet steel becomes a more cost-effective buy at volumes of about 100,000 units annually it is difficult to quantify the savings. However, with the tendency of the market to move to more

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Automotive Technology Roadmap and more niche vehicles, the producers of SMC parts are certain that they are in a growth industry.

Nanocomposites Nanocomposites are described by Basell as the future of automotive plastics. One of the worlds largest producers of polypropylene resins for plastics, Basell is providing the resin and processing technology for a new thermoplastic olefin (TPO) nanocomposite part a stepassist used on GM mid-size vans and Chevrolet Astro. It is the first exterior automotive application of this high performance material, developed in a joint project with Southern Clay Products, Blackhawk Automotive Plastics and GM. Compared to a conventional TPO the new clay-based nanocomposite is stiffer and lighter providing weight savings of up to 20%. It also has a class-A surface and is also more recyclable. No new tooling is required to mould the parts. As with other thermoplastics, a solid material is added to a plastic resin to produce the nanocomposite. However, with this the particles are only one-millionth of a millimetre thick whereas the filler in conventional thermoplastic olefins is on average a thousand times thicker. Although the step-assist is a simple, low volume part it is seen as a significant first step that will open the door to the increased use of TPO-based nanocomposites. Future uses being investigated include body panels and rocker panels. The driver behind many of the recent developments in engineering plastics has been new legislation on waste and recycling, now major considerations when it comes to vehicle design. Siemens VDO Automotives, Air fuel Module Division has announced a redesigned thermostat housing to eliminate the need for machined metal compression inserts. As well as offering a possible 20% cost reduction and 30% weight saving it can be recycled at end of vehicle life. Thermostat housings have traditionally been manufactured from a thermosetting phenolic resin with machined metal compression inserts that prevented them from being recycled. The redesigned housing uses recyclable 30% glass-filled Nylon 66, developed by Bayer, and is fabricated from two low-cost injection mouldings using an automated vibration welding process. It is easier to manufacture than the design it replaces and has fewer components. Its first application was on the revised Ford Zetec and Sigma engines. As it seeks to develop improved polyurethanes, Bayer is also looking for better processing technology. One area of promise it has identified is chopped fibre injection (CFI). This offers a way of adding glass fibre to the mix as the polyurethane is injected in the mould. However, the process cannot be used for parts with steep sidewalls or large deep draw sections, where the polyurethane starts to gel, so Bayer is currently developing a polyurethane high-density structural reaction injection moulding (HDSRIM) system with an extended gel time. The system is currently undergoing tests. In 2000 Huntsman Polyurethanes Automotive introduced of a new variable-length fibre injection production technique called FIBERIM. The system, which substantially increases manufacturing speed and reduces both component weight and manufacturing scrap, attracted a high level of interest from manufacturers. With traditional structural injection moulding (SRIM) a glass mat or pre-from is manually placed in the mould by prior to PU injection. With variable fibre injection, the glass reinforcement is injected as lengths up to 100 mm of glass rope directly into the polyurethane liquid stream as it is poured into an open mould. This makes it an attractive option for any thin-walled structural moulding requiring a high mechanical specification. Initial tooling evaluation and customer trials were carried out in the US. Dow Plastics has developed a revolutionary pultrusion process technology called Fulcrum that produces continuous fibre thermoplastic composite materials that are recyclable. These have the workability of a thermoplastic and strength comparable to high-performance thermoset compounds. The new technology also makes it possible to pultrude thermoplastic composites at very high rates.

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Body and Systems Dow has also developed a fabric-free moulded polyurethane foam technology that can be used to produce car seats and other interior parts that look and feel as if they are covered with leather. The technology uses an elastomeric layer over moulded foam; the elastomer takes the place of conventional materials like fabric or leather as the skin of the upholstery, while the foam continues to be used as internal padding. It is a technology that benefits the seating manufacturer by eliminating processing steps and provides consumers with seating products that maintain their durability even with long-term exposure to sunlight. It also provides benefits to the environment in terms of better recyclability. The all-polyurethane construction also gives the moulder the potential to replace conventional overstocks a key target for most OEMs. The use of natural fibres as reinforcement materials and renewable raw materials is another important area of plastic development. At Warwick University in the UK, the Manufacturing Group is looking at a variety of new sustainable materials and processing routes, including a gas assisted injection-moulding process called Coolgas. The groups other work includes thermoplastic matrix composites in which polypropylene is used as the foam or core of a thermoplastic sandwich, and the manufacture of composites from natural fibres such as Euphorbia Lagascae, which is related to the Poinsettia.

Recycling Steel is the most recycled material in the world, to the extent that almost half the global production comes from recycled sources, including end-of-life (ELV) vehicles. The 370m tonnes of recycled steel each year is estimated to be significantly more than all other recycled materials combined.

New ways of recycling No matter how promising the new material mixtures and combinations may be, their use is only practical if they can be recycled at the end of the vehicles service life. Engineers are therefore concurrently developing new recycling methods. One promising method is an innovative way of fractionating shredded mixtures of plastics by means of an infrared spectrometer. Each plastic part can be precisely analysed and classified based on its individual spectrum. This process achieves a 99% separation by grades, a result unattainable by present methods.

Future trends
A key competitive factor is the know-how regarding materials and production technologies since the use of new materials always depends on how they can be processed and on the process technology employed. Success will come only to those who are skilful in integrating new materials technologies, new production technologies and new engineering designs.

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Automotive Technology Roadmap

Advanced Lighting Technology

Front lights
One of the areas of focus of intense development amongst European OEMs is the Advanced (or Adaptive) Front-lighting System (AFS) in which the key parameters are road run, road type, weather conditions and driver requirements. The objective is to provide the driver with the best possible visibility by varying the light distribution over time without dazzling oncoming traffic. Different models over the years have had the headlight beam mechanically following the direction of the front wheels, the most well known perhaps being Citron DS. However, the concept never caught on with other manufacturers, legislation eventually killing it off with the requirement that headlamps be fixed in the straight-ahead position on cars. Now, though, adaptive front lighting systems have been developed by companies such as Hella, Valeo and Visteon and can be found on the Audi A8, BMW 5 Series, Mercedes-Benz E-Class, Porsche Cayenne and the Opel Astra, Signum and Vectra. The lighting components on a car are governed by stringent international standards ECE in Europe and Japan and FMVSS in the US. However, in a move that sees legislation finally catching up with technology, they are about to be swept away, thereby removing the constraints that have been placed on car designers and engineers for years. Legislation is being introduced in two stages. The so-called fast track that has come into force allows swivelling of the low beam function while the full AFS version, with additional features such as motorway beam operation or bad weather condition light distribution, is forecast for approval by 2005. However, the system is more than the straightforward mechanical application as seen on the Citron, the view being that swivelling both headlights may be a little bit too dramatic for some situations. A better solution is to keep one of the lamps steady and just swivel the in-board one, although a compromise would be to swivel both but at different angles the in-board one swivelling into a wider angle and a little less on the outboard one.

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Body and Systems

Figure 7: Mercedes-Benz/Hella active light system (1)

Source: Mercedes-Benz/Hella

Hella, Valeo and Visteon are all demonstrating two bending light systems main bending light and fixed bending light. Based on the use of xenon, the two systems are complementary functions that can be used separately or in combination. The main bending light headlight enhances vision in large curves at medium to high speeds. This system consists of either a bi-xenon projector or reflector headlamp motorised to rotate by up to 20 degrees from the normal position. The fixed bending light enhances vision in sharp curves at low to medium speed and at intersections. This system consists of an additional projector or reflector in order to deliver an increased quantity of light into an on-coming road bend at a fixed angle, usually 45 degrees. In combination the two systems offer overall higher performance.

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Automotive Technology Roadmap

Figure 8: Mercedes-Benz/Hella active light system (2)

Source: Mercedes-Benz/Hella

The actuation of the motorised lighting unit within each headlamp assembly is controlled electronically. Optimum performance is achieved by the use of control algorithms. These take into account signals from a steering wheel sensor, a wheel speed sensor, and optionally a satellite navigation system. Bending light will be further optimised when it is combined with a lane departure warning system that will provide information on road conditions ahead. At the moment, it is activated through the steering angle when the vehicle is already in the bend. However, because the lane departure warning system uses a video camera and an image-processing unit, it will be possible to detect a road bend before the vehicle enters into a curve and enable the light to be pointed in the direction of the drivers view. However, some of the challenges still to be confronted are the robustness of the equipment, the limited aperture angle of the camera and the camera technology itself. Fundamental questions that need to be addressed include when and in what direction should the dip beam be swivelled, what is the optimum relationship between the radius of curvature and the slew angle, do both or only one of the headlamps need to be swivelled into the curve and the vertical angle for steep hills.

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Body and Systems

Figure 9: Hellas swivelling light module

Source: Hella

Another future function is increasing the headlamp levelling at higher speeds. When the vehicle is on a motorway, it will be possible to give the driver a better view without causing glare. The next stage envisaged will be additional scope for moving the dipped beam while the longer term aim is to provide variable-shape light distribution. In this way, various implementations of the light-dark boundary will be possible and so the light functions for urban roads, country roads and freeways. AFS will also be able to adjust to suit weather conditions. In rain or fog, for example, the beam will be directed at the ground, but delivered at an intensity that will minimise reflection from the road so as not to dazzle others users driving along the wet surface. A cornering light illuminates the side area next to the dip beam in a manner that is appropriate to the situation. When turning off or going through tight curves, the attention of the driver is directed to precisely this area that is often not adequately illuminated by street lighting. To do this, the system evaluates a variety of sensor signals in the vehicle to detect the situations in which the cornering light is needed. The vehicle speed, the steering angle and the indicator setting are key input quantities. To complement the input signals, it is also intended to use the wheel speeds and the yaw rate. Audis core speciality is the functional design of the system. Intensive trials on prototypes will be used to evaluate various slewing characteristics and to check the robustness of algorithms. In the longer term, the plan is to go to a third stage that will provide variable-shape light distribution. In this way, various implementations of the light-dark boundary will be possible and so the light functions for urban roads, country roads and motorways. Even simple information from the navigation system, say the road type, increases the reliability of classification of the urban road, country road and motorway scenarios. A predictive navigation system knows the current position of the vehicle and estimates the further run of the road based on the direction of travel. The road geometry is described in terms of spirals referred to as clothoids. The accuracy of the digital map and the accurate determination of position are the current focus of development. The characteristic feature of urban lighting is the wide illumination. The light-dark boundary is horizontal, plane and reduced by the range. While the bouncing movements of the vehicle do AutoBusiness Ltd 27

Automotive Technology Roadmap not dazzle oncoming traffic, the broad light distribution improves sideward perception. The adjustable country-road light is a dip beam optimisation for this environment. Lifting the lightdark boundary on the left improves the visibility of the edge of the on-coming roadway. A flat light-dark boundary is provided for motorway lighting. When raised, the drivers range of vision is increased. A pre-requisite for the third stage of AFS is unambiguous sensing and classification of the urban road, country road and motorway scenarios. Audi has developed, validated and tried out a number of methods. Various applications such as ESP, intelligent speed control and AFS will use the same sensors. The smooth interworking of all components is essential in a networked vehicle. Audis research also shows that the use of video systems to determine the run and width of the road, or the use of navigation systems, are other ways of enhancing the potential of AFS. If the run of a road is known in advance, the light distribution can be adapted beforehand. The intention is to let the light guide the drivers gaze into the curve. The evaluation of the video images will make it possible to predict the further run of the road. Furthermore, the position of other traffic users can be detected. Adapting the light distribution minimises glare. The width of the road way is another quantity that is ideal information for AFS. The robustness of the techniques, the limited aperture angle of the camera and the camera technology itself are challenges. The cornering function requires a wide variety of input quantities for its operation. The side illumination when cornering or at crossroads is a function of the radius of curvature that, amongst other things, is determined by the steering angle. Also, the activation of the cornering function depends on the speed range on the motorway, the illumination of curves which have a large radius of curvature anyway is, in the final analysis, not wanted. The indicator signal can also provide an early warning about the direction in which the driver intends to turn off so that illumination of the appropriate area can be effected before going through the cornering curve or before the turn off procedure. Using the data provided by the navigation system, the radius of curvature can be calculated beforehand or the road classification can be used to determine certain speed ranges. The appropriate lighting can be activated at crossroads. Signals from photo sensors/rain sensors should also indicate if any adjustments to road illumination are required for example, switching on a bad-weather light or a reduction in glare from on-coming traffic on wet roads.

However, there are many open questions relating to the human aspects of the cornering function problem. When and in what direction should the dip beam be swivelled? What is the optimum relationship between the radius of curvature and the slew angle? Do both or only one of the headlamps need to be swivelled into the curve?

To answer these questions Audi is undertaking intensive trials involving test persons. A specially equipped vehicle makes it possible to vary the various light-specific and controlspecific parameters in a precise way. Visteon has shown an adaptive lighting system that utilises a halogen bulb as opposed to xenon light thereby making the technology affordable to drivers of compact and mid-sized vehicles. Taking the best part of five years to develop, it is able to vary the length, width and direction of the pattern beam, with the reflector inside the headlamp electronically swivelling to the left or right depending upon the angle of the steering wheel and vehicle speed. The technology is based upon Visteons in-house developed algorithm that controls the headlights actuation, with a central 16-bit processor receiving data from the steering wheel sensor, speed sensor and axle sensor to direct the headlamp beam in real time precisely. Furthermore, the software recognises certain driving characteristics, and thus has the

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Body and Systems capacity to raise the low beam level of the headlamp when the vehicle is driving at high-speed and in a straight line.

Figure 10: Visteons advanced front lighting unit

Source: Visteon

Visteons targeting of a yet untapped market within advanced headlamp technology stems from the fact that approximately 50% of compact and mid-sized cars essentially hatchbacks and C-segment vehicles are sold throughout Europe. Visteon is confident that by introducing a halogen-based advanced front lighting system, it can help carmakers achieve rapid and extensive market penetration with its dynamic bending light technology. The AFS technology is applicable for both 14-volt and 42-volt systems, with an integrated damping programme also being featured that smoothes imprecise steering inputs. The next stage for front lights is likely to be the use of light diodes (LEDs). Both Hella and Valeo showed LED headlights at the IAA in Frankfurt in 2003 and forecast that they will be increasingly offered alongside halogen and xenon lights during the second half of the decade.

Figure 11: Hellas LED headlamp

Source: Hella

BMW showed a prototype headlamp system in late 2002 that utilises pixels based on DMD (Digital Micromirror Device) technology. A DMD chip incorporates 480,000 minute micromirrors that take over the function of a conventional reflector. Light from the beam is diverted by these micromirrors and transmitted to the road ahead. Each micro-reflector representing one pixel can be controlled and moved individually by means of computer AutoBusiness Ltd 29

Automotive Technology Roadmap circuits. This provides brand new, unprecedented functions such as anti-dazzle permanent high-beam illumination, with the beam being cancelled out in the area around the eyes and vision lines of a motorist coming the other way. Further advantages are the particularly bright illumination of road markings and the projection of navigation as well as warning messages straight onto the road ahead. Work is going on at BMW on the active integration of information signals such as light fields presenting direction change arrows for navigation purposes and thus displaying the drivers route directly in his line of vision. In the first phase of development, pixel headlights will be used as an additional element supplementing conventional light systems. In this case, the standard front headlights will ensure the necessary illumination of contours to the side, whilst the pixel light bean will serve as a spotlight illuminating specific areas, more brightly whenever requested. In a further step, pixel lights will be used subsequently to provide all the illumination required at the front offering a wide range of applications for a significant improvement of both motoring comfort and road safety.

Rear lights
However, it is not just the front of the car that is coming under close scrutiny, but also the rear. According to some research analysis released by Renault in 2001, while the headlights comprise 60% styling and 40% technology, for those at the rear the figures are 80% and 20%. Rear lights have long been used to convey the brand identity of a make, following a trend set by Volkswagen that uses its trademark design on the parking and brake lights across the range. LED (light emitting diode) matrices provide multiple advantages over incandescent lighting, ranging from quicker illumination, reduced power, improved reliability, more compact packaging and more flexible optical designs.

Figure 12: Visteons LED rear light cluster

Source: Visteon

The advantages of LED rear lights are the increased security benefits for the driver behind because of the quicker illumination when the brake pedal is depressed. They should also last the lifetime of the car; offer luminosity variability; and increase styling freedom by taking up little space. This latter point is very important for vehicle stylists as LEDs are quite thin, they do not take up the entire vehicle corner and they are far more flexible in terms of graphics. Over time, expert opinion within the OEMs sees them replacing conventional rear lights. Software-driven design of this kind will even make it possible to provide variants for different models and changes being made with software upgrades. What all rear-light variants have in common is a large, easily seen brake light. If multi-coloured LEDs are used, variations on the red functions, the flashing light and the reverse light become possible. 30 AutoBusiness Ltd

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Although they are coming down in price, though, LEDs are more expensive than conventional lights, but as now seen on the Volkswagen Phaeton, admittedly a low volume, expensive car, LED technology does seem to have a future in the automotive sector. Despite this, though, the 80/20 ratio looks likely to change soon in favour of technology as carmakers and their suppliers see rear lights as an effective means of allowing the driver to communicate with the driver behind, new technology opening the way to make them far more effective in conveying what the driver is doing. This also includes increasing the functionality of both the rear lights and the brake lights. Audi and Hella having set themselves the target of making rear fog lamps obsolete in the foreseeable future. By integrating contamination and visibility sensors in the headlamp it should also be able to detect fog, spray, rain and snow, contamination on the lamp window and even the separation and speed of following traffic. Using this data in conjunction with that of the vehicle, it will be possible to adapt light output from the rear of the vehicle intelligently. The basis for the introduction of this innovation is LED rear-light technology. By pulse-width modulating the power supply, for example, the luminance of LEDs can be easily varied over a wide range. There is also likely to be a day and night configuration for the rear lights, which would mean the incorporation of a sensor that could determine the density of any fog. Legislation already permits a distinction to be made for day and night levels. A light sensor can measure the ambient brightness and the light intensity of the rear, brake and indicator function adjusted accordingly. At night, a level that is about a third less than the current value is used as the eye is already night-adapted. During the day, the higher ambient brightness caused by sunlight is compensated for by trebling the current level. This means that, even in direct sunlight, it can be discerned whether the rear light is flashing or indicating braking.

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Figure 13: Hellas variable intensity LED rear light clusters

Source: Hella

Another area that is under general discussion is how to convey the brake signal to the driver behind. Rather than varying the intensity, which was found to be less than satisfactory, Hella believes that a light radiating from a centre point is more effective. The harder the brake pedal is pushed, the greater the surface area is illuminated. BMW was to have been the first with such a system on the 2002 7 Series, but had to revert to more conventional lighting as it would not pass legislation as it stood. In November 2003 BMW finally homologated its Brake Force Display rear lights that glow brighter the harder a driver brakes. Standard fitment to 5, 6 and 7 Series models commenced in late 2003/early 2004 and some models already featuring the (deactivated) lights, such as the revised 3 Series coupe, will now have them activated by dealers. Another area that Hella is looking into is the use of hazard warning lights. Seen square on and it is apparent that some type of warning is being given, but seen from one side and it looks like an indicator flashing. One solution would be a double click for hazard warning and single click for the indicator.

Interior lighting
Interior lighting is not covered by ECE standards. In this case, the objective is to provide the maximum scope for interior customisation. It is not innovative leaps that are crucial but rather 32 AutoBusiness Ltd

Body and Systems fine-tuning, harmony and a high-quality ambience that promote recognition. Apart from LEDs in all the necessary colours, the new light source of the future, according to Audi, is electroluminescent foils (EL foils) that have, until now, been used to provide extremely uniform and glare-free illumination in aircraft cockpits. EL foils are ideal for highlighting contours or uniformly illuminating strips. EL foils are driven from an AC supply. This means that some form of ballast is required and some thought would have to be given to the associated electromagnetic compatibility issues. Unlike conventional central interior lighting, adaptive light distributions open up completely new avenues for interior lighting design. Making sensible assumptions about physiological conditions, Audi has come up with an ambient interior lighting concept. The objective is to increase active driver safety and to integrate lighting into interior design. This ambient lighting ensures optimal orientation inside the vehicle and so enhances driving safety. It is adapted to the prevailing driving scenario. Also, at night and in dark environments just when it is needed a perception of space is created, so producing a feeling of well-being. In conjunction with other electronic components, light can be staged individually for the driver, the prevailing mood and the ambient conditions. The virtual representation of the interior is a useful tool during the concept phase.

Display technology
The use of LCD technology in automotive applications is hardly new. Indeed, it has become a familiar part of the interior landscape of vehicles of all types. However, things are changing. Today, the pressure on OEMs to integrate complex electronic systems navigation aids, communications, entertainment into their production models has taken the demand for highperformance displays to a new level, one that previous generations of display technology could not easily meet. The result has been a race over the past few years among display suppliers to develop new technologies that meet the rigorous technical and commercial demands of the automotive sector. The fruits of this activity are now being borne, with the emergence of in-car displays that are a sign of things to come. The most basic and cheapest type of LCD is TN (Twisted Nematic) and its more refined stablemates TN FM, ETN or HTN, which have been used in the automotive sector for some years. In fact, for low-resolution black and white displays, they still have their place in cars, mainly due to cost reasons. Delivering acceptable performance at temperatures between 40oC and 90oC, TN displays can cope with the hostile automotive working environment, and are ideal for applications such as daily trip computers and simple radio displays. This means that TN will almost certainly continue in production for years to come. For slightly more complex requirements, STN (Super Twisted Nematic) LCDs are a common choice, but while they are suitable for higher multiplex (up to 480:1) designs, they have a natural colouring of yellow-green/dark blue. This is unfortunate as customers prefer neutral black and white that can be backlit to whatever colour they want. This is achieved by adding a compensation foil on top of the LCD to neutralise the colour a process that gives rise to FSTN (Film STN), but while it has some advantages over TN, it has a more limited temperature range. DSTN (Double STN), however, addresses this through the use of an additional dummy cell to compensate colour to monochrome. This yields high reliability, good temperature performance and excellent contrast in negative mode such as white characters on black. However, not only is DSTN physically bulky, compared with other approaches, it is expensive and difficult to produce. This is because two cells have to have their cell gaps (the gap between the two pieces of glass) matched to within 0.1m accuracy to achieve the best results (the normal cell gap for STN is about 4-5m). Although these technologies are acceptable for many applications, problems begin to mount when more complex displays, with higher resolutions and especially colour are required. Many of the latest in-car navigation systems, which show detailed maps and routes, demand high-resolution colour graphics to indicate complex road shapes, roundabouts and so on. And even black and white arrow-indicator navigation systems (which are popular because they AutoBusiness Ltd 33

Automotive Technology Roadmap have the advantage of being much simpler and more intuitive to use than the emerging colour systems) require relatively complex graphics. In developing technologies that can meet the requirements of advanced applications such as this, the working environment of a car becomes a major factor. This is because the operational temperature range of most colour technologies is limited a result of the fine nature of the fluid, polarisers, filters and foils used to create the optimum image quality. Also, as the size of the display increases, the need for backlighting also becomes higher especially in colour displays which "eat" more light, which in turn causes more temperature problems. The automotive industry also demands high readability and contrast, which becomes more difficult to deliver as the complexity of the display increases, because of the higher multiplexing which is required. Further complicating the issue is the fact that viewing angles need to be sufficient to allow all car occupants to read the display equally well, whether in the driving seat or in one of the passenger seats. Solutions to these problems for two-colour displays, at least already exist, in the form of compensating or correcting technology. For some time, manufacturers such as Nan Ya have been offering special foils, automotive fluids, integrated ITO (Indium Tin Oxide) heaters (a separate piece of glass with heating electrodes) with NTCs (negative temperature coefficients) bonded onto the glass for accurate temperature compensation. This allows control of cooling fans and adjustment of driving voltage to match the temperature curve (LCDs require less power at high temperatures, and more at lower temperatures, because the fluid becomes either too excitable, eventually reaching a point where the LC structure breaks down and the whole LCD goes black, or too lethargic causing response times of several seconds). Although this approach can work very well, it is obviously preferable to use displays that are inherently able to deliver the performance levels required and the displays industry has been working on this with considerable success. In fact, through the constant improvement of fluids, polarisers and glue, the temperature performance of all LCDs is being brought significantly closer to the requirements of the auto industry, thus reducing the need for compensatory heating/cooling. Nan Ya already offers a number of options to choose from which, although they are not yet in standard product form, are available for custom designs and offer significant advantages over any of the technologies already mentioned. ASTN (Automotive STN), for example, builds on DSTN by eliminating the need to match two cells, instead using a simple compensation foil to achieve the same result. This gives an excellent cost: performance compromise (much lower cost than DSTN with similar performance) with very low colour variation as a function of temperature. ESTN (Enhanced STN) and ISTN (Improved STN) displays have also been developed by Nan Ya to increase further the performance of displays in terms of contrast by adding dyes to the fluid and using super-efficient polarisers to allow better use of the available light. These products offer high reliability and lo- performance variation (colour, viewing angle) with temperature. Another recent development from (originally) Epson is MLA (Multi Line Addressing). This is a display driving technique that drives four lines at once, thus reducing the multiplex level of passive displays by a factor up to four. Less multiplexing means higher performance in terms of contrast, viewing angle and temperature sensitivity, and can also allow more use of grey scales in monochrome displays. MLA ICs are now available for FSTN and DSTN. When it comes to full colour, though, matters are more complex. The problem is that while high-performance colour display technologies exist, they are not yet commercially viable for most mass production applications. TFT (Thin Film Transistor) technology, for example is a familiar product in the PC environment a technology that (because each individual pixel is addressed individually, as opposed to STN which requires a scanning process) offers very fast response times (enabling video capability), plus very high contrast and viewing angles. The downside of TFTs for automotive applications is that they are expensive to produce, very difficult to customise, have a relatively high power requirement and a limited operating temperature range. 34 AutoBusiness Ltd

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Nonetheless, it is almost certain that TFT-based instrument clusters will be in mass production within 3-4 years. When they are, they will enable the driver to select different instrument styles and customise the instrument layout while preferred information can be given greater prominence. For example, navigation information can be moved from a separate screen to the centre of the driver's main information binnacle. Another colour technology of high interest to automotive manufacturers is OLED (Organic Light Emitting Diode). Unlike LCDs, OLED displays are self-luminous and do not require backlighting. This eliminates the need for bulky and power-hungry fluorescent lamps and yields a thinner and more compact display. OLEDs also offer a level of brightness and sharpness not possible with other technologies, and a wide viewing angle (up to 160 degrees), even in bright light. Because of this combination of features, OLED displays are well suited to automotive applications, although (currently) lifetime and temperature issues are a barrier to widespread use in OEM applications (although a car radio using OLED does already exist, manufactured by Pioneer). In three years, however, this is likely to have changed, and we will see many more OLEDs in cars. Also, full colour STN displays are constantly developing in performance. Although they are slower and more limited in viewing angle than TFTs, they are cheaper and more energy efficient. Furthermore, transflective devices are now available. This means that they use reflected ambient light (rather than backlights) to produce the necessary contrast levels, thus ensuring good viewing conditions under direct sunlight. In summary, recent developments in display technology are playing a major part in helping OEMs add advanced features and enhance brand loyalty through differentiation. For example, high-resolution displays are a key part of the current move towards integrated telematics the ability of the car to communicate with the manufacturer about faults, allowing remote diagnosis and emergency reporting.

Future trends
Until now, any innovative leaps in vehicle lighting technology have, in the main, been due to new light sources becoming available. Halogen lamps in the 1970s in particular and gasdischarge lamps and LEDs in the 1990s were key developments. New production methods and numerical analysis techniques have also made free-form and ellipsoidal reflector technology possible. The system suppliers and the subcontractors of vehicle manufacturers were the driving force behind innovation. Until now, almost all the systems have been static in nature; the information provided by the vehicles electrical system was limited to the light functions and the signals for controlling the illumination range. The complexity of the development trends outlined has resulted in intensive efforts to shift the development process further back into the early concept phase to integrate the new, multifacetted development trends in vehicle lighting into the product creation process. A variety of simulation tools means that concept tuning can be performed without the need for hardware. The effect of component designs in the vehicle can be assessed in a virtual reality environment created from nothing more than the initial raw data. The data are also used for the digital mock-up, a 3D, virtual model for installation trials. Checks on the heat and light technology involved are also performed by computer simulations. When there is an input of dynamic characteristic values, even driving manoeuvres can be evaluated in this virtual environment. In three key simulation areas, light technology can be viewed from a wide variety of objectives, most notably: design presentation; validation of the headlamp or lighting concept; and functional integration into the global vehicle system

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Design presentation Even using data that are not fully processed and based more on modelling than construction, it is possible to show how and where the headlamp of the future fits in with the vehicle as a whole. By using virtual reality techniques, the design is brought to life. Using this technology, the observer can interact with the vehicle; thanks to a stereoscopic display, he/she can see the headlamp in 3D. Design modifications that have to be made because of aesthetics, or requirements relating to light technology, production technology or the law, can be displayed quickly and spontaneously and further optimised.

Validating the headlamp and lighting design Thanks to digital mock-ups (DMUs), the headlamp is positioned digitally in its future location at the earliest possible design phase. The lamp must be checked for any collisions as its environment may change as the result of the on-going development process. The concept for securing the lamp must ensure optimal hold for the whole range of vehicle dynamics in a wide variety of driving scenarios. Modern lamps are providing high functionality and also becoming more and more compact. Design aspects and also high reflectivity and filigree elements are strongly restricting the choice of materials that can be used. At the same time, temperatures inside the lamps are extremely high and components must be protected. Heat, causing the high temperatures, is transferred by: direct radiation; convection; and conduction through the materials involved. The methods of numerical analysis are used in the design phase to check if the lamp design could in fact be implemented under the given temperature requirements. It is not just headlamps that are given a thorough health check by computer rear lights and interior lighting also undergo a series of checks in the design phase. By using parallel light-ray tracing, for example, the beam path in the rear light is determined and an image of the future chamber partitioning calculated. Even the light in the interior, which is usually diffusely back-scattered, can only be determined by taking the whole of the interior fittings and their surface descriptions into account. The results of this calculation in some cases a very time consuming process can be assessed in a virtual reality environment.

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Safety
In 1998 the World Health Organisation estimated 1,170,694 road traffic deaths worldwide. Such deaths were the tenth leading cause of death for all ages, accounting for 2.2% of global mortality. There were 1,029,037 road deaths, accounting for 88%, in developing countries with India (216,859) and China (178,894) contributing significantly to this total. Serious as these figures are, road deaths are projected to increase to 2.3m by 2020 and move up the table for deaths for all ages from tenth to third behind ischaemic heart disease and unipolar major depression. Economically, these deaths currently absorb around 1% of GNP in developing countries, 1.5% in transitional countries and 2% in highly motorised countries, although within each group there are significant variations from 0.3% in Vietnam to almost 5% in the US. For the EU as a whole, the figure is nearly 2%.

Table 1: Road User Fatalities as a Percentage of all Fatalities (%)

Country Thailand Malaysia Delhi Japan Netherlands Australia EU US Pedestrian 47 15 42 27 10 18 16 13 Cyclist 6 6 14 10 22 4 5 2 MTWV 36 57 27 20 12 11 16 5 Cars/LTVs 12 19 12 42 55 65 57 79 Buses 3 5 1 2 6 1

Source: World Health Organisation

According to the University of Birmingham in the UK, there is a framework in place in most highly motorised countries and some developing countries that help diminish traffic deaths and accidents. These are: Exposure Control reducing high-risk exposures Crash Prevention the design and operation of the road network, and primary safety in vehicle design Behavioural Change improving road user behaviour, while recognising the limitations of human performance and fallibility Injury Control improving the crash performance of vehicles and the roadside Post-Crash Injury Management enhancing pre-hospital care, and improving the quality of trauma management

However, infrastructure improvements take time and cost money to come into effect although targeted traffic management and blackspot elimination schemes can be effective very quickly. This means that the most efficient and quick way to minimise traffic deaths and injuries in the short to medium term is through vehicle design, especially with regard to other road users.

Vehicle occupant safety

Airbags Over the last ten years, airbag technology has developed to the point where a car can now have eight airbags on board driver, passenger, side and window. In Europe, the driver and passenger airbags are also dual stage. The Volkswagen Phaeton, launched in the summer of 2002, for example, has head airbags that run from the A to the C pillar and 28-litre window airbags that run from the A to the C AutoBusiness Ltd 37

Automotive Technology Roadmap pillar and from the roof to the bottom of the window. Additional protection is provided by thorax side airbags in the front and rear backrests.

Figure 14: Autolivs inflatable curtain

Source: Autoliv

With the advent of so many airbags, it has been necessary to develop sophisticated sensor systems and control units. The airbag release system of the Phaeton consists of a control unit with two internal acceleration recorders and six satellite sensors distributed throughout the exterior areas of the vehicle. All the sensors measure the current longitudinal and lateral acceleration with the control algorithms taking care of the evaluation and release signal. The aim of these measures is further to reduce the loads exerted on occupants in the event of serious collisions, while at the same time optimising the protective functions used in collisions occurring at moderate speeds.

Figure 15: Autolivs inflatable tube

Source: Autoliv

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Body and Systems With the introduction of the Phaeton, two early crash sensors in the immediate vicinity of the left-hand and right-hand front headlights have been implemented for the first time by Volkswagen. On the 2002 Mercedes-Benz E-Class, they are located on the radiator crossmember. They do several things. Firstly, they generally ensure a reduction of the airbag release times as well as an optimum adaptation of the release of the two-stage front airbags to the actual seriousness of the accident. Secondly, the front sensors allow the system to react more quickly to accidents where the car goes under a truck, thus reducing the consequences.

Figure 16: Autolivs adaptive front airbags

Source: Autoliv

The E-Class was the first saloon in the world to be equipped with a rollover sensor positioned on the transmission tunnel which is capable of reliably detecting this type of accident and then instantly relaying the data to the restraint systems central control module. Within the sensors casing lies a metal rod that responds to electrical stimuli and vibrates in a similar fashion to a tuning fork. The Coriolis force the force of inertia in a rotating system that acts when the vehicle rolls over alters the frequency of this tuning fork; electrical measurements conducted by the control unit sense this change and the protective systems are immediately activated.

Seat belts The wearing of seat belts is now the norm in many parts of the world, but there is still a lingering resistance to wearing them even when the law demands it. The 2001 road death figures in the US, for example, showed that of the 42,116 people who died as a result of car crashes, around 60% were not wearing seat belts. There is also a section of the population that actively dislikes wearing them. Research into the wearing of seat belts by pregnant women carried out at the University of Halmstad in Sweden in early 2002 came to a number of conclusions: all but one of the 139 women surveyed always used a seat belt before their pregnancy; several women in the final stages of AutoBusiness Ltd 39

Automotive Technology Roadmap pregnancy said that they were now using their seat belts less, the reasons cited including belt chafing, fear of the unborn child being affected and difficulty in attaching the belt; almost half of the women in the late stages of pregnancy had experienced problems with the belt moving upwards onto the tummy instead of remaining across the hips. In a similar study in the US the majority of the sample of 200 said that wearing a seat belt was uncomfortable, that it chafed, and that it slipped upwards onto their tummies. Also, far more of the American women said they thought the belt caused discomfort and also stopped using them while pregnant. These differences could well be a question of habit.

Table 2: Percentage of women reporting seat belt discomfort by cause (%)

Belt chafing on lower abdomen Belt chafing and pressing against abdomen Belt too tight on breasts Belt not long enough
Sources: US and Swedish studies

US 47 15 42 13

Sweden 6 6 14 2

While a minority, pregnant women are a significant and important section of the population and show that despite the comparative maturity of the seat belt, that they are still far from perfect. Smart seat belts are now beginning to be introduced on a number of models. The BMW 7 Series introduced in 2001 and the 2002 Mercedes-Benz E-Class use systems developed and produced by Autoliv while the new Nissan Primera and the entire Saab range feature a less sophisticated system designed and developed by IEE. Autolivs smart seat belt is able to adapt its restraining force to the severity of the crash and to the restraining force of the airbag. Building upon the experience gained with the static load limiters that were introduced into its seat belt systems in 1995, the retractor in the smart seat belt is fitted with a gearbox to control the extent of the seat belt movement. In a crash, the smart seat belt starts as in most modern seat belt systems by tightening the belt up to 15 cm, using a pyrotechnic pretensioner. This eliminates slack and makes it possible to release some webbing at a later stage, if the load on the occupant becomes too high. In a traditional system, the loads to the occupant from the seat belt and the airbag are added to each other when the bag also starts to restrain the occupant. In the smart seat belt, though, the system just shifts into the second, lighter gear to maintain the restraining force at a relatively constant level. The change of gear can be varied within a relatively wide time span. In a milder crash, it may be enough to run the smart belt system in first gear for only 40 thousandths of a second before shifting to the lighter torque. In a really violent crash, however, the change of gear should take place later, often 70-80 thousandths of a second after the crash occurred. When the triggering of the load limiter is tuned to the severity of the crash, the same sensors that control the frontal airbags are used, but the software programming of the airbag control unit has to be upgraded. This smart seat belt will be particularly beneficial for the elderly and for small women the rib cage of a 60-year occupant can only take half as much load as the body of someone in their twenties. The smart seatbelt reminder system developed and produced by IEE and fitted to the 2002 Nissan Primera and the entire Saab range triggers a warning light and an audible signal reminding the seat occupant to fasten his or her seat belts. In addition, the system enhances occupant safety, especially that of children, by warning both the occupant and the driver when someone unbuckles the seat belt whilst the car is in motion. Since Euro NCAP has decided to award a safety point for a passenger-side seat belt warning, many European vehicle manufacturers have expressed their interest in IEEs system.

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Body and Systems Saab and Volvo are also investigating how the cars occupants can be kept more in place rather than thrown around, and maybe out of their seatbelts, thereby sustaining further injuries. One answer, although only in the experimental stage, is the Saab Supplementary Belt (SSB). This concept features an additional two-point shoulder belt mounted in the top of each front seatback, at its inboard side, which is pulled down across the occupants chest. It can be used as an optional addition to the conventional three-point harness. It also acts as a pre-pre-tensioner, taking up any slack if it detects panic braking as it is activated through an accelerometer in the brake pedal. Volvos solution is to be found on its Safety Concept Car that was shown at the Detroit Show in 2001. One is the X4 Crisscross harness, a conventional three-point belt that is supplemented by a retractable diagonal chest belt that goes from the unbelted shoulder to the opposite hip in much the same way as the SSB. The other is the Centre Buckle V4 belt, developed by Ford that is similar to what is currently being used in racing cars and child seats. SSB has been devised to be most effective in side impact scenarios on the opposite side of the car from the driver or front passenger, frontal impacts with a small 10-15% overlap, oblique side swipe impacts along the side of the car, or fast continual roll-over actions.

Active head restraints Introduced on the Saab 9-5 as a world first in 1997, the active head restraint, developed by Delphi, has been the subject of a great deal of research to see whether it really does make any difference. One major study has been conducted in Sweden by Dial, one of the countrys leading insurance companies, to compare its performance against earlier Saab models fitted with conventional head restraints. It was also used to assess the validity of laboratory test results using dummies. All the accident studies took place on Swedish roads over an 18month period from September 1998 to April 2000 and involved single rear-end impacts only. In almost 80% of the cases, the cars were stationary. Injuries were categorised as short-term pain, lasting up to one week, medium term injury, up to ten weeks, and long-term injury, persisting for more than ten weeks. A total of 85 cases involved Saab 900/9000 models with standard headrests and 92 cases involved Saab 9-3 and 9-5 models with active head restraints. The report showed that the proportion reporting no injury at all rose from 47% (40 cases) in the 900/9000 group to 59% (54 cases) in the 9-3/9-5 group, a significant 25% improvement. Whilst the proportion reporting short-term pain was more or less similar in both groups, 35% compared to 37%, there was a remarkable 75% improvement in medium- and long-term injuries. Just four people in the 9-3/9-5 group complained of medium to long-term pain compared to 15 in the other. An analysis of the long-term injury cases showed in the 9-3/9-5 group that all three individuals had a pre-existing whiplash condition that was not aggravated at all. In the 900/9000 group, five out of the seven long-term sufferers complained that their pre-existing condition had worsened. Interestingly no women using the active head restraint suffered from whiplash injury and none of the seats had to be repaired or replaced. Despite figures such as these, though, most car manufacturers are not specifying active head restraints into their vehicles as whiplash is usually not life threatening and they would rather use their precious resources in other area.

Passive Occupant Detection System (PODS) Delphi was first to market with a passive occupant detection system, introducing it on the 2001 model year Jaguar XK8. This technology consists of a silicon-based load cell cushion weight-sensor mounted under the passenger seat cushion. The system provides information that allows the airbag control unit to determine whether to suppress or allow passenger airbag deployment based on the passengers weight classification.

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Figure 17: Delphis passive occupant detection system

Source: Delphi

Recently enacted US legislation requires that vehicles sold in the country must begin implementation of an advanced airbag system, with nearly 100% compliance required by model year 2006. PODS is a key component of the advanced airbag system. Unlike systems with manual on/off switches, the passive system requires no interaction or involvement by the driver or passengers to achieve the appropriate deployment decision. In addition, the system is nearly universally adaptable to all seat types without affecting seat crashworthiness or comfort. Delphi has since been awarded its fourth major contracts for its innovative passive occupant detection system and expects revenues from this new technology to exceed US$300m annually by 2004. Bosch has also been working on its own passive occupant detection system, developing a mat with pressure-sensitive sensors that establishes the relative pressure profile and uses the data to calculate the weight class of the person on the seat. In parallel with this, it has also been developing a system which based on the information from four deformation sensors installed in the seat sub-frame permits absolute weight detection. Additional information of this kind helps for example to distinguish between, say, a lightweight adult for whom the airbag must be completely activated or a child for whom the bag must either not be triggered at all, or only very gently inflated. Work is also proceeding on the development of an ultrasound-based system that complements the seat information and optimises situation-specific airbag inflation: sensors mounted in a roof module determine the distance of the occupants from the dashboard and their sitting posture. If the person is in an unfavourable position, only one airbag stage may be activated, or the bag may not be triggered at all. Bosch entered series production of this system in 2002.

Vehicle control and rollover Mounting fatalities from rollover crashes in the US have led to increased awareness by the American public about a vehicles capabilities. According to the National Highway Traffic Safety Administration (NHTSA) more than 10,000 of the 42,000 plus road traffic accidents recorded in the US in 2001 were the result of rollovers and of the 6,000 plus teen drivers 42 AutoBusiness Ltd

Body and Systems killed annually as a result of vehicle crashes, over half were in vehicle rollovers. A total of 8,400 people died in rollover accidents in which no other vehicle was involved. Rollover is normally the result of skidding the driver loses control of the vehicle than it overturns. In fact, more than 80% of rollovers occur when the vehicle leaves the road. With their high centre of gravity, SUVs are three times as likely and pick-ups twice as likely to overturn as normal passenger cars. In contrast to the US, though, crash-related injuries and deaths in Europe and Japan are declining more quickly. Studies in Germany indicate vehicles equipped with electronic stability control systems were involved in 30% fewer single-vehicle crashes and overall in 15% fewer crashes. Although electronic stability control technology is available in the US, only 6% of the vehicles currently on the road are equipped with this safety technology, in contrast to Germany where the figure is nearly 60%. According to Bosch, around half of all cars leaving the production line in Germany have ESP, in France it is around one in five, one in eight in Italy and one in 12 in the UK. There is therefore a great deal of work still being undertaken on various safety systems. These include driver assist systems and lane departure warning systems. Driver assist systems involve the development of algorithms to sense the road ahead algorithms that can measure the lane width, the position of the vehicle within the lane and the curvature of the road ahead. When combined with other sensors on the vehicle, a variety of different applications can be utilised including lane departure warning, lane guidance, drowsy driver monitoring and adaptive headlights.

Figure 18: Hellas advanced lane recognition system

Source: Hella

Lane departure warning systems have been in existence for some years now Valeos system has been fitted on the Mercedes-Benz Actros truck since June 2000 but are the subject of continuing refinement. Delphis system, first seen in 2003, for example, uses a digital camera, typically mounted in the rear view mirror housing, to look up to 25 m ahead of the vehicle. The data are supplemented by vehicle speed data and yaw data collected from other systems via the vehicles high-speed databus. Should the vehicle wander off line, a number of warning strategies can be implemented to warn the driver. In the more distant future, where vehicles are fitted with active steering, the system may even help adjust the line of the car to maintain a safe course. AutoBusiness Ltd 43

Automotive Technology Roadmap With regard to vehicle stability control programs, the NHTSA estimates that programs such as Boschs Electronic Stability Programme (ESP), TRWs Vehicle Stability Control (VSC) or Continental Teves Electronic Stability Control (ESC) can prevent 25% of all fatal rollover accidents and reduce the severity of about half of them. On this basis, something like 2,100 lives could be saved on US roads. Vehicle stability control programmes are designed to modulate braking and powertrain forces to avoid excessive yaw rates as noted above, one of the main reasons for rollover accidents is the vehicle leaving the road. If integrated with electronically controlled steering, there is the added potential of providing coaching for the driver during oversteer and understeer situations, as well as during potentially dangerous manoeuvres such as panic braking on split surfaces. This helps the driver keep the vehicle going in the intended direction and maintaining control. Such vehicle stability systems are now being developed so that they can be further integrated with other systems. Anti-rollover systems such as TRW Automotives Active Roll Control (ARC) or Continental Teves Active Rollover Protection (ARP) can reduce a vehicle's roll or tipping sensation and provide a softer ride through a combination of hydraulic and electronic technologies. By actively engaging a vehicles anti-roll bars only to the extent needed to reduce body roll in cornering, they not only improve vehicle handling, but also help to reduce the risk of vehicle rollovers during cornering manoeuvres. While rollover control/protection is proactive in emergency situations and implements the necessary actions to prevent a rollover, the only difference between this program and vehicle stability control is the extended software package no additional hardware is needed. TRW Automotive also has safety technologies that help to protect the occupants in the event of a rollover. The suppliers Active Control Retractor (ACR) is now available on the MercedesBenz S-Class and is the first active seatbelt system on the market. It uses braking and stability control sensor information to pre-tension the seatbelt should the system sense a potential accident. The systems electronic drive unit integrated into the seatbelt system provides the pre-tensioning as part of the Mercedes Pre-Safe system and resets itself if the critical event is avoided. TRW Automotive has also developed the Cold Gas Inflator and Safety Canopy: This new automotive safety technology, which permits the airbag to stay inflated for up to six seconds, provides increased protection in prolonged events such as rollovers. Typical side impact curtain bags remain deployed for up to one second as the gas produced from conventional inflators begins to cool. The TRW Automotive system includes an industry-leading gas distribution technique that achieves faster filling of the safety canopy and more even distribution along the inside of the vehicle from the A to the C or the D pillar. The cold gas inflator is designed to deploy the curtain downward in less than 20 milliseconds to close the gap between the occupant and side window. According to TRW Automotive, the issue of rollover is a complex one for NHTSA, carmakers and consumers alike. The supplier believes that by taking a holistic approach and integrating technologies that can help prevent rollovers along with systems that are designed to protect occupants should a rollover actually occur, it can help carmakers increase total vehicle safety for drivers and passengers. One thing is becoming clear - the various systems on a vehicle are becoming more and more integrated so that each interacts with the other, none more so than vehicle stability control programmes. Bosch is already working on extending the scope of its ESP by a number of additional functions and will be offering not just a single ESP, but a modular system ESPlus that allows an almost free combination of desired functions tailored to individual markets. These include electronic brake prefill that immediately moves the brake pads into contact with the brake discs when the driver suddenly lifts his or her foot off the throttle pedal, softstop braking, brake disc wiping, whereby the brake pads are made to touch the discs briefly on a regular basis to remove the film of water in heavy rain, hill hold control, and stop & go that expands the adaptive cruise control distance control system to bring the vehicle to a complete halt. By integrating three of its technologies millimetre-wave radar that detects vehicles and obstacles ahead, a pre-crash safety electronic control unit (ECU) and a seatbelt ECU 44 AutoBusiness Ltd

Body and Systems Denso developed the worlds first pre-crash safety system that was launched in February 2003 on the Toyota Harrier. The system is able to identify inevitable obstacles a split second prior to collision, automatically tighten passenger seatbelts and activate a brake assist system to reduce vehicle speed. The algorithm that Denso developed for ACC is used to achieve the detecting capabilities of the millimetre-wave radar while the pre-crash safety ECU incorporates proprietary expertise and technologies from the ACC systems to process information from the millimetre-wave radar. The seatbelt ECU also incorporates Denso technologies from the electric power steering system to control the motor that tightens the seatbelt. Continental has developed its APIA (active passive integration approach) project that also integrates vehicle stability control systems with the brakes and active cruise control system. It is based on data interchange between all the systems collecting information on the activities of the driver, the vehicle and the driving environment. This enables sensors to double up on their duty, such as the yaw sensor in the ESP system, for example, also providing the signals for the ACC system. The key component of the APIA is the danger control module that collects and continuously evaluates the data received from all the individual safety systems. For any given traffic situation, this module which takes the form of additional software in the EBS control unit determines a hazard potential that reflects the current accident risk. If the hazard potential reaches a defined limit, the danger control module initiates a staged hazard response strategy. If two vehicles are driving nose to tail, various levels of accident risk can be determined from their relative speeds and the distance between them: These are as follows. Level 1: The leading vehicle brakes gently, and the following vehicle is no longer at a safe distance. APIA warns the driver of a potentially dangerous situation by means of a visual display on the instrument panel (safe distance!) or a haptic warning via a vibrating pedal. Level 2: The leading vehicle brakes harder, rapidly reducing the gap between the two vehicles. The level 1 response comes into play plus: pressure in the brake system is boosted to 5 bar; the seat belts are pre-tensioned to take up the slack (little pressure is applied at this stage and the process is reversible); and the side windows and sliding roof are closed. Level 3: The leading vehicle brakes very hard, rapidly reducing the gap; the driver of the second vehicle fails to react. Level 1 and 2 responses come into play plus: APIA actively applies the brakes up to a deceleration of 0.3 g (the maximum allowed by law for automatic braking) to keep a safe distance from the vehicle ahead; reversible seatbelt tensioners are activated, effectively restricting the occupants to the safest position in their seats; the powered passenger seat is adjusted to a position ensuring sufficient spacing between the occupant and the airbag; and the seat squabs of the driver's seat are adjusted to the ideal position. Level 4: The leading vehicle makes an emergency stop; the driver of second vehicle reacts. Level 1 to 3 responses, plus, the extended brake assist detects the start of emergency braking when the driver rapidly shifts his/her foot from the accelerator to the brake pedal. As the system pressure has already been boosted at level 2, maximum pressure is rapidly reached, ensuring the shortest stopping distance possible. Reversible seat belt tensioners are activated with maximum power, forcing the occupants into the safest position in their seats. Level 5: Despite emergency braking, a collision occurs. Stage 1 to 4 reactions come into play and, in addition smart airbags are activated, depending on the type and severity of the accident.

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The full range of responses described above is only available if the vehicle is fitted with a brake system with ESP and ACC designed to accept external control signals. Automatic braking can only be initiated using the signals from radar or infrared distance sensors. However, some safety functions can still be activated without ACC sensors if the vehicle has just passed through a critical handling situation. In this case, the danger control module bases its decisions on the control status of active safety systems such as brake assist, ESP and anti-rollover system, whose combined effect is implemented by extended ESP software. In this basic version, APIA includes the following functions for enhanced passive safety in high-risk situations: driver information and warnings; side window and sun roof closure; passenger seat adjustment; and activation of reversible belt tensioners. Advanced environmental sensors, designed for accident prevention and injury avoidance, will play a key role in the development of the car of the future. Continental Temic is currently working on a highly dynamic pre-crash closing velocity (CV) sensor. It features a wide shortdistance detection range, is ideal for detecting events very near to the vehicle and enables very precise predictions of the severity and direction of an impending collision. This information means that the danger control module is able to use the time period before a collision even more effectively, for example by appropriate activation of the airbags. Apart from improving occupant protection, this CV sensor can also be used in pedestrian protection systems in combination with additional contact sensors. In the vehicle of the future, equipped with a full speed range ACC, data on objects near to the vehicle will also be available, for example by means of 24 GHz radar sensors. These data will be useful not only for new convenience features such as active parking assistance, with automatic steering and braking support, but also for improved integrated functions such as the effective use of reversible passive safety systems. The advent of driver assist systems is going to see the demand for cameras in vehicles hugely increase as image-processing camera systems allow even more safety improvements. They will not only be able to detect objects near to a vehicle but also classify them. Safety systems can then be activated as appropriate for a given situation, providing even more effective protection for vehicle occupants and other road users. One company that is quite advanced in developing cameras for automotive applications is Omron Automotive Electronics. Developed by IMS Vision, a joint venture between Omron in Japan and the Institute for Microelectronic Stuttgart, its new High Dynamic Range CMOS (HDRC) camera provides significantly higher resolution than competing products in high and low-light conditions, such as tunnels, in blinding sunlight and after dark. It represents the next-generation high dynamic range CMOS (HDRC) camera using conventional complementary metal-oxide semiconductor (CMOS) technology. The camera provides clear electronic digital images that allow an advanced driver assistance system to function throughout a broad range of light levels. It detects light levels over an intensity range of 70 dB, which is a significant improvement compared to conventional CCD cameras that typically have a limited dynamic range of 60 dB. This makes the camera ideal for use in difficult viewing conditions. It does not require an F-stop or shutter control and no additional light source is needed. It also has superior near-infrared region sensitivity and can detect images that are irradiated with near-infrared light outside the night-time headlight range. Omron Automotive believes these systems provide increased visibility for blind spot detection, lane departure, collision warning and other functions and that the camera is the image sensor that will meet or exceed the need for advanced driver assist systems. Delphi has also invested a great deal of research effort in the image processing systems required to interpret accurately the data they provide. This is really the key to making these systems work effectively, according to Dr Richard Lind, director of advanced engineering for Delphi Delco Electronic Systems. The availability of affordable, powerful microprocessors has allowed us to develop very sophisticated algorithms that can identify and interpret the 46 AutoBusiness Ltd

Body and Systems many different situations that the system will see. This allows safety systems to make intelligent decisions based on an assessment of a wide range of factors. Looking ahead to the future, passive safety systems will be activated much more rarely than at present. The seeing car of the future will feature onboard intelligence, data interchange with other vehicles and telematics information, allowing it to take active avoidance of a large proportion of potential accidents. Although it will be 10 or 20 years before customers can buy a vehicle of this type, the first fully integrated functions, which will already ensure significant safety improvements, will have reached the production stage in a few years time.

Figure 19: Evolution of vehicle control systems

Source: Bosch

Figure 20: Visteons driver awareness system

Source: Bosch

Pedestrian protection
Most safety technology up until now has been applied to protect those inside the vehicle. A next step in vehicle safety could be applying this life-saving research to people outside the vehicle. AutoBusiness Ltd 47

Automotive Technology Roadmap Pedestrians accounted for 68,000 injuries and 5,200 fatalities in traffic accidents in the United States in 1998, the most recent year for which figures are available, according to the US National Highway Traffic Safety Administration. Children and the elderly represented half of these casualties. In Europe, approximately 41,000 people die every year as a result of injuries sustained in road traffic accidents. Of these some 6,000 are pedestrians. Pedestrians have formed the second largest group of road fatalities for many years although powered twowheelers are now about the same. In some countries, such as Japan, more pedestrians than vehicle occupants are injured or killed in traffic accidents. The average collision velocity between a car and a pedestrian is about 40 kph. At this velocity the head contact for an adult in a typical vehicle-pedestrian accident occurs at about 140 to 150 milliseconds after the first contact between the leg and the bumper. The shoulder of the pedestrian would also typically impact with the bonnet about 120-130 milliseconds after the initial contact. In comparison, the head impact for a seven year old occurs earlier, after about 60 milliseconds. The pelvis meets the leading edge much earlier, at 20 milliseconds. Data from the German In-Depth Accident Study (GIDAS) show that in 77% of cases the collision partner is a car. The majority of pedestrians killed 68% - died in built-up areas. If non-fatal injuries are included, this figure rises to 94% for urban regions. Victims over 60 accounted for 48% of all urban fatalities while those under ten accounted for 25% of all serious urban injuries. Head, upper and lower extremities are the most frequent injured body regions in car-topedestrian accidents. However, 62% of pedestrian fatalities were caused by head injuries. Brain contusion and skull fractures in general are mainly caused by pedestrian head contact to the windscreen/A pillar and the bonnet. Non-life threatening injuries were generated by impact to the cars front end/bumper and the road surface. As things currently stand in Europe, there are two important factors at play. The most significant one is the Working Group 17 (WG17) that has been set up by the EEVC the European Enhanced Vehicle-Safety Committee to draw up and recommend proposals on pedestrian safety that can be presented to the European parliament as the basis for legislation. It has established test procedures that represent three different impact scenarios between pedestrians and cars: impact of an adult from the side at the bumper (leg form impactor) impact of the upper leg of an adult from the side at the bonnet leading edge (upper leg from impactor) impact of the head of children and adults at the bonnet (child and adult head form impactor)

The use of the impactor tests is intended to represent different impact scenarios allowing the evaluation of injury levels using measured data such as accelerations, forces and the moments and angles associated with bending. WG17 is working on a timetable that would see any new proposal applied for new vehicle types from 2010 and for new vehicles from 2012 to 2014. This is subject to a feasibility study to be conducted by 1 July 2004, for some time in the 2005-2010 period. As a counter to this, the European Automobile Manufacturers Association (ACEA), the body that represents the interests of the European carmakers, has drawn up its own proposals that will be adhered to by the European manufacturers in a voluntary-compulsory way following negotiations with the European Commission. Divided into two stages, the first commitment is to bring new vehicle types into line with the recommendations of the Commission Joint Research Centre (JRC) with effect from 1 July 2005 with the second covering new vehicles over a period from 2010 to 2012. Although it is too early to state categorically, opinion is that it is the latter option that will prevail especially if they are also adopted by the Japanese and Korean Manufacturers Associations (JAMA and KAMA) who are in separate negotiations with the Commission. It is translating these proposals into action that has been exercising the minds of those involved in launching new models in just over three-years time. What at first sight seemed to 48 AutoBusiness Ltd

Body and Systems be a relatively straightforward exercise is now proving to be an extremely complicated one in which a huge number of issues need to be resolved. These include issues related to stiffness and styling; increased weight; and packaging. Chief amongst these, though, is the interconnectivity of many components and subassemblies in the vehicle to many other assemblies and functionalities. Seemingly unrelated parts can have significant effects on the performance of others, not just physically but in terms of meeting targets. The choice of powertrain effects compatibility and this in turn affects the front structure. This in turn effects the ability of the sensor diagnostic module to deploy the airbags in high-speed impacts and meet legislative criteria, which is also affected by the low-speed pedestrian protection performance. This in turn affects the bonnet style and therefore the NVH performance, which is dependent on the driveline characteristics, design and so on. Stiffness is also an issue. For leg impact, for example, it is important to achieve a proper balance in stiffness between bonnet leading edge, bumper and spoiler. Apart from the sheet metal itself there is also the immediate infrastructure that needs to be considered bonnet locks, for example, which are often tweaked to aid ride and handling as well as other secondary load bearings that are designed to withstand severe impacts. Another incompatibility is that in order to comply with legislation, the upper leg must be able to pass through the headlights. The trouble is, though, that lights have their own stiffness requirements, added to which the next-generation versions are becoming bigger and heavier. New adaptive headlights are going to be a great safety bonus for the driver, but they may be less beneficial for the pedestrian struck by a vehicle with these lights. The end result is that there is likely to be an increase in the use of aluminium for bonnets because its strain rates are better suited than those of steel. In other words, the faster a steel panel is hit, the stiffer it becomes while there is only a small difference in the strain rate in an equivalent aluminium panel. There is a downside for the carmakers, though, and that is in the increased cost. It could be said that the days of the sleek, handsome sports car may be a thing of the past. As things stand, there is simply no space between the bonnet and the engine as this has been minimised. However, if a car is to comply with pedestrian safety requirements, a space must be created. It is unlikely that the engine can be lowered any further, so the only alternative is to increase the height of the bonnet. This in turn means that the height of the cars occupant has to be increased otherwise the field of view might be obscured. This also means that the height of the roof has to be increased, entailing major changes to the body-in-white. Packaging is a huge issue. Legislation is going to demand that the front of a car must absorb a 700 Joule impact on the front edge of the bonnet. This means with most cars there needs to be at least 300 mm of space before anything is hit. With space in a car being at such a premium, it is difficult to know how this is going to be achieved. The problem is that the maximum impact energy absorption as things stand is 500 Joules. 15 kN must be reduced to 5 kN which means that the internal target is therefore just 4 kN going by the traditional 80%. A short car, for example, will probably need a front overhang of between 200 mm to 300 mm made of a soft material that will allow the car to meet the upper leg requirements. However, a soft material without support undermines the integrity of the car in other areas such as its dynamics. With such issues needing to be addressed, especially with the changes that will be needed to the body structures, it is important that the advanced engineering teams are aware of as many facts as possible at the start of the new vehicle program. Pedestrian protection is all on the surface of the vehicle because it is not possible to lower the engine or suspension by even 30 mm because that has already been done. While pedestrian safety has not yet entered the public domain as a burning issue, there is no question that over the next few years it will do so. As the introduction of the EuroNCAP rating system five or six years ago so transformed the public perception of vehicle occupant safety, so the new tests, which are based on the EEVC guidelines, will do so for pedestrian safety. The face of the car in Europe is going to change dramatically over the next few years. AutoBusiness Ltd 49

Automotive Technology Roadmap

Fords Pedestrian Safety car A number if ideas about how best to protect a pedestrian are illustrated on Fords Pedestrian Safety car, a modified Explorer. The Ford Pedestrian Safety display features two innovative airbags coupled with cowl airbags to protect pedestrians during an impact. The grille and lower bonnet areas, in the absence of airbag coverage, are a source of abdominal and hip injuries for medium or large adult pedestrians, and chest and head injuries for smaller-stature adults or children. The over-the-bonnet airbag deploys from just above the bumper. It is activated before impact by a pre-crash sensor, and inflates within 50-75 milliseconds. The inflated airbag, approximately 54 inches wide (1,371 mm), 22 inches high (558 mm) and five inches thick (127 mm), spans the area between the headlights and extends from the top of the bumper to several inches over the bonnet surface. The folding pattern and cross-section are engineered so that the deploying airbag conforms to the profile of the vehicles front end. It stays inflated for a few seconds, in contrast to typical interior air bags that can remain inflated for less than 100 milliseconds. The over-the-bonnet airbag also could offer protection in a specific type of vehicle-to-vehicle impact. In a broadside collision, the nearside occupants in the vehicle being hit are at risk of injury from their head hitting the bonnet of the striking vehicle. The over-the-bonnet bag buffers that danger zone. The cowl airbag system is designed to offer head protection for a secondary impact, when the pedestrian is thrown over the bonnet toward the base of the windscreen. The system consists of two airbags, each extending from the centreline of the vehicle to the corresponding A pillar. Each cowl air bag is approximately 27 inches wide (686 mm), 12 inches tall (305 mm) and 5 inches thick (127 mm). These airbags are triggered by a sensor that detects the pedestrians initial impact with the bumper. The airbags inflate in the time it takes the pedestrian to travel over the bonnet area toward the windscreen about 100 milliseconds. When fully inflated, the two airbags cover the full width of the vehicle along the windscreen base, from A pillar to A pillar. This covers the critical hard points, such as the windscreen wiper spindles and bonnet mounts, as well as the base of the windscreen glass. However, the bag does not completely block the drivers view.

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Figure 21: Autolivs pedestrian protection system (1)

Source: Autoliv

Figure 22: Autolivs pedestrian protection system (2)

Source: Autoliv

Because this airbag could use a less complex impact sensor, it is potentially closer to production than the over-the-bonnet bag, which would require sophisticated pre-impact detection. Extensive research is under way to determine the best way to activate both of these airbag systems.

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Automotive Technology Roadmap Likewise, specialised crash tests are used to determine the best configuration for the bags. Safety researchers use four customised forms, rather than full crash dummies, to simulate the effect of pedestrian impacts. These specialised forms represent the adult leg, including calf and thigh; the adult upper leg, with thigh only; the child head; and the adult head. The adult upper leg form also represents child thorax impacts.

Compatibility
Manufacturers have been working on compatibility for quite a long time and it is now generally recognised as the next big step forward for reducing car occupant injury and death. Addressing frontal impact compatibility is essential if the improvements in car safety are to be fully realised in accidents on the road and future advanced restraint systems are to be effective. From 1995, the UKs Transport Research Laboratory (TRL) changed its focus from frontal impact to compatibility. This has helped to initiate co-operative international compatibility research through the European Enhanced Vehicle-safety Committee (EEVC) and the International Harmonisation of Research Activities (IHRA). Initially this research was aimed at gaining an understanding of compatibility and the factors that affect it. Having achieved this, more recent research has focussed on developing test procedures able to measure the most important characteristics. Prior to this research, conventional wisdom said that compatibility problems were limited to crashes between cars of different masses, where mass ratio had the dominant influence. Now it is clear that it is the effect that mass has on frontal stiffness that is responsible for this effect. Furthermore, the importance of good structural interaction between impacting cars has been highlighted. This aspect of compatibility plays a part in virtually every road crash. Without good structural interaction, the energy-absorbing capability of the frontal structure is compromised, leading to compartment intrusion in severe accidents. Once good structural interaction has been achieved, frontal stiffness matching between vehicles, combined with strong passenger compartments, should ensure that the impact energy is absorbed without passenger compartment intrusion. Beyond this, there is scope for better optimisation of the cars deceleration pulse to minimise restraint-induced deceleration injuries. With good compatibility, cars should perform in a more predictable manner over a range of impact configurations enabling the meaningful development of advanced restraint systems. What has to be taken into account, though, is that the front end of a car has to accommodate a number of contradictory factors self-protection of the occupants, pedestrian protection, reparability, aerodynamics, engine cooling, and brand image design. Following research undertaken at the TRL, it has found that to achieve good structural interaction, it is important that the structures of each car meet something substantial on the other car to react against. Current views are that this is best achieved by utilising multiple load paths, with good links between them. These links may take the form of front inter-connections or of shear connections set back from the front. Such structures should provide a more homogeneous front against which other cars structures can react. Engineers at Renault have suggested that three targets should be set for better compatibility: all vehicles should have an homogeneous front end; all vehicles should have a minimum crush force capacity; and all vehicles should absorb a minimum amount of energy before reaching selfprotection force

In order to address these issues, the TRL has devised three test procedures to assess and control both compatibility and frontal impact. These are:

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a full width test at 56 kph with a deformable barrier face and high-resolution load cell wall (LCW) to assess and control structural interaction. This will be achieved by controlling the force distribution on the LCW, to encourage the development of structures that behave in a more homogeneous manner; a 64 kph Offset Deformable Barrier (ODB) test the current EuroNCAP front test with a high-resolution LCW. From the load cells, the cars frontal stiffness could be controlled by specifying that the peak force recorded should lie within a specified range. In the future, control of the pulse shape could be used to manage the passenger compartment deceleration and restraint loading; and a high speed, possibly 80 km/h, ODB test with a LCW to assess the strength of the passenger compartment. This test would not require instrumented dummies.

The sensitive car

Bosch has been actively working together with the automotive industry for a long time to develop both active and passive safety systems that will ideally prevent accidents from ever happening. An important aspect in this development work is the ability of the vehicle itself to perceive its environment and recognise hazardous situations. Bosch is developing highly sensitive sensors to detect the conditions that surround the vehicle, as well as highperformance control devices to interpret and evaluate the data. The goal of achieving a sensitive automobile is now within reach. Among the already familiar driver assistant systems developed by Bosch are the Parkpilot, which uses bumper-mounted ultrasound sensors to monitor a close-range area at a distance of up to 1.5 meters, and Adaptive Cruise Control (ACC), which evaluates information at a range of up to 120 meters. Data are supplied to the system by Long Range Radar (LRR) sensors with operating frequencies of 77 Gigahertz. This information can either be used to warn the driver that he or she is getting too close, or to automatically maintain a safe distance from the vehicle in front. In 2003, Bosch started series production of its Short Range Radar (SRR) with sensors operating in the 24 Gigahertz frequency range. These then form a virtual safety belt around the vehicle. Their signals are able to warn the driver of a range of hazardous situations, for example when a vehicle enters the drivers blind spot. Video sensor technology installed at the rear of the vehicle to assist with parking and reversing manoeuvres yield a far greater benefit when the objects detected are interpreted by image processing and the information is used to warn the driver in critical situations for example, if an intended change of lane would risk a collision with a rapidly approaching vehicle already about to overtake. Forward-facing video cameras can supply information, which enables the driver assistant system not only to measure the distance to an object, but also to classify the object it has detected. In addition, Bosch is implementing new functions such as lane recognition with a warning to the driver if he unintentionally strays from this lane or traffic sign recognition. Not least among the capabilities of such cameras is the implementation of a night vision system. The sensitive car detects what is going on inside the passenger compartment, so as to trigger the airbags and belt tensioners in the right way to suit the given situation. By proceeding on this basis, using various sensing principles coupled with high-performance computers and highly complex image evaluation techniques, it is possible to assemble a package of data which serves as a valuable resource for both active and passive driver assistants as well as comfort and safety systems.

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Human-machine interface (HMI)

There are four main types of distraction visual, auditory, physical and cognitive, where someone is mentally distracted. The typical distraction, though, is usually a combination of all these. Human-machine interface and driver distraction have become important issues with the carmakers, their suppliers, government agencies and academic institutions. In early 2001, for example, Ford announced that it was spending around US$10m over two years on computeraided research to assess the extent to which in-car gadgets distract drivers. There are various governmental initiatives in both the US and Europe that are also addressing these issues. The In-Vehicle Information System (IVIS) project is a five-year program funded by the US Federal Highway Administration as part of the Driver Vehicle Information Program. Using advanced communications and computing technology, an invehicle information system provides a variety of information management services intended to make the complex task of driving including both vehicle control and route navigation safer, more efficient, and easier for the driver. IVIS is a key component of the Advanced Traveller Information System (ATIS) programme, which provides for the delivery of a wide variety of en-route information to motorists inside the vehicle. As part of the ATIS programme, a significant amount of research has been conducted to identify travellers en route information requirements. Required en-route driver information falls into the following categories: navigation information ; route guidance; motorist services; real-time traffic information; real-time safety advisories and warnings; and real-time regulatory information.

Jaguar is also currently co-ordinating a project funded under the EC 5th Framework (FP5) programme which is looking at issues of human error both in the automotive and aeronautics arena and ways of assessing driver performance. The aim is to produce guidelines on the development of in-car systems and a common way of evaluating the systems to ensure they are safe. A similar research project called HASTE (HMI and Safety Traffic in Europe), also funded by FP5, aims to create a test or series of tests that can be run in actual driving conditions to assess whether such systems are safe to use. The issues of workload are an important aspect of research, particularly bearing in mind the growth in multimedia mobile systems, and were specifically addressed in a three-year project called COMUNICAR (COmmunication Multimedia UNit Inside CAR) , that was completed in December 2002. Partially funded by the EU and involving 11 partners from six different companies COMUNICARs goal was to design, develop and test an easy-to-use on-vehicle multimedia HMI prototype. With Centro Ricerche Fiat (Italy) the project co-ordinator, members included the University of Siena (Italy); Volvo (Sweden); DaimlerChrysler (Germany); Borg Instruments (Germany); Metravib RDS (France); University of Athens (Greece); University of Genoa (Italy); Fraunhofer Institute (Germany); The Federal Highway Research Institute BASt (Germany) and TNO (Netherlands). The findings, though, have not been released. The Human Sciences and Advanced Technology (HUSAT) unit at Loughborough University, Leicestershire, England is also conducting related studies and is working with industry to develop a design process that integrates HMI with multiple systems, and addressing issues of prioritising information in real time. Volvo Cars is doing similar work on a system that handles dynamic prioritisation and workload assessment of the driver so that only information that is relevant to the situation is put through to the driver.

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Body and Systems The car has already reached a level of complexity to operate the current range of functions that many users find off-putting. One of the main reasons is that the individual devices each have specific, distinctive display and operating concepts. The driver is thus confronted with a confusing mass of man-machine interfaces in order to access the desired services. Whenever the driver wants to use a desired function the reason for its very presence in the car he or she has to go through a substantial learning process, which has to be repeated for every single device. If the interaction between driver and vehicle were to remain unchanged, the integration of yet more functions would overburden the driver, potentially even undermining road safety. Expectations would therefore only be met to an inadequate degree, leading inevitably to disappointment. However, the amount of space available for controls inside the car is in addition becoming more restricted for reasons of occupant safety for example, in the event of impact involving a knee or the head and for ergonomic reasons, in other words reachability. These problems highlight the fact that the primary goal of complete customer satisfaction can only be achieved if development processes focus on creating new and, above all, simple operating concepts. The drivers workload needs to be significantly reduced by the functions made available in the vehicle, rather than increased while expanding the range of individual operating options. However, it remains a minefield as BMW has discovered with the iDrive which first appeared at the launch of the current 7 Series in 2001. With up to 700 different control functions now conceivable, BMW had analysed all elements of the man/machine interface from the ground up in their structures and processes. It then subdivided these functions into three levels, depending on the frequency of use and the relevance of the individual functions for motoring. The basic functions most significant for motoring and traffic safety were moved to the immediate vicinity of the driver, with all driving functions directly around the steering wheel, also within easy reach of the driver. The basic functions that are more frequently required and also requiring rapid access are on the second level provided by conventional switches and rotary knobs on the instrument panel. Typical examples are basic functions such as the light switch or comfort features such as the automatic air conditioning with its temperature setting. New, enhanced comfort, communication and driver assistance functions account for by far the largest increase in control options to be found in a modern car. The driver and passengers while on the road, however, rarely change the specific settings involved. Since the specific data and information involved must nevertheless be easily and quickly accessible at all times, these functions are handled by a control centre in an optimum manner. Here all the functions involved are laid out logically and with exactly the right ergonomic features for easy, intuitive control. The monitor, directly in the drivers line of vision, provides all the information required at any time without distracting the driver from the traffic and road situation around him. The control centre offers direct access, through its simple and intuitive operation, to all the many functions, information and communication options that will benefit the motorist in future. Despite the great deal of research that has gone into this system, though, it received an enormous amount of criticism on the 7 Series launch for being difficult to learn and for not being intuitive enough. However, this appears not to have prevented BMW pursuing the concept further, with the iDrive, albeit with modifications from the original now appearing on other models including the new 5 series.

Driver aids A great deal of research is going into what is called predictive driving predicting where the driver wants to go so that the vehicle systems are prepared and working in advance. Whether it is adjusting the light pattern or selecting the appropriate gear, preparing to brake for a bend or accelerating on a straight, the move is to ensure the vehicle knows what its driver requires AutoBusiness Ltd 55

Automotive Technology Roadmap so that it can react more efficiently and positively. The motivating factor is safety and accident-free driving. With the stated aim of reducing road fatalities and accidents over the next 15 to 20 years, DaimlerChrysler is working closely with the Massachusetts Institute of Technology to develop systems and processes that might be applied to future vehicles. So far, the partnership has released the 300M-IT Edition, a test vehicle based on the Chrysler 300M on which a number of systems have been applied. The starting point for the project was studies by the National Highway Traffic Safety Administration (NHTSA) indicating that most accidents are the result of a critical second of inattention or distraction. It has also been established that 80-90% of accidents can be avoided if the driver is given one second of warning or the distraction is prevented in the first place. The 300M IT-Edition began life as a project for management of a hands-free phone and evolved into one to lower the burden on the driver by monitoring driver stress and activity levels and presenting information in an appropriate manner and at an appropriate time. The projects aim has been to develop and test innovative human-machine interface approaches that allow interaction with the driver in a safe, non-intrusive manner and to moderate information flow and regulate mobile phone usage in a manner that minimises distraction to the driver and does not aggravate the customer. This means that the driver has to be assessed by the cars system, the on-board computer reacting to different types of driver, their driving style and even their emotional state at the time. The 330M IT-Edition monitors the driver, constantly observing the position and state of the drivers hands and feet. For example, whether the driver has both hands on the wheel, or is leaning on the door or console armrest, or holding the gearshift calmly or nervously. Head and eye movements are also monitored to see where the driver is looking, and whether he is alert or he has gone into a vacant stare. The level and frequency of conversation with the passengers and the use of the car phone are also monitored. At the same time, the system is also monitoring the vehicles activities. Put together, what this means is that if the phone rings while the driver is changing lanes on a busy motorway, the 300M IT-Edition suppresses the ringing tone, diverts the call to voicemail, and informs the driver when it is safe to do so. Vehicle warning lights and acoustic signals unless critical are also suppressed during manoeuvres. At the heart of the MIT car are cameras to track the drivers eye and head movements and accelerometers and GPS to determine vehicle motion and position, road quality and the traffic situation. Naturally there is an array of sensors including grip force ones on the steering wheel, instruments, gear lever, arm rests and the pedals to determine the whereabouts of the drivers hands and feet. Other sensors can be found in the cupholder and ashtray, ultrasonic ones on the bumpers to determine the proximity to other vehicles, seat sensors for vehicle occupancy and an ambient noise level meter to measure the level of passenger conversation. There is also a carbon monoxide sensor to safeguard against CO-induced drowsiness. All these are linked to the vehicle communications network so that the speed, direction, throttle position, brake pressure and steering angle can be determined. All this information is processed by a computer system located in the boot of the vehicle and using algorithms developed in conjunction with MIT Media Lab, the computer can then control the flow of information to the driver. Motorola is also working with partners and universities to develop a driver advocate an onboard system that suspends information exchange when inputs from vehicle systems indicate the driver is distracted. TRW Automotive has unveiled its Driver Assistance Systems (DAS) vision which brings together its active safety systems braking, steering, suspension and combination vehicle control systems with video and radar sensing to support the driver and ultimately deliver collision mitigation. The roadmap is set out in phases, moving from ride and handling enhancements through highly reactive vehicle control to predictive control. 56 AutoBusiness Ltd

Body and Systems TRW Automotives future development of driver assistance systems is broken into three phases: ride and handling optimisation; highly reactive vehicle control; and predictive vehicle control

Ride and handling optimisation involves the integration of braking and steering systems to deliver enhanced cornering. The next phase, highly reactive vehicle control, moves to by-wire technologies such as steer-by-wire and electromechanical braking as well as systems controlled by sensor fusion to deliver active braking and steering and collision avoidance. The final phase, predictive control, involves the integration of in-car systems and sensors with environmental sensors and intelligent transportation systems (ITS) to provide enhanced driver information and creating the base for collision mitigation and avoidance. Active cruise control (ACC) is an example of a system that will move through these development phases. TRWs ACC system uses radar to identify and track the closest vehicle ahead in its lane. If the vehicle is travelling slower than the selected cruise speed the system sends a signal to the engine and braking system to decelerate until an appropriate following distance is achieved. The next phase of development of this system is known as follow-stop, whereby the ACC system is capable of following the car in front down to a standstill. The final phase of this comfort system, known as stop & go will further extend the capabilities of this system to enable the car to accelerate when the vehicle in front begins to move forward. Advanced systems of this type require high-quality information about both obstacles and the surrounding environment. Radar and lidar systems are focused on the accurate determination of the vehicle locations, but consider little information about the road structure. TRW is developing video-based systems that can detect road structure information through lane markings. These systems can also be used to detect rain and light-levels, with future generations having the potential to detect signposts, pedestrians and vehicles. A wide variety of applications can make use of this information, such as lane departure warning, lane guidance, ACC, blind spot warning, drowsy driver monitoring and adaptive headlights. TRW is currently in discussions with several vehicle manufacturers regarding development contracts for its vision-based driver assistance systems. Lane following systems are being developed by TRW and will be available for passenger cars by between 2005 and 2007. This system combines video sensing with TRWs steering expertise to assist in the lateral control of the vehicle. Again, like ACC, this system will follow the DAS development path outlined above. Lane departure warning systems analyse video and vehicle trajectory information to warn the driver of potential lane departures through audible and haptic feedback. The capability of this system will be extended to actively control the vehicle to maintain an acceptable lane trajectory automatically through interaction with the steering system. TRW Automotive has set out its plan beginning with the launch of its radar-enabled Adaptive Cruise Control (ACC) on a Volkswagen Group model in 2002, through to the introduction of automatic collision mitigation systems before 2014. Ultimately, DAS will involve vehicles equipped with TRW developed x-by-wire technologies programmed to assist the driver to take evasive action to avoid or minimise vehicle crashes. The evolution towards integrated vehicle control systems is the result of a long series of developments in automotive electronics. As the reliability of electronics in automotive environments has improved and the cost of electronics decreased, more and more of the individual control functions have transitioned from mechanical systems to electronic systems. Equally important has been the development of vehicle networks and protocols that enable the sharing of sensor and control signals among the various vehicle subsystems.

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Voice activation
One of the solutions to HMI is seen as voice activation. Jaguar was the manufacturer to market a car with voice activation as standard with the S-Type in 2000. Developed and supplied by Visteon, it recognised a range of voices and had the ability to adapt to different accents and dialects. It also understood continuous and natural patterns of speech, in whichever language it was programmed, so that the user did not have to remember fixed instructions, or artificially pause between words. The most importantly aspect, though, was with drivers being able to keep their eyes on the road and hands on the wheel, focusing their attention on driving rather than operating controls. Now virtually every tier one supplier has its own voice activation system, but it has opened the doors for suppliers who are not usually associated with the automotive industry. Ford example, ScanSoft, a leading supplier of imaging, speech and language solutions, is supplying Citron with its speech and language technologies. ScanSoft has teamed with Clarion to provide leading speech and language capabilities for Clarions AutoPC, which is now available as an option in Citrons Xsara and new C5. Clarions ground-breaking in-dash personal assistant incorporates ScanSofts ASR 200 and text-to-speech (TTS) technology that allows drivers to use voice activation in the vehicle. ScanSofts ASR speech recognition software processes all spoken commands and the TTS engine converts written text to spoken word for e-mail reading or navigation system output. Examples of how Citron drivers are using ScanSoft speech technology include: drivers can use their voice to select tracks automatically from the CD changer, activate or de-activate the navigation unit or radio, scan or select stations and adjust the volume; the system automatically informs the driver when an e-mail has arrived; the driver can orally browse through messages, listen to who sent them, identify when they were sent and determine what the subject lines say; drivers can dial their cell phones via pre-set numbers simply by telling the unit to select a name in the address book; and the system sends drivers spoken traffic alerts concerning accidents and driving conditions. Step-by-step vocal guidance is provided to manoeuvre drivers around such conditions and arrive safely at their destination.

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Interior systems
Vehicle interiors are incorporating more and more electronics, telematics and other advanced technologies, and yet the end-consumer is usually more concerned about its looks and comfort. At the same time, the car manufacturers, while still controlling the design and development process, are passing the responsibility for the actual production of the interiors to their suppliers. GM, for example, has designated five suppliers at its interior integrators: Intier Automotive for full-size SUVs; Johnson Controls for the next-generation minivans and midsize cars; Lear for full size pick-ups and full-size cars; Venture Industries for the Hummer H2; and Visteon for the next-generation small cars

The real revolution, though, is now taking place out of sight of the vehicle consumer and involves brand new areas of business for all the carmakers and for some of their suppliers.

Climate control systems

Delphi has been responsible for the development of a revolutionary under-the-floor climate control system that features in the fourth generation Renault Espace and offers enhanced levels of air circulation and an increased storage area within the cabin. The new climate control system, which is not only unique to Delphi's Thermal Systems but also a technological first for the entire passenger vehicle industry, goes against industry standards to place the climatic control module inside a vehicle's instrument panel and within the dashboard area. Unlike traditional climate systems, the Delphi/Renault climate control system is mounted under the floor and beneath the front passenger seat of the Espace IV, thus directing air through ducts that are extended to the first row of the rear seats. Consequently, the new system circulates air more evenly throughout the vehicle cabin and insures that all passengers are offered the same high levels of thermal comfort. The systems unique design also saves up to 50 litres of space around the in-dash area of the vehicle, thus making extra room for additional storage and parts, such as safety and electronic components. Delphi also claims that the under-floor placement of the module provides ease in installation and service, especially as the dash does not need to be removed to access the system. Additional components of the climate control system include the 7-CVC electronically controlled Compact Variable Compressor, which is in its first European application, and offers better economy, refinement and performance.

Infotainment the Internet in the car

The present range of electronic information and entertainment options includes systems such as radio, CD, TV, navigation, telephone and telematics. These functions are referred to collectively as infotainment, as they provide both information and entertainment. The trend towards increasing mobility, and above all communication, is being driven largely by increasingly dense traffic. A study by Ford in 2002 found that 61% of the population do not have enough time. The vehicle is therefore becoming increasingly important as a place of work and a leisure zone and has, in effect, already become an integral part of the inhabited world, where the occupants are unwilling to forgo all the things they are accustomed to having around them. This is why rear-seat entertainment systems videos and DVDs have seen phenomenal AutoBusiness Ltd 59

Automotive Technology Roadmap growth in North America over the last five years to reach around US$240m in 2002. In Europe, the take-up has been far slower, perhaps because there are fewer minivans/MPVs, the vehicle that is most appropriate for this technology. When it launched Audi telematics in autumn 2000, the German carmaker became one of the pioneers in creating a mobile data connection between vehicles and the outside world. Building on the established safety and mobility-oriented services, it wanted to give its customers access to many more information sources and functions through the use of standardised Internet technologies. The Internet in the car can therefore be interpreted as a logical complement to, and extension of, existing telematics services. In technical terms, Audi interprets the role of the Internet in the car as the geographically independent exchange of data between the vehicle and external data media, based on standard Internet technologies, via a radio interface. According to this definition, it is clear that the role of the Internet in the car is not comparable to its role on the home PC, where its most immediate function is for surfing the Web. Rather, the use of familiar Internet technologies such as browsers, data protocols, software applications and security concepts offer the vehicle occupants an information and communication platform that is specifically tailored to the environment comprising the driver, vehicle and road. The worldwide spread of the Internet is essentially based on two technological features: Internet protocols - worldwide standardised data protocols; and Internet browsers - worldwide standardised user interfaces for visualising content. Internet protocols (IP) establish the technical basis for the worldwide transfer of data. The connectionless transport protocol UDP, the connection-oriented TCP and the applicationoriented protocols such as HTTP, Telnet and FTP build on them. The use of this family of Internet protocols makes the vehicle a moving component within the World Wide Web. Access to the vehicle is via the Audi online portal. This offers a wireless, secure IP connection with the vehicle via the mobile communications network. The driver and passengers have access on the one hand to data on the Internet from the car, and on the other hand to the vehicle from the Internet, for example, in order to modify the vehicle configuration or to transfer data conveniently for a calculated route. It is also conceivable that current vehicle data could be transmitted to Audi Service for servicing purposes. As part of the Internet, the vehicle is in theory prone to manipulation by hackers. Audis overriding development objective has therefore been to offer supreme security for in-car Internet applications. However, security cannot be added as an after-thought so it is important to examine all aspects of the overall concept for guarding against security deficits from the outset. Audi implements a multi-stage security concept both outside and within the vehicle. Internet access to the car is only possible via the Audi online portal. The cars IP address is assigned dynamically. A modern firewall concept acts as a barrier between the Audi online portal on the one hand and the Internet and incorporated intranet on the other. The result is that only authorised users have access to the vehicle. An encrypted Internet connection using the latest security algorithms is established between the portal and the vehicle. This creates a virtual private network that can also be extended to include the customers home sphere, between the portal and the vehicle. A further firewall in the vehicle monitors all access to the vehicle and permits only specific protocols.

System and software architecture Such a complex function as the Internet in the car also alters the way in which the car industry works together with its supply industry. The key factors dictating success are strong development partnerships between manufacturers of complementary technology modules that are ultimately assembled by the car manufacturer to form a new system capable of running in a vehicle. As the system development partner of the new Audi infotainment platform, the German company Harman-Becker Automotive is developing key system components such as the head unit and the navigation system. As an active member of the 60 AutoBusiness Ltd

Body and Systems Media Oriented Systems Transport (MOST) consortium, it is also playing a central role in the introduction of its technology. As systems integrator, Becker is in charge of the integration of all the components of the new Audi infotainment platform. As part of the Internet in the car project, Becker also integrated the WML browser from Openwave (formerly phone.com) into the automotive operating concept. The HMTL browser, on the other hand, is an entirely independent new development by Becker that has been designed specially for the conditions encountered in cars. In view of the robustness and security required, the firewall and Internet access software in the communication unit in the vehicle is Java-based. Audi has chosen a Java solution from Sun Microsystems that has been optimised for use in mobile systems. In the form of its Websphere Everywhere Suite product family, IBM also provides a comprehensive end-to-end solution for Internet access both at the vehicle end and at the server (back) end. As the product cycles of vehicles are much longer than those of mobile communication systems, high-performance mechanisms that assure a high degree of software flexibility need to be found. All communication unit settings need to be administrated without it being necessary to bring the car into the workshop on each occasion. Secure mechanisms for dynamically reloading, installing and modifying the software via a radio interface therefore have to be implemented in the relevant vehicle components. Initial applications have been developed jointly with the German company 3SOFT, which has many years of experience in the automotive sector and in the development of real-time operating systems. For such applications the software cannot take the form of a monolithic, unalterable block, as has previously been the case. Instead, component-oriented software structures such as those defined by the Open Service Gateway Initiative (OSGi) are used. Such software components can be substituted either individually or in groups. As an open platform, the new technology offers Audi scope for installing new software dynamically. This is a particularly effective way of realising vehicle-based functions. Established in 1999, OSGi is an independent, non-profit corporation working to define open software specifications for the delivery of networked services to devices anywhere. It provides a simple and efficient platform to access, download and use dynamic, on-demand services in a vehicles mobile environment. Applications as diverse as remote door locking, on-demand navigation and remote diagnostics to banking, entertainment and information access can all be enabled by the OSGi platform. The range of infotainment features will become even broader in future. The sophisticated networking of individual devices, new technologies and optimum integration into the vehicle will in future give customers access to an unprecedented range of information and entertainment.

Telematics
Internet technologies and the corresponding standards will be adopted in the field of telematics. Along with the launch of the new hardware, the established range of services that comprise service, emergency and information calls and the traffic reports used for dynamic navigation will systematically broaden the field of online services.

Online services There are two conceptual focal points to the optimisation of online services to the vehicle environment: the user interface and personalisation. Conventional websites are not suitable for the car, where the display monitor is relatively small and the range of operating options limited. Both the display and the form of data input are consequently far from user-friendly. It will therefore require the carmakers and their suppliers to design their own portals.

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Automotive Technology Roadmap Personalisation is a significant component. As part of the multi-channel concept, the customer should be able to configure his or her profile of interests on just one occasion from the services available, and then subsequently always have access to personalised content whether from the vehicle or via other WAP or Web-based terminal devices. The concept moreover for the first time makes it possible to segregate the service from the vehicle. The customer can, for example, access content from a suitable hire car. In this way, it is possible to put together a tour one day and call it up the next day in a different, suitably equipped vehicle. There is scope for Java-based services to provide access to vehicle-based functions and statuses in the future. Applications for telemetric diagnosis or for a complex theft protection system are conceivable, for example. The futuristic emphasis of the next telematics platform and the use of open standards are certain to promote the flexible development of the topic, possibly resulting in applications that may at present still be no more than a vision. From just US$1bn in 1998, the telematics market is set to grow to US$42bn by 2010, with 50% of all new cars and 95% of all higher-end cars being equipped with real-time data services or telematics by 2006.

Bandwidths
A comparison between the technical boundary conditions governing a stationary and a mobile environment reveals significant differences. The narrow bandwidth and technical characteristics of mobile terminal devices are particularly notable. The available bandwidth and stability of the mobile communications network are currently much lower than for the landline network. Whereas most home users have at least a 56 kBit/s modem connection or a 64 kBit/s ISDN connection, a mobile application with a straightforward GSM connection has only a nominal 9.6 kBit/s. Higher data rates of up to 38.4 kBit/s and 50 kBit/s are only possible with modern data transfer methods such as high-speed circuit-switched data (HSCSD) and the general packet radio service (GPRS) respectively. These are essential for attaining transfer rates that permit the implementation of Internet protocols and therefore the use of general standards in the mobile environment. The introduction of UMTS promises to promote a further breakthrough, though the system is not likely to achieve widespread coverage for the foreseeable future. New, intelligent functions that make the Internet in the car an interesting prospect involve networking it with other vehicle components. Audi uses MOST technology for its new generation of infotainment systems. This makes it possible to establish an IP-based intranet between individual vehicle components. It consequently becomes possible to exchange data rapidly between applications such as an address book and the navigation system, or establish a data connection with an online travel guide. A MOST-CAN gateway can also evaluate signals from other control units that do not constitute part of the infotainment systems. In future, this will permit the utilisation of vehicleend information for new applications in the vehicle. Audi will therefore be the first car manufacturer to implement IP technology systematically in the vehicle. This will considerably simplify the use of mature standard software, guaranteeing in particular greater reliability and therefore superior quality. The Internet in the car consists of three fundamental, integral functional units: A control unit or head unit controls the overall system. This is where all control and display applications run. The display unit which shows the menus and therefore also the browser is connected to it; It is operated via a console connected up directly to the control unit. Its principal control elements are the function keys and the rotary control/pushbutton; The functions for wireless communication are grouped together in the telematics communications unit, or TCU.

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Body and Systems In order to use a browser in a vehicle, a high-performance control unit and a display with a suitable resolution are needed. At their most basic, the displays are simple dot-matrix displays, and at their most sophisticated they are a display with a WML (wireless markup language) browser. High-quality TFT displays with a resolution of approximately 480 x 230 pixel, which Audi is to use in its high versions, permit significantly more than primitive text representation and graphics. As it would be a shame to leave their graphics capability unused, the use of automotive HTML browsers is beneficial. Audi will therefore support both browser technologies. The WML browser allows all pages designed with mobile phones in mind to be displayed without modification in technical terms. The automotive HTML browser allows all pages that adhere strictly to the HTML 3.2 standard to be displayed. However, this purist approach is unfortunately not shared by all those providing content on the World Wide Web. The online services developed by Audi are, however, optimised for use in the motor vehicle environment. The functions for wireless communication are grouped together by Audi in a new telematics communications unit, or TCU. In addition to providing the functions of a built-in mobile phone, this unit assures telematics and Internet functions. The TCU is intended for use in Europe and North America; the Internet function is to be introduced initially in Europe on the basis of GSM dual-band 900/1800 MHz with GPRS. Thanks to the scope for upgrading the integrated modem component, it will subsequently be possible to supply this unit as a UMTS variant. The integral Bluetooth module (radio connection) provides a wireless interface for the cordless, optional telephone receiver. This interface in addition permits the exchange of data between the system and other devices with Bluetooth capability, such as personal digital assistants (PDAs) and notebooks.

Bluetooth
One of the enablers allowing this technology to happen is Bluetooth that has been threatening to find its way into the vehicle since 1999. This technology is a standardised wireless communication that allows electronic devices to communicate with each other via a shortrange radio signal. After a number of false starts in the automotive sector, it looks as though it could become a reality in 2004. The reason for this new found acceptability is less to do with developments in the automotive industry and more to do with consumer acceptance elsewhere. This is feeding an expectance that it should also be found in the car. As volumes increase, prices drop, with the cost of Bluetooth chips expected to decline to US$5 from the current cost of US$10.

Aerials
Todays high-specification vehicles have as many as 15 antenna modules. Optimum car radio reception alone requires up to five antennae for amplitude and frequency. However, the number of antennae in a top-of- range car will have to rise to around 20 in the medium term. They will handle satellite navigation systems, TV, mobile radio-telephone, e-mail, Internet, speech functions and digital radio including the international standard Bluetooth wireless radio interface. A modern, mobile aerial system must satisfy supreme standards of freedom from interference and reception quality from the customers viewpoint. The quality of radio and TV reception that consumers are accustomed to from cable networks serves as the yardstick here. Aerial systems integrated into a vehicle must moreover support a wide variety of different technologies. This has prompted a broadening of the frequency range from the previous 150 Kilohertz -110 Megahertz to the present 1.8 Gigahertz, which will be extended in the future to 2.2 Gigahertz.

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Electronics
Electronic systems on the car have advanced at a rapid rate in a very short space of time. It was only in 1967 that the first vehicle took to the road with any kind of controlling program this was an electronically controlled fuel pump that did not even use software. In a current Mercedes-Benz S-Class, there are, depending on the options, more than 50 controllers controlling different functions while 600 signals pass along the cables and around 150 electronic messages are multiplexed onto three buses. It was necessary to write around 600,000 lines of program code to make the car smart. By 2015, it has been estimated that there will be more than 100m lines of code on a high-end car.

Microprocessors Ricardo Perspective

Legislation, safety, and increased consumer demands have led to a dramatic and rapid growth in the number of microprocessors in a vehicle.

Figure 23: Estimated number of microprocessors in a vehicle

300 250 200 150 100 50 0
Nos. 1975 CPUs/ Year Source: Ricardo

Estimated #Micros, average vehicle Estimated number of micros, high end vehicle Poly. (Estimated #Micros, average vehicle) Expon. (Estimated number of micros, high end vehicle)

1980

1985

1990

1995

2000

2005

2010

This growth is both economically unsustainable (e.g. each microprocessor requires its own separate power supply, EMC/RFi protection etc), as well as practically unsustainable (as the process of functional integration of so many nodes becomes unmanageable). In parallel, rapid changes in silicon design and manufacturing technology combined with economies of scale for higher performance microprocessors will bring technology, which is currently limited to the desktop environment, into the realms of automotive applications within the next 3-5 years.

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Ricardo Perspective (contd.) Figure 24: Processing power increases to 2005

2005

Source: Ricardo

The outcome of this trend (commonly known as Moores Law) is that microprocessors, with a performance at least 10x faster than todays fastest automotive processors, will be used in vehicle applications before the end of the decade. This will lead to dramatic changes in vehicle electronic architectures, functionality, safety strategies and development tools. In architectural terms, as the performance levels of microprocessors increase, the opportunity arises to reduce the total number of controllers in the vehicle. The impact of this change is probably the largest single change in the automotive electronics industry since moving from 6V to 12V. The end game of this change is that vehicle functionality becomes distributed across multiple high performance controllers, rather than locked into one single subsystem provided by one single supplier. This then requires the OEMs to move from being systems integrators to software integrators. However, this further opens the door for the OEMs to integrate their custom software into hardware and software platforms provided by the tier one suppliers. The inter-module communications strategies and protocols will play a critical role in this new open architecture, because they will be carrying data which will necessitate high communication speeds and degrees of fault tolerance, as information is shared between multiple software modules embedded in physically different ECUs.

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Ricardo Perspective (contd.) Figure 25: Evolution of vehicle functionality 1990s 2000s
Other vehicle systems Gateway CAN- C ECU-1 ECU-2 ECU-n ECU-4 ECU-4 ECU-5 Network Controller Engine Separate high speed links ECU-1 ECU-2 ECU-3 ECU-3 ECU-3 ECU-3 Deterministic high speed bus protocol e.g. Flexray ECU-1 ECU-2

2010s

Gateway

ECU-3

Discrete ECUs Stand-alone functions Interaction limited by Bus capacity

Centralised system Develop control hierarchy Partition functions in h/w & s/w Evolution from existing actuators

Distributed system Evolution from centralised system when all technology enablers in place ECU requirements defined from centralised system

Number of CPUs/function reducing

Source: Ricardo

This open architecture gives OEMs the ability to own their unique brand-defining control strategies. However, the act of blending tier one and OEM intellectual property rights (IPR) in the same ECU, or on the same vehicle network, needs careful management if the benefits it offers are to be realised. Adequate integration testing of the tier one and OEM software is critical. A complete and accurate Application Programming Interface (API) is an essential prerequisite, but even if both OEM and tier one supplier software components have been thoroughly tested in isolation, this is no guarantee that the combined system will behave as anticipated. A misunderstanding of the interface, or an ambiguity in it, can cause spectacular failure. The difficulty and cost of establishing fault in the event of a failure across the interface, if neither party is prepared to reveal IPR to the other, should not be underestimated. It is important to both OEMs and tier one suppliers that their software treat the other with suspicion. Checking signals passed across the interface in both directions can help prevent processing errors. Failure to perform this kind of check was the root cause of the Ariane 5 destruction in 1996. It is even more important in a safety-critical application to ensure that a failure of a software component cannot result in unsafe behaviour of the system. Critical operating system kernels (eg ARINC 653) are useful in providing protection in avionics applications, but are too unwieldy for automotive systems. The automotive engineer must consider the safety claims made for the software underlying the API and, where necessary, seek independent assessment of those claims. Any substantial OEM software being built onto an open architecture will, itself, need careful design to ensure that it is robust, safe and maintainable. The cost of keeping software current with an evolving API can be significant, if the software has not been designed with maintainability in mind. High performance microprocessors enable the use of real time models embedded in the vehicle controllers, which offer significantly improved levels of control compared to traditional modelling techniques. They also offer the opportunity to use more sophisticated adaptive control algorithms, reducing the level of calibration required, which is an area becoming a critical path to the vehicle launch process at such high levels of functionality.

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Ricardo Perspective (contd.)

Such models validate to within 3% of engine test data and can improve engine management control. This can lead to reduced emissions, better fuel economy and better driveability. The combination of these changes and opportunities significantly changes the role of the OEM relative to the tier one supply base and requires a significant shift in the skill base and processes of the OEM to effectively exploit and manage these opportunities.

Software potential
Software plays an increasingly decisive role in the realisation of electronic innovations. For the customer, this might make itself felt in the form of new functionality or in the maintenance of a vehicles value over its lifecycle. Possibilities are, for example, software updates/upgrades for motor controls, suspension, or telematics. From the point of view of a car manufacturer, software development must therefore become an additional core competence. The complexity of the software is, however, rising to a considerable degree. Investigations show that the volume of software doubles every 18 months, while, at the same time, the risk of software errors grows exponentially. This is mirrored in the rising proportion of development costs that are devoted to software. Currently, depending on the model and level of equipment, 50-70% of the electronics development costs is being spent on software.

Growth areas
Despite the very many new electronic systems that have been added to the car over the last ten years, there still remains huge growth potential in certain areas of the vehicle. These include: Hybrid and fuel-cell vehicle systems applications; Telematics systems incorporating global positioning systems (GPS); Wireless Internet connections; Driver assistance systems; and Voice recognition

However, the current electronics architecture is reaching its capacity it is simply running out of power, so the advent of 42-volt architecture is becoming a distinct necessity if not, at present, a reality. There is also the question of harmonisation. Having learnt from previous mistakes, the industry as a whole is committed to as much standardisation as possible to allow greater opportunity for the plug and play principle. Not only should this help keep costs under control, but it will also enable OEMs to select different systems from different suppliers and yet still be able to communicate with each other.

Controller Area Network (CAN)

In the past, there have been various event-controlled communication systems, such as ABUS, VAN, M-Bus, but none of these protocols developed into a widely accepted standard. Most of them remained manufacturer-specific or disappeared quickly from the market. Only CAN became a standard in Europe. This role was assumed by the J1850 protocol in the US, although there were, in fact, manufacturer-specific variants that resulted in systems that were not compatible. Such is the amount of information now going through the vehicle, though, that CAN is being seen by some carmakers as no longer providing the answer. In the convenience systems sector, a 100 kBit/s low-speed CAN system is used but it will soon be unable to deal with the AutoBusiness Ltd 67

Automotive Technology Roadmap increasing amount of audio and video data in infotainment systems coming into the vehicle. In the drivetrain, a 500 kBit/s high-speed CAN system is in use today but this cannot cope with the data-quantity requirements that will be needed in the foreseeable future. Because of the high demand for bandwidth and the associated high utilisation of the system, the runtime performance deteriorates, so there is therefore a need for a new bus system. It is for this reason that a group of manufacturers founded a consortium to develop a more advanced optical data bus system.

Media Oriented Systems Transport (MOST)

The advanced optical data bus system that has been developed by the Media Oriented Systems Transport (MOST) consortium is a direct descendant of the Domestic Digital Bus (D2B). This was first used in a Mercedes-Benz S-Class in 1998 for the telematics and sound systems. That developed by MOST, though, can transmit data four times faster, at 25 Mbits per second. Not only is it a low-cost interface for the simplest of devices, such as microphones and speakers, it also allows more intelligent devices to network with each other, especially as application programming interfaces (APIs) is part of the MOST specification to ensure compatibility. Computer-based data, such as Internet traffic or information from a navigation system, are typically sent in short bursts and are often going to many different places. MOST has defined efficient mechanisms for sending asynchronous, packet-based data. The control channel permits devices to send control messages while the data channels are in use so all devices can cleanly start up and shut down the data they are using. The MOST specification encompasses both the hardware and the software required to implement a multimedia network and defines all seven layers of the OSI reference model. This means that designers developing applications can concentrate on the functions that affect the end user rather than the complexities of the underlying network. More advanced though it was, the MOST data bus still had its limitations. Made of polymethyl methacrylate (PMMA) fibres, the data bus had an operational ceiling of 85 degrees C, but replacing this plastic material with glass fibres has raised the temperature resistance to 125 degrees C. This means that they can now be installed in the engine compartment. Another benefit is that as they absorb virtually no light, they can transmit laser-generated light at a wavelength of 850 nanometers with practically no losses. As a result, there is no effective restriction on the length that such glass fibres can reach, which means that they are applicable to buses and trucks as well as to cars. However, the most important advantage of the glass fibre bus development by DaimlerChrysler is its high data transmission rate, which goes well into gigabits per second range, making it 50 times higher than the prevailing rate. This, in turn, enables the transmission of uncompressed video images, and with it, the use of video-based systems for applications such as pedestrian recognition. This new optical data bus can therefore be used to implement safety-related driver assistance systems as well as telematics services. Audi, BMW, DaimlerChrysler, Fiat, Ford, Jaguar, Porsche, PSA Peugeot-Citron, Saab, Volkswagen and Volvo have all designed MOST into production vehicles.

Standards bodies
Important though the MOST consortium is, it is not the only standards organisation that has been created in the automotive sector. Others include the following; AMI-C; 1394 Trade Association; ERTICO; IDB Forum; ISO; Magic Services Forum; OSGi; OpenLS Forum; and SAE. Of these, the US-based AMI-C (Automotive Multimedia Interface Collaboration) is one of the most influential since its members include Fiat, Ford, General Motors, Honda, Nissan, PSA 68 AutoBusiness Ltd

Body and Systems Peugeot-Citron, Renault and Toyota. Its mission is to establish a global automotive industry organisation dedicated to creating common requirements that do the following. Enable vehicle manufacturers to take advantage of current developments in mobile information and entertainment systems. Enable cost reductions for mobile information and entertainment systems. Improve customer satisfaction with mobile information and entertainment systems. Enhance the safe in-vehicle operation of mobile information and entertainment systems. Enhance participation in the development of mobile information and entertainment systems. Improve quality of mobile information and entertainment systems.

Time-triggered protocol (TTP)

While Audi is part of the MOST consortium and is using the data bus in its vehicles, it believes that the communication systems currently in use are unsuitable for future requirements and so is investigating other areas. One is TTP as used in the aerospace industry for by-wire applications. TTP is a communication protocol for integrated real-time systems that enables the design, application and maintenance of failure-tolerant, or redundant, systems. It has partnered with TTTech Computertechnik of Vienna that has wide experience with the fast, comfortable, and safe networking of different systems using TTP.

The architecture A new architecture in vehicle electronics is the basis for distributed regulation systems, and, as the next step, could bring by-wire applications to series production. The important attributes for such architecture include: it must be deterministic, that is to say, its behaviour over time must be predictable; it must be failure-tolerant, which means that the system must be able to tolerate hypothetically-occurring faults. All previous systems in vehicles were merely failsafe, and had mechanical back-up functions. This is not sufficient for genuine by-wire applications; it must be possible to extend the communication system during its life cycle; it must be possible to test all functions of ever more complex systems, both individually and in a complete system; and the architecture must be able to support distributed systems and functions.

TTPs advantages over CAN still the most widely used network in car applications is that it is a purely time-controlled protocol. It builds on the Time Division Multiple Access procedure (TDMA) and every junction is allotted a predetermined frame length. With CAN, priority is controlled by an identification at the start of the message the higher the priority, the greater the probability that this message will prevail on the bus. The advantage lies in the flexibility of the system. It is easy to enter a new message to an existing network, and access to the bus can take place without loss of information. Here, however, lies the challenge, because, in larger networks, this procedure prohibits raising the transmission rate above 1 Mbit/s. Due to priority control, a time-dependence arises within the network. The higher the loading of the bus, the greater the time delay of information transport, and thus the uncertainty regarding when a message arrives at a receiver, and if it ever does. With TTP it is possible to tune tasks to individual junctions and control loops very closely connected to them. In addition, the protocol provides a relatively simple way of implementing safety mechanisms.

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Distributed functions The basis of a safe, failure-tolerant system is a robust power supply. The next level is a communication system with the properties described. If these are given, then a safe communication network is viable with the failure-tolerant layer building on that. It is of exceptional importance because it determines system behaviour in the event of a failure to a significant extent. The application as the final level comprises local controllers, generally from external suppliers, and the overall controller, which is part of Audis core competence. In current cars, the various systems such as the Electronic Stability Program (ESP), the Electronic Differential Lock (EDL) and ASR traction control are strongly affected by braking. Linking of the individual systems using the CAN bus is almost completely limited to the exchange of status information so the information from the sensors is only available to the control unit directly connected. Due to the lack of precision in the system, the controllers must therefore be prepared to miss one or more messages. This results in very limited possibilities for implementing distributed regulation. If a way can be found to bring the individual systems much closer to each other and to couple them functionally, distributed regulation becomes possible. The decisive factor is deterministic behaviour, in that the time at which a piece of information arrives at the receiver is known from the start, and all systems are synchronised. If a pure by-wire system were to be installed in a second stage, then further optimisation of the controller is to be expected and further advantages of this architecture without a mechanical back-up can be anticipated. There are also environmental and recycling advantages as there is no longer hydraulic fluid to worry about. In addition, through having more precise knowledge about the individual system components, there will be improved diagnosis possibilities and also extended maintenance intervals. Having Time-Triggered Architecture (TTA) in a vehicle will permit the improvement of warning functions because the control units will have a much-improved view of the current running condition.

Security
What is meant by vehicle security is prevention of the use of a vehicle without permission by unauthorised third parties. It may be subdivided into access security and drive-away security. Access security is provided by the mechanical locking of the entire vehicle interior, that is to say doors, windows, luggage compartment, and engine compartment. It prevents access to the vehicle by unauthorised persons. Drive-away security is provided by coding of the ignition/starter lock, by mechanical locking of the steering, and by electronic protection of starting (immobiliser), and prevents unauthorised movement of the vehicle. Intrinsically linked to this is the new keyless system, also known as Keyless Entry/Go. In future, all functions associated with activation and de-activation of vehicle security will be available to the vehicle user without explicit operation of a key or corresponding button. The driver only has to have the key on his or her person. It is immaterial whether the key is in a jacket pocket or in a briefcase. However, the well-known functions of remote operation of the central-locking and ignition-key operation remain additionally available. The development of future vehicle access systems brings comprehensive changes and further development of the component architecture for vehicle security in its train. The current mechanical ignition/starter lock will be replaced by an electronic ignition lock in which the key coding is electronic. In this way, it is possible to have a unique, individual key for every vehicle. Mechanical locking of the steering will be carried out by an electric lock. These functions will be ensured by data exchange on a bus system, in combination with a single electronic control unit. Various antennas in the vehicle will provide for wireless communication with the key. Communication will be bi-directional on the basis of a coding 70 AutoBusiness Ltd

Body and Systems algorithm that contains a vehicle-specific secret code and a variable code element in what is known as a challenge/response procedure. In the key, the electronics for remote operation, Keyless Entry/Go, immobiliser, and the mechanical key will be integrated. Activation and de-activation of the central locking can take place at any door of the vehicle. To this end every door handle contains a proximity sensor and a locking button. To trigger a function, an authorised key must be within about 1.50 metres of the appropriate door handle. Access to the rear is by operating the soft-touch on the tailgate, and again an authorised key must be within about 1.50 metres of the rear. The drivers wish to open a door is recognised by a sensor in the door handle as he or she starts to operate it, and the evaluation electronics activated. A coded enquiry, whose content is the vehicle-specific secret code (challenge), is sent by radio to the key. The key calculates the appropriate reply (response), and sends it back to the vehicle. If the key is identified as being authorised, the central-locking system is activated and the vehicle unlocked. The driver can decide on the configuration, that is to say, between unlocking the whole vehicle or a single door alone. The vehicle can also be unlocked, by radio remote control, by pressing the appropriate button on the key. The remote control function operates in a radius of more than 30 metres around the vehicle. For the vehicle-locking function too, the driver only needs to have the key with him. When the locking button is pressed, the vehicle electronics search by radio transmission for a key that belongs to the car in the vicinity of the door. If an authorised key is present, the central locking system is activated and the vehicle locked. The vehicle can also be locked, by radio remote control, or by conventional mechanical key operation. For this purpose there is still a mechanical lock cylinder in the driver's door. To start the vehicle, an authorised key must also be inside it. The enquiry covers the entire passenger compartment. With operation of the starter button, a coded enquiry, whose content is the vehicle-specific secret code and an enquiry-specific variable code (challenge), is sent by radio to the key. The key calculates the appropriate reply (response), and sends it back to the vehicle. The data security of the coding algorithm is at the same level as that of the most modern immobiliser systems. If the key is identified as being authorised, the steering is released by the electric steering lock, the ignition is activated and the vehicle starts. Of course, this only happens if all other preconditions are fulfilled, for example, an automatic transmission must be in P or N and the brake pedal depressed, or with a manual gearbox, the clutch pedal must be depressed. When the stop button is operated, the ignition and motor are switched off. In the usual way, the vehicle can be started or stopped by inserting and turning the key (or, respectively, the reverse of these actions) in the electronic ignition lock. The fingerprint sensor, such as that developed by SiemensVDO and shown at the IAA Show in Frankfurt in 1999, recognises this individual identification characteristic. By contacting the feeler with the finger surface, this is recorded, for example, by a capacitive sensor field consisting of 65,000 sensor electrodes. The information obtained is used to create a digitised grey-scale image of the fingerprint. In a fraction of a second, a decision is made on whether the quality of the image is adequate, or whether a further impression is required. Following this, an algorithm for feature filtering and recognition searches for between one and two dozen characteristic features, so-called minutiae. These line ends, branches, whirls and loops are memorised as vectors with their position and direction, and prohibit reconstruction of the original fingerprint for purposes of manipulation. Next, in a few milliseconds, the characterising data are compared with information stored in a fingerprint database. If the comparison is successful, the vehicle systems can be released for use, in the same way as if a PIN or password had been entered.

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42-volt architecture
The electric power requirements of the average car have increased by 4% annually between 1980 and 2000. Modern technology, though, and the huge number of systems that are now being fitted to all classes of cars, means that there has been a growth in the demand for power by as much as 300%. As this is a trend that is likely to continue, it means that the current 14-volt (commonly known as 14-volt) system is reaching its capacity with an alternative 42 volts becoming a viable alternative. The question is how and when. Although the date of introduction has been pushed back in the last two years, it is still expected that nearly every car manufacturer will have the 42-volt system on at least one of its models by 2010. In Europe and Japan, demand is being driven by the quest for better fuel consumption and emissions reduction while in the US, it will be seen as an energy-boost for the hybrid vehicle. In every case, though, the architecture is being seen as meeting the needs for the increasing electrical/electronic content on a vehicle. These include integrated starter/alternator, electrically heated windscreen, electrically heated catalyst, electric water pump, electronic valvetrain, X-by-wire, electric steering, electro(-hydraulic/-mechanical) brakes; and air conditioning (A/C) compressor Other features that will benefit from the 42-volt system although still possible on the current 14-volt architecture include the electric engine cooling fan, electrical passenger compartment heating and active chassis control Another factor with the 14-volt architecture is that there are some components on the car that are reaching their capacity. For example, alternators are reaching their performance limit, requiring complicated and expensive cooling strategies and wire gauges for power distribution are becoming too large, adding excessive weight to the vehicle and causing manufacturing problems

Benefits The main beneficiaries of higher voltages in vehicles as identified by Opel in a paper presented at the Ricardo conference in June 2001 [The Future of 42V Vehicle Systems. Peter Gresch and Axel Nix, Adam Opel AG, Germany) are systems with high electric loads, for example electric/electro-hydraulic power steering or electric heaters. Integrating those on a traditional 14-volt system causes problems that will not exist in the 42-volt architecture which, once established, will also be able to accept other loads, replacing todays mechanically driven A/C compressors or water pumps with intelligent electric motors. Those will allow a flexible and continuous power adjustment unknown today. Other advantages of the 42-volt architecture unknown today include: higher efficiency of energy generation and distribution; improved controllability of electrically versus mechanically powered consumers; weight reduction in the wiring harness; more efficient use of semiconductors for power switching; and possibility for higher electrical loads.

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Fuel efficiency
Often improved fuel efficiency is cited as a major driver for 42-volt architecture but an analysis undertaken by Opel in 2001 revealed that this assumption does not automatically hold true. Fuel efficiency is determined in the Motor Vehicle Emissions Group (MVEG) cycle which is the basis of the Association des Constructeurs Europeens dAutomobiles (ACEA) self-commitment to reduce CO2 fleet emissions to 140 g CO2/km (=5.2 l/100 km gasoline) by 2008. The average electrical load during the MVEG cycle is about 10A. Generating those 10A out of a traditional alternator with an efficiency of 50% causes a fuel consumption of approximately 0.13 1/100km. The comparison of a 14V FAS with a predicted 75% efficiency with a 42V FAS of about 80% efficiency results in an additional fuel efficiency improvement of 0.006 l/100 km. This efficiency gain is equivalent to a weight reduction of only approximately 4 kg. If 42 volts can be related to fuel efficiency improvements, it is by enabling other features such as electric valvetrains or electrically heated catalytic converters.

Weight reduction
The expectation that the 42-volt system will lead to significantly reduced weight in wiring harnesses is only partially correct. An analysis by Opel based on existing harnesses has shown that the wiring of an Astra would be about 4 kg lighter if 42-volt components were used. The majority of wires today are signal wires; their gauge of 0.35mm2 is constrained by their mechanical strength and not affected by 42 volts. In a dual voltage 14/42-volt vehicle, the weight improvement gained in the wiring harness would easily be overcompensated by the additional battery and DC to DC converter supporting the dual voltage architecture.

Package flexibility
Among other potential benefits of 42-volt electrical systems is increased package flexibility. If the alternator is replaced by a flywheel alternator/starter and the A/C compressor is powered with an electric motor, the engines belt drive may be deleted. The interior trim can be revolutionised if an electric steer-by-wire sensor replaces the steering column. On the other hand, 42-volt components are not automatically smaller than 14-volt components. A 42V/20Ah battery is bigger than a 14V/60Ah battery. 42-volt electrical systems are introduced to generate more power than todays 14-volt systems. In general, this will lead to an increase in the overall size of electric power generation components rather than a decrease.

Performance improvements
The usage of an electrically-driven compressor will improve heating, ventilation and air conditioning (HVAC) performance at idle by utilising a full compressor capacity under this condition. This is currently impossible with the belt-driven system. The compressor design may also become simpler with no need for variable displacement compressors. Brake performance may be increased by using electric brakes and also save space where the traditional brake booster or hydraulic lines were once located.

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Challenges Undoubtedly the 42-volt architecture offers many benefits but there are also many fundamental challenges it has to address. Areas of particular relevance when optimising the power generation and distribution system are: Electro-magnetic compatibility (EMC); Quiescent current; Protection against short circuits between 42V and 14V; Jump-start; Power supply, grounding concepts; Packaging, especially in small vehicles; and Cost

There are also servicing issues that need to be addressed including the standardisation of wire colours for unfused circuits, part identification between 42-volt and 14-volt components, incorrect part substitution and changes in repair times, such as the integrated starteralternator. Special composite tools may also be needed for safety reasons.

Applications In Europe, the 42-volt architecture will first be applied to large luxury cars and small to midsize mild-hybrid cars and in North America to small trucks, pick-ups and SUVs. However, there is likely to be two different sets of voltage storage for the different types of vehicles with advanced battery technology being applied to hybrid vehicles using NiMH and lithium-ion technology and advanced lead-acid battery technology for more conventional vehicles.

Outlook Even though the 42-volt architecture enables some functionality and solves some problems related to 14-volt systems, there are still inherent challenges to it, leading to innovation in 14volt components such as the flywheel starter alternator for small engines. It is very unlikely that any OEM will go directly from 14 volts to 42 volts in one move. Some elements like the voltage used at the diagnostic connectors are mandated by law and are beyond the manufacturers control. Lighting and other items that are permanently under tension will also remain with 12 volts for as long as practically possible. However, the dual battery 14/42-volt electrical system comes at a high structural cost, such as a DC/DC converter or even a second battery between the voltage levels, and at least 16 kg additional weight. It will therefore only be used in a transitional period before pure 42-volt systems can be introduced. General Motors, for example, is working on a dual-voltage system but then sees a transition to 42 volts after 2006. It expects the first application to be on hybrid vehicles. The 42-volt architecture will act as the enabler of new technology in vehicles, but it comes at a cost. 42-volt components require new production lines, new development and they will initially have a relatively low volume and volume production of 42-volt vehicles can only happen if all sub-components like transistors and CAN transceivers are already developed and validated. There are also issues like EMC filtering and higher manufacturing costs to take into account. This means that the 14-volt system is very likely to remain the dominant one in the more price-sensitive small and medium-sized cars for at least this decade and probably well into the next one as well.

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Table 3: 14V versus alternative architectures

14V + Proven technology + Optimised cost 14/42V + Prepared for future electrical loads + Starter/ alternator without electrical limitation 42V + Prepared for future electrical loads + Starter/ alternator without electrical limitation + Reduced weight of wiring harness (app. 4kg) 42V No jump-start Reduced standing time High development risk Higher cost Transition possible only with major facelift, introduction not possible in next years

14V Load management required Starter/alternator only with small engines Existing electrical loads can be supported, but limited reserves

14/42V No jump-start Short circuit 42V 14V - New technology, little experience, few components available - Package, cost (min Euro 100) and weight penalty (16kg)

Source: World Health Organisation

Summary
Automotive electronics has become a multi-billion dollar industry, in which there have been many forecasts made. These range from US$80bn-US$100bn in 2002, growing to US$98bn$120bn in 2006 with the three regions North America, Europe and Asia/Pacific each accounting for around one third each. In future, 90% of all innovations in vehicles will be shaped by electronics, and a significant proportion of these innovations will be realised by software. Therefore, mastery of the software development process will play a decisive role in system integration. Electronics have become a key technology, which enable a car manufacturer to enthuse its customers with innovative products at attractive prices. Besides improving comfort, information and safety, electronics offer further inestimable possibilities for innovation.

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Chapter Two
Chassis

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Introduction
The purpose of a modern chassis and suspension is not just to provide superior safety and simple, straightforward handling, but also optimum comfort with maximum agility. The two main factors crucial to the character of a cars chassis are the steering and the springs, and depending on the chassis set-up, the car will place greater emphasis either on comfort or sporting performance.

Steering
All current steering systems are based on one basic principle: the turning movement of the steering wheel is converted mechanically into a swing movement and then transmitted mechanically to the steered wheels. To that end, there is a closed chain of mechanical components between the steering wheel and the drive wheels. Hydraulics, electrics and electronics only serve to assist and refine the steering process. The main advantage of this design is the high system dependability. Even if individual hydraulic, electric or electronic components should fail, the vehicle still retains a basic steering function, albeit a restricted one. It is, however, precisely that mechanical basic principle that prevents further development. Firstly, the steering column itself is a hazard in the event of a frontal impact and secondly, it presents a space problem given the trend to increasingly compact vehicles. A system without a steering column would solve both problems. The one aspect of the vehicle that is unlikely to be integrated into any driver assist system before undergoing a fundamental change is steering. Due to the mechanical connection of all the components, an active steering assistant would cause reactions such as abrupt turns in the steering wheel that might irritate and confuse the driver. Only a break in the mechanical steering design would solve this problem, leading to the fact that the future of steering is likely to lead to the disengagement of the steering movement made by the driver from the steering movement of the wheels.

Electrically Power Assisted Steering (EPAS)

One of the principal features of the Fiat Punto introduced in 2000 was the Electrically Power Assisted Steering (EPAS) system. Although a standard item on Japanese microcars as well as on niche vehicles such as the Honda NSX and MGF, the Punto marked the first time that EPAS had been applied to a high-volume model. Early Japanese systems were low-speed, parking assist only applications. Pioneers in the technology were Nissan, Mazda and Daihatsu. Suzuki, however, featured a sophisticated, load and road-speed sensitive electric power-assisted steering system on some of its microcars before fitting it to its top-selling Wagon R+. The Delphi-developed set-up in the Punto referred to by Fiat as Dualdrive was fully speed sensitive but also unique in that it was the first such system offering the driver two selectable settings. One was for normal out-of-town driving while the other perceptibly lightened the steering for urban driving and parking manoeuvres. The driver pressed a city key in the middle of the facia to switch to the second setting. Drivers who forgot to switch this setting off when driving at high speeds were protected in that both programmes offered the same degree of power assistance over 70 kph (43 mph) to ensure an appropriate steering wheel response at higher speeds. On the Punto Sporting derivative with the 6-speed gearbox, the city key was also connected to throttle response so that initial take-off and acceleration was smoother and more gradual. This was possible because the accelerator activated an electronic, drive-by-wire, nonmechanical system.

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Automotive Technology Roadmap The system itself comprises four main components an ECU, an opto-electronic torque sensor, an electric motor, and an intermediate gear with clutch. All these components are integrated into one single unit that can be placed on any part of the steering column. A data bus is used to communicate the vehicle speed and engine speed to the EPAS system, and the opto-electronic sensor detects the force the driver is using to turn the steering wheel. All this information is passed to the ECU. The ECU then uses this information to calculate the additional force required from the EPAS system to achieve the pre-programmed steering feel. The steering power is then transmitted by the engine to the steering gear by means of an intermediate gear system. The ratio between manual steering torque and electric power can be controlled in relation to the vehicle speed, offering the relevant assistance at varying speeds. At low speeds the system offers maximum power, making the steering easy to operate, and at increased speeds, when little or no assistance is required, reduces the amount of power supplied. Throughout this operation, the ECU monitors the system constantly to detect malfunctions, and if necessary disengages the power assistance with the aid of a built-in clutch; this ensures the car is still steerable even if a fault occurs.

Surface Acoustic Wave The key to the success of EPAS and future by-wire systems is an accurate, reliable, low-cost torque sensor. However, torque-measuring systems are complex and expensive. They are usually based on techniques that require an intermediate compliant member in the steering shaft (usually a torsion bar), and physical electrical connection between the steering shaft and the electronics. Other non-contact sensors have been seen to be costly, difficult to produce or susceptible to temperature or electrical interference. The Torqsense transducer produced by Transense Technologies of the UK makes use of the little known Surface Acoustic Wave (SAW) phenomenon. This approach has allowed the development of very small transducers (5.0 x 2.0 x 0.5mm) which are not only accurate but require no physical contact between the revolving shaft and its housing. Instead of simulating feedback to the driver through a package of electronics, the system, developed by Adwest Steering before its takeover by Dura Automotive in 1999, directly measures the torque required to turn the wheels at any given speed and converts this to a motor control signal. Called Elektr-a-Steer, it has been demonstrated to Volkswagen. Surface waves are produced by passing an alternative voltage across the terminals of two interleaved comb-shaped arrays that are laid onto one end of a piezoelectric substrate. A similar receiving array, at the other end of the transducer, converts the wave back into an electrical signal. The frequency of the wave generated is dependent on the spacing of the teeth in the comb array. The direction of the wave propagation is at right angles to the teeth. Any change in length alters the spacing of the teeth and hence tension in the transducer reduces the operating frequency while compression increases it. Two transducers are bonded rigidly to a shaft 45 degrees to the axis and connected in a half bridge configuration, so that when the shaft is subjected to torque, one is in compression and the other in tension. The frequencies from the two transducers are combined to produce either difference or sum signals, leading respectively to torque or temperature measurement. Signals are exchanged via a RF coupling device comprising two rings: one rotates with the shaft while the other is stationary. This frequency of the excitation used is typically 100-1,000 MHz, with the frequency shift produced varying by up to 1MHz. On this basis, the torque can be measured to an accuracy of one part in a million.

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Chassis It is the combination of SAW technology and close control of the motor that provides the Dura system with the notch-free performance that carmakers are looking for. The system also has a superior self-centring capability that adds to the realistic feedback experienced by the driver.

EPAS advantages The incentives to move to EPAS are reduced energy consumption and weight and in many cases, ease of packaging and installation. For example, it takes 4-6 minutes to fit on the assembly line compared to the 30 minutes for the more conventional hydraulic system, thereby cutting average total vehicle assembly time by 5.7%. Because it uses energy only when it is operating, Fiat estimated that EPAS provided the Punto with a 3% fuel saving over mixed routes a similar result to that which would be achieved by reducing the cars weight by 50 kg. Including the control unit, the system weighs around 8 kg (16.5 lb) and is more than 1 kg (2.2 lb) lighter than a comparable hydraulic system. Fiat also claimed that with the elimination of the conventional hydraulic pump, which is a critical noise-producing component, the passenger compartment became quieter. As the system does not contain any fluid or rubber for disposal, the electric system is 95% recyclable compared to the 85% of hydraulic systems. There is also higher reliability due to the much lower temperature working of EPAS compared to a conventional system. Another advantage is its tuneability on average it takes one week for the OEM to tune the system to meet the specific vehicle handling requirements compared to the nine months of a conventional system and it can be customised to the drivers personal requirements.

Future growth A joint development between Mercedes-Benz and Siemens Automotive in 2000 saw the two companies invest around US$100m in developing ready-to-install EPAS systems for series production in 2002 and to market them worldwide to all vehicle producers. As this system is suitable for front axle loads that exceed 1,200 kg, hitherto its critical limit, truck manufacturers have also be targeted as it will able to be used on commercial vehicles up to six tons due to advanced electrical distribution systems. Altogether, the partnership is targeting the development and marketing of around three million electromechanical steering systems per year. The market for EPAS is growing fast with major suppliers such as Delphi, NSK, Siemens and TRW all involved in its development. It has been projected that EPAS will overtake all other systems within a decade. By 2005, the market for EPAS will be around US$3.5bn worldwide and US$5bn by 2010 with global volumes exceeding 25m units.

Electro-Hydraulic Power Steering (EHPS)

Electro-Hydraulic Power Steering (EHPS) is regarded as something of a stopgap between EPAS and the conventional hydraulic systems. This is a system where an electrical motor drives a hydraulic pump that provides hydraulic fluid to a conventional power assisted steering system. The hydraulic circuit is very similar except that the tank and pump can be more readily integrated with the motor drive to produce a power-pack that can be incorporated with the steering gear to produce a complete steering system module. However, EHPS does not provide power only at the time it is needed, and although the motor is not working flat out when not required, it is still ticking over between 700 to 2,000 rpm, depending on the type of EHPS system. Its advantages include the ability of using existing HYPAS (hydraulic power assisted steering), low development time and cost and failure can result in loss of hydraulic assistance only. The ECU, powerpack and sensors are not safety critical and there are no instability problems due to high inertia directly coupled to steering systems. AutoBusiness Ltd 81

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Such a system is now in volume production on GMs new Opel/Vauxhall Astra Delivered as a single module from TRWs plants in Germany, Belgium and the UK, it is fully filled with hydraulic fluid and tested by the supplier. It takes the carmaker about 30 seconds to install and connect the module to the vehicles electrical system. TRW claims that the approach dramatically improves assembly time which is around 93% faster and quality compared with conventional hydraulic systems.

Electric Power Steering (EPS)

While EHPS and particularly EPAS will become the most common installations on cars over the next ten years, they will eventually be superseded by full by-wire, or Electric Power Steering (EPS), systems. While a considerable amount of work has already been carried out in this area by both the vehicle manufacturers and the principal suppliers, the system to date has only been seen on various concept vehicles, such as GMs HyWire fuel cell car shown in late 2002. While the benefit of EPS to the driver will be to minimise the steering effort required, it offers an even greater number of advantages to the vehicle manufacturers. These include easier integration into the vehicles other electronic systems, energy savings, weight reduction, ease of installation and optimum adjustment to the vehicle. With an electronically-controlled motor replacing the conventional hydraulic system, energy is only consumed when necessary, leading to a saving of more than 80% compared to hydraulic systems. According to ZF Friedrichshafen, there are savings of around 0.2-0.3 litres of fuel per 100 kilometres, depending on the vehicle model, with its Servolectric steering system first seen on the Volkswagen Golf V in early 2003 compared with hydraulic solutions. Omitting the steering valve, steering pump, oil tank and high-pressure hoses considerably reduces the weight and facilitates installation. Since it dispenses with oil and hydraulics, EPS is also completely maintenance-free. The electric power operates independently of the vehicle engine, ensuring easy matching of the power steering assistance to any vehicle model. The electronic controls are distinguished with a wide variety of parameters, such as driving speed, steering angle, steering wheel torque and steering speed taken into account. Outstanding absorption of the road surface jolts is assured by programmable damping characteristics. Depending on the installation space, the vehicles electrical system and the rack force required, the power steering unit is attached to the steering column, to the pinion, to the double pinion or parallel to the rack. For drivers, this means that as soon as they make a steering movement, absolutely precise sensors will register the appropriate steering wheel torque and steering speed. The data acquired are then passed on as an electric signal to the control unit. This then computes the required steering assistance. The servomotor is then controlled on the basis of these computations. This motor finally transmits the optimum servo torque via a worm gear or recirculating ball gear to the steering column, pinion, double pinion or rack of the mechanical rack-and-pinion system.

Active Front Steering (AFS)

One system that has been developed by ZF Lenksysteme, the 50/50 joint venture between Robert Bosch and ZF Friedrichshafen, is Active Front Steering (AFS). BMW has a similar system it calls Active Steering. This is not a full EPS system as the mechanical connection between steering wheel and steering gear is maintained at all times. However, it goes further than any hydraulic or electro-hydraulic system in assisting the driver by means of electronically-controlled interventions in the steering system that go beyond the torque assistance provided by power steering. It not only guarantees full maintenance of all steering 82 AutoBusiness Ltd

Chassis functions, even if one of the assistance systems is not operating properly or breaks down altogether, but is also the prerequisite for the authentic steering feel the driver appreciates so much. By contrast, a steer-by-wire system alone, due to its underlying principle, is unable to simulate such realistic feedback to the driver. It is for this reason that BMW is becoming the first carmaker in the world to opt for Active Steering that will eventually lead to all-out steerby-wire.

Figure 26: Components of an active steering system

Source: ZF Lenksysteme

In technical terms the various functions and benefits offered by AFS are based on the principle of overlapping steering angles: an electromechanical adjuster between the steering wheel and the steering transmission adds an additional steering angle to the angle predetermined by the driver. The core element is therefore the override steering effect provided by the planetary gearing with two incoming and one outgoing shaft integrated in the split steering column. One incoming shaft is connected with the steering wheel and the second is driven by an electric motor via a self-inhibiting gear wheel transmission and thus serving to reduce the transmission ratio. The overall steering angle finally coming out on the outgoing shaft is made up of the angle determined by the driver on the steering wheel and the angle determined by the electric motor. Steering forces when turning the wheels, however, are not determined by the electric motor, but rather by separate power assistance, as with conventional steering. Additional components on AFS are the separate control unit and various sensors for determining both current driving conditions and the drivers commands. AFS also communicates directly with the DSC control unit through the cars on-board communication network.

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Figure 27: Active steering system components

Source: ZF Lenksysteme

Under normal driving conditions AFS varies the steering transmission particularly at low and medium speeds, therefore making the car even more agile and nimble in its behaviour. In critical situations it serves furthermore to change the steering angles of the wheels, thus stabilising the car faster and more efficiently than the driver would be able to. This offers dynamic driving advantages in many situations. AFS gives the driver significant dynamic driving benefits, typically on country roads, where it chooses a more direct steering transmission ratio than a conventional steering system, making the car even more agile and nimble in its response. Quite appropriately, steering behaviour of this kind is described as that typical kart feeling, the driver enjoying an even more agile and dynamic motoring experience. On the other hand, when driving at very low speeds, such as when parking, the driver only has to turn the steering wheel twice thanks to this direct steering transmission ratio in order to manoeuvre the vehicle smoothly and without the slightest effort into the most confined parking space. At higher speeds, the steering transmission ratio becomes increasingly indirect up to the level of a conventional steering (or even beyond). The level of steering forces increasing at the same time prevents any undesired and unwanted movement of the steering, giving the driver a significantly higher standard of driving stability. AFS serves to carry out driving manoeuvres at high speeds even more spontaneously, keeping the driver safely in control through purely intuitive movements of the steering. It is also beneficial whenever driving stability is limited such as on wet and slippery roads, in crosswinds or when braking on mixed surfaces. In uncritical driving situations, the strain on the driver can be effectively reduced by the adaptation of steering-typical characteristics. Active changes in the steering angle help stabilise vehicles in the borderline areas of driving dynamics. The modulation gear ensures direct control of the drive wheels from the steering wheel when the control motor is stationary. One example of this is the adaptation of the steering ratio to the driving speed, which permits a considerable reduction in the steering effort needed for manoeuvring/parking and in innercity traffic. To achieve functions of this type, the steering angle must be actively influenced.

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Chassis ZF Lenksysteme offers two steering assistance functions: Variable Steering Ratio (VSR) serves to adjust the steering ratio to the driving speed, meaning a direct ratio at low driving speeds and an indirect one at high driving speeds; and a further steering assistance function is Steering Lead (SLD). This permits an increase in agility response to steering commands and assistance of the driver in dangerous situations front wheel angle in advance of steering wheel angle.

Use of this system, says ZF Lenksysteme, will be possible in 2005 while BMW introduced its system on the redesigned 5 Series that was introduced midway through 2003.

Figure 28: Variable ratio steering

Source: ZF Lenksysteme

Four-Wheel Steering
A Delphi-developed four-wheel steering system was first introduced on the GMC Sierra in 2002. While not the first, it has been a number of years since four-wheel steer systems were last used by a number of Japanese manufacturers, but the principles remain the same: at low speeds, the rear wheels turn out of phase with the front wheels to make turns sharper so that parking in tight spots is easier; and at high speeds, the wheels turn in phase with the front wheels, eliminating most of the yaw associated with lane changes

A sensor in the steering wheel records the desired angle, and speed sensors determine whether rear wheels are steered in the same direction or opposite to the front wheels. An electric DC motor activates a rack-and-pinion steering mechanism for the steerable rear axle. The system is also giving GM experience in steer-by-wire. In this case, the fail-safe plan that controls steering if there is an electrical fault is a spring that brings the rear wheels to dead centre, turning the truck into a two-wheel steer model. In the future, steering systems will be closely integrated with other chassis-control functions such as braking and suspension to form an overall chassis control system.

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Suspension
Suspension technology has moved a long way from just being a combination of springs and shock absorbers. With the advent of advanced electronics, it is seeing the introduction of a great number of systems that at the end of the day are trying to solve the eternal conundrum of giving the vehicle both perfect ride and handling. However, since the improvement of one is always at the expense of the other, the perfect solution has yet to be found. There are, though, a number of innovative compromise solutions that are appearing on different cars.

Active body control

Active Body Control (ABC) is a DaimlerChrysler innovation that was first seen on the 1999 Mercedes-Benz CL Coupe and then on the S-Class. The 2001 SL roadster featured a developed version that took the actual vehicle weight into account to provide the best in driving dynamics regardless of the number of passengers or amount of luggage on board. ABC uses adjustable hydraulic cylinders to neutralise undesirable rolls, swings and pitching movements, the electronics deciding on the amount of hydraulic pressure is necessary, and in which cylinder, in order to prevent body roll in curves and front-end pitching upon braking. The effect is a 48% reduction in roll movements on a 65 kph slalom course. Through a button, the driver can also increase the applied power of the active hydraulic cylinders. This function reduces the roll angle by an additional 17% during a 60 kph slalom, and makes steering even more responsive. Delphi has developed an active or semi-active roll control system, it calls dynamic body control, that adjusts the roll bar force to reduce vehicle roll while cornering. The active and semi-active roll control improves the off-road performance of SUVs, while the active system can improve vehicle handling, stability and ride comfort for all vehicles from passenger cars to light-duty trucks. The active system contains one or two controlled active anti-roll bar modules, a hydraulic source, a hydraulic manifold with integral valves and a pressure sensor, a controller and steer angle, lateral acceleration and vehicle speed sensors. The semi-active, two-position roll control systems contains one or two controlled unlatching semi-active stabiliser bar modules, a controller, and appropriate vehicle sensors. According to Delphi, the benefits of its active dynamic body control system are: improved driver comfort through better isolation, reduced head toss, and reduced impact harshness; anticipatory control of transient driver-induced handling manoeuvres; precise control of body roll angles, up to zero degrees, when cornering or in severe handling manoeuvres; enhanced vehicle stability and control; extended limits of vehicle performance; and improved low speed off-road traction, with increased wheel articulation

The semi-active dynamic body control system benefits are: elimination of traditional compromise between on and off-road performance; potential to improve ride isolation and reduce head toss for straightline driving; and improved low-speed off-road traction with increased wheel articulation

Active roll control is currently in production while the target date for the availability of semiactive roll control for SUVs is 2005.

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Chassis

Anti-roll bars
All vehicle anti-roll or stabiliser bars are designed to keep a car flat when cornering, especially at speed. However, conventional systems also increase the overall spring stiffness of the vehicle causing the potential for vehicle instability in certain situations. Fitting even stiffer conventional anti-roll bars reduces roll angle but compromises driving comfort, off-road traction and on-road handling. As a wheel travels up and down over extreme terrain, performance is affected by the wheels inability to move independently. Electronic suspension systems can reduce some of the problems, but they are costly and complex and all too often have inadequate programme algorithms which can be tricked by some road circumstances resulting in potentially dangerous situations. One solution developed by Monroe, the subsidiary of Tenneco Automotive, is the Monroe Kinetic system. An alternative to costly electronic suspension, it bridges the gap between offroad ability, on-road performance and comfort, combining responsive handling and drive comfort in a single package. The Monroe Kinetic system features proprietary and patented mechanical, hydraulic and pneumatic interconnections between vehicle springs, combined with actuators integrated into the anti-roll bars. Two hydraulic lines connect front and rear actuators at points both above and below pistons. Fluid for the hydraulic system is simply transferred to and from a total of two, inter-linked, double acting hydraulic cylinders at the front and rear of the vehicle via wheel motion. When a vehicle corners, the Monroe Kinetic system passively senses the roll motion using hydraulic pressure. The anti-roll bars are in full operation to minimise the roll angle of the vehicle. However, if the vehicle also feels a bump during cornering, the Monroe Kinetic system simultaneously allows enough fluid flow to compensate for the bump without reducing the roll forces. A vehicle fitted with Monroe Kinetic maintains almost the same load pressure at full wheel movement up or down as it does on flat ground. Fluid flows between the hydraulic connections allow wheel movement to be spread evenly between all wheels. The Monroe Kinetic technology also frees-up a single wheel to move far more independently than with conventional suspension systems resulting in significant comfort as well as improved off-road traction and stability. Patented Monroe Kinetic components operate automatically, without the need for input from sensors, electronics or the driver. Kinetic technology simultaneously achieves ride and handling benefits and on-road and off-road improvements, rather than improvements in one area at the expense of another. Key benefits of the Monroe Kinetic System are as follows: improves stability ensures near equal wheel loading by maintaining tyre to surface contact; reduces roll angle separates roll from wheel bounce and articulation; improves ride comfort reduces single wheel stiffness; improves traction and steering; superior off-road ability; and improves secondary ride control reduces harshness.

Adaptive damping system

Originally developed for Yamaha but never adopted by the Japanese company, Dynamic Ride Control (DRC) technology has been developed by engineers from Audi and ApuKayaba, a joint venture formed by its Spanish and Japanese shock absorber suppliers, for the high-performance models of the Volkswagen Audi Group. Less complex than computer-controlled systems, DRC is based on purely mechanicalhydraulic processes and uses flows of fluid that are generated when the suspension is AutoBusiness Ltd 87

Automotive Technology Roadmap compressed. Part of the technology was originally incorporated on a Japanese market Toyota Supra, where it was used to replace the front anti-roll bar. However, the concept has been taken much further for the RS 6, which has permanent four-wheel drive and overtly sporty suspension for maximum traction and optimum handling. Each of the front single-tube shock dampers is connected to the diagonally opposed rear damper via a central valve. These activate additional damping forces via throttles integrated into the two central valves. DRC is now being developed for other models, since it provides good ride comfort, coupled with excellent resistance to rolling and pitching. Because it is highly responsive, it produces precision steering reactions and neutral self-steering characteristics even at high cornering speeds.

Air suspension
A number of vehicle manufacturers have turned to air suspension in their quest to provide the perfect ride and handling solution, the latest being Jaguar with the system installed on the 2003 XJ saloon. Other manufacturers to have installed air suspension on some of their models include DaimlerChrysler, Land Rover and the Volkswagen (Phaeton). DaimlerChryslers Airmatic air suspension, for example, has been on the Mercedes-Benz SClass since 1998. Since this time, though, it has been further developed with the 2002 EClass having the Airmatic DC Dual Control system that, for the first time, electronically controls both the springing and damping. For the damping aspect, Mercedes-Benz uses the familiar Adaptive Damping System (ADS II) which constantly regulates the force of the shock absorbers according to needs, taking into account the state of the road surface, the style of driving and the loading of the vehicle. Special rubber bellows in the spring struts are responsible for the springing. Inside them is compressed air that ensures softer, and therefore more comfortable, suspension of the wheels and body. Under normal driving conditions, the pressure in the E-Classs Airmatic DC system is between seven and nine bar. A new feature of this system is the opportunity to control the air volume actively while on the move. When cornering at speed, for example, or where other dynamic handling requirements are high, Airmatic DC briefly deactivates a proportion of the air volume, ensuring a harder spring rate. The effect is to reduce pitch and roll, which has a positive influence on the ride stability and cornering stability of the saloon. Under normal driving conditions, though, the entire air volume remains active so that maximum comfort is achieved with softer basic suspension. In other words, Mercedes-Benzs air suspension offers sports and comfort suspension in one. By adjusting the springing and damping according to the given situation, this system solves the familiar conflict between perfect comfort and high dynamic handling when it comes to suspension tuning and therefore meets the most diverse of customer wishes. The rapid activation or deactivation of the comfort air volume and the automatic adaptation of the force of the shock absorbers is controlled by an ECU on the basis of various sensor signals. These supply information on the steering and yaw angle of the body, forward and lateral acceleration of the vehicle, the level of the body and the driving style. The control unit compares this up-to-the minute data with stored set points and starts a programmed algorithm that determines both the optimum characteristic of the adaptive shock absorbers and the control of the air volume. The commands are then implemented in various ways involving springing and damping. With a dynamic driving style, control valves in the spring struts separate off the proportion of the air volume that determines comfort, which is directly integrated in the spring struts at the front axle. At the rear axle the additional air reservoirs are attached separately, for reasons of

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Chassis space, to the front cross member of the subframe and connected to the spring struts by fabric hoses. Selectable solenoid valves in the shock absorbers allow the rebound and compression damping to be altered to suit the situation so that movement of the body is significantly reduced. The so-called skyhook algorithm regulates the damping forces at each wheel in such a manner that the forces resulting from the wheel movement that act on the body are reduced. Due to the precise regulation for each individual wheel, for example, both front wheels can be dampened harder on braking than the rear wheels in order to prevent the bodywork from diving. Depending on the control command, the valves can set one of four characteristics in an extremely short time of less than 0.05 seconds. The four stages are as follows. Stage 1: improved road roar and tyre vibration characteristics with less movement of the body and lower acceleration values as a result of soft compression and rebound stage. Stage 2: skyhook mode soft rebound setting and, at the same time, hard compression stage. Stage 3: skyhook mode soft compression setting and, at the same time, hard rebound damping. Stage 4: hard rebound and compression setting to reduce the effects of wheel load variations on dynamic cornering. Where there are small movements of the body, the new E-Class uses ADS stage 1. If the speed of movement on the part of the body exceeds a certain level, the system switches to the skyhook algorithm and, with the aid of its rapid solenoid valves, permanently switches back and forth between second and third damping stages to compensate for pitch and roll of the body. In addition, the driver can influence the switching thresholds between the four ADS stages and the spring rate by pressing a button on the chassis switch in the centre console in three stages, from comfortable to sporty. Further performance features of this air suspension system include automatic all-round selflevelling suspension. This ensures that, even with a heavy load, the same spring travel is always available. Furthermore, while the vehicle is on the move, this system works in a speed-sensitive manner and automatically lowers the body by 15 mm at both axles from a speed of 140 kph in order to reduce drag and enhance ride stability. Below a speed of 70 kph the body is raised to the normal level again. An innovation seen on the BMW X5 as an optional extra is the double-axle air suspension with self-levelling that combines air suspension, automatic load balance and self-levelling as one overall function. To facilitate loading and unloading, and to provide easier entry to and exit from the vehicle, the entire car can be lowered by 35 mm, just as ground clearance can be increased by 25 mm whenever required. As soon as the X5 exceeds a certain speed, the system automatically lowers the ride level to normal. This balance function even works when the car is carrying a heavy load only on one side, and a new feature is the compressed air tank for faster height adjustment. In the air suspension developed for the Range Rover introduced in 2002, in addition to the normal height control and levelling, there is cross-linking of the front and rear springs via a cross-link valve in each axle. During on-road driving the valve is closed so that the roll stiffness component due to the spring rates is preserved. When the suspension control ECU senses it is off-road via sensing of road speed and, via the wheel height sensors, of whether axle articulation is conspicuously out of phase, the front and rear valve will open automatically, allowing air to pass from one side to the other. This has two effects. It lowers the spring rate by around a half, because as one wheel rises in bump more easily, air passes to the other wheel as it falls, preventing the springs fighting each other, so increasing off-road driving comfort, and also preventing the springs countering the need for articulation. AutoBusiness Ltd 89

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Control of the valves is via terrain sensing software and signals received from the four height sensors on each corner of the car. The software can therefore differentiate between cornering, when individual height changes front/rear will stay in phase and off-road when they will sometimes move out of phase either one big cross-articulation or many small articulations will cause the valves to open. A cross-check is provided by a wheel speed sensor input, the software knowing the car is running at typical main road speeds, so not allowing the cross-link valves to open.

Figure 29: Continentals air suspension system

Source: Continental

Semi-Active Suspension
One of the first examples of semi-active suspension to come to market is Delphis MagneRide. This is a high-performance, semi-active suspension control system that responds in real time to road and driving conditions based on input from sensors that monitor body and 90 AutoBusiness Ltd

Chassis wheel motions. The system provides fast, smooth, continuously variable damping in a costeffective and reliable package that reduces body motion and increases tyre road contact on all types of surfaces. It uses magneto-rheological fluids and valve-less dampers to provide a wide range of damping force control with unparalleled responsiveness and authority. The MR fluid consists of soft iron particles suspended in a synthetic hydraulic fluid. When current is applied to an electromagnetic coil inside the dampers piston, the resulting magnetic field aligns iron particles, changing the rheology of the fluid its resistance to flow, and therefore produces a mechanically simple but very responsive and controllable damping action without any valves. An onboard controller continually adjusts the damping forces up to once every millisecond based on input from four suspension displacement sensors, a lateral accelerometer and a steering wheel angle sensor. It minimises vehicle body motion for a flatter ride and more precise, responsive handling, while reducing small road disturbances, improving load transfer characteristics and providing a quieter, more refined ride due to improved road isolation. MagneRide debuted on the 2002 Cadillac Seville STS and is standard equipment in the 50th anniversary edition of the 2003 Chevrolet Corvette in which the driver can select between a tour mode that optimises ride comfort and a sports mode that enhances driver feedback and handling performance. It will also appear on the 2004 XLR Cadillac Roadster. MagneRide provides improved comfort, performance and safety from one system, through the following characteristics: greater sense of safety and security due to improved wheel control; minimised vehicle body motion for a flatter ride and more precise, responsive handling; reduction of small road disturbances; improved load transfer characteristics, providing better roll control and steering precision during sudden, high-speed manoeuvres; and a quieter, more refined ride due to improved road isolation.

Computerised Electronic Suspension System

The one part of suspension that has so far not been linked into a vehicles electronics is the shock absorber. However, it is an area that is now being comprehensively researched by a number of companies. The specialist Swedish company hlins Racing in association with Monroe, a subsidiary of Tenneco Automotive, has been developing a semi-active suspension system that uses electronics to relay a continuous stream of commands to the shock absorbers. Known as computerised electronic suspension system (CES), it enhances both road-holding capability of a standard car as well as its refinement so that it has the handling of a sports car and the comfort of a limousine. An agreement has been reached between hlins and Tenneco Automotive, whereby Monroe will mass produce and distribute the new system, based on hlins patent, for use on almost every type of vehicle, with contracts already taken out by Audi and Volvo.

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Brakes
Brake Assist
Sensotronic Brake Control (SBC) is the name given to an innovative electronically controlled brake system introduced by Mercedes-Benz on the SL model in 2001 and subsequently across its passenger car range. Electric impulses are used to pass the drivers braking commands onto an ECU that processes various sensor signals simultaneously and, depending on the particular driving situation, calculates the optimum brake pressure for each wheel. As a result, SBC offers even greater active safety than conventional brake systems when braking in a corner or on a slippery surface. A high-pressure reservoir and electronically controllable valves ensure that maximum brake pressure is available much sooner. To provide the driver with the familiar brake feel, a special simulator linked to the tandem master cylinder moves the pedal using spring force and hydraulics. In other words during braking the actuation unit is completely disconnected from the rest of the system and serves the sole purpose of recording any given brake command. Only in the event of a major fault or power failure inside the 12V vehicle battery does SBC automatically use the services of the tandem master cylinder and instantly establishes a direct hydraulic link between the brake pedal and the front wheel brakes in order to decelerate the car safely. In addition to the data relating to the brake pedal actuation, the SBC computer also receives the sensor signals from the other electronic assistance systems. For example, the anti-lock braking system provides information about wheel speed, while ESP makes available the data from its steering angle, turning rate and transverse acceleration sensors. The transmission control unit finally uses the data highway to communicate the current driving range. The result of these highly complex calculations is rapid brake commands that ensure optimum deceleration and driving stability as appropriate to the particular driving scenario. What makes the system even more sophisticated is the fact that SBC calculates the brake force separately for each wheel. The high-pressure reservoir contains the brake fluid that enters the system at a pressure of between 140 and 160 bar. The SBC ECU regulates this pressure and also controls the electric pump that is connected to the reservoir. This ensures much shorter response times than on conventional brake systems. Another advantage is that full braking power is available even when the engine is switched off. The hydraulic unit mainly comprises four so-called wheel pressure modulators that mete out the brake pressure as required and pass it onto the brakes. In this way it is possible to meet the ECUs stipulations while each wheel is slowed down separately in the interests of driving stability and optimum deceleration. Pressure sensors inside the wheel pressure modulators monitor these processes. The main performance characteristics of SBC include the extremely high dynamics during pressure build up and the exact monitoring of driver and vehicle behaviour using sophisticated sensors. SBC recognises the drivers rapid movement from the accelerator onto the brake pedal as a clue to an imminent emergency stop and responds automatically. With the aid of the high-pressure reservoir, the system increases the pressure inside the brake lines and instantly presses the pads onto the brake discs so that they can get a tight grip the moment the driver steps onto the brake pedal. As a result of this so-called pre-filling of the brake system, the stopping distance of an SBC-equipped sports car from a speed of 120 kph is cut by around 3% compared to a car featuring conventional braking technology. Due to electro-hydraulic back up, the performance of Brake Assist is also improved further. If this system issues the command for an automatic emergency stop, the quick pressure buildup and the automatic pre-filling of the wheel brakes leads to a shorter braking distance. Even when braking in corners, SBC also offers more safety than a conventional brake system. This is where the variable and targeted brake force distribution is of particular 92 AutoBusiness Ltd

Chassis advantage to actively influence the cars compliance steer. While conventional brake systems always mete out the brake pressure equally to the inner and outer wheels, SBC offers the possibility of assigning brake forces in a way appropriate to the situation. Hence the system will automatically increase the brake pressure at the outer wheels because the higher vertical forces also allow them to transfer greater brake forces. At the same time the brake forces at the inner wheels are reduced to provide the higher cornering forces needed to stay on course. The result is a more stable braking behaviour along with optimum deceleration values. With SBC, Mercedes has still stuck to the proven principle of a variable brake force control for the front and rear axles. They programme the system in such a way that, when slowing down from a high speed, the larger part of the brake force continues to act on the front axle. This prevents a potentially hazardous over-braking of the rear axle. Again SBC is capable of adapting to the prevailing situation. At low speeds or during partial braking, the system automatically increases the brake force share at the rear axle to improve brake system response and achieve even wear and tear of the brake pads. Both the separation of the SBC pedal from the rest of the brake system and the proportional pressure control using mechatronics serve to increase brake comfort particularly during sharp deceleration or when the anti-lock braking system is operational. The usual vibration of the brake pedal when ABS sets in does not occur, which, Mercedes-Benz engineers have found, is not only a comfort feature of the new system but also offers measurable safety benefits. According to DaimlerChrysler research, almost two thirds of all drivers are startled when ABS pulsation sets in they do not increase the brake force further and are even prone to taking their foot off the brake pedal for a short while, thereby lengthening the stopping distance of their vehicle. On a wet road surface the system emits short brake impulses at regular intervals to ensure that the water film on the brake discs dries off and that SBC can always operate with optimum effectiveness. This automatic dry-braking function is activated at regular intervals when the cars windscreen wipers are running. The driver does not even notice these ultra-precise brake impulses. SBC also incorporates a so-called Traffic Jam Assist function, which is activated using the cruise control stalk while the car is stationary. The benefit is that during stop-and-go traffic, drivers only need to use the accelerator pedal; once they take their foot off the accelerator, SBC slows down the car to standstill at a steady rate of deceleration. The Traffic Jam Assist facility can remain operational up to 60 kph and switches off automatically at higher speeds. The so-called Soft-Stop function of the SBC software ensures particularly gentle and smooth stopping that provides significant comfort benefits particularly around town when frequently slowing down for traffic lights. All this is made possible by the higher precision pressure control due to mechatronics. On hills or steep drives the Drive-Away Assist prevents the car from rolling backwards or forwards stepping onto the brake pedal quickly but sharply is all it takes to activate the brake. If the driver accelerates, the Drive-Away Assist releases the brake and allows the car to drive off smoothly. The advent of electronics in brake technology opens up new and promising opportunities and not only in the disciplines of safety and comfort. Due to systems like SBC it will be possible to guide the cars of the future along roads automatically with the aid of video cameras, proximity radar and advanced telematics. For such autonomous vehicle guidance, a computercontrolled brake system is required that automatically acts on the instructions of an electronic autopilot and stops the car safely.

Full Contact Disc Brake

The Canadian company NewTech, which also has offices in the US and France, specialises in the development of new braking systems based on several patented designs. One of the areas it has been addressing in recent years is braking systems for commercial vehicles where the current technology of calliper brakes and the drum brakes is believed to be quite AutoBusiness Ltd 93

Automotive Technology Roadmap inadequate and inefficient for modern trucks and trailers. Its answer is the full contact disc brake, a concept first shown in 1998. The aluminium housing, which holds the finned outboard pad and supports the whole brake assembly, has been designed to optimise the use of space inside the wheel. Special inserts made of friction material are distributed evenly on the entire surface of the pad. When the brakes are released, the inboard pad, which is also finned for heat dissipation, is returned to its original position by means of a special spring-loaded mechanism. The rotor then disengages from the outboard pad and returns to its neutral position. The inboard pad is fitted with a moulded thermal barrier made of a special composite material. Special inserts made of various friction materials combined to ensure performance under diverse conditions are distributed evenly on the entire surface of the pad. Overall brake performance is improved by a reduction in noise and vibration that is achieved by differentiating the dynamic amplitude between the inner and outer pads thereby reducing the self-induced vibration phenomenon. NewTechs Multi-Mode Stage Rotors (MMSR) design optimises the mean braking radius for a given wheel size, increasing the system gain while its unique design contributes to a more effective heat exchange. The hydraulic diaphragm a membrane made of an elastomer composite is incorporated into the spider. It extends and retracts much like a piston. Incredibly resistant, it can withstand 15 times the required pressure. Besides providing rapid and gradual action during braking, it needs little pressure to operate the action. This diaphragm is kept in position inside the spider by means of a gasket-ring which eliminates distortion and leaks that could occur through excessive use of the brake. When used in conjunction with the NewTech braking optimisation system, it offers an impressive performance. The spider and the hub carrier have been combined to integrate the brake system and the suspension. The rotor is connected to the wheel by means of the driving hub. It is kept in optimal working position at all time by the polymeric inserts. The spider is equipped with the NewTech Mecatronic torque sensor, an ultrasensitive sensor that transmits the torque exerted on the brake either to the NewTech braking optimisation system or to any other control system.

Ceramic Composite Brakes

After a five year research and development programme, Porsche released details of its ceramic composite brake, or PCCB, system in 2001. There were two issues that needed to be resolved - a new material had to be developed and a high-quality but economic production process had to be conceived. In developing the right type of material, Porsche examined a range of different fibres and their level of protection when exposed to high temperatures of over 1,000C, ensuring that they were able to meet stability and wear requirements. It was also necessary to harmonise the frictional interaction of the brake disc and the lining, at the same time trying out new friction materials. Developing a new process for the production of a fully-fledged, inner-vented brake disc was an absolute must for Porsche since only cooling ducts in involute design with qualities already proven on grey cast-iron brake discs were able to provide the high standard of cooling required for physical reasons alone. The patented solution Porsche arrived at was a two-shell design offering the highest level of freedom in making optimum use of the cooling duct geometry. Unlike grey cast-iron brake discs requiring only a few hours in production and machining, the ceramic brake disc involves an extremely elaborate production process lasting more than one day. The choice of the right carbon fibres and their pre-treatment is essential for the discs made of carbon fibre and silicon carbide, and baking these materials in the autoclave in the process of carbonisation as well as siliconisation in a high vacuum calls for a great deal of

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Chassis experience. It is for this reason that Porsche selected SGL Carbon of Wiesbaden to produce the ceramic composite brakes. Benefiting from an extremely high level of hardness, the ceramic brake disc is subject only to minimum abrasion compared with a metal brake disc. Its service life, accordingly, is very long indeed, comprehensive tests proving that the disc will last as long as the car itself with a service life of up to 300,000 km. A further factor contributing to the brake discs extremely long service life is its immunity to corrosion, the ceramic brake disc not being affected in any way by liquid or solid salt on the road. The disc support and the connection elements on the disc, in turn, offer the same long running life, Porsches engineers using stainless steel for the disc support in order to make the PCCB a lifetime component in every respect. The new brake linings, finally, offer a long running life with about twice the mileage of conventional brake linings. Although the diameter of the brake discs has been increased to 350 mm with a six-pot calliper rather than the four of the conventional system on the standard Porsche 911 Turbo, weight is reduced by 16.4 kg compared with a with grey cast iron brake discs. This reduction of unsprung weight has a positive effect on the cars overall dynamics. Beneficial though ceramic composite brakes are in terms of weight and durability, they are extremely expensive and are only likely to be fitted on high-performance cars as an option or as standard on those few road cars that have really been developed for motor racing, such as the Porsche GT3.

Brake-by-wire
Brake-by-wire separates the mechanical hydraulic connection between brake pedal and wheel brake. Sensors determine the drivers braking command and transmit this information to an electronic control unit. Using the corresponding actuators, the control unit creates the required brake effect on the wheels. The technology will be applied to vehicles with conventional powertrains, as well as to vehicles with advanced power sources, like hybrid electric, fuel cell and advanced battery electric propulsion. Brake-by-wire advantages include the following: improved brake response time; reduced stopping distances; consistent pedal characteristics; reduced weight; improved brake pad wear; improved fuel economy; vehicle stability optimised under most driving conditions; hydraulic brake fluid eliminated reduced maintenance and ecologically friendly; more efficient manufacturing process; significantly fewer parts than a hydraulic-based system; no mechanical linkages through the bulkhead; enabling technology for active safety systems by providing control of each wheel independently; and electronic architecture more easily upgradeable

However, before brake-by-wire will be fully accepted, it has to address a number of challenges including the fault-tolerant requirement. As there is no hydraulic back-up on such a system, it is necessary to have a secondary or redundant system in place, meaning that important sensors and controllers will need to be replicated. Additionally, the serial communications between each of the nodes in the system must support fault-tolerance. While failure in the individual wheel need not be catastrophic as each one would have its own motor-controlled actuator unit, and three wheels could still brake the vehicle, a failure in the brake-pedal-position sensor could be catastrophic, so it is likely that a redundant sensor would be added to this part of the system. AutoBusiness Ltd 95

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Vehicle Stability Systems

There are a number of proprietary vehicle stability systems, including Boschs electronic stability program (ESP) or Delphis TRAXXAR, that are variations on a theme they all aim to be a back-up for the driver and to take control of some of the vehicles dynamics before and during emergency manoeuvres. A skidding vehicle can be stabilised by specific braking of individual wheels, by reducing the engine torque and making steering corrections. Techniques to influence the brake system automatically or to reduce torque automatically have been in use for some time, but systems with automatic steering intervention are still in the development phase. Anti-lock braking systems (ABS) and traction control (ASR) have already improved vehicle safety in a significant way. Vehicle stability systems offer the driver safety technology that controls the vehicle in almost every driving situation. Such systems are typically comprised of a hydraulic modulator and a control unit with sensors, which determine and evaluate the driving situation. The hydraulics quickly build brake pressure on a single wheel in critical situations in order to counteract the undesired skidding motion. This pressure increase occurs automatically on the wheel, without driver involvement. The brake impulse can thereby stabilise the vehicle at all times and return it to the proper course. The system may also reduce the engine torque, which provides an added stabilisation effect. The benefits of ESP for the driver include improved steerability in critical situations, reduced danger of slipping or skidding, greater vehicle stability within physical limits and optimised stopping distances.

Figure 30: Boschs yaw torque compensation system

Source: Bosch

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Wheels and tyres

Wheels and tyres are usually outsourced, and while OEMs work closely with their suppliers, particularly the tyre companies, they have tended to come low on the list of priorities. However, a number of factors have changed in the last few years, such as the Ford-Firestone situation where the Firestone tyres on US made Ford Explorers were prone to failure on highways causing the vehicle to crash, ensuring that a far greater interest is taken in their development. One major development has been in tyre pressure monitoring systems.

Tyre Pressure Monitoring System (TPMS)

According to a research survey by the US National Highway Traffic Safety Administration (NHTSA), 27% of passenger cars and 33% of light trucks (including sports-utility vehicles, vans and pickup trucks) on US roads are driven with one or more substantially under-inflated tyres. Operating a vehicle with substantially under-inflated tyres can result in a tyre failure, shorten tyre life and increase fuel consumption. It is for this reason that vehicle manufacturers, tier one suppliers and tyre makers have been jointly pursuing effective tyre pressure monitoring systems. This was given fresh urgency with the Ford/Firestone situation that prompted the US federal government to enact legislation prompting carmakers to install these devices as a matter of law. The US Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act was passed by the NHTSA (National Highway Traffic Safety Administration) in the autumn of 2000 following the Ford/Firestone crisis. It included provisions in four major areas: tyres, child passenger safety, rollover, and defects/noncompliances/recalls. It was the largest piece of recent legislation to impact all vehicle manufacturers and many other auto industry suppliers. Incorporated in the Act was the Tyre Pressure Monitoring System (TPMS) rule that had been issued by the National Highway Traffic Safety Administration (NHTSA) on June 5, 2000 allowing carmakers to choose between direct and indirect tyre pressure monitoring systems. However, this was contested by the Center for Auto Safety, Public Citizen and the New York Public Interest Research Group three non-profit US public interest groups which filed a petition in December 2002 against the Act. This resulted in a decision issued on August 6, 2003 in which the US Court of Appeals found that the cheaper and less accurate indirect TPMS was both contrary to law and arbitrary and capricious while the more accurate direct TPMS complied with the Safety Act. In remanding the case to NHTSA to come up with a new rule, the Court effectively ruled that NHTSA could not consider indirect systems that are inaccurate 50% of the time. An indirect system uses the antilock brake system to compare wheel speeds in diagonally opposed wheels and cannot tell if (1) all four tyres, (2) two tyres on the same axle, or (3) two tyres on the same side are underinflated. A direct system monitors the pressure in each individual tyre. Direct TPM systems, which use self-contained rim- or stem-mounted sensing units that communicate via a radio frequency (RF) link, are far more accurate than ABS-based solutions and are becoming the hardware of choice for automakers anxious to get a system quickly onto their vehicles. However, they have their own drawbacks such as a limited battery life that forces these active systems to strike a balance between transmitting data and conserving power, and when the battery goes dead the entire unit must be replaced. Though the regulation came from the National Highway Traffic Safety Administration, the court ruling was more of a rebuke to the Office of Management and Budget. The agencies differed sharply on the course to take on tyre pressure monitoring. In February 2002, the budget office took the unusual step of rejecting a proposal on the matter from the highway safety administration as too costly. The traffic safety agency had planned to mandate that automobiles phase in direct systems by the model year 2007. But Dr. John Graham, the regulations administrator of the budget office, wrote a letter to the AutoBusiness Ltd 97

Automotive Technology Roadmap agency urging it to allow indirect systems, too, because he said they would encourage greater use of antilock brakes. The highway safety administration subsequently submitted a rule that said both kinds of systems would be permissible in the short term and said that it would study what to do in the longer term. TRW and Michelin signed a technical co-operation agreement in 2000 to develop and market tyre pressure monitoring devices for the car and light truck industries. Initially, the agreement called for TRWs TyreWatchT radio-frequency-based transmitter sensor which transmits tyre pressure and temperature data to an in-vehicle receiver to be integrated with Michelins PAX System and Logic software. Subsequently, the two companies worked together to develop a next-generation transmitter for application on the PAX System as well as on conventional tyres. Michelins PAX System is a completely redesigned tyre/wheel assembly that prevents the tyre from coming off the wheel and provides excellent vehicle handling and steering response as well as mobility and safety when the tyre goes flat. Michelin Logic is a special predictive algorithm that makes use of vehicle operating conditions to provide sophisticated warning modes indicating that the tyres are nearing marginal safety. TRWs TyreWatch T System integrates tyre pressure sensing and radio-frequency technology to economically provide added safety and improved performance for vehicles equipped with run-flat or conventional radial tyres. By October 2003, the work between the two companies lead to the creation of EnTire Solutions, a 50/50 joint venture dedicated to the development, promotion, sales and service of TPMS. By early January 2004, the new company was able to announce that it was already supplying such systems for the 2004 Acura MDX luxury sports-utility vehicle and had been selected by Fiat to provide advanced TPMS for a range of its upcoming European models. Other customers included Hyundai and Kia and sensors for a range of General Motors trucks and sports-utility vehicles. EnTire Solutions system employs a battery-powered pressure sensor mounted on the valve stem inside the wheel. The sensor communicates tyre pressure and temperature information to a vehicle-mounted receiver via a radio signal. Additionally, when fully implemented, EnTire Solutions almost totally eliminates false alarms that are a significant source of consumer dissatisfaction and OEM cost.

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Four-wheel drive (4WD)

Four-wheel drive is usually associated with off-road vehicles as the drive to each wheel increase grip enabling the vehicle to traverse difficult and rough terrain that would be impassable to two-wheel drive cars. In the last ten years, 4WD off-roaders have also become fashion accessories to the extent that many never leave the road. At the same time, 4WD has also been fitted to a selected number of cars. While this is often to enhance a models or carmakers sporting image, it also improves vehicle safety. Four-wheel drive technology has tended to be fairly static for many years, but the advent of increased electronics in the car has opened up opportunities to integrate more advanced systems.

Ricardo Perspective
All-wheel drive (AWD) technology has become synonymous with the delivery of increased mobility, safety and capability off the back of the explosion in Sports Utility Vehicle (SUV) sales in recent years. SUVs have successfully exploited a desire for features that are not directly related to the traction or dynamic benefits offered by AWD, for example, higher driving position, occupant and packaging space and perceived occupant safety. The envelope of appeal for these types of vehicle has been stretched from the utility element with the emergence of crossover vehicles (CUVs). These vehicles offer improved on-road performance and more car-like luxury, whilst making a statement about the drivers lifestyle, status and fashionable tastes. In Europe, AWD technology is seen as an enhancement for safety, mobility, performance and dynamics resulting in increased consumer demand for across all segments. Premium brands, such as Audi, BMW and Mercedes-Benz, are strengthening their offering in the D segment with AWD, which is putting pressure on mass-volume manufacturers to follow suit. According to Wards Auto, Mercedes-Benz is to introduce 27 new models with AWD. In general, AWD enables manufacturers to charge a price premium, maximizing profitability. Successful exploitation of this trend requires careful balancing of conflicting commercial and environmental pressures. This results in the need for advanced driveline technology that allows OEMs to develop new AWD models delivering both real (traction, dynamics) and perceived (styling, image, fashion) capability.

Figure 31: AWD systems balance required for a successful system architecture

Source: Ricardo

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Ricardo Perspective (contd.) Emissions and Fuel Economy

National Highway Traffic Safety Administration (NHTSA) and European Automobile Manufacturers Association (ACEA) targets for fleet average fuel economy and emissions performance need to be addressed in the face of increased consumer demand for AWD. AWD has traditionally imposed a negative penalty on both. Given the increasing demand for crossover vehicles and AWD car derivatives, manufacturers may find that consumers seeking the features that these vehicles offer, despite their investments in other areas, are forcing fleet averages to increase. The deployment of advanced driveline technologies creates the potential to develop more efficient AWD systems with respect to torque management, parasitic losses and, even, energy recovery.

Active Torque Dynamics (ATD)

Prodrive, the UK company that has strong motorsports roots, including engineering the Suburu Impreza for the World Rally Championship, has developed a system it calls Active Torque Dynamics (ATD). ATD works using the active centre, front and rear differentials by locking or releasing them to modulate the torque applied to each wheel dynamically. Working with BorgWarner, Prodrive has developed a number of control strategies to ensure that torque distribution is suited to every stage of a different manoeuvre and that the system can be applied equally effectively to different types of vehicle. Prodrive claims this provides a superior performance and feel compared with conventional brake apply systems and can increase driver confidence in emergency situations. The system is able to modulate the torque at each of the four wheels in real time. This allows the vehicle to enter a corner with the favourable dynamics of a rear-wheel drive car, then progressively increase torque to the front wheels as it moves around the corner. As the vehicle leaves the corner, the torque split is biased towards the front wheels to provide maximum straightening force and to help prevent a spin. Modulation of torque from side to side, based on yaw and wheel-speed data, is used to increase stability further, particularly on low-grip surfaces and in emergency situations. ATD uses data from wheel speed sensors that can be shared with the anti-lock braking system, a yaw rate sensor and a steering wheel angle sensor to compare what the driver is requesting with what the vehicle is providing. If the driver is accelerating, or has some throttle applied, a torque can be applied to the appropriate wheel to counter oversteer and understeer. If the driver is braking, or there is zero throttle signal and the system is integrated with a conventional stability programme, it can brake the opposite wheel to enhance directional stability while reducing vehicle energy. Prodrive has developed its own actuators as well as its own ECU architecture. All the hardware, apart from the ECU, is mostly bought in and simply assembled, but the valueadded that Prodrive offers is in the formulation of the control algorithm in the software. The strategies used to determine when and how to intervene have been developed using an Automated Dynamic Analysis of Mechanical Systems (ADAMS) package, taking the responses of World Championship rally drivers as one of the inputs.

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Ricardo Perspective Safety

Whilst light-trucks and SUVs have always been perceived as being safer than passenger cars, US safety regulators released 2002 road fatality figures recently stating that SUV rollovers now account for 25 % of road fatalities in the US. Increased consumer awareness of roll-over protection performance and, perhaps, even future legislation, will drive the development of new technologies and systems that can modify vehicle dynamic behaviour. Recent advances in active driveline technology enable the response of a vehicle to be extended through redistribution of drive torque, making it easier for the typical driver to perform dynamic manoeuvres. This functionality can be exploited to provide both active safety and increased driver enjoyment through improved handling and responsiveness. The widest application is predicted in SUV and crossover vehicle segments, where more car-like attributes are being demanded.

Economics
Given a greater number of variants of a particular platform with an increased demand for AWD across all segments, driveline commonality represents the next major opportunity for cost reduction.

Differentiation
Manufacturers with a high platform utilisation recognise the savings that can be achieved through economies of scale, but are increasingly aware of substitutional sales, as the trend towards downsizing continues. So, as budget brands get premium hardware, consumers perceive they are getting the same for less. Advanced driveline technologies allow common hardware architectures with vehicle attributes to be delivered through changes in software and calibration. This allows manufacturers to deliver dynamic performance that is consistent with segment and brand expectations, for example sports, safety and comfort. Extensions of this philosophy allow the driver to configure the vehicle's behaviour to complement his / her driving style. The development of an increasing number of AWD derivatives is leading to clearly defined expectations in terms of vehicle attributes. Figure 32 illustrates Ricardos view of the potential differences in attributes and consumer expectations between a high-ride height wagon and a performance AWD derivative, despite the fact that they may be based on the same fundamental platform and driveline architecture

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Ricardo Perspective (contd.) Figure 32: Attributes of lifestyle AWD wagons and performance AWD vehicles

Low M u T rac tion

5 4 3 2 1 0

Lw M u To wing

Yaw D amping

G ra diants

Yaw Authority

Low R atio

T ec hno logy

W hee l Slip C ontrol Effic ie ncy

Cost

Lifestyle A W D W agon
Source: Ricardo

P erformance A W D

Figure 33 illustrates Ricardos view of the shift in attributes and consumer expectations between traditional SUV type vehicles and crossover vehicles, where compromises in offhighway performance are accepted in favour of more car-like on-road behaviour.

Figure 33: Attributes of SUVs and crossover vehicles

Low Mu Traction Lw Mu Towing

Gradiants

5 4 3 2 1 0

Yaw Damping

Yaw Authority

Low Ratio

Technology

Wheel Slip Control Efficiency

Cost

CUV
Source: Ricardo

SUV

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Ricardo Perspective (contd.) Technologies and Challenges

The discussion of driveline devices is here restricted to devices that control the distribution of engine torque between front and rear axles, although similar devices may be applied to bias torque across (i.e. left/right); they are loosely classified as follows.

Configuration Part time describes a system in which the vehicle is driven in 2WD mode up to the point where either the driver, or an automatic control system, engages partial torque transfer to the other axle to drive all four wheels. This system offers significant opportunities for appropriate sizing, reduction of negative CO2 impact, and dynamic enhancement beyond 2WD. This system is also referred to as on demand AWD and hand-on systems, because of the ready adaptation of existing 2WD powertrain architectures in vehicle classes for which full time AWD may not be required by the majority of customers. Full time systems are in decline for all but most extreme applications, ie where tractive performance and long duration towing are required.

Controllability The traditional approach is to use passive systems (i.e. those with fixed mechanical characteristics). Many solutions are available (e.g. Torsen in many Audi AWD products). Several inherent problems exist that impact compatibility with ABS & ESP, particularly with respect to system dominance and interaction. Active couplings (partially variable) are devices that may react to wheel slip (e.g. supplied by Haldex in many Volkswagen AWD products), or that allow pre-event energisation to provide torque distribution to both prop shafts. This wide category of devices offers greater opportunity for control and integration with other vehicle systems, notably brake-based stability systems. Developments are centred on reducing cost and on improving efficiency (on and off-state). Torque vectoring (fully variable) systems are a new generation of devices that force small speed differences to arise within the driveline, which, in conjunction with the tyre characteristics, transfer torque. Although providing the highest authority over torque distribution, the cost and potential complexity may limit this technology to premium vehicle classes. Electric AWD The electric all-wheel drive (eAWD) concept involves the use of auxiliary electric drives to provide propulsion at a set of wheels (front or rear depending on vehicle platform architecture) to augment the mechanical drive provided by the internal combustion engine. Much research is underway in this area as eAWD is seen as a simpler method of achieving the fuel efficiency and emissions benefits of hybrid drives, without the mechanical complexity inherent in existing hybrid systems. It also has the additional advantage of being able to provide part time on-demand AWD at a higher efficiency than a part time mechanical AWD system. The deployment of eAWD architechtures allows greater packaging flexibility, increased efficiency and reduced cost through the elimination of power take-off units, propshafts etc. This makes it an attractive proposition for predominantly on-road use.

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Ricardo Perspective (contd.)

From a functional point of view, eAWD configurations offer significant benefits over mechanical AWD architecture, whereby strategies can be employed to provide launch assistance, torque assistance, low traction control, torque vectoring and regenerative braking on an as-and-when required basis. These factors make these systems increasingly of interest, given the drivers described previously.

Hardware Selection In selecting the hardware devices associated with AWD provision, a robust cost/benefit comparison is required, not only for driveline hardware, but also for chassis systems. A process has been developed for AWD driveline selection, in which multiple hardware configurations are investigated. For each hardware configuration, in this case front, centre and rear differentials, the fundamental characteristics are varied and the performance of this particular candidate solution is assessed in a virtual test environment to achieve a score that is plotted against its estimated cost. Where devices are active rather than passive mechanical elements, an appropriate control algorithm must be applied within the scheme. Integration of Control Systems At a fundamental level, the quality of control software is reflected in the effectiveness with which it achieves performance from the selected hardware over the entire operational envelope of the vehicle. Fault synthesis is a useful feature that supports early product validation by introducing faults and assessing the ability of a driver to stabilise a vehicle using a workload metric associated with handwheel velocity, number of changes of direction, similar metrics for accelerator pedal and brake pedal. The scheme is equally applicable to distributed algorithm control architectures (current technology) and also attribute-down approaches such as supervisory control of several vehicle dynamics-influencing technologies, for example active suspension, ABS, ESP, active driveline, throttle-based stability systems etc, for full integration of vehicle dynamics control.

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The future for chassis design

The evolution towards integrated vehicle control systems is the result of a long series of developments in automotive electronics. As the reliability of electronics in automotive environments has improved and the cost of electronics decreased, more of the individual control functions have evolved from mechanical systems to electronic systems. Equally important has been the development of vehicle networks and protocols that enable the sharing of sensor and control signals among the various vehicle subsystems. As the car manufacturers strive to find the perfect solution between ride comfort and handling, electronically controlled chassis systems will have a greater part to play in the future. While still in its infancy with regard to production applications, a fully integrated chassis system, such as Delphis Unified Chassis Control, could control steering, suspension and braking functions and the interoperability of all related subsystems in the near future. However, this next step will require real-time vehicle information on all six degrees of freedom as well as on the status of each systems control variables and a real-time communication link with all relevant systems, including the powertrain. Both steer-by-wire and brake-by-wire are prerequisites for new safety and comfort enhancing functions, which can only be created by the interaction of several vehicle systems. As they become more complex, and future systems become networked to provide additional safety features, performance requirements of the central algorithmic processor will see a significant increase in required capabilities. Advantages of a fully integrated chassis system include the following: expands ride and handling capability envelopes, eliminating performance trade-offs; reduces rollover propensity, especially on high-centre-of-gravity vehicles; co-ordinates vehicle character and feel; supports tuning flexibility; helps driver avoid emergency situations; improves stopping distances by up to 20%; and reduces driver effort, stress and fatigue while driving in poor weather

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Chapter Three
Powertrain

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Introduction
The most successful car companies (in terms of profitability and market share) appear to have two things in common technology and an extremely strong brand image. A strong brand, supported by the right technology, draws the customer to the product. This chapter provides an assessment of the requirements for engine technologies and how these technologies are expected to develop over the next 5-15 years.

Industry Drivers
Between 1990 and 2020, the number of vehicles on the road is expected to double from 700m to 1.4bn with the 1bn landmark being passed before 2010. By 2013, 50% of total oil reserves will have been used up and while experts are predicting that in addition to the known reserves of 1,000bn barrels, around another 2,200bn barrels will be able to be produced from new sources and unconventional reserves such as oil shale, it will be at extremely high cost. Road traffic emits more than 4bn tons of CO2 annually into the atmosphere. If the predictions about population growth and the demand for mobility in the Third World hold true, then these emissions will grow to more than 6bn tons in 2030. Although the relationship between CO2 emissions and climatic change continues to be a controversial subject even among experts, there is no doubt that the overriding view is that precautions must be taken. In other words, the quest for reduced fuel consumption and emissions in all vehicles will continue. Priorities differ throughout the world, however. For example, in Europe, reductions in fuel consumption and emissions are the centre of attention. The self-imposed requirements of the Brussels-based European Automobile Manufacturers Association (ACEA) and the Euro standards are now a matter of routine to the automotive industry. In certain markets, fiscal incentives either proposed or in place will promote customer demand for low emission vehicles well ahead of legislative requirements. As a result a high level of importance has been assigned to the development of powertrain systems that meet Euro 4 emission requirements with todays advanced technologies.

Ricardo Perspective
Legislation has been one of the most influential drivers for automotive technology, particularly for engine and aftertreatment systems. In Europe, this has been highly successful in the reduction of oxides of nitrogen as shown in Figure 34. It is no coincidence that the sharp decline in NOx emissions coincides with the introduction of successive levels of vehicle emissions standards.

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Ricardo Perspective (contd.) Figure 34: Urban road transport NOx emissions, 1990-2015

Urban Road Transport NOx

Based on predicted growth in vehicleparc and Euro 1- 4 emissions standards 500 /yr 450 ) kt 400 on ne 350 s ToE1 300 tal E 250 mi ssi 200 on s ( 150 100 Total Emissions 0 (ktonnes/yr) 1990
Source: Ricardo

E1 E2 E3

Motorcycles LGV Buses HGV Cars

Emissions Legislation
E4

50

E5??
2010 2015

1995

2000

2005

Fuel consumption is directly proportional to emissions of carbon dioxide (CO2) which is identified as a potential contributor to global warming. As such, there is now a shift in emphasis from continued tailpipe emissions reduction, to CO2 particularly in Europe, Asia, Canada and California, as can be seen in Figure 35. Again, engine-related technologies are the most influential provider of fuel consumption improvements and a huge drive in these areas is being witnessed throughout the industry.

Figure 35: World Fuel Consumption Targets vs. Time

Europe
ACEA members on track for 140g/km

E4

USA California
Japan 2000

E5 (E4/2) cost of E6 =?? 140 g/km CO2 further progress? 120 g/km CO2 100 g/km CO2? Tier 2 SUV / CAF? California, Canada now OBD3 committing to LEV2/ULEV2
CO2 reduction

Escalating

Japan Speculative
1995
Source: Ricardo

Japan 2010? Tokyo Particulate

EU studies in these areas

HVAC effects? Pm Size spectrum Off Cycle Emissions?

2005 2010 2015 2020

2000

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Table 4: Permitted emissions for cars by class

Emissions Class TLEV LEV ULEV SULEV 1 PZEV ZEV Emissions Class Euro 2 Euro 3 Euro 4 EEV3
1 2 3

CO g/mile 3.4 3.4 1.7 1 0.1 0 CO g/km 2.2 (1.00)2 2.3 (0.64) 2 1 (0.50) 2 1

NMOG1 g/mile 0.125 0.075 0.04 0.01 0.004 0 HC g/km (incl. NOx) 0.5 0.2 0.1 0.04

NOx g/mile 0.4 0.05 0.05 0.02 0.005 0

PM g/mile 0.40 0.01 0.01 0.01 0 PM g/km 0.080 0.050 0.025 0.010

NOx g/km (incl. HC) 0.5 (0.70) 2 0.15 (0.50) 2 0.08 (0.25) 2 0.08

NMOG = non methane organic gas Vehicles with diesel engines Under discussion

Source: Ricardo

Road vehicles in Europe account for 12% of man-made CO2 emissions throughout the continent. In 1995, a new passenger vehicle emitted an average 186 g of CO2 per km in Europe, 191 g in Japan and 260 g in the US. To improve on these figures, the ACEA signed a voluntary commitment with the European Commission in 1998 with the twin objectives of: marketing road vehicles in Europe emitting less that 120 g of CO2 per km from 2000 (ie an average fuel consumption of 4.9 litres per 100 km 57.6 mpg); and a mean emissions level of 140 g of CO2 per km for all vehicles sold by 2008 (ie a mean fuel consumption of 5.7 litres per 100 km 49.5 mpg).

By the end of 2001 the average CO2 emission level of ACEA new car fleet (diesel and gasoline) registered within the European Union was 164 g/km, a 2.5% reduction on the levels in 2000 (169 g/km). This was helped by the sales of over 360,000 with CO2 emission levels under 120 g/km in 2001, accounting for more than 2.5% of sales. European vehicle emissions standards proposed for the year 2005 (Euro 4) require that the NOx and Particulate Matter (PM) be reduced to half that of 2000 levels, whilst the HC and carbon monoxide (CO) emissions are also significantly reduced. Further reductions in emissions levels are under discussion for legislation in year 2010. In addition, market demands and mean fleet CO2 targets proposed for 2008 and 2012 require that OEMs maintain or improve fuel economy whilst these significant reductions in tailpipe emissions are achieved. As a result of smog problems in different cities in the US, the quality of exhaust emissions is a particularly important feature. In some states, such as California, specific quotas of ZEVs (zero emission vehicles) or SULEVs (super low emission vehicles) are prescribed. However, due to comparatively low fuel prices, fuel-efficient engines still tend to play a minor role. This explains why technologies such as efficient diesel engines or technology modules like direct fuel injection for gasoline engines are followed with some degree of interest, but are hardly ever implemented, largely due to the fact that these new features invariably incur higher costs.

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Automotive Technology Roadmap It is the state of California that is once again setting the agenda. In what has proved to be a very controversial move, the former California Governor Gray Davis signed a potentially farreaching piece of legislation aimed at helping combat global warming by curbing the emissions of greenhouse gases. The new law gives the California Air Resources Board the authority to set new standards until 2006 and until 2009 to come up with the technology needed to comply with them. In Japan, the measures are concentrated on reducing fuel consumption and particulate emissions: as in the US, particulate emissions are subject to extremely low limits, and this is a major hindrance to the market viability of diesel engines for passenger cars powered by present-day technology. On the other hand the development of the direct-injection gasoline engine has been intensively driven forward for years. The Japanese driving cycles traditionally include high proportions of low-load operation - precisely the range where the fuel-efficiency benefits of direct injection can really make themselves felt. Another benefit is that low-sulphur gasoline has been available in Japan for much longer than it has elsewhere the decisive factor governing effective and stable long-term emission control for gasoline engines with direct fuel injection.

Summary and outlook Ricardo Perspective

At present, cost-effective and robust solutions are becoming available to allow Euro 4 emissions legislation (2005) to be met by most vehicle classes. It is also anticipated that the European target of 140g/km CO2 emissions can be achieved via a combination of increasing diesel market share, a collection of other efficiency-improving technologies, and attention to detail in vehicle design. However, the incremental cost of these measures is mounting and often cannot be passed on to the consumer in a competitive environment. Beyond the Euro 4 emission stage in 2005 and the 140 g/km CO2 target for 2008, a step change in technologies (and associated expense) will most probably be required to make further progress. It is clear that technologies that offer maximum benefit for minimum cost are essential for survival. Technology options are discussed in following sections. Other drivers affecting the market are indirectly related to technology. These include brand and product differentiation, globalisation, customer value and profitability. Following the ACEA initiative, Japanese and Korean manufacturers have in turn made a commitment to reduce their emissions to 140 g/km, but by 2009. This trend continues with the next significant emissions reduction for passenger vehicles required in 2005 and probably 2008 (targets not yet agreed). A similar trend is seen in all major markets, particularly the US and Japan.

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Sulphur
Sulphur is a natural constituent of crude oil and it is very much on the agenda currently as modern car engines do not need it and in the opinion of many automotive engineers it should be filtered out during the refining process. This is technically feasible, as examples from Sweden, Finland, Japan and California have shown, where fuels with a sulphur content of just 6 to 30 parts per million (ppm) have been available for years. At present throughout the rest of Europe, though, gasoline contains a maximum of 150 ppm and diesel fuel a maximum of 350 ppm of sulphur. However, a European Union guideline is limiting the maximum value of sulphur in fuel to 50 ppm from January 2005 followed by a total ban on gasoline with a sulphur content coming into effect by 2011. A date for mandatory zero sulphur diesel fuel will be fixed in a review in 2006. However, there is still pressure from the car companies, catalytic converter manufacturers and organisations such as the Federation Internationale de lAutomobile (FIA) to reduce sulphur content more quickly, with the figure of 10 ppm being the immediate short-term objective. In the US, the Environmental Protection Agency (EPA) has proposed that the sulphur content of diesel fuel sold for use in on-highway vehicles could be cut from 500 ppm to 15 ppm a 97% reduction by June 2006. However, flexibility has been incorporated into the rule to allow exceptions to this limit. The EPA estimates the extra cost to produce and distribute the low sulphur content will be 4.5 to 5 cents a US gallon while the American Petroleum Institute estimates a cost increase of at least 15 cents. According to tests carried out in Germany, particulate emissions are reduced by approximately 35% and 20% for gasoline and petrol respectively without further technical modifications to the engine or exhaust system if the fuel contains less than 10 ppm of sulphur. At the same time fuel consumption is reduced by about 1.4%. The big issue, though, is that the level of sulphur in fuel is hampering the production start-up of new catalytic converters that are necessary to meet future EU exhaust emission limits. Because of the high sulphur content in gasoline, the use of modern, extremely heat-resistant three-way catalytic converters with a palladium coating is not currently possible as the precious metal cannot withstand exposure to sulphur over a period of time. Likewise, present fuel quality prevents the series introduction of innovative storage-type catalytic converters that would enable car diesel engines to meet the strict limits of the future Euro 4 emissions guideline. It is particularly the very low NOx limits (0.25 g/km) prescribed by this, the worlds strictest regulation for passenger cars that makes such a system necessary; the storage-type catalytic converter reduces the NOx content in diesel exhaust gases by more than 50%. In order to store nitrogen oxides, the catalytic converter is given a base coating consisting of barium or potassium oxide in addition to the coating of platinum, palladium and rhodium. Contact with these precious metals causes the nitrogen oxides to be converted to nitrates that are then stored in the base coating. Once the storage capacity of the catalytic converter is exhausted, the electronic engine management system briefly changes the engine operating parameters from lean to rich to create the conditions for converting the stored nitrates they are freed, react to become nitrogen and the catalytic converter is fully operational again. However, this chemical process is upset by diesel fuel containing sulphur as it is deposited in the catalytic converter along with the nitrogen oxides. The sulphur reacts to become sulphate, which remains permanently deposited and stays in the unit during the regeneration phases. As a result the storage-type catalytic converter loses a good 60-70% of its nitrogen oxide converting efficiency and it cannot be regenerated due to sulphur poisoning. Similar problems also hinder the development of gasoline direct injection engines where emission control remains an open question as conventional three-way catalytic converters whose chemical conversion processes only work perfectly with a fuel-air mixture of 14.6:1 AutoBusiness Ltd 113

Automotive Technology Roadmap (Lambda 1) are not suitable for gasoline direct injection engines. These engines mainly operate with a lean mixture that certainly produces significant fuel consumption advantages but is not compatible with the principle of the three-way, closed-loop catalytic converter. According to figures released by DaimlerChrysler, where the sulphur content in gasoline is 50 ppm, the conversion rate for nitrogen oxides sinks to just 30% after only 7,000 kilometres. However, when the sulphur content in fuel amounts to less than 10 ppm, the catalytic converter retains a high level of efficiency, at around 90-98%. According to the EPA, when the current heavy-duty fleet in the US is completely replaced by 2030, around 2.64m tonnes of NOx emissions, 117,000 tonnes of NHMC emissions and 111,000 tonnes of particulate emissions will be eliminated annually compared with todays levels. The presence of sulphur in fuel results in a number of characteristics, as follows: inhibits catalyst performance by strong adsorption and competition for space on the catalyst surface with pollutants; limits the amount of NO2 formed on an oxidising catalyst a problem for some diesel particulate traps and NOx absorbers that rely on NO2 for their regeneration; reacts with chemical NOx traps more strongly than NOx this decreases NOx storage capacity and requires more vigorous and frequent regeneration increasing fuel consumption; creates sulphate particles with any emission control system that includes a precious metal catalyst with an oxidising function; and contributes to coating on the catalyst surface.

However, any major reduction in sulphur will necessitate substantial changes in refining plants and processes and, coupled with increasing demand for product and tight refining capacity, will pose a significant challenge to most refineries. The EPAs proposal is already beginning to have an impact on fuel sulphur levels in the US, with some major refineries declaring their intention of reducing sulphur content to 15 ppm well ahead of the 2006 deadline.

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Gasoline Engine Technology

Cylinder shutoff Variable Displacement Engine (VDE) or Displacement on Demand
The switching on and off of cylinders is known either as variable displacement engine (VDE) or displacement on demand technology, and the concept is undergoing something of a revival due to advances made in the control algorithms. For example, it is regarded by Delphi as the leading fuel economy technology in North America. VDE systems used in some cars in the 1980s such as in a Cadillac V8 engine in 1981 were noisy when operating on four cylinders and were unable to make a seamless transition to eight-cylinder operation because the on-board computers of the day had small memories and were unable to perform much more than about 200 calculations per second. Todays onboard computers can perform 2,000 functions per second, offering far smoother operation. Automatic cylinder shut-off is activated when the engine only has to supply part of its power and torque, for example in urban traffic, on country roads or when cruising on the motorway at a constant speed in the medium range. Normally, under these conditions, a conventional eight-cylinder engine would lose efficiency due to incomplete cylinder filling and high losses during the gas cycle. As soon as the engine is only operating in the part-load range, the electronic engine control unit deactivates half the combustion chambers. The work of determining which cylinders are not necessary is handled by a microprocessor that controls the opening and closing of selected intake and exhaust valves. With the valves closed, piston movement continues, but there is no mechanical work lost because the air in the cylinder is simply compressing and expanding. Engine displacement quickly grows back to eight or 12 cylinders as soon as the driver steps on the accelerator, as in a passing situation. The fuel consumption of the Mercedes-Benz S 500 in the NEDC driving cycle is reduced by an average of up to 7%, the same figure claimed by Ford for its 5.4 litre Ford F-150 4x4 which also claims an 11% saving for its 6.8 litre V10. These figures can be further improved depending on driving style. According to figures published by DaimlerChrysler, gasoline consumption is reduced by about 15% when cruising at a constant speed of 90 kph and by 13% at a constant 120 kph. It is because of these advances that many car manufacturers see the VDE principle being extended across the engine range for the everyday consumer rather than just being a niche market experiment. Ford, for example, is now able to mass-produce variable displacement engines due to availability of new, more powerful control modules while it has been a feature of the Mercedes-Benz V8 engines, as seen on the S Class, since 1998. However, Ford, unlike General Motors, is not entirely committed to the principle believing that there are more benefits from other technologies such as lean burn. GM, though, is working closely with Delphi and Eaton who are supplying the valvetrain hardware and much of the control system hardware for GMs VDE technology, which is appearing on its trucks and SUVs in 2004.

Valve technology Ricardo Perspective

Variable Valve Actuation (VVA) implies that both the lift and the timing of the valve opening and closing can be independently controlled. This can be either by mechanical systems or, in the far future, electromagnetic or hydraulic actuation.

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Ricardo Perspective (contd.)

Mechanical variable valve timing (VVT) is a widely available technology, which Honda (VTEC) and others mass-produced for improved speed range, performance, economy and emissions. VVA is a relatively recent technology and, as a simple system, is available from Honda (VTEC-i) and a more complex system from BMW (Valvetronic), in which the valve lift is used to limit the air flow into the engine rather than the throttle. The principal benefits are improved engine efficiency (by not having to use the throttle so much) and improved power output by having flexible valve timing. Ricardo expects mass production of these systems with a wide market share by 2006-8 for assistance towards the 2008 ACEA fleet average fuel consumption agreement of 140g/km CO2. In addition to this, it is possible to incorporate cylinder deactivation, which can shut off four cylinders of a V8 engine, for example. This, effectively, downsizes the engine whilst operating at part load, giving fuel consumption advantages. This is likely to be applied more widely after 2005 to six (and higher) cylinder engines.

Altering valve timing and lift by switching between two or three different cam profiles is a well established means of boosting power output, as is varying the timing between exhaust and inlet valves by advancing or retarding the relative rotation of inlet and exhaust camshafts. However, when Honda, the first manufacturer to apply variable valve timing and lift to a roadgoing car, combined both techniques, it was setting out its engine design strategy for all future petrol engines. In doing so, Hondas motive appears to be as much about reducing emissions as improving performance characteristics. As if to underline the point, i-VTEC intelligent variable valve timing and lift, electronic control made its 2001debut in the Stream MPV and the highperformance Civic Type R, two very different cars. In essence, i-VTEC adds cam phasing to two-stage VTEC, but different approaches are adopted for higher and lower power variants. For the Stream, the familiar two-stage variation in valve timing and lift is only applied to one of the two inlet valves, similar to the VTEC-E system fitted to the Honda Insight. For the higher-powered engine variant, the DOHC VTEC system uses three cam lobes for the two inlet and exhaust valves associated with each cylinder. At lower engine speeds each pair of valves is operated by the two identical profile outer cam lobes, via roller cam followers. In between the two, the third rocker is actuated by the centre cam lobe. This lobe provides higher lift and will open the valves for longer than the outer matched pair. At lower speeds, the centre third rocker merely follows its cam lobe profile but serves no other function. The pivot shaft for the cam followers feeds oil under pressure through it to the centre rocker. At a pre-programmed engine speed, the engine ECU opens a valve and the pressurised oil pushes two pins from the centre rocker through its adjacent rockers. Locked together, all three rockers then follow the centre lobe high lift/longer dwell cam profile, improving gas flow. The result is a higher specific power output and a broader spread of torque across the engines operating range. For the lower rated engines, the design is more conventional. There is a pair of cam lobes for each pair of valves on the inlet camshaft. One lobe has a fairly normal cam profile while the other is almost circular, opening the valve sufficiently to create swirl in the cylinder at lower speeds, permitting the use of a lean mixture. As engine speeds rise, a pin again locks the two followers and both valves follow the more normal cam profile increasing mixture flow and power output. The exhaust cam is completely conventional without any VTEC component. So far, there is nothing different from other Honda VTEC systems, but the VTC system introduces a second variable element. The inlet cam in the current i-VTEC engine is attached to its sprocket drive by a collar with a helical gear on its outer surface. This in turn fits into a corresponding helical gear at the centre of the drive sprocket. Hydraulic pressure acting inside the helical gear unit can force the camshaft and its drive sprocket further apart, which thanks to the helical gear, rotates the camshaft relative to the sprocket, advancing or retarding inlet valve timing relative to the exhaust valves. Again, the oil pressure valve 116 AutoBusiness Ltd

Powertrain regulating pressure in the helical gear is controlled by the engine ECU. Whereas the cam profile change is in two fixed stages, the VTC system is continuously variable according to the ECU mapping. By this means, i-VTEC addresses the shortcomings of both the existing Honda VTEC and cam phasing variable valve timing systems. Although Hondas VTEC can deliver high specific power output, the improved breathing delivers this at relatively high engine speeds. Switching between the cam profiles tends to improve matters at either end of the engines operating range, but leaves the mid-range poorly served. An example is the 2.0-litre engine fitted to Hondas S2000 sports car. Its VTEC system ensures a very high power output, reaching a maximum of 240 ps (177 kW) at 8,300 rpm and 208 Nm (153 lb ft) of torque at 7,500 rpm. It also needs super unleaded 98 RON fuel to achieve this performance. Although the current i-VTEC power output is not as high, maximum torque is produced at lower speeds and the torque curve is flatter. Over 90% of maximum torque is available by 3,000 rpm in the Civic Type R. The Stream engine will deliver 95% by the same engine speed, although its torque curve is not as flat. In both cases, the performance is achieved using premium 95 RON fuel. The better torque characteristics of the i-VTEC engine are the result of the greater degree of valve overlapping the system permits. Gas flow can be improved at any engine speed, it is no longer restricted to the fast cam/high rpm phase of Hondas conventional VTEC. The variable cam phasing also offers reduced fuel consumption and emissions performance, through improved exhaust gas recycling. It was at the 2001 Geneva Show that BMW showed one of the most significant new valvetrain technologies that has now reached full series production. Called Valvetronic, it is available on some I4 and V8 models. BMW claims fuel economy gains of 14% for the V8 engine and 10% for the 4-cylinder compared to their more conventional predecessors. It is, however, a costly method. Over the years there have been various solutions to replacing the throttle butterfly the throttling of gasoline engines has always been a frustrating necessity. Both BMW and Renault have shown concepts where valves are opened using electronic solenoids while Fiat has demonstrated a hydraulic system, but they were all too costly for series production. It looked as though the throttle butterfly was here to stay until someone devised a satisfactory method of reducing fuel intake while maintaining an appropriate mixture. That someone is BMW with its Valvetronic system in which valve lift to control air intake is varied mechanically through an intermediate arm. This arm is located between each camshaft lobe and its inlet valve, pivoted at both the top and centrally, close to the cam. An electric motor with worm gear and eccentric drive atop the valvetrain acts upon a shaft close to the upper top pivot point that in effect moves the intermediate arm closer to, or further away from, the camshaft which in turn effects the valve opening. The closer the central pivot point is to the cam, the wider the valve opening. Through this method, valve lift is variable between zero and 9.7 mm while adjustment of the worm gear from one extreme to the other takes 300 milliseconds. Combined with BMWs Double Vanos valve timing technology, the camshaft angle relative to the crankshaft can be adjusted by up to 60. The intermediate arm is finished to a tolerance of 0.008 mm and the cams controlling the eccentric shaft are machined to tolerances of a few hundredths of a millimetre. The entire system is pre-assembled and dropped as a module into position in the cylinder head. A 40 Mhz 32-bit engine management system CPU reflects the speed at which the system needs to operate with another processor controlling the Valvetronic system. The benefit of controlling the valve opening in this way, according to BMW, is a 10% improvement in fuel consumption due to the elimination of pumping losses found on conventional engines. Other advantages include improved atomisation at low throttle openings due to gas velocity of around 320 per square metre through the part open valves, and cleaner valve seats due to the high velocity. Valvetronic is also a fundamental building AutoBusiness Ltd 117

Automotive Technology Roadmap block in the companys aim of meeting the 2008 carbon dioxide fleet requirements of 140 gm/km. BMW regards Valvetronic as being as significant a step as that from carburettors to fuel injection a few years ago. However, there is a cost the new engine costs around 15% more to produce than the original despite highly automated manufacturing systems at the US$600m engine plant in Hams Hall in the UK. After producing around 60,000 4-cylinder engines in 2001, BMW expects annual output to increase to around 400,000 units once the new small 1-Series small car, the X3 and the new Z4 arrive in 2003/04. Saab has also showed two advanced concepts that do not look so likely to be taken up, despite some clever ideas. The Saab Variable Compression (SVC) is a radical method of altering the compression ratio between 8:1 and 14:1 without interfering with the combustion chamber shape while the Saab Combustion Control (SCC) is aimed at substantially reducing exhaust emissions and fuel consumption without impairing performance. The project was directed squarely at the US ULEV2 requirements due in 2005 that will demand half the emissions of current Saab engines. Both systems move far outside the conventional envelope of four-valves per cylinder and multipoint injection. The prototype 1.6-litre SVC had five cylinders, developed 225 bhp and 305 Nm torque and was split horizontally, effectively creating a separate crankcase and cylinder block. The top half was combined with the cylinder head as one complete unit that Saab calls a monohead, doing away with the cylinder head gasket altogether. It was hinged along one side allowing it to tilt by four degrees, the movement hydraulically controlled by an actuator crank joined to the monohead by connecting rods. By doing so the cylinder bores move up and down in relation to the crankshaft, increasing or reducing the size of the combustion chambers. Major advantages of the engine include NOx reduction through better control of combustion temperatures. CO2 emissions are reduced through lower fuel consumption that Saab claims is 30% less than a conventional normally-aspirated 3.0 litre engine under normal motoring conditions. In the long term, SVC offers huge potential as a multi-fuel engine because of its susceptibility to knocking and Saab claims the limitation in a conventional engine of matching octane rating to compression ratio, does not exist with SVC. The two key issues that SCC addresses are the commitments made at Kyoto to reducing C02 and the very tough position taken by the US on NOx. The SCC process revolves around a new spark plug injector (SPI) developed in conjunction with the Australian company, Orbital. The SPI sits in the centre of a conventional four-valve combustion chamber and can deliver both fuel and compressed air. The spark can arc from a centre electrode to either a fixed earth 4.0mm away, or to a raised contact on the top of the piston. However, both SVC and SCC have progressed slowly to date. While they address both NOx and HC emissions in the US as well as the greater emphasis on C02 in Europe, it still remains to be seen whether Saabs parent, GM, is sufficiently interested to adopt either technology on a wider scale. Amongst European manufacturers, BMW in co-operation with SiemensVDO, has exhibited but not yet put into production an electronically controllable variable valve timing system that exhibits several of the possible benefits of the technology. The BMW system replaces the camshaft with powerful electro-magnetic actuators, one to each valve. Each actuator consists of two electro-magnets each side of a ferrous disc that is part of a vertical shaft, one end of which terminates in the valve head. This shaft and disc are loaded by compression springs, explaining why the generic name adopted by some for this type of mechanism is a mass resonance system. Given that such an arrangement can attract the disc either fully up, fully down, or with equal magnetic flux from both coils, midway, it is capable of putting the valve head in just three positions fully open, fully closed, or halfway between. Because magnetic force varies in proportion to the square of the gap between magnet and disc, there is clearly a limit to the maximum lift the system can provide. Also, experience has proved that this same effect produces a relatively violent valve shutting action, which as well as being inherently noisy, in the long term use threatens undue valve seat recession wear. 118 AutoBusiness Ltd

Powertrain Finally such a system could be difficult to package, since electromagnets powerful enough to provide the force required tend to be heavy and large.

Injection systems Ricardo Perspective

Direct injection replaces the port injection technology and injects fuel directly into the cylinder where it mixes with air to form a homogeneous mixture. This has two advantages. Firstly, the fuel does not displace the air (as port injection does), so the amount of air trapped in the cylinder is increased. Secondly, as the fuel evaporates, it cools the charge in the cylinder. This reduces the likelihood of pre-ignition and allows a higher compression ratio to be used. These effects can lead to higher power output and improved efficiency. In addition, it is possible to operate the engine in a mode where the fuel is burnt in a small pocket of air (stratified) in the cylinder as shown in Figure 36. This is globally lean combustion that further increases economy but only over a small operating window and at the expense of NOx emissions. These stratified gasoline direct injection engines require lean NOx traps (LNT) to remove NOx emissions and, in real world driving, fuel savings generally do not live up to expectations. LNTs also require near-sulphur-free fuel to ensure efficient operation which is greatly limiting the markets where these vehicles can be sold. This has led to a focus on homogeneous direct injection engines which offer economy gains without the expense of a lean NOx traps.

Figure 36: Ricardo VECTIS CFD Simulation of the Gasoline Direct Injection Process

Equivalence ratio () or less

Source: Ricardo

or greater

In 1997, the pioneering Mitsubishi 1.8 GDI (gasoline direct injection) engine entered production. It was an advance that left many competitors feeling left behind. This event was the impetus that committed many undecided carmakers to the concept. The engineering objections were swept aside, safe in the knowledge that where Mitsubishi had led, following could not be that difficult. Growing concerns over particulate emissions were threatening diesel acceptability for light vehicles, making non-diesel high efficiency engine concepts even more attractive. Six years on, though, it is Mitsubishi that looks in danger of being left behind, the initiative for promoting this technology having been taken by Audi. Success at the Le Mans 24 Hours race is never easy, but when Audi scored a 1-2-3 in 2000 it placed a marker that it was the team to beat. In the following year, Audi, working with Bosch had an ace up its sleeve that did not become apparent until the 2001 race got underway, the ace being direct injection. The move to GDi is a core part of Audis drive to reduce emissions and fuel consumption across its range and it ties in with the companys stated aim of moving to direct injection for all its gasoline engines, including the new 3.0 litre V6.

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Automotive Technology Roadmap Termed the FSI principle by Audi, its significance is on a par with the TDI diesel engine the company claims by succeeding in combining high power output and lower fuel consumption to a previously unattainable level. While both the torque and power output are increased, fuel consumption is reduced by around 15% at the same time. The main factor contributing to these improvements is the stratified charge principle of part load. In this operating mode, the engine only needs a fuel-air mixture capable of immediate ignition in the area around the spark plug. The remainder of the combustion chamber is filled with a leaner mixture, that is one with a considerable degree of excess air. As a result of this, the engine can be run without the incoming mixture flow being throttled. The direct injection engine also benefits from reduced heat losses, because the layer of air around the cloud of ignitable mixture isolates the latter from the cylinder and cylinder head. While direct injection petrol engines have been around for many years, it has been the introduction of a number of key technological features that Audi maintains have moved the goalposts. This includes a high-pressure common-rail fuel injection system with a singlepiston injection pump specially developed for this purpose it only supplies sufficient fuel to maintain the desired pressure in the system. The engine also has a new cylinder head with four valves per cylinder and valve operation by roller cam followers and a developed version of the air-guided combustion process with continuous control of charge movement. Finally, there has been further development of the exhaust emission control system, with a NOx storage-type catalytic converter and NOx sensor. The fuel is injected directly into the combustion chamber rather than into the intake port. The injector, which is supplied by a single-piston pump and common-rail fuel line, is in the side of the cylinder head, and controls the injection time to within a thousandth of a second, at injection pressures of up to 110 bar. In the stratified-charge operating mode, fuel is injected on the engines compression stroke and is picked up by the movement of the air that has been drawn into the combustion chamber. This movement is imparted to the air by a movable flap in the intake pipe and by the shape of the intake port and the piston crown. The resulting controlled movement is known as tumble. After combustion, a layer of insulating air remains between the ignited mixture and the cylinder wall. This cuts the amount of heat lost to the engine block and increases the engines operating efficiency. In the stratified charge operation, lambda values of up to 4.0 related to the combustion chamber as a whole are achieved which is essential if fuel consumption is to be reduced at low and medium engine speeds. At full load, the fuel is injected synchronously with the air intake phase. This fills the combustion chamber homogeneously. Again, a reduction in fuel consumption is achieved along with higher power output and torque figures compared to indirect fuel injection. This has the advantages of reducing the tendency to knock as a result of direct fuel injection into the cylinders and the resulting internal cooling effect. In addition, the engine is capable of operating at a higher compression ratio. After having been brought to market in 2000 with the Volkswagen Lupo FSI, it was subsequently introduced on the Volkswagen Golf and the Audi A4, by which time a number of OEMs were also showing their thoughts on the subject. For example, at the IAA Show in Frankfurt in September, 2001General Motors unveiled an innovative V8 that showcased several advanced technologies, including an air-assisted direct injection petrol system developed by the Orbital Engine Corporation and Delphi. The air-assisted direct injection system is integrated into a unique three-valve cylinder head design with dual cams in the block, enabling optimal positioning of the injector and spark plug in the centre of the combustion chamber. BMW also claimed a first at this time with its all-new 6.0 litre V12 aluminium engine featuring direct injection gasoline injection supplementing Valvetronic technology and fully variable biVanos camshaft control. It claimed that the combination of these technologies allowed unparalleled fuel economy plus supreme specific torque and output. However, its greatest advantage is that contrary to GDI engines incorporating a lean-burn concept and a DeNOx 120 AutoBusiness Ltd

Powertrain catalytic converter, the BMW Valvetronic + DI concept with lambda 1 emission technology is suitable for use worldwide, regardless of the level of sulphur in the fuel available, without any increase in fuel consumption. Ford commenced production of a new generation of gasoline engines featuring direct injection spark ignition in 2003. With turbocharging linked to its new DISI system, efficiency is thought to show an improvement of between 7-10% over conventional power units of similar displacement. DaimlerChryslers first use of direct fuel injection technology was achieved with the M 271 a new turbocharged Mercedes-Benz four-cylinder gasoline engine. Compared to its predecessor, fuel savings averaging 18% were achieved, while at the same time, the new engine was able to comply with the Euro 4 emission limits. Combined for the first time in an engine concept, the M 271 brought together the modules of four-valve technology, intake camshaft adjustment, Lanchester balancer and compressor turbocharging with charge air cooling - and this potent marriage of concepts is known as the Twin Pulse system. This new family of engines makes it possible to achieve power rating variants ranging from 105-141 kW from a single 1.8 litre unit. It is expected that these engines will make inroads in the market up to about 2012. Stratified combustion will extend into 2015 as lean NOx catalysis possibly becomes cost effective and the fuel efficiency gains offered by lean combustion can be realised over a wider speed range. However, direct injection technology may be the enabler for a wider range of technologies. In North America, though, there is nothing like the enthusiasm for gasoline direct injection as found in Europe and Japan, believing that the results are very disappointing. Delphi, for example, will not have a system on the market until the second half of this decade. It is concentrating on fuel-spray control, using higher pressures to get finer atomisation and better control of the stratified mixture in the combustion chamber.

Turbochargers Ricardo Perspective

Turbocharging is the enabler for engine downsizing, as discussed above. For gasoline engines, the variable geometry turbine (VGT) will be a departure from wastegate technology and will allow significant downsizing. However, there are complications with exhaust temperature limits, which will require application of advanced (and costly) materials. Alternative technologies being investigated include an electrically driven compressor, which can supply high boost pressure at low engine speeds using energy from the battery. This requires 42V for powers greater than around 2kW. A traditional turbocharger is then used to supply boost at higher engine speeds in the normal way. This can allow high levels of downsizing and give good driveability. While gasoline direct injection has yet to find acceptance in North America, turbochargers are becoming increasingly popular and, according to both BorgWarner Turbo Systems and Garrett Engine Boosting Systems, a division of Honeywell, will find their way into more North American vehicles. This will be due to the growth of diesel cars in the region. They will also spread to gasoline cars as well, primarily driven by engine downsizing for improved fuel consumption and emissions, but they will not replace normally aspirated engine in numbers until at least 2012. Gasoline engines will be turbocharged by variable-geometry turbochargers, or what BorgWarner calls variable turbine geometry (VTG) that have been fitted to diesel engines since the late 1990s. However, the two-stage turbocharger is set to emerge in the near future as a VGT alternative. This is a system that can continually vary the amount of boost, and because there are two compressor stages, there is a much wider range of which the engine

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Automotive Technology Roadmap can be boosted. While the two turbochargers are not as complex as VGT, there are packaging issues. Looking further into the future, it is possible that electric motors driving the compressors, something that Borg Warner terms an eBooster, will be used alongside a turbocharger. This will be able to boost the engine throughout the entire range and provide high-pressure air whenever needed by the engine, irrespective of the exhaust energy. Garrett Engine Boosting Systems is also developing turbocharger systems, and has high expectations for its twin-scroll technology. This is a technique that results in better engine performance at low speeds, decreased back pressure at high speeds, and significant gains in fuel economy.

Lean-burn
Lean-burn (16 to 22:1 AFR) premix-charge was abandoned in the early 1990s due to lack of suitable after-treatment. Lean-NOx catalysts are now available off the shelf thanks to the efforts required for stratified charge. The premix-charge lean-burn system offers a proportion of the fuel economy gains of a stratified charge unit but at much lower development costs and without a direct injection fuel system. This is particularly relevant to smaller/economy vehicles where engine cost is very important. As engine-size falls the benefits to be gained by avoiding pumping losses fall, but the cost of high-pressure fuel systems remains similar. Stratified charge direct-injection therefore becomes proportionately more expensive on smaller engines.

Crankshaft starter generators

Modifications to the combustion process are not the only way that OEMs and their suppliers are expecting to achieve a reduction in fuel consumption and emissions. Stop-and-go functions for faster, silent motor starting and, to a certain extent, acceleration support, are some of the innovative approaches that have been suggested. Although not a new concept Bosch developed the first combined starter-generator for aero engines in the early 1930s and Moto Guzzi and Lloyd both used the Bosch-Lichtanlasser in the 1950s, it was Continental ISAD Electronics Systems, a Continental Automotive Systems company, that developed the concept for modern use. It first showed the ISAD (Integrated Starter Alternator Damper) system in 1998. ISAD technology combines the starter and alternator functions in one compact highperformance unit that is installed in the vehicle between the engine and the gearbox instead of a flywheel. Bosch, Delphi, Denso, SiemensVDO, Magneti Marelli and ZF have all been working on their own systems, but Continental remains the leader. It began development in 1994 and has signed development contracts with BMW and Citron. The combined starter-generator generates significantly more electrical current than conventional systems. It starts the engine far faster, reaching higher speeds than conventional starter motors and can accelerate the engine to idling rpm levels in only 0.2 seconds, without disturbing noises. When the car stops at a traffic light, the engine turns off. When the driver presses the clutch, it automatically comes back on. This reduces fuel consumption and emissions. Fuel consumption is reduced by as much as 12% through the combination of brake energy recovery with start/stop and booster functions. The start/stop function alone accounts for a consumption improvement of just under 9% in a 115 ps mid-size vehicle with a 1.8 litre engine that was not optimised for these functions. Newer versions, such as those offered by Bosch and ZF Sachs, have a synchronous motor with permanent magnet excitation and internal rotor. In comparison with other designs, internal rotor motors are especially compact and allow greater design flexibility because of the outer stator ring. Other advantages include low inertia and easy cooling line and cable routing. They are compatible with 12-volt electrical systems currently in use, and can 122 AutoBusiness Ltd

Powertrain therefore be used in existing vehicles and they are also suitable for small-volume, low-fuel engines, providing appreciable support in the form of additional torque for the start process and at low rpm levels. Depending on engine size and type, an additional three to eight kilowatts of power are available for use. Despite their low depth of about 55 mm, integrated starter alternators require considerable changes to the design of the entire drivetrain and can therefore only be introduced effectively together with new engine generations. Dana, for example, has prototypes that are in the final stages of development testing which means that its technology can be incorporated in customers platforms from 2006. Delphi has identified the light truck market, including SUVs, for the 42-volt integrated startergenerator (ISG) that is currently under development. Its primary attraction to vehicle manufacturers is its ability to reduce fuel consumption by switching the engine off during coasting and idle, and employing early torque converter lock-up with torque smoothing, regenerative braking, and electrical launch assist. It also boosts onboard power generation and energy storage, allowing for increased vehicle electrical loads. The first models having a crankshaft starter generator came to market in 2003. Following a pilot series for demonstration vehicles and vehicle manufacturer testing in 2002, full-scale production commenced in 2003 at Continentals Landsberg, Bavaria, Germany plant to supply its ISAD system to a vehicle manufacturer for a truck application. The Ford Explorer is expected to be one of the first vehicles to market with this technology in 2004. It is estimated that there will be around 40m vehicles with the 42-volt power system on the roads by 2010, all fitted with crankshaft starter generators. Additionally, there are a few programmes that anticipate using crankshaft starter generators with the existing 12-volt electrical systems.

14-volt belt-driven starter-alternator

A number of stop-start systems rely on 42-volt architecture, but since the introduction of the higher voltage system is being continually delayed, development has focused on systems that are compatible with 14 volts. Whether it be 14 or 28 volts, the in-line crankshaft-mounted ISG suffers from being both too expensive and having packaging problems, which mean that it is not really possible to spread it across a complete car line. Batteries are also an issue for this type of application. The belt-driven starter alternator, as shown by Valeo in 2003, is a flexible alternative to the Integrated Starter-Alternator (ISA). By using the existing alternator engine mountings, the unit is a flexible and cost-effective bolt-on solution that does not intrude on the powertrain design. This design approach is unlike competing water-cooled integrated starter-alternator designs that are located between the engine and the transmission and therefore require extensive, and expensive, re-design of these components. Valeos belt-driven starter-alternator adopts the standard claw pole alternator similar to the 12m units the company produces each year. It combines the functions of the starter and alternator into one easy-to-install unit that, through electronic control, not only efficiently generates electrical energy but also is capable of performing the function of a conventional starter motor. This has sufficient power to crank large gasoline engines of up to 4.2 litres. The system enables the Start-Stop mode, a fuel saving feature Valeo claims it delivers up to 10% saving in fuel consumption that automatically cuts off the engine when the vehicle is at standstill and instantaneously and silently restarts it when the driver engages a gear or releases the brake. It complies with European as well as international environmental regulations. PSA Peugeot Citron is the first vehicle manufacturer to adopt this 14-volt belt-driven starteralternator for an undisclosed vehicle model scheduled for production in Europe during 2004.

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Automotive Technology Roadmap While the powered alternator is relatively inexpensive and has packaging virtues, its limitation is in its cranking capability it can either crank well but not generate, or it has good generation capabilities, but at the expense of cranking. Driveability is an issue with the powered alternator and it is too slow to crank. Starter systems, which are both cost-effective and fast-starting, will still play a part in startstop systems in larger engines in US-built vehicles, but for Europe the issues are packaging and the fact that it retains the existing alternator. The best solution, according to Visteon is the belt-driven integrated starter-generator (ISG) which has a fast and silent start, improved generation capability, is very cost-effective and has package flexibility. Measuring 146 mm x 156 mm, which is roughly the same size as a medium frame alternator, Visteons prototype SpeedStart 12 ISG that it first showed in the autumn of 2003 basically comprises a compact belt-driven starter generator that incorporates the motor and power electronics in one unit. It therefore eliminates the starter motor, alternator, standard battery and belt system and, in some cases, the starter ring gear. Weighing 11 kg, it integrates the starter with the cars alternator and requires an upgraded belt system and a 12-volt Valve Regulated Lead Acid (VRLA) battery. Visteon has worked the system so that stepping on the brake consistently and with a certain amount of force causes the engine to cut out. Unlike other systems, it can still remain in gear and there are a number of other parameters set by Visteon that are also completely changeable. This includes the 16 kph (10 mph) flag that prohibits the engine from cutting out until the car has gone over that speed. Even then, though, the engine will cut out if the vehicle has not moved for eight seconds and the brake pedal has been firmly depressed. The re-start takes just 400 milliseconds. Visteon claims a 5% fuel economy improvement according to New European Drive Cycle (NEDC) figures and a 20% efficiency improvement compared to current alternators, while delivering up to 3 kW continuous generation. It therefore opens the door for other automotive technologies that require higher power. It has more cranking power and torque for premium, large displacement gasoline engines and with the ability to operate at 30C, it enables the deletion of a starter motor for gasoline engine applications up to 3.0 litres. Finally, the SpeedStart 12 is also fully integrated and easy to package even in the tight space of the engine compartment. One drawback yet to be overcome with this system is the inability to power all the systems like headlamps when in use, the air conditioning system and other power functions without the need for the engine to continue running.

Exhaust systems
Traditionally, exhaust systems are suspended rather loosely under the vehicle on rubber bushes that allow it to move up to 2 cm in all directions. Therefore this long item, typically comprising two or three sections clamped together, must be made strong and stiff in all modes. It must be able to expand around 2 cm at 600C on average and due to the acoustics and vibrations that emanate from the engine, the exhaust vibrates a great deal so it must be decoupled from the floor. However, Bosal is the first to develop decoupling of the exhaust from the engine in a mechanical way, thereby reducing the vibration level by a factor of ten. The fundamental concept is that each component of the system is separately and independently attached to the car structure in such a way that only very small relative movements up to 1 mm between the floorpan and the exhaust are permitted. Special rubbers allow thermal expansion to take place. Such a system no longer needs to be self-supporting and can therefore be made out of much thinner material, up to 50%, at which point it becomes economic to use a much higher grade of stainless steel than normally specified. The mechanical stability of the system is provided by the car floorpan, and the corrosion resistance is improved dramatically. Innovative technologies ensure the system is totally de-coupled from engine motion and vibration. Typical exhaust vibration levels are reduced by some 10 dB so that internal noise levels in the car are minimised.

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Powertrain The silencers feature a unique design whereby acoustic and thermal insulation can be combined. In many cases the thermal insulation is so effective that heat shields become unnecessary, reducing cost and weight further. The silencer design also minimises dimensional changes due to thermal expansion, allowing the engineers to apply tight limits to the packaging of the system. The silencers and converters can then be attached more closely and precisely to the car floorpan. Because the exhaust does not move, a considerable amount of space can be saved so that larger silencers can be packaged than with conventional systems a clear advantage in tackling more severe noise legislation in the future. Interested OEMs have already completed running prototype systems on accelerated longterm durability testing with positive results. Bosal is now working on development programs with two OEM customers, that are expected to lead to production contracts. Projected piece prices for production systems show them to be competitive with systems constructed using conventional technologies. According to research presented by exhaust systems manufacturer Heinrich Gillet GmbH, a subsidiary of Tenneco Automotive, there are a number of trends that can be identified that will be seen on future products. Cast manifolds, for example, are increasingly being replaced by fabricated, tubular and/or clam-shell manifolds which improve the light-off of catalysts, reduce weight and increase durability. Gillet claims that weight reductions of up to 40% can be achieved due to new materials and alternative design concepts in exhaust systems. Another trend involves direct-injection gasoline engines that run lean in the part-load range with NO2 storage catalysts used to reduce nitrogen oxides. While passive heat exchangers are already in series production, temperature-controlled active heat exchangers are currently under development. Another trend is in manifolds that have cooler skin temperatures. Bosal, for example, has developed manifolds that have a skin temperature 200C or 300C less than the norm. With packaging becoming ever more critical, the advantage of these cooler items is that they enable plastic and electrical components to be located closer to the engine. The current Opel Vectra is the first of many GM vehicles to be equipped with this fabricated manifold. Manicat , Bosals new manifold concept, is a double-walled design formed from pressed stainless steel half-shells with the gap between the walls partially filled with insulating material. The pressed-steel construction offers powertrain designers increased flexibility in underbonnet packaging both from the design freedom introduced with the manufacturing process and from the reduction in underbonnet temperatures due to the insulation in the new manifold. The insulation also minimises energy loss upstream of heat-dependent items such as a turbocharger, catalyst or heat exchanger. It has an integrated starter catalyst, the main purpose of which is to improve light-off performance of the close-coupled catalyst, with secondary benefits being improved NVH, lower weight and reduced heat radiation to the engine compartment. The first OEM customer program is expected to reach start of production (SOP) during 2004. Current trends in emission standards demand constant improvement in emission control systems, especially in terms of cold-start performances. This dictates that the catalytic converter has to be located as close as possible to the engine to get the fastest possible lightoff. Such a close-coupled converter must be designed to meet very severe conflicting demands of durability high temperatures and vibration levels, compactness, low backpressure and cost. Bosals new radial flow catalytic converter is based on pre-coated corrugated stainless foils packed in stainless steel-framed modular blocks of typically 100 cm3 that can be built up to make the required substrate capacity. The modular approach results in high design flexibility allowing the use of high cell densities up to 1,250 cells per square inch without any increase in back-pressure. It also frees up design solutions where there are severe space constraints. The blocks are aligned in the stainless steel canister to give a homogeneous radial gas flow from the centre axis of the silencer to the periphery, instead of the conventional axial and uneven gas flow of ceramic substrates. AutoBusiness Ltd 125

Automotive Technology Roadmap

The patented radial flow concept ensures an even flow of gas for optimal catalytic conversion and flow distribution throughout the substrate. The corrugated foil substrate has a high cell density and high ratio of voids to material giving a lower thermal mass for a faster light-off. Bosal is currently running a generic product validation programme with an OE customer before moving to a production development programme. Work is also underway on advanced diesel exhaust systems with Emitec, the 50/50 joint venture of Siemens and GKN, showing its new pre-turbo catalyst (PTC) for diesels that makes use of the significant higher exhaust gas temperatures found before the turbocharger. It has already shown a similar product for gasoline engines, but this reflects the growing demand in Europe for diesel applications.

Thermal solutions
Valeo claims that its UltimateCooling concept, that was shown for the first time at the IAA in Frankfurt in September 2003, is an environmentally friendly and comprehensive thermal solution that is applicable to all types of future car powertrains. It provides an optimal, highly efficient, thermal environment with valuable space and cost savings for carmakers, improved passive pedestrian safety and low maintenance costs for consumers. UltimateCooling goes beyond conventional cooling according to Valeo. Current vehicle cooling designs are based on numerous independent cooling systems that each serve a separate thermal function engine cooling, air conditioning and oil cooling. Each requires a separate radiator and specific controls as well as many individually connecting hoses. Such systems are costly, space consuming and complex to integrate into the overall vehicle design. UltimateCooling is believed to be the first comprehensive design approach that offers both a full control strategy and full design flexibility. Using water as the single coolant, UltimateCooling provides carmakers with ease of assembly and offers consumers convenience when refilling the cooling system. The elimination of 70% of the costly high-pressure fluid hoses found in todays vehicle engine bays offers carmakers further potential cost savings. By freeing-up significant space in a critical area of the vehicle, UltimateCooling also offers carmakers the opportunity to improve passive pedestrian safety. Additional crumple zones, for example, may be integrated into the newly created space behind the front grille and will contribute to satisfying future European legislation relating to improved protection of pedestrians and other road users. The UltimateCooling approach is compatible with all engine fuel types as well as hybrids or fuel cells and will enable the optimal and efficient transfer of heat energy out of the engine, leading to better fuel economy and emissions reductions. UltimateCoolings unique single radiator design provides a flexible concept that can be easily adapted across a range of platforms a distinct cost-advantage for carmakers. Based on the THEMIS (THErmal Management Intelligent System) principle, the companys revolutionary engine cooling system which regulates engine temperature according to driving conditions, UltimateCooling also provides full and accurate temperature control and heat transfer between all fluid flow in the powertrains thermal management system. These include the engine coolant, engine oil, engine fuel, recirculated exhaust gas, automatic transmission oil, air conditioning refrigerant and the intake air. According to Valeo, the production of THEMIS, either in part or in totality, is forecast by 2005 and based on the assurances it has received from the different carmakers, the system will inevitably become a standard in engine cooling by 2010. It is currently being tested by the majority of car manufacturers with the first production starts having already been announced.

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Powertrain

Technology trends for gasoline engines Ricardo Perspective

Low fuel consumption does not come naturally to the gasoline engine and hence the diesel engine is rapidly gaining ground. However, gasoline engines are significantly cheaper and offer better emissions performance. In response to these drivers, a number of technologies are being developed to allow the gasoline engine to remain competitive over the next 15 years and more. These include: engine downsizing; direct injection; variable valve actuation (VVA); turbocharging; and alternative operating strategies DaimlerChrysler believes that the following trends will guide the future of the gasoline engine during the next ten to 15 years. The conventional gasoline engine with port injection and exhaust gas aftertreatment in a three-way catalytic converter with oxygen sensor will continue to play an important role. This is due to the unquestionably favourable results achieved by this technology in terms of pollutant emissions and fuel efficiency. With regard to the challenges involving a reduction in fuel consumption, new technological approaches will have to be pursued to shorten the lead currently enjoyed by the diesel engine in terms of fuel efficiency. This will involve technologies such as direct fuel injection, turbocharging combined with downsizing as well as variable valve timing. Indirect technologies will also contribute towards the goal of reduced fuel consumption, one example being the new starter generator system. Tests will also be conducted into combinations of these innovative technology modules. Mono-fuel or hybrid natural gas engines will have a role to play, supported by the increasing availability of natural gas as a fuel. At the end of the day, the success or otherwise of these development approaches will be determined by customer acceptance, costs, speed of development and quality. It is even conceivable that the current dominance of the gasoline engine may be put in question, perhaps even right around the world. For this reason, DaimlerChrysler and all other car manufacturers are calling for the rapid introduction of sulphur-free fuels that are the key to achieving substantial improvements in this situation. Newly developed fuels that tangibly extend the potential of low-emission diesel combustion processes should be made available on the market at the earliest possible point in time. At present, the diesel engine is enjoying rising popularity, a trend that looks set to continue due to its outstanding performance characteristics and fuel economy. Renault also believes that in the short and medium term, reduction of fuel consumption involves downsizing, i.e. maintaining the level of performance by using an engine with a smaller capacity coupled with a turbocharger. If permitted CO2 levels fall even lower than expected, petrol engine technology will become entirely direct injection, which makes it possible to reduce fuel consumption by 10-15%. The point in time at which alternative propulsion systems (such as hybrid concepts with fuel cells or internal combustion engines) will achieve a market breakthrough depends largely on just how swiftly and convincingly the technical problems can be solved and production standards reached. In terms of the future prospects for individual mobility, it is, however, vitally important that intensive research and development is now engaged in this direction. In AutoBusiness Ltd 127

Automotive Technology Roadmap this context, it is also important to develop appropriate and economically efficient processes for the manufacture and distribution of alternative fuels, including hydrogen. With regard to fuel economy, Mercedes-Benz has for example achieved a reduction of 15% against 1990 levels across all model series, combined with an average increase in performance by 14%. It believes that further substantial improvements in fuel efficiency can be achieved if systematic use is made of every innovative technology component available for the powertrain. However, to achieve further reductions in emission levels, improved and in some cases even entirely new fuels are needed which in turn will open the door to new emission control technologies.

Downsizing Ricardo Perspective

Engine downsizing strategy is based on the principal that small engines are more efficient for driving around town, because the components are smaller and so have lower friction. Also, the engine is better able to operate at more efficient conditions (with less throttling). However, larger engines provide highway driving performance and the driving enjoyment, which sell many vehicles. So, if a small engine can be made to feel like the large engin, then improved fuel economy can be realised around town and sufficient performance can be offered, when required. This can be achieved by increasing the specific rating of the engine, i.e. the power per litre of engine displacement. As advanced materials become more economic and turbocharging and supercharging (boosting) technologies are developed, it is becoming possible to make engines considerably smaller, whilst retaining the maximum torque and power output of the larger engine. This is happening in the marketplace today, where, in Europe, 2.0 litre engines are now being replaced 1.6 litre units with the same performance. Between 20% and 30% fuel consumption savings will be possible in the next 5-10 years with turbocharged engines of 1.2 and 1.1 litre replacing 1.8 litre naturally aspirated engines of today. In 5-10 years time, this significant downsizing will be supported by hybridisation (adding an complementary electric drive to the vehicle) technology suitable for mass production. This will allow even further engine size reduction, whilst retaining driveability. Beyond this timeframe, we may see downsized engines switching between four stroke and two stroke operation to better match driver demand, whilst giving excellent performance and low fuel consumption. The most significant area of current technology development is in the boosting system. Key difficulties are overcoming the transient response (removing the delay from when the driver presses the pedal and the engine responding) and low engine speed torque. Variable geometry turbine turbochargers offer a solution to this by offering a wide operating range and good efficiency and are starting to find limited application to gasoline engines today. Downsizing is appropriate for C, D, E and larger classes of vehicle. It is difficult to apply significant downsizing to sub-B and B class vehicles as the engine size is already small (1.01.4 litres). This is because smaller cylinders have a worse combustion efficiency and it is generally not popular to offer three cylinder engines (to increase the individual cylinder capacity). Also, there is a limit to how small turbochargers can be made whilst remaining efficient. Current disadvantages with downsizing include increased NOx emissions, changes in driving feel and the issue of selling cars with smaller engines in markets where engine size equates to personal status. At the present time, modern naturally-aspirated gasoline engines with four valves per cylinder tend to achieve power ratings in excess of 50-65 kW per litre of displacement. This means that, in terms of performance, many cars would appear to have no compelling need for turbocharging. Nevertheless, turbocharging makes perfect sense to achieve other favourable combinations such as fuel savings, weight and package benefits and torque curve improvements.

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Powertrain DaimlerChrysler, for example, is in favour of what is known as the downsizing concept the use of smaller-displacement gasoline engines, with comparatively high power ratings achieved through turbocharging. This conceptual approach is based on the notion that smaller engines operate more frequently in the fuel-efficient range, thereby achieving substantial benefits in terms of fuel economy. This concept is being applied from the three-cylinder SUPREX engine for the smart right across the Mercedes-Benz range of four-cylinder gasoline engines and out to the 12 M 285 Maybach engine with a displacement of 5.5 litres and turbocharging.

Visteon torque enhancement system (VTES)

Another downsizing solution has been offered by Visteon, with its torque enhancement system (VTES). It is estimated that by 2010 there could be up to 12m new vehicles produced in Europe with either turbocharged diesel engines or boosted gasoline engines. This is equivalent to nearly 75% of the total market and as such represents a significant market opportunity. The turbocharger market in Europe alone is estimated to be worth at least US$1bn a year Garretts business with Volkswagen is worth some US$400m. VTES is Visteons key to enter this lucrative market since it is a technology that has been designed to boost low-end torque on normally aspirated gasoline and turbocharged gasoline and diesel engines. It will, for example, allow a naturally aspirated 1.2-litre gasoline-engined car to have the performance of a 1.8-litre model whilst retaining small-car fuel economy. On a turbocharged diesel engine, it can enhance low-end performance despite the advent of expensive variable nozzle turbochargers (VNTs), turbodiesels remain sluggish at low speeds. VTES fills out an otherwise sagging torque curve in this speed region, giving the driver a progressive feel against rising torque and enhancing driveability. Developed by Visteons engineers at Dunton, Essex, UK, VTES is an integrated air management unit that fits under the bonnet of an existing vehicle without any changes to the bodywork. Work on the VTES concept began in 1998; some aspects of the work have been challenging, most notably making it work, developing the necessary electric power control strategies and meeting duty cycle requirements. The electrically-driven compressor, running at speeds of up to 50,000 rpm, and its air intake, are integral with the normal car battery and are linked through a controller to a smart charge alternator. Inlet air by-passes the supercharger when it is not in use. VTES cuts in instantaneously to provide an increase in boost pressure at the inlet manifold, especially at low engine speeds. This lifts the torque curve of a 1.2-litre engine by 30-40%, particularly in the engine speed range of 1,000-4,000 rpm. A sophisticated electronic control system links the compressor to the vehicles electrical charging system through the smart charge alternator to ensure there is no loss of control of the energy balance within the vehicles electrical system. Engineers claim the system is transparent headlights will not dim on full throttle drive-away. Although the battery is of standard automotive duty it must be able to accept deep charges and discharges. VTES operates only on demand so it is being used only for about 10% of the time, claim Visteon engineers. Between 30 and 40 patents are involved in the new concept, many of them in the design of the lightweight, high-efficiency compressor wheel and its motor power control module, the smart charger alternator and the powertrain control module. The system adds 5 kg to overall engine weight. The implications for car makers are significant: the technology allows manufacturers to cut their carbon dioxide levels to meet future agreed ACEA fuel economy levels of 140 g/km in 2008 and 120 g/km in 2012. Forecasts suggest that by 2012, makers of naturally aspirated gasoline engines will see their market shrink to 30%, leaving boosted gasoline engines with 15%, boosted diesels with 50% AutoBusiness Ltd 129

Automotive Technology Roadmap and mild hybrids with 5%. Manufacturers will be able to use VTES to boost gasoline engines or downsize their engine ranges by at least 20%, for example replacing a 1.8-litre engine with a 1.4-litre power unit. In diesel applications, Visteon claims VTES does not require a costly VNT a simple wastegate design is adequate. This is significant since VNTs can cost US$250 each against US$125 for a wastegate unit. An electronically-controlled VNT costs around US$300. However, Visteon remains vague about costs, merely noting that it is application specific; this suggests it is quite expensive. A figure of half the cost of a direct injection gasoline system has been mentioned. VTES can be applied to all engines in the range of 1.2 to 3 litres. One potential future application could be Fords new twin-turbocharged 2.7-litre V6 Lion diesel engine for Jaguar while Fiat could be among the first to use the technology.

Alternative solutions
While there are always new solutions being presented on conventional engine technology that often are not viable or lack thought, some do show the kernel of a good idea. One such is the e3 Variable Motion Engine concept shown by Mayflower in October, 2001 that has been under development since 1990. A radical solution, it has the ability to alter the compression ratio and the swept volume while running via a complicated process that moves the stroke relative to the bore without changing the length of the stroke. The piston motion is also different to that of a conventional fourstroke engine in which the big end revolves around the crankshaft centreline in a circular motion. In the e3, the additional link causes the big end to follow an elliptical path. Mayflower claims an advantage here in slowing the piston immediately after TDC, allowing extra time for more complete combustion. As an engine usually runs at part load or unloaded for 95% of the time, Mayflower claims that the e3 would improve fuel consumption by at least 40%. It also claims a 50% reduction in emissions. No details have been disclosed relating to the control mechanism that adjusts the position of the lever arm pivots. Saab has been working on the SVC concept for more 20 years, but it was not until 1997 that enough processing power became available to build the first serious prototype. The processing power required for current research engines is considerable and Saab uses two, 32-bit Motorola processors, each with 64 kb of RAM and 512 kb of flash RAM. Although Mayflower is not an engine producer and does not wish to get into that area, it is investing in the technology with a view to licensing it especially as the technology can be applied to both two and four-stroke engines powered by both gasoline or diesel. It does, however, remain a big gamble. The A, B and C-segments are becoming flooded with low cost, lightweight, highly efficient and yet fairly conventional engines with the latest designs already comfortably meeting Euro 4 and beyond.

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Powertrain

Summary Ricardo Perspective

In summary, the gasoline engine will require the application of additional technologies to ensure fuel consumption and emissions keep up with legislation and environmental targets beyond 2008. This will add to the cost of the powertrain, but some technologies offer more benefit for less cost. Figure 37 summarises the powertrain cost increase versus fuel consumption improvement (CO2 reduction) over the NEDC test cycle for a range of gasoline engine technologies.

Figure 37: Cost /Benefit Trade-off for Engine Technologies

Cost of Fuel Economy - Euro 4, C-segment vehicle
30

Reduction in Drive Cycle CO2 (%)

25

Opportunity to develop better, lower cost CO2 & emissions solutions Opportunity to promote technologies which enable cost effective alternatives
Lean Boost DI
GDI Strat

Diesel Target? 4v HSDI Diesel

Diesel +

20

15

PM trap Dies el + DPF Effic + ie Cos ncy - 5- LNT t+2 8 0-25 %? %?

10
2stg cam

Full

Downsized Boosted GDI (Strat) Downsized Boosted GDI Downsized Boosted MPI

VVA GDI
Hom

Dual

VVT

0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Increase in Unit Cost (%)

4v MPI Gasoline

Source: Ricardo

This indicates that lean boost DI technologies have the potential to offer excellent economy gains for a reasonable increase in cost, especially when compared with the diesel engine after the cost and efficiency reduction of the necessary diesel aftertreatment is considered. The most important and common aspect of these technologies is downsizing. This is one of the most effective means of reducing fuel consumption.

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Diesel Engine Technology

Ricardo Perspective
The diesel engine has witnessed an impressive surge in sales, particularly in Europe, in all classes of vehicle over the last five years. This has been mostly due to direct injection technologies, which have offered significant gains in power output, refinement and fuel economy. Large diesel engines are now the powertrain of choice for larger vehicle classes and even very small B class vehicles are selling with more diesel versions than ever. The following technologies will continue this progression for the diesel engine: downsizing; weight reduction and new materials; fuel injection systems; emissions control technologies; and air handling and exhaust gas recirculation systems

Downsizing for diesels has exactly the same basis as for the gasoline engine as described above. Specific power increases are again achieved by turbocharging and modifications to the combustion and fuel injection systems (described later). For the diesel engine, the constraint on power output is the peak cylinder pressure and the compression ratio. Over the last five years, these have been changing to reflect a general increase in specific power and a resulting downsizing in the market place as shown in Figure 38.

Figure 38: Effect of diesel engine downsizing on fuel consumption

General Trend

Effect of Downsizing on Fuel Consumption

7.0 Fuel Consumption (l/100km) Opel 2.2 6.5 6.0 5.5 Renault 1.9 5.0 Volkswagen 1.4 I3 4.5 4.0 Renault 1.5 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 Opel 1.7 Volkswagen 1.9 I4 Opel 2.0 Alfa Romeo 1.9 Opel 2.0 Alfa Romeo 2.4

Engine Capacity (litres)

Source: Ricardo

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Ricardo Perspective (contd.)

Five years ago, the compression ratio was typically 20:1, which provided cold starting ability. Now, however, this is reduced to typically 17.5:1, as cold starting is less of a problem, because of the use of advanced glow plugs and common rail fuel injection systems. Using a lower compression ratio reduces friction in the engine and can also allow higher specific ratings. Maximum cylinder pressures are now 160 bar and approaching 180 bar in production engines. Ten years ago, 130 bar was the norm. This advance has required developments in structural design, materials and engine control techniques. Further significant downsizing is expected over the next five to ten years. Downsizing from 2.0 litre to 1.4 litre can be expected to yield a 10-15% gain in fuel consumption. This can be extended with hybridisation and further advances in air boosting technologies. The trend in typical specific power ratings shows an increase from 40kW/litre five years ago to 50kW/litre today, 60kW/litre by 2005 and 70kW/litre by 2008 in mass production. This is resulting in smaller engines with highly enjoyable driving characteristics, lightweight structures and good fuel economy.

Since 1989, when the first particulate emission standards were introduced in Europe for light diesel vehicles, particulate emission limits have been lowered by a factor of 22, from the original 1.1 grams per kilometre (old test cycle) to todays limit of 0.05 grams per kilometre (Stage III). Even tougher diesel particulate emission limits are now being developed to meet Stage IV standards. At the same time, state-of-the-art diesel performance has increased at an astonishing rate. For example, the maximum power of the Volkswagen 1.9 litre engine has increased from 90 to 150 ps in less than a decade. The latest 79 ps/litre rating makes this diesel competitive on specific output with all but the highest-rated gasoline units. A raft of technical improvements is behind the rise in diesel performance. Fuel system pressure increases have reduced combustion system reliance on extreme charge motion and so allowed free-flowing intake ports and increased volumetric efficiency, while reducing smoke limited AFR. 4-valve cylinder heads have improved airflow. Variable geometry turbochargers have allowed the usable spread of power to be increased. Control system advances have allowed diesel-knock to be reduced and performance to be increased while limiting rises in cylinder pressure. Higher cylinder pressures can now be tolerated. Material improvements and the widespread use of finite-element methods have allowed these strength increases without equivalent mass gains. Advances in combustion control, catalysts, and exhaust filtration have removed the threat of imminent extinction from emissions legislation, while particulate emissions are no longer seen as an exclusively diesel issue.

The result of these improvements, together with the financial benefits gained form either a lower price per litre, tax incentives or both have seen European diesel car sales rise from 14% of the total car market in 1990 to around 28% in 1999, 36% in 2001, 40.9% in 2002 and almost 44% in 2003 to a record 6.2 million cars. Sales of petrol-powered vehicles slumped about 7%. The biggest growth areas are in the large medium car and multi-purpose vehicle segments with market penetration reaching 47% and 68% respectively for these segments. This trend is expected to continue with diesel penetration expected to be anything between 40-50% by 2005. Diesel engines have traditionally enjoyed fuel economy benefits of around 15% compared to gasoline engines a difference that is expected to be maintained and will sustain the volume and growth through its contribution to CO2 reduction. However, it has been the advent of

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Automotive Technology Roadmap common rail fuel injection, variable geometry turbochargers coupled with improvements in cooling techniques that have given what looked to be a fading technology a new lease of life.

Weight reduction and new materials Ricardo Perspective

Weight reduction and new materials are assisting with downsizing and general fuel economy gains. For larger Vee-type engines and in-line 4 and 6 cylinder engines, cast iron is being replaced with spheroidal graphite cast iron (SGI), which is tougher, so it can be used in thinner structural sections. This saves weight or allows very high specific engine ratings (>60kW/litre). Aluminium is also being used in larger engines to save weight. For the smaller engines (<1.5 litre), aluminium is being used extensively, resulting in engines weighing less than 100 kg. Over the next five years, this trend will continue. Over the next ten years, many larger engines (>2.5 litre) will be all aluminium.

Common rail
In the common rail system, the fuel is distributed to the injector nozzles at a high pressure of up to 1,800 bar via a common distribution pipe the common rail while the electronic engine control adjusts the injection pressure at will, as a function of engine speed and throttle position. Sensor data from the camshaft and crankshaft provide the electronic control unit with the basic information required for a precise and need-oriented adjustment of the relevant injection pressure. However, high-pressure injection causes an increase in NOx emissions but this has been resolved by something called pilot injection. A small amount of fuel pre-injected into the cylinder ignites immediately, thereby preheating the combustion chamber. As a result, ideal conditions are created for the main injection process; the fuel ignites more rapidly, and yet the temperature does not rise so abruptly, with advantageous effects on NOx emissions. Pilot injection also reduces combustion noise, so that direct injection diesels can achieve the same good noise level as modern pre-chamber engines. Conventional high-pressure injection systems have separate lines to each cylinder, so that the injection pump has to generate the injection pressure over and over again, separately for each combustion chamber and repeatedly with each working stroke of the engine. The advantages of the common rail system are reduced CO2 emissions and even lower particulate emissions in the exhaust, less combustion noise and improved fuel consumption. Modern diesels have redefined levels of performance and driveability as well as exceptional refinement and NVH (noise, vibration, harshness) this has allowed the diesel to displace a number of gasoline variants and provide entry into the premium segments. The range of diesel engines has to be increased to cater for this level of customer choice. From its introduction into the marketplace in 1996, Bosch supplied a total of 4.3 million common rail and unit injector systems in 2001, up from 2.7 million in 2000. By 2002, it had a manufacturing output of more than 4 million systems involving around 17.6 million injectors for both passenger and commercial vehicles.

Boschs third generation common rail system

At the IAA 2003 in Frankfurt Audi showed an A8 with a new 3.0 litre, six-cylinder diesel engine the first series application of Boschs third generation common rail injection system with innovative piezoelectric inline technology. The special features are the inline injectors with their piezoelectric actuator built into the injector shaft and lying very close to the needle of the injector jet. The new injectors have 75% fewer moving parts and 75% less mass allowing them to switch twice as fast as conventional magnetic and piezoelectric injectors. This results in lowering diesel engine emissions by up to 20%, increasing the achievable engine power by 134 AutoBusiness Ltd

Powertrain 5% to 7%, reducing fuel consumption by 3% and lowering engine noise by 3 dB(A) depending on the specifics of engine development. Production of the new generation of the system commenced in May 2003 with around 20,000 piezoelectric inline injectors having been produced for Audi and other OEMs by the end of that year. This was expected to increase to 300,000 units in 2004 to meet orders from DaimlerChrysler, BMW and Renault while more than 2 million of the novel injectors are expected to come off the production line in 2005. A future development from Bosch includes injection pressures of 1,800 bar matching that of Denso that was introduced in 2002 that are scheduled to go into series production in 2005. A further technological leap is planned for 2006 with Bosch examining raising the injection pressure at the injector jets to more than 2,000 bar by means of a kind of pressure gearing, without having to increase the system pressure itself. It is also simultaneously working on injectors with variable-geometry injector jets.

Common rail for commercial vehicles

Common rail fuel system technology has, until now, been tainted in a heavy-duty truck and bus diesel context with an image of questionable component durability. Meanwhile, for transport companies whose annual fuel bills can tilt the balance between survival and insolvency, small percentage point differences in fuel efficiency increasingly influence vehicle purchasing/leasing decisions. When it comes to getting the best possible fuel economy from a big diesel, under the ever more rigorous constraints of emissions legislation, common rails maximum injection pressure limitations have put it at a disadvantage against engine camshaft driven unit-injector and so-called unit-pump systems. However, those perceived shortcomings are being rectified in an entirely new generation of diesel fuel systems that nevertheless retain the common rail principle of fuel being held in an accumulator under continuous pressure. Bosch revealed in early 2003 its plans for a new pressure intensified version of common rail. In the vital matter of balancing fuel consumption against emission law compliance, Bosch says it will outperform the most advanced unitinjector and unit-pump systems in production today, including the Delphi two valve E3 and Cummins-Scania HPI designs. In Boschs revolutionary Amplifier Piston Common Rail System (APCRS), a 2.5 to 1 pressure intensifier is provided for each injector. Either built into the top of the main injector body, or as a separate amplifier piston module between accumulator (rail) and injector, it delivers nozzle pressures up to 2,500 bar compared with 1,800 bar for normal common rail technology. At the same time, it will allow intricate, multi-event, rate shaping precise regulation of the rate of fuelling through the microseconds of each injection stroke. In satisfying those criteria, the APCRS system will enable Euro 5 truck and bus emission limits 2 g/kWh NOx and 0.02/0.03 g/kWh particulates to be met in 2008 with the best possible fuel economy and torque characteristics. Crucially, the system is also designed to overcome todays widely voiced doubts about common rail component durability. Each injectors stepped-piston hydraulic intensifier will generate nozzle pressures matching even the Cummins/Scania HPI unit-injector systems industry leading 2,400 bar but from a modest maximum accumulator, i.e. rail, pressure of no more than 700 bar, though 1,000 bar is envisaged eventually. As with HPI and the Caterpillar/Navistar HEUI fuel system, both of which also feature stepped-piston intensifiers, the very high spray pressure is confined to the plunger and nozzle part of the injector, where tight machining tolerances and sealing are inherent. APCRS pump, rail and component strength and joint sealing, over say a 1.5m kilometre engine lifetime, consequently pose fewer durability issues than in present common-rail installations based on 1,300-1,600 bar maximum rail pressures. In any case, the intensifier does not function continuously, but only when dictated by the sensors monitoring engine speed, load, fuel usage, and interfacing the calculated emissions map. EU legislators are hopeful that by 2008, when Euro 5 limits come into force, sufficiently AutoBusiness Ltd 135

Automotive Technology Roadmap accurate and robust sensors indicating NOx as well as particulate matter (PM) tailpipe emission levels will be available. They would provide input signals to the fuel system as well as for mandatory on-board diagnostics. For Euro 4, the EU has approved OBD systems relying on NOx and PM measurements calculated from the engine map. Under the control of the system electronic control unit (ECU), when fuel consumption is not jeopardised by the systems control of particulate and NOx emissions, the intensifier is closed off, i.e. by-passed, and the injector nozzle receives only rail pressure up to its 700 bar maximum. An additional solenoid, when signalled, diverts fuel at rail pressure away from the regular nozzle feed line to the intensifier. There it exerts a downward thrust on to the larger diameter top face of the stepped i.e. two-diameter piston. The bottom face of the piston, because of its 60% smaller cross-sectional area, converts that kilogram thrust into a 150% pressure amplification. For example, 700 bar (10,290 psi) above the piston becomes 1,750 bar (25,720 psi) below it. If the ECU calculates that, within the Euro 5 European transient cycle (ETC) emissions window, fuel economy could benefit from an increase in injection pressure above the highest available in the rail, then the intensifier is activated. Compared with current common rail systems, the APCRS systems 40% lower accumulator pressure needs less pumping energy. Nevertheless, some diesel makers presently committed to UI and UP fuel systems, with pumping elements by definition driven from the main engine camshaft, are understood to be already looking at the feasibility of converting their engines to APCRS. Rather than adopting the system as initially being offered by Bosch complete with its timing gear-driven high-pressure pump diesel makres think they might retain (rather than scrap) the considerable pumping potential of one or more of the existing fuel system lobes on the engine camshaft. As well as being cost-effective, such a solution could, in the case of either overhead or in-block camshafts, allow beneficially short and response efficient pipe connections to the accumulator/rail. Claims made by Delphi for its two valve E3 unit-injector, now being fitted to Volvo D12 engines for the North American market, include performance flexibility features similar to those put forward for APCRS by its rival Bosch. However, it seems probable that beyond Euro 5, when legislation is expected to stipulate acceptable soot particle size and/or number, an intensified common rail system might allow the necessary injection rate-shaping more readily, without compromising the very high nozzle pressures which help reduce particulate mass. Among the most significant future users of APCRS is understood to be DaimlerChrysler. Group engine executive Michael Schittler has said the maximum injection pressure capability of todays best unit-injectors up to some 2,400 bar at the nozzle combined with the versatile injection process rate shaping provided by common rail flexibility, will prove unbeatable. The intensified common rail system is expected to be adopted on DaimlerChryslers all-new globally-rationalised in-line six-cylinder big engine range due in about 2007. Under both the Mercedes-Benz and Detroit Diesel brands, it is due to replace todays Mercedes-Benz 500 Series V6 and V8, the Brazilian-made 12 litre OM457 and its longer-stroke 12.8 litre MBE4000 derivative, as well as the Detroit 60 Series. Because DaimlerChryslers next generation of big diesels will have to meet emission rules on both sides of the Atlantic, Bosch has had to ensure that its intensified common rail injection system is compatible with the two very different technology routes being adopted to reduce NOx. All indications are that, for the US market, EGR (exhaust gas recirculation) is here to stay, at least through the emission limit step-downs scheduled for 2007 and 2010.

Piezo technology
To date common rail diesel systems have been equipped with injectors featuring solenoid valves to control the amount of diesel injected. This is a proven technology not a small merit in vehicle design so why change it? Emissions legislation (Euro 4 and 5), smooth running and acoustics provide the answers. Now that the common rail principle permanently offers 136 AutoBusiness Ltd

Powertrain high-pressure fuel for injection at any given moment, it is indeed possible to control the combustion process very closely. For that end it will become important to add several small pilot and post-injections to the main injection during a working cycle. While solenoids are an indispensable part of the common rail system, another technology that has been successfully developed and applied and may one day replace them is the multilayer piezo actuator. One of the limiting factors of solenoids is that they are not quick enough to offer more than one pre-injection plus one post-injection. In particular, two development goals demand multiple injections: One is a slower pressure build-up and pre-heating via a pilot injection combined with a steep slope of the injection rate during the main injection The other goal dictating possibly several post-injections is to burn soot particles more efficiently. Additionally, one of the post-injections can be utilised to help regenerate a particulate filter

The multilayer piezo actuator developed by SiemensVDO Automotive for the Peugeot 307 presently offers four times the speed of a solenoid. At this level, at least five injections will be possible during one injection cycle with six being achievable. This is because electrically speaking the piezo is a capacitive element that reacts to a change in voltage with a change in form faster than any other system known to date. Piezo technology is a means to improve two fundamental criteria further: injection volume and timing while also offering flexibility. Injection time, pressure and volume can be selected freely via the engine controller. For example, multiple injections can be used under 2,500 rpm, double or triple injections in the middle rev field and single injections at full load and throttle. SiemensVDO believes that its piezo technology will make an important contribution to the injection process. Initially the company is focusing on the European market with its continuing growth in the diesel segment, but it has already entered the US market with a joint venture with engine manufacturer International (formerly Navistar) under the name Siemens Diesel System Technology (SDST) in 1997. Presently around 4 million direct valve injection units are manufactured a year with the first product being a modified high-pressure injection system based on the common rail principle for use in light-utility trucks. SiemensVDO is also investigating its suitability in other areas including unit injectors, variable valve lift to make injection control even more flexible and even in gasoline injection systems.

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Figure 39: SiemensVDOs piezo injector

Source: SiemensVDO

In October 2003, Delphi unveiled the next-generation of its Multec common rail technology, which now uses a unique solenoid injector design to optimise fuel rate, spray shape and accuracy. The new system provides the smallest injection quantities, highest precision fuel delivery and, along with closed loop strategies, results in claimed best-in-class emissions and acoustics performance. It can deliver up to five injections per cycle, allowing high flexibility for combustion optimisation. In addition, it is capable of 1,800 bar system pressure, although initial Euro 4 applications are at 1,600 bar. At the same time Delphi also introduced a unique, piezo-based injector that is expected to generate a 25-30% reduction in emissions in its first implementation (compared to the current piezo common rail technologies) and could lead to better results with further combustion optimisation. This Piezotecinjection system will help OEMs meet Euro 5 emissions regulations on heavier vehicles, and stringent new US emissions regulations. It can deliver up to seven or more injection events per cycle with extremely high fuel quantity accuracy for pilot, main and post events. The design breakthrough allows dramatically reduced spacing between events, giving engine designers full freedom to shape the flow of fuel throughout the combustion stroke. Delphi will be producing around 2.5m systems per year by 2007. Its Multec common rail system is fitted by Renault/Nissan, PSA Peugeot-Citron, Hyundai/Kia, SsangYong, and Ford/Premier Automotive Group. The enhanced system will enter production with Renault and Hyundai from early 2004. Four additional vehicle manufacturers have also selected Delphis systems for introduction in 2005 and beyond.

HCCI
Homogeneous charge compression ignition (HCCI), sometimes known as controlled auto ignition (CAI), is a relatively new and promising combustion concept that works by self-ignition of an ultra-homogenous lean mixture that instead of, as in todays technology, late injection of diesel fuel droplets igniting several flames, the air and fuel are first mixed together, as with 138 AutoBusiness Ltd

Powertrain gasoline technology, to obtain a homogenous mixture. The piston compresses this until the temperature rises to the inflammable point and the mixture self-ignites. The flame propagates immediately and at a lower temperature than with current engines. This reduces the production of NOx and also the formulation of particulates. Another benefit of HCCI is that because it is a lean-mixture technology, it also reduces fuel consumption. Because HCCI combustion is a thermal-related auto-ignition process, with ignition itself being controlled mostly by chemical kinetics, it is vitally important to be able to control conditions in the combustion chamber instantaneously. However, conventional control techniques (such as the engine management system) are not suitable. There are several control techniques available to HCCI offering the potential to control the timing of auto-ignition and the rate of heat release. One of these is exhaust gas recirculation (EGR). After several years of slow movement, homogenous charge compression-ignition (HCCI) technology has moved quite rapidly since the start of 2002 and is starting to become more widely accepted. Japan led this acceptance, with the US and Europe following behind. Work into HCCI began in Japan in the late 1970s when the phenomenon was discovered quite by accident. Since then the technology has been applied mainly to two-stroke motorcycle engines. Now both Nissan and Toyota have the technique under investigation. Honda too is understood to be assessing the technology. In North America, Ford is known to be actively pursuing HCCI, but under a different name, and one manager at DaimlerChrysler has already published a book on the subject, suggesting the carmaker does have more than a passing interest in it. In Europe, Lotus appears to be the most active company; although it is understood Jaguar has just begun to investigate HCCI. There is work going on too in France at LInstitut Franaise du Petrole, but the PSA Peugeot-Citroen group appears to be holding its cards close to its chest. In Germany, carmakers seem to be watching and waiting. Fiat is understood not to be active. However, in Sweden Volvo is keen and so too is the Lund University in Malmo and Helsingborg, and Chalmers University in Gothenburg. However, in the UK, researchers at Lotus Engineering and Loughborough University are pioneering the application of HCCI to four-cylinder spark ignition engines, since this is the area where Lotus is perhaps best known for its expertise. Lotus began its work in 1997; Loughborough started work a year later. The basic aim of the work is to effectively tackle NOx and CO2 reduction at source. Researchers in the UK claim HCCI can give a 97% reduction in NOx at low loads and up to 30% reduction in fuel economy and consequently CO2 reduction. There are several alternative methods of initiating HCCI in an internal combustion engine: preheating the mixture (as used by Ford) and exhaust gas re-circulation (EGR). At the heart of the Lotus/Loughborough University work is the concept of using EGR to initiate the process. Within the EGR remit, there are two alternatives: internal EGR and external EGR. Of these, internal EGR can be applied to existing engine architectures; external EGR, on the other hand, requires a fundamental redesign of the engine leading to significant on-costs not only in terms of component design, manufacture and supply but in machining and manufacturing. A fundamental feature of the Lotus work is the use of variable valve technology (or, as Lotus prefers to call it, Active Valvetrain AVT) to control the HCCI process. AVT is the precursor of the camless engine. The next-generation of HCCI engines will have camshafts, but future HCCI engines are likely to be camless. On the basis that AVT can be fitted to an engine then, in theory, it is possible to introduce HCCI into any spark ignition engine. This not only widens the scope for the application of HCCI, but also broadens the appeal in Lotus being able to market and sell its technology overseas. The other major difference is a change of piston design. AutoBusiness Ltd 139

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Tests are being conducted on a four-cylinder, 1.8-litre GM-Opel gasoline engine with three of the cylinders blanked off. The complete engine can develop about 100 ps (73 kW) but the single-cylinder laboratory derivative produces some 25 ps (18 kW) The Opel engine carries Lotuss AVT in which electro-hydraulic units are used to control valve motion. AVT is able to independently control all four elements of valve actuation, namely: exhaust valve opening and closing; and inlet valve opening and closing. The fundamental problems surrounding HCCI, and ones still to be surmounted, are those of control. Researchers have found that auto-ignition has been difficult to control over the entire range of engine speeds and loads; also difficult to control are the high hydrocarbon (HC) and carbon monoxide (CO) emissions and the high cylinder pressures. As a result, HCCI is limited to the operating region between idle and part load. Operation at higher loads can lead to rapid increases in cylinder pressure, up to10 bar per degree of crank angle effectively an explosion. Such explosions can be damaging to the engine and would need to be guarded against in production engines. According to Renault, which is one of the advocates of this technology, proper functioning of the HCCI concept cannot be ensured at high engine power and torque. If the mixture is ignited as in a traditional diesel, the pressure that builds up in the cylinders (over 200 bars) is incompatible with the mechanical structures of diesel engines, which can resist a maximum of around 190 bars. In other words, it will probably be necessary to combine two different modes of combustion: HCCI when the engine is under low load; and beyond a certain threshold, traditional injection-controlled combustion (where fuel is injected sufficiently late to limit the pressure). HCCI will also work with gasoline engine technology, with the same advantages and the same drawback of ensuring correct ignition under heavy load to be overcome. Within Renault-Nissan, development work is being carried out in two locations Renault on the diesel application at Rueil-Malmaison, France and Nissan on gasoline in Tokyo, Japan. Other partnerships include one between Lotus Engineering and Eaton Automotive to develop and produce a production version of the Lotus Active Valvetrain (AVT), that formed in 2003, while there is a EU-funded consortium working on HCCI in high-speed diesel engines. Besides Lotus Engineering, the consortium consists of Renault, GM-Opel, LInstitut Franaise du Petrole, CRT, Polimi and Brunel University. Looking ahead to 2010, it appears likely that research may converge on HCCI.

Aftertreatment Ricardo Perspective

Emissions Control Technologies (ECT) are likely to create a step change in 2005, with the introduction of the diesel particulate filter (DPF) to many diesel vehicles. These filters trap carbon particles and then burn them off (into safe CO2) at intervals of about every 300 miles. This results in completely invisible exhaust gas and helps reduce airborne particulate matter, which is linked with causing asthma and cancer. However, the use of the DPF reduces fuel efficiency (by 1-5%) and adds cost to the vehicle. It is likely that vehicles above 1,600kg will require the filter to achieve Euro 4 emissions. Also, some governments may insist on fitment (as is the case in Tokyo now), even if legislated levels are achieved by other means. The Lean NOx Trap (LNT), as discussed in the gasoline section is likely to be fitted to larger diesel vehicles (above 1,360kg) in order to achieve emissions legislation beyond 2008. Again, this is a complex technology, which may worsen fuel consumption. Selected Catalytic Reduction (SCR) is a competing technology to LNT for 2008 and has the advantage of being simpler and may improve engine fuel economy. However, it requires added infrastructure for the supply of Urea or Ammonia which is difficult to achieve for the huge dispersion of fuel stations throughout Europe and beyond.

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Ricardo Perspective (contd.) Turbochargers

Air handling systems are vital to the success of the diesel engine and an enabler for downsizing, as described in the gasoline section. For the diesel, to achieve 70kW/litre with sufficient spread of torque through the speed range, a twin boost system may be employed. This consists of two turbochargers of different size to give high boost levels across the speed range. A schematic is shown in Figure 40.

Figure 40: Simple twin boost turbocharging

Engine
Intake Exhaust

Turbo 1

Turbo 2
Source: Ricardo

There are considerable dynamic control challenges for this arrangement but it will allow very significant performance gains to be made. A number of OEMs are preparing this for production in 2008. The Variable Geometry Turbine (VGT) systems mentioned in the gasoline section are now common on diesel engines of 45-55kW/litre. These are expected to develop into the second generation technology by 2004, which will give higher efficiencies at low engine speed, so offering further torque improvements. Beyond this, the use of variable geometry compressors are probable, although the cost/benefit balance will have to be proven in comparison to other technologies. Electrical compressors (E-Boost) systems are also being investigated (as for the gasoline engine) to enable fast response at low engine speeds and their potential to replace the expensive VGT with a traditional wastegated turbo. This may appear by 2008.

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Figure 41: Boschs diesel particulate filter

Source: Bosch

Pistons
The combined effect of higher fuel injection and, in many cases, combustion pressures, together with reductions in fuel sulphur and likely adoption of EGR and aftertreatment, is unavoidably bringing higher piston loadings. Compared with typical current (Euro 2) engines, an increase of heat flow into the piston of 20% could be anticipated, along with a peak cylinder pressure increase of some 40%, up to 26 MPa. Piston durability is accordingly being challenged. Aluminiums attractions of low inertia weight, good heat conductivity and cost-efficient manufacturing have to be set against its fatigue strength limitations in particular. A NiResist top groove insert and an annular cooling gallery have helped improve durability, as have brass gudgeon pin bushings. However, more durable material for the main body of the piston has also been required. Mahle, Europes largest piston manufacturer, has formulated two new higher-grade aluminium alloys to withstand the higher heat and pressure loadings projected under Euro 4 and 5 conditions. Crucially, the copper content (by weight) has been increased, from the 0.8-1.5% found in regular Mahle 124 piston material, to 2.5-4% in the latest Mahle 142, and 4-6% in the even tougher Mahle 174 specification. The nickel content has also been increased from 0.8-1.3% to 1.75-3% in both new alloy grades. The silicon and magnesium constituents are largely unchanged. The new alloys not only promise up to 60% better fatigue characteristics, they also result in up to a 15% friction wear reduction, implying gains in engine service life. Forged steel as an alternative piston material offers clear fatigue strength and wear resistance advantages over aluminium, in the extreme cylinder pressure and temperature conditions associated with future low-emission diesel technology. However, those merits are offset by higher inertia weight, poorer heat conductivity and higher machining costs. On Mahles latest Monotherm forged steel piston design, though, elimination of lower-stressed areas of the skirt portion has helped to reduce reciprocating weight, almost to that of an aluminium equivalent.

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Powertrain Competitors have manufactured articulated diesel pistons with a steel crown and an aluminium skirt. However, Mahle has found that maximisation of gudgeon pin bearing strength in meeting the demands of higher peak cylinder pressures was hampered by the unavoidable shortfall in bearing strength around the skirt portions aluminium-supported bearing. As with aluminium pistons, mechanical properties, notably fatigue resistance, at high Euro 4/5 combustion temperatures, were critical in developing improved steel pistons for future truck and bus diesels. Mahle anticipates a move away from manganese-rich micro-alloyed steels towards quenched and tempered chromium-molybdenum or even chromium-silicon rich steels. The latter could tolerate surface temperatures up to 600C, though there was an unavoidable trade-off in heat conductivity. With hotter surface temperatures, of 450C or more, there is an increased likelihood of material oxidation, seen as formation of scale with an attendant risk of cracking. Mahle has tackled the problem with two different strategies. One was to use a nickel-chromium alloy protective coating applied by thermal spray. The other approach was to protect the part of the piston crown most vulnerable to scaling and subsequent cracking, namely the bowl rim, with a ring of higher-grade steel. Mahles articulated (two piece) Ferrotherm diesel piston used manganese-steel alloy for both crown and skirt components, but the radiussed edge of the bowl rim comprised a more heat-resistant chromium-silicon steel.

Compacted Graphite Iron (CGI)

There has been a great deal of debate about material usage in future diesel engines. With talks of peak pressures increasing from the current 160-180 bar to around 190-210 bar for light duty diesel engines, existing materials are reaching their limits. This is allowing new materials and solutions to make an appearance. However, CGI is not a new material as such. It is a particular grade of iron in which magnesium content is important and needs to be controlled to within +/- 0.003%. It must also have more than 80% of its graphite particles in compacted or vermicular form. Having rounded edges and irregular surfaces rather than elongated flakes with sharp edges and smooth surfaces that characterise conventional grey cast iron, natural crack propagation avenues tend to be eliminated in CGI. Where normal grey cast iron has a tensile strength of 25 kg/mm, that of CGI is 40 kg/mm, this strength making it better suited for diesel engine cylinder blocks. Ford engineers have been working on CGI for the last two decades while Audi has used it for the blocks of its high-performance 3.3 litre diesel. However, annual production volumes per engine are typically around only 3,500 to 4,000 units. Following joint research between a number of companies including SinterCast, the Swedish company that has developed the material, Ford, Lamb Technicon for high-volume machining, ABB for foundry automation and Grainger & Worrall for rapid prototyping, a way has been found to machine CGI cylinder blocks for high-volume series. Proof that even the leading iron block and head foundries had to demonstrate CGI production capability came in August 2002 when the Teksid Iron Foundry Division announced that it was adopting the SinterCast process control technology. With nine iron foundries, and a market share of approximately 11% of cylinder blocks in both the passenger car and heavy-duty truck markets, Teksid is one of the largest foundry groups in the world. This collaboration increases SinterCasts ability to supply the CGI needs of the world automotive industry.

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Automotive Technology Roadmap SinterCast process control systems are also installed at: Caterpillar in the US (CGI engine components); Daros in Sweden (large piston rings); Halberg foundry in Germany (Audi V8 CGI diesel engine cylinder blocks); VDP in Italy (Rolls-Royce cylinder heads and engine frames for large stationary diesel engines); Teksid in Italy (commercial vehicle cylinder heads and passenger car V engines); Cifunda in Mexico; ICC-International; and Tupy in Brazil.

In addition to the system installed at the SKF foundry in Sweden for ductile iron production, SinterCast also has a system for CGI prototyping and development at Isuzu in Japan. However, Eisenwerke Bruhl of Germany, which in 2003 won the contract from Audi to supply 3.0 litre V6 CGI cylinder blocks, does not use the Sintercast process, having developed its own processes since 1997 to create a material that meets Audis demanding specification. Originally it was believed that the Tupy foundry in Brazil would produce the cylinder blocks for the 2.5 and 3.0 litre versions of the new V6 engine, but it lost out to Eisenwerke Bruhl. This is some consolation to the German company after it worked very closely with Ford on its CGI materials development programme only to lose out to Tupy. German company Grob Machine Tools won the contract to handle the block machining lines for both the V6 and the V8 diesel engines. This includes milling and boring operations. Despite being a relative newcomer to CGI machining, this company is a preferred machine tool supplier to Audi and has won many contracts in the past including the latest gasoline engines. Both Ford and Audi launched V6 diesel engine programs with CGI cylinder blocks in 2003, which once fully ramped up, could mean as many as 400,000 units a year being produced. This could then quickly grow to 600,00 units a year once Hyundai programs come on stream and then up to one million units when PSA Peugeot-Citron produces its version of the Lion engine. Some more optimistic reports talk of a potential 10m engines a year made using CGI blocks. Whether this number will ever be remotely reached is open to question, but what is not beyond doubt is that Ford is investing more than US$1bn over ten years in its new Lion V6 engine that will power future Jaguar, Land Rover and Ford models. A V8 derivative is also in the pipeline, so Ford for one is taking the CGI solution very seriously.

Diesels in the US
While the US seems tailor-made for the diesel car, with the long distances being covered in generally heavier vehicles than in Europe, it is very much dependent on which way the legislation in the country will go. There are definite indications that the legislation will no longer be aimed at zero emissions, but will concentrate more on the reduction of CO2 emissions than in the past which opens up a great opportunity for the diesel car. Bosch, for example, is now supplying common rail injection for an eight-cylinder engine made by Isuzu/General Motors to be used in the US while additional projects are in preparation. Ford is also seriously studying plans to offer a V6 diesel for the F-Series light-duty pick-up, which could also be used in SUVs, for 2005 while a diesel powered Focus is in the works for sale in North America by 2007. In the summer of 2002 Ford was testing a version using the co-fuelling system as a way to achieve Tier II standards that require further improvements in engine and fuel systems and exhaust aftertreatment technology. Low sulphur diesel fuel 15 ppm or less that will be available in the US in mid-2006 is a critical requirement for these emissions controls. In December 1999 the EPA announced new engine and gasoline standards commonly known as Tier II. The standards were designed to reduce the emissions from new passenger cars and light trucks, including pick-up trucks, minivans, and sports-utility vehicles. Beginning in 2004, the nation's refiners and importers of gasoline have to manufacture gasoline with 144 AutoBusiness Ltd

Powertrain sulphur levels capped at 300 parts per million (ppm), approximately a 15% reduction from thethen industry average of 347 ppm. By 2006, refiners will meet a 30 ppm average sulphur level with a maximum cap of 80 ppm. The Tier II regulations are predicted to decrease NOX emissions by 61%, and VOC emissions by 24% between 2004 and 2030. A way to manage NOx emissions, critical for Tier II compliance, also needs to be achieved. Among the solutions being studied is a NOx absorber type catalyst and, as noted above, a co-fuelling of diesel and urea, an ammonia-based compound, to reduce NOx emissions.

Development trends for diesel engines

One key technology in the battle for fuel efficiency and emission reductions in diesel engines will continue to be common rail technology. Improved atomisation of fuel at injection pressures of 1,800 bar rising to 2,000 bar, multi-point fuel injection and cooled exhaust gas recirculation deliver the conditions for achieving further reductions in emission levels and compliance with the next set of European Euro 4 exhaust emission levels. The pre-chamber combustion engine will be replaced by the turbocharged diesel engine with direct fuel injection and common-rail technology or comparable high-pressure fuel injection systems. This is guided by the objective of achieving compliance with future Euro 4 emission limits and creating the conditions for compliance with the even more stringent exhaust emission levels that are already being discussed. Having said that, in terms of powerful engines in heavy vehicles, the critical path being pursued in Europe, the US and Japan is one of undercutting the stringent limits set for particulate and nitrogen oxide (NOx) emissions. To achieve this, current estimates suggest that DeNOx catalytic converters and particulate trap systems will be introduced, although these technologies still have to complete field trials. Further development of injector technology with piezo drives will further enhance this potential. However, this development will have to be combined with improvements in exhaust gas aftertreatment to reduce further nitrogen oxide and particulate emissions. This calls for sulphur-free fuels.

Ricardo Perspective
Fuel injection systems are the heart of the diesel engine. In 1994, Bosch and Fiat developed the common rail injection system, which revolutionised the diesel engine. Full electronic control of the injection event has allowed very low emissions, excellent refinement and high power outputs to be achieved. Also, the smoothness of power delivery can now exceed that of a gasoline engine. Multiple injection pulses during one cycle are used to improve emissions and refinement and this technology will develop in sophistication over the next ten years. Together with this, piezo-electric control of injection will start to take a hold, allowing even finer and faster control of the injection process. By 2010, it will be possible to control all aspects of the injection event, leading to unparalleled engine refinement and emissions. It really will be impossible for a car passenger to distinguish between diesel and gasoline engines. The most significant factor holding back widespread use of advanced injection systems is their cost. Unfortunately, they are getting more complex, so cost reductions are only likely to result from increasing volumes. In some instances, injection system production (due to its complexity and production tolerances) can be a supply difficulty, which can limit the growth of the diesel engine.

The economic benefits of engine families

Strategies for the economically efficient development and production of new families of engines have to be based on an extensive parts commonality concept. This includes, for example, standard geometric parameters for main components such as the definition of cylinder spacing or a description of what is referred to as a standard cylinder. Similar thinking is applied to the electrical and electronic platform, involving the use of processors, hardware modules or software architecture. AutoBusiness Ltd 145

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Engine developers face a number of challenges, ranging from the need for standardised geometry and concepts for basic engines to the standardisation of auxiliaries. DaimlerChrysler, for example, opts for powertrain concepts that permit both flexibility and standardisation, and which take due account of local customer preferences in the regional markets. An all-encompassing powertrain strategy incorporating this downsizing concept has now placed DaimlerChrysler in a position where it can offer a range of gasoline and diesel engines with and without turbocharging in a performance range from 30 to 405 kW. To this achievement, the company can add a range of transmissions, traditionally developed and produced in-house, including automatic transmissions, automated manual transmissions and specially adapted 4WD transmissions. This strategy of creating complete engine families has meant that, taking the DaimlerChrysler Smart as one example, the gasoline and diesel engines can be manufactured on a shared production line economically and in large volumes. Uniform cylinder spacing of 73 mm makes this possible. This philosophy is being followed with engines for the Mercedes-Benz A-Class with a cylinder spacing of 90 mm for gasoline and diesel engines: this common platform concept delivers tangible cost benefits. Mercedes-Benz has also adopted these geometry parameters for its new engines in the midrange and luxury classes. The M 271, a new 1.8 litre four-cylinder engine, is based on this production strategy, as is the 12-cylinder M 285 Maybach engine which is derived from the M 271. In future, every generation of engine will be based on this strategy. In the current family of M 112/M 113 V-engines, the six and eight-cylinder units share cylinder spacing of 106 mm. This range of V-engines has become the commercially most successful range in this segment on the European market. The DaimlerChrysler plant in Bad Cannstatt, Germany has already built more than 1.6m of these engines in seven variants.

Summary and outlook

It is generally assumed that the internal combustion engine in all its variants will continue to be the dominant form of propulsion for cars for at least the next three decades. The primary technology driver will remain the need to reduce fuel consumption and emission levels further. The strategy adopted therefore aims at developing and testing technology modules and their combinations that afford the greatest potential at acceptable costs. The key concepts here are: turbocharging with and without downsizing; controlled high-pressure fuel injection; variable valve timing; exhaust gas aftertreatment with special catalytic converters for lean operation; and further development of direct fuel injection for diesel engines with particular emphasis on common-rail technology. The key to successful implementation of these resides in the availability of high-quality, sulphur-free fuels, including the possibility of synthetically-produced fuels. By adopting this technology strategy, most manufacturers believe it will be able, in the foreseeable future, to introduce well-adapted innovations to the market and to respond to the divergent requirements of customers and legislators in their respective national markets.

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Ricardo Perspective
In summary, the diesel engine is here to stay and can compete on regulated tailpipe emissions for all of the proposed European standards to 2008 and beyond, whilst offering CO2 benefits over the gasoline engine. Acceptable aftertreatment technologies will have to be developed in conjunction with near zero sulphur fuels, in order to control NOx levels. After this, future advanced boosting and fuel injection technologies will enable the powertrain of choice, rivalling the gasoline engine in the high power, luxury and budget sectors. In the USA (particularly California), the emissions limits beyond 2008 are very tough for the diesel, particularly NOx, and this will limit the possibilities for the engine, unless there is significant progress with Lean NOx Traps. This is unfortunate, given the CO2 advantages these engines could bring.

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Alternative fuels
Ethanol
Country-specific circumstances often play a major role in the particular choice of an alternative fuel. In Sweden, for example, use of ethanol is about to see substantial growth. Ethanol burns cleanly, offers good range and is therefore an attractive choice of fuel. Supported by an alliance of private and public sector organisations promoting the production of ethanol, Sweden is currently building production plants as well as setting up a supply network for consumers. The current number of 50 filling stations is planned to rise to 500 by 2006. The type E85 fuel available in Sweden is a mixture, normally comprising 85% ethanol and 15% petrol. Ethanol production is a particularly promising concept wherever an abundance of waste wood is available, such as in the Swedish lumber industry. New technology developed in Sweden includes the use of waste wood and straw as base raw materials for the production of ethanol. Additionally, government subsidies, including tax relief programmes, are helping to develop the market for ethanol vehicles. For these reasons Ford, the market leader for such vehicles in the US, has launched its Ethanol-Focus FFV in Sweden. To adapt this Ford Focus, which meets Euro 4 emission standards, to ethanol, the valve and valve seats, fuel tank and fuel lines are made of a special material. Moreover, the car is equipped with a sensor system to recognise the fuel mixture, which means that it can be operated with any desired mixture of petrol and alcohol. Another prerequisite for operating the Ford Focus FFV with an ethanol-petrol mixture is a variable ignition map, which adapts to the respective ratio present in the fuel tank. The cylinder block has a particularly effective preheating for cold starts, because ethanol has less positive cold starting characteristics than petrol. Most US manufacturers in the their home market make E85 models to take advantage of the 1.5bn US gallons of ethanol brewed every year from corn. Outside Sweden and the US, though, ethanol is not such a viable fuel, despite its excellent properties and very low emissions of ozone-forming hydrocarbons and toxins, as the cost of the fuel is high and there is a very limited refuelling infrastructure. Another ethanol blend is ethyl tertiary butyl ether (ETBE) with gasoline. It raises the octane rating and improves efficiency without generating additional emissions and because ETBE is biologically derived, it is carbon neutral, resulting in a small reduction in carbon dioxide. Another advantage is that it can be transported in pipelines (unlike ethanol which cannot as it absorbs moisture). According to PSA Peugeot-Citron, it is possible to use a blend of up to 12% ETBE in gasoline.

Biodiesel
Biodiesel (rape methyl ester), made of rapeseed oil esterified with methanol, is another source of renewable energy. As with ethanol, the burning of biodiesel provides the potential for a CO2 neutral cycle. Nevertheless, biodiesel is by no means harmless to the environment. Produced in large quantities, some are concerned for biological diversity, whilst only covering merely between 1.5% and a maximum of 5% of the German fuel requirement. In addition to frequently encountered damage to diesel injection pumps, the aggressive properties of rape ethyl ester have a negative effect on the life of various plastic components in the fuel system of the car. Primarily owing to the fact that the durability issue of injection pumps has not yet been resolved, Ford has stopped pursuing this project for the time being. DaimlerChrysler and Choren Industries, which is headquartered in Freiburg, Germany, launched in April 2002 a US$10m research project for the production of methanol and diesel

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Powertrain fuel from biomass. These fuels will then be tested in appropriately powered vehicles to establish their suitability. This programme, which ended in mid-2003, was to clarify at what prices and conditions these renewable fuels could be produced. In addition, the researchers evaluated the fuel quality and quantities available, compiling a comprehensive energy and material balance, covering everything from the collection of biomass and processing through to distribution of the fuel. In January 2004 Volkswagen announced that it had signed a memorandum of understanding with Decatur, Illinois-based Archer Daniels Midland, a 23.9bn (US$30.7 bn) turnover operation with 270 processing plants to accelerate the development of biodiesel. Significantly, the deal was announced as Volkswagen premiered the V10-powered Touareg, the worlds most powerful series-produced passenger car, at the North American International Auto Show in Detroit. Named Sunfuel as it almost neutralises the emission of CO2 and it gives an instant benefit because the liquid can be used in any diesel engine without need of modification, the cost of the gas-to-liquid alternative is now in line with the price of normal oil. Volkswagen predicts that it will be made available in Europe in 2006.

Liquefied Petroleum Gas (LPG)

LPG, consisting of propane and butane, is a by-product of mineral oil and natural gas production. Additionally, LPG contains ethane, pentane and the unsaturated compounds of propene and butane. While the octane rating for LPG may be in the region of 105 to 109, the calorific value per litre is much lower than that for petrol. Theoretically the distance travelled per litre of fuel is 10% less for LPG than for petrol. However, it does not quite work out like that. To take full advantage of LPG properties, the compression ratio needs to be raised, the ignition timing altered and different spark plugs that can tolerate higher heat fitted. The actual reduction in the performance is in the region of 20% of that of petrol for a well installed system. It is also mandatory in most countries that at least 20% of the fuel tank volume be allowed for fuel expansion which, in the case of LPG, means a very large tank that takes up a great deal of boot space. Currently, there are nearly two million liquefied petroleum gas vehicles operated in Europe, primarily in Italy, the Netherlands and, increasingly, the UK.

Compressed Natural Gas (CNG)

Natural gas consists of 98% methane the higher the methane content, the higher the energy content of the natural gas and thus its suitability for use as a fuel. Natural gas fields are often linked to oilfields, but are also found aside from the latter in great abundance. For example, Argentina has developed its own natural gas resources primarily for transportation purposes, with over 60,000 vehicles being operated with natural gas. Other sources of methane only scarcely developed in Europe so far are landfills, farms and water purification plants, where biogases can be drawn from the fermentation process of organic substances. Again, the major component of such biogases is methane and, after purification to extract impurities and carbon dioxide, they are equally suitable for operating vehicles. In Germany, several municipal authorities have started to set up biogas tanks next to their sewage treatment plants to fuel their service vehicles. Compressors are used to fill the gas into the vehicles tanks. In north east Italy, there is a good CNG infrastructure supporting a CNG vehicle parc of around 400,000, most of which are aftermarket conversions. Fiat produces a CNG version of its Multipla MPV, of which some 12,000 are now on the road, while Opel is using the Zafira to test the market for CNG. Italy is its first target with Germany and Scandinavia close to the top of the list.

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Automotive Technology Roadmap With regard to safety, the natural gas vehicle is as safe as a conventional vehicle in every respect. Seven different features have been designed for maximum protection: the pressurised gas bottle, with an operating pressure of 200 bar, has a bursting strength of nearly 600 bar; the tank valve of the pressurised gas tank has a stop valve; melting protection prevents overheating; a safety valve will shut off the high-pressure line in case of a line break-off; a double-valve seal prevents the escape of gas; an integrated start-lock mechanism at the filling connector prevents the engine from being started when the filler cap is open; and solenoid shut-off valves are actuated as soon as the engine stops.

The hydrogen internal combustion engine

As a renewable energy source, hydrogen is seen today as the fuel of tomorrow. Its greatest advantage, however, when used as a fuel, is that hydrogen does not produce any emissions at least locally. In addition to using hydrogen in fuel cell vehicles, its use is being researched and tested in internal combustion engines. Using hydrogen instead of gasoline should see a 25-30% improvement in fuel consumption, but it does come at a cost. There is additional pipework within the vehicle, a more complex electronic engine control system and a thermos-like fuel tank capable of maintaining temperatures at just above zero. However, BMW is a big advocate of this technology and is concentrating its resources in this direction rather than towards fuel cells. In 2001, it initiated a World Energy Tour in which it demonstrated the V12 750iL that had been converted to run on hydrogen as well as on gasoline. Called the 750hL, it was classified as a ZEV (Zero Emissions Vehicle) when running on hydrogen or as an ULEV (Ultra Low Emissions Vehicle) when running on gasoline. However, it is not quite as clean as a fuel cell car as high-temperature combustion results in at least a trace of nitrous oxides, although this can be scrubbed from the exhaust by a special catalytic converter. While those cars on tour were working prototypes, BMW will bring a production version to market in either 2007 or 2008. According to Fords research, Ford a 2.0 litre Duratec petrol engine, modified for hydrogen operation, and integrated into a Type P2 test buck, achieved up to 30% higher thermodynamic efficiency than the gasoline version. The tank system is comparable to that of a natural gas vehicle and the safety system to that of a fuel cell vehicle. The engine management strategy, on the other hand, resembles that of a diesel-powered vehicle, which means that intelligent throttle valve control achieves a similar efficiency even under partial load operating conditions. The hydrogen engine thus offers nearly the same fuel economy as a diesel engine. GM, Toyota and Mazda are also undertaking their own research into the use of hydrogen in conventional IC engines. However, fuel cell advocates say that the reduction in size of fuel cell systems together with their increased power density means that they will soon deliver better fuel economy than IC engines while the costs are decreasing all the time. Although fuelling stations are being built in some European cities, including Berlin, Germany and London, England (although not robotised as was the station for liquefied hydrogen at Munich airport in Germany), infrastructure issues remain the key to the acceptability of hydrogen as a fuel for cars. To try and address this, though, a Clean Energy Partnership project was created in Germany in June 2002. It subsequently initiated construction of the first integrated public hydrogen filling station in Germany in late November 2003 in an investment worth 33m. It has been an exercise to provide the infrastructure necessary to make and distribute hydrogen to a fleet of 30 modified-engine vehicles and to test these vehicles under everyday conditions. Participating companies include DaimlerChrysler, BMW and GM-Opel, leading German fuel station chain Aral, Berlins traffic management agency Berliner Verkehrsbetriebe (BVG), and industrial firms MAN, Hydro/GHW, Linde and Vattenfall Europe working in co-operation with the German federal transport ministry.

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Powertrain

Hybrids
The subject of an enormous amount of debate within the automotive sector is the timetable regarding commercial introduction of fuel cell vehicles. It is not a question of when the first prototype examples will be seen, but rather when series production will begin. Just five years ago, it was perceived by many senior OEM executives that the crossover point when the production of fuel cell cars will exceed that of conventionally powered vehicles would be between 2015 and 2020. That date has already been pushed back by around five years to around 2025 despite the imminent arrival of some fuel cell cars onto the market. The reason for the delay is the unexpected new lease of life in both gasoline and diesel engines due to the advances made, as reported above. All this has had a major impact on the investment plans of both the OEMs and the major tier one suppliers. Whilst there are still billions of dollars being invested in fuel cell technology, particularly by the major car companies, some of the suppliers are quietly decreasing their activities in this area. This debate, though, is having an immediate impact on another vehicle configuration that was thought by many to be nothing but a stop-gap with a limited lifespan of between 10-15 years and not worth the investment. It now looks, though, as if the hybrid may be a viable solution with a medium-term lifespan after all. Hybrids are not to be confused with the failed lead-acid battery-powered electric vehicles that have been marketed in various guises over the years, but which have never caught the public imagination. Perhaps the most high profile failure was GMs EV1 despite the marketing muscle of the top carmaker. By contrast, hybrid propulsion a combination of internal combustion engine and auxiliary electric motor has aroused the interest of almost every automotive manufacturer over the past few years. Apart from the kudos of being seen to contribute to a better environment, the prospect of tax credits from the US government of up to US$3,000 per hybrid vehicle, which partly offset the higher prices, has increased competition. DaimlerChrysler gives the example of the Dodge Durango TTR (Through-the-Road) a fourwheel drive hybrid vehicle, as one of the reasons why it believes hybrids are a valid form of vehicle. In comparison with a gasoline-powered Durango of the same size and power, the use of regenerative braking energy and the support given by the electric motor on acceleration result in a fuel consumption advantage of 11% alone. There is also a considerable boost given to the torque. The increase in performance provided by the electric motor allows the gasoline engine to be reduced in size in this case from a 5.9 litre V8 to a 3.8 litre V6 without loss of performance. If an automatic cut-off mechanism is introduced and a consumption-oriented gear ratio is chosen, these measures alone result in consumption advantages of up to 38%. Additionally, a completely redesigned transmission, for example, a continuously variable transmission (CVT), or an electronically controlled manual transmission is used, which results in a further 12% saving. Together with improvements to the basic internal combustion engine, such as a variable displacement system or direct injection, the fuel consumption savings can be as high as 65%. Broadly speaking there are two types of hybrid: parallel and series. In a parallel hybrid, power flows simultaneously through both electrical and internal combustion engine routes. In a series unit an auxiliary generator feeds a battery that then provides power for one or more electric motors.

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Automotive Technology Roadmap The parallel hybrid has proved more popular in automotive applications for several reasons: the use of purely electrical transmission is not as efficient as a mechanical transmission; with a series hybrid the electric motor and the generator must be separate and must be large enough to supply full power. With current technology this leads to a cost penalty; and the parallel hybrid architecture has a clear evolutionary path from current powertrain platforms, whereas the hybrid is a completely different animal

The benefits of lower carbon dioxide (CO2) stem from three sources: downsizing of a conventional internal combustion engine; low load and idle elimination; and regenerative braking. To be offset against these is the increased weight which can increase the amount of energy required to propel the vehicle through a given duty cycle. The relative magnitude of gains and losses depends on the vehicle and, crucially, its duty cycle. These benefits can be accurately projected and optimised using dynamic engine, vehicle and control system models, but an assessment can be carried out with a much lower level of complexity. However, which hybrid configuration brings best results is still open to debate, with most carmakers offering their own solutions. No less than 12 different basic hybrid configurations have already reached the prototype stage to date. The only matter on which there is universal agreement is that a parallel configuration of the fossil fuel engine and electric motor presents the most favourable solution in terms of consumption and is also the most practical solution. Regional differences have affected the sale of hybrid vehicles strongly. To date, about 140,000 hybrid vehicles have been sold worldwide. In Japan and the USA, hybrid vehicles have sold relatively well and have retained their re-sale value. These have all been gasoline hybrids from Toyota and Honda. In Europe, the same hybrids have sold in very low numbers (hundreds to low thousands) and re-sale values have been very badly hit. There are four key reasons that can be sited for this. First, Europe has turned to diesels for good fuel economy these are currently cheaper, faster and more economical in real world driving than the hybrid vehicles on offer. Second, Europeans are much more new technology sceptical than Japanese and some Americans (especially Californians), which has lead to concerns about the long-term battery life and, therefore, re-sale values of hybrids. Third, Europeans are, perhaps, less well informed about the benefits of hybrid vehicles. Finally, the current range of hybrid vehicles has been restricted in size and utility compared with the main stream vehicles in particular, the hatch-back style, which is popular in small to medium European cars, has not been offered. These issues are lessening as improved vehicles come to market (e.g. the new Honda Civic) and with better education. However, the diesel vehicle will be strong competition. Ricardo, therefore, believes that a diesel hybrid vehicle may be an interesting product for Europe. In April 2003 the UK government asked carmakers to design and build a new affordable, ultra low carbon family car as a stepping stone towards the new generation of fuel efficient cars which the government had estimated were still 15 to 20 years from production. Under a project called the Ultra Low Carbon Car Challenge, the motor industry was asked to submit proposals for a new car which was capable of travelling 1,000 miles before needing a refill and of being mass produced within 4 to 8 years. The total budget was 10 million over 3 years that would go towards the costs of building a demonstration vehicle. The successful demonstration vehicles needed to be: 152 A full size family car Affordable and capable of being mass produced within a near to medium term timescale Have tail pipe CO2 emissions of less than 90 grammes per kilometre Be fuel efficient and travel around 1,000 miles between refill, with a 12 gallon tank. Capable of doing 3 litres/100 km (80 miles per gallon) or more. AutoBusiness Ltd

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Five consortia were successful in being awarded grants in late 2003:

The MG Rover Group, MIRA, Powertrain and Pi Technology who are building a vehicle based on the Rover 25 vehicle platform. It will use a four-wheel drive IC engine-electric hybrid powertrain in conjunction with reduced body and chassis weight, advanced aerodynamics and thermal systems. ZyteK Automotive Electronics is working with several key suppliers to develop a low carbon vehicle using a small turbocharged diesel engine. This uses series hybrid technology with a high efficiency starter generator and traction motors to optimise the vehicles performance. Bertrand UK is working in conjunction with Echo Developments, CTG, Xtrac and SKF UK on a vehicle that will utilise hybrid powertrain and contra-rotating flywheel energy storage. Artemis Intelligent Power is in partnership with Dana and the Multimatic Technical Centre Europe on a vehicle that will utilise hydraulic energy storage and an infinitely variable hydraulic transmission system. Ricardo, PSA Peugeot Citron and QinetiQ have collaborated on a project codenamed EFFICIENT-C, developing and demonstrating a highly efficient parallel hybrid powertrain system installed in a Citron Berlingo Multispace. Development of this vehicle is expected to take 18 months with completion due in mid2005. The first phase of the programme will comprise a feasibility study that will define the final vehicle architecture.

Key technologies incorporated in the EFFICIENT-C vehicle project included: An efficient PSA Peugeot Citron HDi common rail diesel engine, delivering peak performance of around 90 bhp while achieving Euro 4 emissions levels with low-cost aftertreatment technology. A high output Direct Current (DC) electric motor-generator enabling stop/start operation of the diesel engine, torque assist, efficient electrical power generation, regenerative braking and all electric traction at low speed. An automated manual transmission (AMT) delivering high standards of refinement and driveability in a cost-effective manner. An advanced energy storage system using NiMH (Nickel-Metal Hydride) or Li-ION (Lithium-Ion) batteries, possibly combined with supercapacitors, to achieve the energy and power densities required for efficient operation of the vehicle. Advanced control and electronics architecture, enabling the many constituent technologies of the hybrid vehicle to operate at optimal efficiency.

The EFFICIENT-C vehicle is targeted to achieve CO2 emissions of 89.5g/km over the combined ECE + EUDC drive cycle (this equates to a well-to-wheels CO2 emissions level of 100g/km, using pump grade diesel fuel). Legislated exhaust emissions will be within Euro 4 levels. Vehicle performance targets include a 0-100 kph (0-62 mph) acceleration time of less than 13 seconds and a top speed in excess of 150 kph (93 mph).

Batteries
Batteries still remain an important part of the hybrid vehicle, but a standard solution has yet to be reached, with nickel metal-hydride (NiMH), batteries, Lithium (Li)-ion batteries, lithium AutoBusiness Ltd 153

Automotive Technology Roadmap polymer batteries and even advanced lead-acid (Pb-acid) all having their advocates. DaimlerChrysler, Ford and GM, for example, will initially use Pb-acid batteries, Honda and Toyota will produce vehicles that use NiMH batteries while Nissan is demonstrating vehicles using Li-ion batteries. The failure of the nickel-cadmium (Ni-CD) battery system which has been in existence for more than 100 years to meet the demands of such modern items as laptop computers, mobile phones and camcorders, has led to the growth of the NiMH battery at its expense. Environmentally friendly and continued improvement both in energy density and cost has led to it achieving a market share of 35% since the mid-1980s. Li-ion batteries, which have the greatest potential for a technological breakthrough due to their having the highest negative potential and lowest atomic weight, are regarded by many as the most likely to be commercialised for hybrid vehicle applications. They are capable of storing up to three times more energy per unit weight and volume than the conventional Pbacid and NiMH batteries and Li-ion batteries have a superior life. In the case of the NiMH battery, the life cycle typically drops to 80% of the rated capacity after 500 cycles at the C-rate (one hour charge followed by a one hour discharge). Solid state Li-ion batteries can achieve more than 1,200 cycles before reaching 80% of their rated capacity. Solid state Li-ion batteries also allow for the development of virtually any size batteries and can be stacked into efficient multi-cell configurations. From a cost perspective, the solid-state Li-ion battery uses a relatively inexpensive metal oxide that is fabricated in sheet form to allow inexpensive battery production. Solid Li-ion batteries will be easily mass-produced at less than US$1 per Whr. The NiMH battery, after years of improvements, is being produced at approximately the same cost, US$1 per Whr. The only real downside is that lithium ion on its own is highly reactive with air and with most liquid electrolytes but this has been addressed. Ever since Sony Entertainment introduced the Li-ion battery in 1991, though, the development efforts have been burgeoning. Sony Corporation announced a production increase to 15m batteries per month in 1997 that has been boosted to 30m batteries per month in the years since. The basic chemistry of the lithium-polymer battery means that it has one of the greatest potentials for highest specific energy and power while another major advantage is that it can be formed into any size or shape. This allows vehicle manufacturers enormous flexibility in ways that the battery can be incorporated into vehicle designs. Being solid-state, it also has a safety advantage since it cannot rupture and spill contents in the event of an accident. The only major disadvantage, though, is that the design challenges associated with kinetics of the battery electrodes and other items have resulted in a lower specific power and a limited life cycle and these still need to be addressed.

OEM overview
To most engineers, though, the hybrid vehicle is an unsatisfactory solution. While the concept itself is clever the idea that a vehicle can autonomously switch from diesel or gasoline motive power to electric and back again depending on the traffic conditions it offends the engineer, due to the redundancy factor. At any one point, one of these motors is being carried around as dead weight. However, this has not stopped a number of OEMs from coming to market with hybrid vehicles. Chief amongst these is Toyota, which dominates the hybrid market. From a very unsure start in 1997, the Toyota Prius the worlds first mass-marketed hybrid vehicle has proven its critics wrong. By the end of 2003, six years after its launch, more than 130,000 examples had been sold worldwide. An immediate sales success in its home market, sales easily exceeding the initial targets set for it, it has also done well in the US. When it was introduced to that market in June 2000, the initial plan called for 12,000 units per year. Sales in 2001 were 15,556 but impressive market growth prompted the Japanese carmaker initially to increase the US market allotment to 17,000 units for 2002 although the number sold eventually reached 21,193. With the 154 AutoBusiness Ltd

Powertrain introduction of the new-generation Prius into the US in the autumn of 2003, the Japanese carmaker predicted that sales would increase to 47,000 in 2004.

Figure 42: Toyotas 2004 Prius hybrid passenger car

Source: Toyota

At the end of 2003, Toyotas worldwide sales figures showed a cumulative total of nearly 150,000 units for its hybrid line comprising four vehicles: the Prius, the Estima hybrid minivan, the mild hybrid version of the Crown luxury saloon and the Coaster hybrid bus. While the Prius is sold in 20 countries, the rest of the range is presently only sold in Japan. This is enough, though, to give the Japanese carmaker a 90% share of the world hybrid market Other developments from the Japanese manufacturer are the Toyota Hybrid System-Mild (THS-M) and its Hybrid Synergy Drive (HSD) system as seen on the new Toyota Prius model launched in the autumn of 2003.

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Figure 43: Operation of the Toyota Prius under different driving circumstances

Source: Toyota

Like the original Toyota Hybrid System (THS), on the current Prius HSD is defined as a full hybrid system, which means that unlike competitive systems currently on the market, this system is capable of operating in either gas or electric modes, as well as a mode in which both the gas engine and electric motor are in operation. The advantages of a full hybrid system are numerous. The most important, however, is that because the car can be run under certain conditions with electric power only, fuel consumption, and emissions, can be reduced significantly. 156 AutoBusiness Ltd

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A major difference between the new HSD concept, and how it is improved over the current THS system centres on the duration of electric-mode driving and the peak power delivered electrically. The newer system has a 50% more powerful 50 kW drive-motor operating at up to 500 volts. This increased voltage and a newly adopted high-voltage power converter enables power. Additionally, the generator in the new Prius has a higher peak operating speed that increases electric-mode operation in city and motorway slow-and-go operation. With 50% more electric power available and improved low-end torque from the drive motor, a significant boost in acceleration performance is possible. HSD is expected to increase fuel efficiency in the new Prius by 15% with combined US mpg rising from the high 40s to the mid 50s. This will enable Prius to have the best fuel efficiency rating of any midsize vehicle sold in the US, delivering twice the combined mileage rating of its closest competitor. Furthermore, the mid-size Prius will also boast a higher combined mileage rating than any compact saloon sold in the US. The new Prius surpasses Euro 4 emission standards with hydrocarbon and nitrogen oxides emissions respectively 80% and 87.5% lower than required by the regulations for petrol engines. Furthermore, at a time when most diesel engines on the market do not even comply with Euro 4, Prius NOx emissions are 96% below the Euro 4 level for diesel cars. In addition, Prius produces only 104g/km of CO2 exhaust emissions (on the combined cycle), and breaks the 100g/km barrier on the extra-urban cycle (99g/km). HSD significantly improves acceleration performance accelerating from 0 to 100km/h (062mph) in less than 11 seconds, making it almost three seconds faster than the first generation model and comparable to a conventional 2.0-litre diesel engine. Toyota will add a second vehicle, the Lexus RX400h luxury SUV powered by HSD during 2004 and a third vehicle, the Toyota Highlander Hybrid, the worlds first seven-passenger mid-size hybrid sports-utility vehicle that made its world premiere at the 2004 North American International Auto Show in Detroit, in early 2005. The original Prius sold over 120,000 units worldwide. In Japan the second-generation Prius hybrid car sold some 11,000 units in the first two weeks of sale, outpacing its monthly target of 3,000 sales about eight times. Toyota hopes to build annual hybrid sales to 300,000 per year by 2005 or 2006. While Toyota has the lions share of the hybrid market, some other car companies are hard at work on their own versions. Honda, for example, has long been involved in the development of hybrid cars. The unsuccessful Honda EV pure electric car was followed by the rather more successful Insight which itself is being followed by the Civic Hybrid that was introduced to certain markets in 2003. The US manufacturers are also showing signs of interest in hybrid vehicles. The Ford Escape/Maverick hybrid SUV that was first shown at the 2001 Los Angeles Auto Show was introduced as a production model at the North American International Auto Show in Detroit in 2004. However, Ford is said to be hedging its bets. It has cancelled a hybrid plan for the Explorer and has approached Toyota about a collaboration agreement. It wants to standardise as many components as possible, and by sharing them with another manufacturer increase the volume and reduce the costs. Another DaimlerChrysler hybrid project, based on the 4MATIC-architecture of the MercedesBenz E-Class, will be introduced in 2004 as will a Chrysler minivan, featuring a transverselymounted gasoline engine at the front for driving the front axle, combined with an electric motor for the rear. This design allows the cost-efficient realisation of a four-wheel drive system, with the additional advantages of the hybrid concept. This same concept has also been adopted on a Mercedes-Benz A-Class that has been called the Hyper. This vehicles diesel engine has not been reduced in size resulting is an extremely high-performance fourwheel drive vehicle that can benefit from the advantages of a hybrid drive. GM will be launching a car-based SUV in 2004 using its new gasoline electric ParadiGM hybrid powertrain that it introduced at the 2001 Detroit Show. From a low base of just some 7,000 sales in 2004, it expects to be selling more than 100,000 hybrid vehicles each year from 2010. The first vehicle is likely to carry either a Cadillac or Saab badging but the AutoBusiness Ltd 157

Automotive Technology Roadmap ParadiGM powertrain will be quickly applied across the Epsilon platform for a range of vehicle extending from two-seater cars to urban transit buses. Most of the major suppliers are also involved in the development of hybrid technology. One of the most promising concepts is the I-MoGen project being co-developed by Ricardo and Valeo. Both partners regard an ICE/electric hybrid based on a new-generation small, ultra-efficient, diesel engine driveline as the most promising means of attaining a fuel consumption goal of 4 litres/100 km (70.5 mpg) for a C class European car in the Ford Focus, Volkswagen Golf size category. A Vauxhall Astra has been used for the first trial installation; its standard electric power steering suited the mild hybrid concept of driving as many auxiliaries as possible by controllable and hence flexible electrical power. The technology is also designed to achieve emission levels that undercut Euro 4 passenger car limits by 50%. In contrast to Toyotas adoption of a big (3.0 litre) gasoline engine as a mild hybrid baseline, Ricardo has been working on a 4-cylinder, 16-valve design 1.2-litre engine with aluminium head and cast-iron block, which has figured in earlier Ricardo projects. Its very modest swept volume, by C class car standards, leads to obvious cost, weight and friction loss reductions compared with the diesels of 1.8 to 2 litres capacity which now power European cars of the same size. A variable-geometry (swivelling vane) turbocharger, from Garrett, and Bosch common-rail injection with a high, 1,600 bar, accumulator pressure, contribute, in conjunction with low-swirl mixing, to a high power density or specific output. The engine is rated at 100 ps (73 kW) at 4,000 rpm. Thanks largely to the VGT, projected maximum torque is also more than respectable for an engine of only 1.2 litres capacity, at 230 Nm (169 lb ft), albeit exerted at the relatively high engine speed of 2,500 rpm. Ricardo concedes, however, that notwithstanding its common-rail/VGT combination, torque at lower rpm, and hence vehicle driveability, fall somewhat short of some of todays C-segment performance expectations. Integration of the small diesel into a mild hybrid powertrain, as in the collaborative project with Valeo, is intended to address these shortcomings to make an extremely fuel-efficient diesel competitive in road performance terms with many gasolineengined alternatives. At the same time it will bring significant emission (including CO2) reductions, necessarily accompanied by worthwhile fuel savings. In the mild hybrid installation, the Ricardo diesel is married to what Valeo has chosen to call a flywheel mounted electrical device (FMED), otherwise known as an integrated starteralternator, based on the use of 36/42-volt electrics. The FMED is water-cooled and, with its accompanying inverter, delivers up to 6 kW of power either to give a 42-volt battery charge or directly augment vehicle performance. Complete with batteries and power controllers, the FMED weighs 67 kg. Use of NiMH technology greatly reduces battery size and weight from what would be needed in a lead-acid equivalent delivering the same electrical performance. Indeed the battery pack could have been accommodated in the Opel Astras engine compartment. However, with NiMH battery life being very temperature sensitive, the batteries are accordingly mounted in the spare wheel well of the luggage boot, and incorporate their own cooling fans, which draw air from inside the car heated in winter, air conditioned in summer. Despite this proliferation of hybrid cars, informed opinion, as typified by the European Council for Automotive R&D (EUCAR), estimates that alternative drivetrain systems will only have an overall market share in Europe of less than 5% by 2010 with the biggest application being in niche vehicles such as SUVs. Initial demand, though, is likely to come from fleet and commercial applications, where cost influences are stronger and infrastructure implications less fundamental. Beyond 2010, though, much depends on legislation, availability and affordability of new technologies and of conventional and alternative fuels. Another big factor is the public acceptability of such vehicles. The vehicle manufacturers, all too aware that in the short to medium term there is no definitive approach to this issue, are seeking to set their own trends while, at the same time, 158 AutoBusiness Ltd

Powertrain keeping their options open. They are watching each other closely and, more importantly, are co-operating in an unprecedented number of joint programmes.

Summary Ricardo Perspective

In summary, the hybrid powertrain types (micro, mild and full) will form an evolution of introduction of hybrid technology, starting with micro in 2003/2004, mild in 2006/2008 and full hybrid in 2010. These are cost effective technology mass production dates, as opposed to current niche manufacturing at a loss. Fuel consumption improvements will be in the order of 5-8% for micro, 15-30% for the mild and approaching 50% for a full hybrid over a typical drive cycle such as the NEDC. In addition, regional differences are likely to affect the hybrid configuration for given markets in much the same way as engine technologies are affected today. However, this must be minimised to reduce complexity and cost.

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Fuel cell vehicles

Even though the timetable for series production of fuel cell vehicles has been pushed further back, they are still seen as the motive power of the future. They operate very efficiently while producing extremely few emissions or none at all, depending on the fuel used. However, there are still a great number of challenges that need to be overcome before they reach mass production. These include driveability issues such as start-up time and transient capability, and operating conditions and hostile environments, such as long exposure to very high and low temperatures, and ascent of long hill climbs or mountain passes. There are also the manufacturing processes than need to be taken into account. The proton exchange membrane (PEM) fuel cell is generally considered the most promising solution for cars and light trucks. Its low operating temperatures allow it to provide a quick start-up and the power it generates for its weight and size is suitable for light-duty vehicle traction. Some manufacturers, though, are developing the phosphoric acid-based fuel cell (PAFC) even though it has a lower power density and is not suitable for light transportation vehicles. The alkaline fuel cell (AFC) has a reasonable power density and operates at low temperatures, but its performance can be degraded by CO2 contamination from the input fuel stream. The solid oxide fuel cell (SOFC) has very high power, but its operating temperatures require long start-up times.

Table 5: Comparison of fuel cell technologies

Fuel cell PEM PAFC AFC SOFC Availability Commercial Commercial Commercial Prototype Power Density Medium Low Medium High Operating Temperature Low Moderate Low to Moderate High

Source: Auto Business

One of the key drivers in fuel cell vehicle research has been the Partnership for a New Generation of Vehicles (PNGV). This was created by the then President Clinton in September 1993 as a co-operative research and development programme between the federal government and the US Council for Automotive Research (USCAR). Members of this organisation included DaimlerChrysler, Ford and General Motors. Unique in creating a partnership between industry and government, its objective was strengthening US competitiveness by developing technologies for a new generation of vehicles. It was succeeded in January, 2002 by FreedomCAR a joint effort between the US Department of Energy (DOE) and USCAR with the stated goal of reducing US dependence on petroleum through the development of hydrogen-powered fuel cell cars and light trucks. The programme is focusing on the basic research needed to provide a full range of fuel cell vehicles that use no petroleum and produce no harmful emissions and the earliest introduction of commercially viable polymer electrolyte membrane fuel cell systems. In April 1999, the US State of California also initiated its own fuel cell project. The goal of the California Fuel Cell Partnership (CFCP) is to help improve the commercial viability of fuel cell technology by bringing all stakeholders together in an effort to eliminate barriers to mass production and implementation. Included in the CFCP are OEMs (DaimlerChrysler, Ford, General Motors, Honda, Hyundai, Nissan, Toyota, Volkswagen); energy providers (BP, ExxonMobil, Shell Hydrogen and ChevronTexaco); fuel cell companies (Ballard Power Systems, UTC Fuel Cells); and Government agencies (California Air Resources Board, California Energy Commission, South Coast AQMD, US Department of Energy, US Department of Transportation, US Environmental Protection Agency (from July 2002)).

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The programme has identified the following technical challenges for fuel cell power systems. Reducing component and system costs. Reducing precious metal requirements. Developing high-volume manufacturing capability. Demonstrating component and system durability. Reducing system start-up time. Developing high-efficiency air management subsystems. Developing a suitable fuel infrastructure (sulphur-free gasoline and hydrogen).

Quite separately to all this, the US DOE committed around US$80m to more than 25 research projects in fuel cell technology during 2001. This was followed up by a further US$115m being committed to 20 organisations, including two universities, for two- to four-year projects commencing in late 2001. In Europe, under a new framework programme, it is estimated that proton exchange membrane (PEM) fuel cell research for transportation is receiving about US$15m per year. The programme participants are both OEMs and suppliers. The OEMs include DaimlerChrysler, BMW, Volkswagen, Volvo, Renault and PSA Peugeot-Citroen. The suppliers include Johnson Matthey, SiemensVDO, Ansaldo, Rolls-Royce, CJB, and DeNora. In principle, fuel cell vehicles can run on a variety of fuels and therefore offer mobility independent of the limited resource petroleum. They can either carry the hydrogen used to generate electricity in the fuel tank or they can use a reformer to obtain it from liquid fuels such as the hydrogen storage medium methanol. The beauty of hydrogen is that it is available in practically unlimited quantities and can be obtained from water, natural gas or as a byproduct of the chemical industry. The electrolysis of water is the simplest method. Here, electricity is used to break down water into hydrogen and oxygen. However, this process requires a great deal of energy. Only if the electricity for the electrolysis comes from water power, wind power or solar energy would there be no emissions involved from the time the fuel is created to the time it is used in the vehicle. Hydrogen vehicles also require a special filling station infrastructure. Furthermore, the possibilities for storing hydrogen onboard the vehicle are limited as the tanks require a great deal of space and the gas needs to be kept to 235C. It is for these reasons that fuel cell vehicles carrying hydrogen fuel are best suited for use in fleets such as for delivery services or as city buses, rather than for personal use. They return to the same central location each day and refuelling can be undertaken by professional staff at special depots. However, other methods of transporting hydrogen on a vehicle are currently being investigated. One is nanostorage, a method in which the hydrogen atoms are attached to the surface of extremely small tubular carbon fibres, and the other is the metal-hydride principle, in which the hydrogen is stored in the interstices of pressed metallic alloy powder, as if in a sponge. General Motors displayed this principle for the first time at the 2000 Detroit Show on its Precept fuel cell study vehicle. DaimlerChrysler agrees that hydrogen offers the best technical solution to CO2 and other pollutant emissions, and developed Necars 4 and 4 (advanced) to prove the concept in 2000, but points out that it has disadvantages. Its energy density, and therefore, the range of the vehicles powered by it, is relatively low. It takes 46 gallons (180 litres) of liquid hydrogen to drive the same distance that could be covered with 13 gallons (50 litres) of gasoline. The difference would be even more dramatic if the hydrogen was stored as a gas, added to which the tanks themselves are elaborate and expensive affairs.

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Figure 44: Mercedes-Benzs fuel cell project car

Source: Mercedes-Benz

The obvious choice is therefore gasoline, but research undertaken by DaimlerChrysler subsidiary Xcellsis and the oil company Shell has demonstrated that there are still technical hurdles to overcome before the method is suitable for everyday use. It found that gasoline reforming requires higher temperatures and more complex systems than other methods such as methanol reforming. Such a drive system would therefore run less efficiently and produce more emissions while the cold start capacity would also be limited. It therefore remains unclear whether the gasoline-powered fuel cell can also offer a real gain over the internal combustion engine. In any case, it does not offer the advantage of being independent of oil. Renault, though, would argue differently. Following its own research into 12 fuels including gasoline, diesel fuel, naphtha, natural gas, LPG, esters and various forms of alcohol, it decided that gasoline was its fuel of choice. It is methanol, though, that is emerging as the fuel of choice for personal transportation for DaimlerChrysler, GM and Toyota, although the latter two are still keeping their options open. In principle, methanol can be produced from any carbon source and industry now manufactures large quantities of the substance primarily from natural gas, which is still available in abundance in many different areas of the world. Natural gas occurs as a byproduct of petroleum extraction, for example, and it is burned off in large quantities. It could be converted into liquid methanolised hydrogen at the well and transported to the consumer. Only partial use has been made of the production capacities up until now. Compared with vehicles that run on hydrogen, though, those driven by methanol are not completely emission-free, but no nitrogen oxides, sulphur dioxide or soot particles are produced. Hardly any hydrocarbon or carbon monoxide emissions can be detected, and CO2 emissions are about a third lower than those produced by internal combustion engines. There are actually no net CO2 emissions in the process at all when the methanol is obtained through regenerative means from renewable resources such as biomass or waste wood, for example. In principle, methanolised hydrogen can also be produced from industrial exhaust gases. As it remains liquid at normal temperatures, it also can be handled in much the same way as gasoline or diesel. One of the most significant vehicles to have been shown was a direct methanol go-kart by DaimlerChrysler at the end of 2000, significant because it dispensed with a reformer to produce hydrogen from methanol. Power was generated directly, and without any intermediary steps, via a reaction between methanol and atmospheric oxygen. The key component of the direct methanol fuel cell is a specially developed membrane that separates a water-methanol mixture on the anode side of the cell from the air on the cathode side. This membrane, which is permeable to protons but impermeable to electrons, is coated with a catalyst containing platinum. Thanks to a special coating technique, engineers have been able to minimise the amount of platinum required for the catalyst and thereby reduce 162 AutoBusiness Ltd

Powertrain costs. In addition, use of graphite paper ensures an optimal contact between the catalyst and the plates of the cell. At a temperature of around 110C, a reaction occurs that produces electrical energy. The water-methanol mixture is broken down into CO2 plus protons and electrons. While the protons migrate through the proton-exchange membrane to the cathode side of the cell and gather there to generate a positive charge, a corresponding negative charge is created on the anode side. An electric current flows through the system as soon as the two poles are connected. The electrons and protons on the cathode side then combine with oxygen from the air to form water. Some of this is used to feed the system while the rest is emitted as water vapour. The go-kart that was used to test the principal had a top speed of 35 kph (22 mph) and a range of 14 km (9 miles) on one tank of fuel. It used a simple flashlight battery to start its fuel cell engine. DaimlerChryslers Necar 5 which in June 2002 completed the first cross-country trip in the US by a fuel cell car and the Jeep Commmander 2 were the first to be shown with a methanol reformer in late 2000 and should be ready to enter service in around 2010. As such, according to the company, it justifies the requisite infrastructure for the use of methanol as a fuel. The system can be cold-started with the aid of a normal car battery and is not affected by winter operations as the water-methanol mixture functions not only as a fuel and coolant for the fuel cell stacks, but also as an anti-freeze agent. As an offshoot, though, the Chrysler unit of DaimlerChrysler revealed Town & Country Natrium the Latin word for sodium its own third-generation fuel cell concept vehicle in late 2001. The fuel cell system is produced by Ballard/Xcellsis and the hydrogen is produced using the Hydrogen on Demand system developed by Millennium Cell of New Jersey, US. After processing, the spent fuel is sodium borate that is chemically identical to borax, the naturally occurring substance used in laundry soaps. This can then be reprocessed into sodium boro-hydride and reused in a fuel cell vehicle. Therefore it is quite an economical system. The sodium boro-hydride fuel storage and processing system are completely packaged under the vehicles floor. There is no cabin intrusion at all, so the vehicle is fully usable. Fuelled with sodium boro-hydride, a compound chemically related to borax. It has a 65 kW (gross power) fuel cell engine, 40 kW LiO battery pack, 35 kW (82 kW peak) electric drive, top speed is 80 mph and it accelerates from 0-60 mph in 16 seconds. It also has a 300 miles range on a single tank of fuel. The sodium boro-hydride fuel is available in significant supplies, it is non-toxic and nonflammable, and it can be recycled, potentially providing an endless supply of fuel for transportation needs and importantly for the US it is available in large supplies in the country. There are, though, still some issues to be addressed before a sodium borohydride fuel-cell vehicle is seen as the answer, one being the ruthenium catalyst. This is the device used to release the hydrogen, but it is very expensive. Another area is the addition of sodium hydroxide to avoid the spontaneous release of hydrogen, but which results in a highly alkaline mixture. Experiments are underway with other ways to draw off the hydrogen without the use of hydroxide. Chrysler is also looking at increasing the NaBH4 solution concentration to achieve the 300-mile range with around 35 (US) gallons of mixture instead of 50. The biggest challenge, though, is developing and demonstrating a cost-effective, energy-efficient process for recycling the sodium borate residue back to sodium borohydride for re-use. However, such is the quantum leap involved in fuel cell technology, and so long term is the investment that most manufacturers are apprehensive about going it alone. It would be too easy to invest billions of dollars in the wrong process. Consequently, most carmakers are entering alliances to co-develop fuel cell vehicles. For example, Renault and PSA PeugeotCitron launched a joint research project in 1999 while DaimlerChrysler and Ford have joined together in a series of joint ventures with Ballard Power Systems of Vancouver and the European Fuel Cell Bus Project. In fuel cell development, the partnership between DaimlerChrysler, Ford and Ballard is a major force in the industry. The original structure dating from 1998 comprised the three major AutoBusiness Ltd 163

Automotive Technology Roadmap partners plus two subsidiary companies XCELLSIS GmbH the manufacturing company for the fuel cell systems and Ecostar Electric Drive Systems LLC, which as the name suggests produces the electric powertrain used by both DaimlerChrysler and Ford. It was a complicated arrangement in which all three parties owned stock in the subsidiaries, but the two vehicle manufacturers also owned a total of 31.5% of Ballard. However, in November 2001, XCELLSIS and Ecostar became wholly owned by Ballard, while the manufacturers increased their total holding in Ballard to 43.1% with DaimlerChrysler taking the majority share of 23.6%. Additionally, the partners have entered into a new 20-year alliance. Ballard Power Systems is a key player in fuel cell technology. Apart from its joint ventures with DaimlerChrysler and Ford, it has also supplied fuel cell stacks to Daewoo, General Motors, Honda, Hyundai, Mazda, Nissan, Volkswagen, and Volvo.

Figure 45: Ballards fuel cell stack

Source: Ballard

Figure 46: Ford fuel cell components

Source: Ford

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Powertrain However, other significant players like Toyota, Hyundai and now General Motors are pursuing an altogether different route. General Motors has been experimenting with fuel cells on and off since the 1960s but in 1998 moved from trials with Ballard stacks to using its own, inhouse design. Three years on they evolved into substantial systems, outpacing even Ballard when it comes to overall performance. In July 2000, its 200-cell stack developed 80 kW continuous power and had a power density of 1.1kW/litre. By September, 2001 those figures had risen to 94 kW and 1.6 kW/litre (a 45% increase) and length had been reduced by 25% to 472 mm. Within weeks, details of an even better, 640-cell, stack emerged with a continuous output of 102 kW and a volumetric energy density of 1.75 kW per litre with the target of 2.0kW/litre being achievable by 2004. In late 2002 GM showed the Hy-Wire fuel cell concept car that incorporated a by-wire system developed by SKF with control of the car, including braking and acceleration, being through controls on the steering wheel rather than by foot-operated pedals. However, it was only available to drive around a test track. Of far more significance was the Opel Zafira-based Hydrogen 3 that could be driven on the public roads. This illustrated the advances that have been made in fuel cell cars in a few years. The weight, for example, had dropped to 1,590 kg and the vehicle had dispensed with the high-power buffer battery, thereby saving nearly 100 kg and freeing up the boot space. Also missing on this car were the previously dispensable humidifying components for the fuel cell, the air conditioning unit and the complete diagnosis system. The entire propulsion had become very compact and was installed on the same chassis mounts as the diesel version. It can also be pre-assembled as a complete propulsion dress-up (PDU) weighing around 300kg and consisting of the electrical traction system, the fuel cell stack, the air compressor and additional units. Companies involved in Hydrogen 3 included QuantumFuel Systems Technologies Worldwide, that provide the advanced pressurised tank system, General Hydrogen, which is involved in the infrastructure aspects of the hydrogen industry, Giner Electromechanical Systems which has considerable experience in the field of high-pressure membrane electrolysers and Hydrogenics Corporation, a specialist company for fuel cell-testing equipment and innovative fuel cell concepts for specialised applications. Despite joining a joint research partnership with GM, Exxon/Mobil and BP/Amoco in 2002 to explore on-board fuel reprocessing Toyota chose to develop its own system known simply as the Toyota FC Stack which appeared in 2003 in its FCHV-4 based on the Kluger V (Highlander in the US) SUV Using aluminium skins for the roof, doors and bonnet, Hyundai reduced the weight of its Santa Fe FCV down to an impressive 1,620 kg. The interior space had not been encroached on by fuel cell systems unlike Fords heavy, 1,752kg Focus FCV that debuted in 2000. A key aspect of the Hyundai project is that it is the only vehicle to be powered by a fuel cell system from International Fuel Cells (IFC), the company that has supplied NASA space programmes for almost 40 years. The 75 kW IFC fuel cell stack differs from that of competitors in that it operates at low pressure about 1psi or just fractionally above atmospheric pressure. Others operate at significant enough pressure to require complex sealing systems. IFC also says its design is easier to manipulate with more freedom in the positioning of manifolds and that performance is not diminished compared to a pressurised system. Because the air is not dried by a compressor, no humidifier is necessary and parasitic losses are reduced to below 3%, compared to as much as 20% for some competitors. The manner in which the current initially flows off the electrodes of the fuel cell is not yet suitable for directly propelling a modern vehicle. The Ballard Mk 902 stacks, for example, deliver 450 volts of direct current. This power must be converted in the traction inverter module (TIM) in order to supply a maximum of 330 amperes to the 315-volt direct-current motor. This motor reaches an extremely high efficiency of 91% with a maximum of 12,500 rpm. As seen in the Ford Focus FCV, it delivers its power to a constant ratio transmission provided with a specially adapted final drive ratio of 10:1, enabling the vehicle to achieve a maximum speed of 128 kph at a maximum rpm of 12,500. AutoBusiness Ltd 165

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All conventional onboard vehicle electrical systems like the windscreen wipers, blowers and lighting, are powered by a 12-volt system via a conventional battery. Although many carmakers intend to have fuel-cell cars on the road in 2004, they are very much one-off or small-run prototypes that will not be sold to the public. Instead, the first major public exposure to fuel-cell vehicles is likely on public transport buses such as one of the 30 Mercedes-Benz Citaro fuel-cell buses that have been sold to ten European cities as part of the European Fuel Cell Bus Project. After extensive trials in Vancouver, Canada, they were/will be delivered in batches of three in 2003 and 2004 to Amsterdam (Netherlands), Barcelona (Spain), Madrid (Spain), Hamburg (Germany), London (Great Britain), Luxembourg, Porto (Portugal), Stockholm (Sweden), Stuttgart (Germany) and Reykjavik (Iceland). However, some fuel cell cars are beginning to trickle out into the public domain with Honda in July 2002 being the first to earn approval from the US Environmental Protection Agency (EPA) and California Air Resource Board (CARB) for its FCX. Based on this approval and the results of road testing in the US and Japan, the Japanese carmaker started marketing the FCX in both countries at the end of 2002, sooner than initially planned. However, it is a very low-key operation involving just 30 vehicles over three years in the two countries. The car itself uses compressed hydrogen carried on board in a 156 litre high-pressure tank. With a maximum output of 83 ps (60 kW) and 272 Nm (201 lb ft) of torque, acceleration is similar to a Honda Civic while it has a maximum speed of 150 kph and a range of 335 km (around 220 miles). Due to the state of the hydrogen supply infrastructure, marketing regions will initially be limited to the Tokyo metropolitan area in Japan, and to the state of California in the US. Heavily subsidised by Honda, the vehicles will be offered to customers on a lease basis, with lease rates and conditions to be determined at a later date. However, they will not be for sale to the general public for at least another decade. Following closely on Hondas heels has been Toyota, which had placed 20 fuel cell cars on the roads of Japan and the US by the end of 2002, again leasing them rather than selling them outright. There will be a variety of versions including the FCHV-3, developed in 1997 and the worlds first methanol-reformer equipped fuel cell vehicle, the FCHV-4, first shown in 2001, that has on-board hydrogen stored in high-pressure tanks, and the FCHV-5, introduced in 2002. This car uses a new low-sulphur fuel called clean hydrocarbon fuel, or CHF, and an on-board reformer to produce hydrogen. The key benefit of CHF it is produced from crude oil, natural gas or coal and can be used in current internal combustion engines is that it can be supplied through the existing service station infrastructure. This would allow the operation of hydrogen-powered vehicles in areas where hydrogen is not yet available. The CHF reformer has a catalyst and heat exchanger, helping with acceleration and high fuel efficiency. As from 2007, Ford is expecting to incorporate a second-generation fuel cell system in its test fleet and see a further expansion within certain cities in the US, Europe and Japan. It then is targeting the marketing of a commercially viable fuel cell fleet after 2010 with the objective of offering such vehicles at affordable prices. At that point, Ford FC vehicles will be marking the first stage of a development that will ultimately see the successful replacement of conventional Ford models powered by internal combustion engines. To date, most FCVs have carried either compressed or cryogenically stored liquid hydrogen. Liquid fuel has provided greater energy density so far although progressive evaporation of the fuel is still a problem and lightweight compressed gas storage technology is catching up fast. Two storage tank types are in vogue, aluminium-based Type 3 and composite Type 4. Type 3 tanks consist of an aluminium core wrapped in composite reinforcement whereas Type 4 tanks are entirely composite but require metal inserts in the end of the tank to attach fuel lines. The advantage of the composite route is weight, but Type 3 exponents question the long-term effect of a plastic tanks inability to conduct away heat generated during filling, and also potential weaknesses surrounding the insertion of metal end pieces. A champion of the composite tank is Quantum Technologies, a subsidiary of Impco, the gaseous fuel storage specialist, with bases in California and Michigan, US. Quantums 166 AutoBusiness Ltd

Powertrain progress with its Tri-Shield tanks prompted GM to take a 20% stake in the company leading to the establishment of the GM Platform Development Centre at Sterling Heights, Michigan. The company developed the worlds first 5,000-psi H2 storage system, which received certification from the European Integrated Hydrogen Project (EIHP) at the end of 2001, for Hyundai, using its TriShield tanks, and the first 10,000-psi system in collaboration with GM and the US Department of Energy in 2003. Both contain internal regulators restricting external gas pressure to a safe 150 psi. The tanks are manufactured using a proprietary composite material that is resistant to becoming brittle through contact with hydrogen. Quantums products are widely used in a variety of applications but the Hyundai Santa Fe is the first FCV to be equipped with the 5,000 psi tank. Mazda has developed a magnesium titanium alloy that can absorb over three times as much hydrogen as the alloy now used in fuel cell vehicles. It worked with Japans National Institute of Advanced Industrial Science and Technology (AIST) on the program. The new alloy a mix of small steel bearings, magnesium powder and titanium powder is able to absorb more than 5% of its own weight in hydrogen, a figure that compares very favourably with the 1.4% possible with existing alloys. Officials claim this is the first successful attempt, after a number of failures at research institutes and corporations around the world, to develop a magnesium-titanium alloy. Because of this failure, todays fuel cell car prototypes use high-pressure tanks to store hydrogen but if the new alloy works, the next-generation of prototypes may be able to do without such tanks.

The different methods

Though prototypes are mostly relying on pure hydrogen fuel, the key to speedy deployment of fuel cell vehicles lies in utilising existing liquid re-fuelling infrastructures to supply hydrocarbon fuel from which FCVs can liberate hydrogen on-board, using reformers. Although the idea of using non-sustainable hydrocarbon fuel seems futile to some, it is nevertheless a realistic way of solving the chicken and egg situation what comes first, the vehicle, or the means to refuel it? Most manufacturers are still considering both methanol and gasoline while some have already taken a decision on one or the other.

Liquefied hydrogen The energy required for cooling in cryogenic tanks (to -253C) has a negative impact on the economy and efficiency of the liquefied hydrogen fuel cycle, as does boiling off required to prevent excessive temperatures. Cost of cryogenic tanks is also a major disadvantage. Liquefied hydrogen also requires a new distribution infrastructure and sophisticated on-board cooling equipment.

Compressed hydrogen Compressed hydrogen requires expensive heavy tanks at pressures of up to 10,000 psi and also requires a new infrastructure for distribution. A major disadvantage is the large amount of space required to package sufficient hydrogen to achieve adequate driving range. Tanks are non-conformable. Equal range requires approximately eight times the volume of gasoline. Also, there is a strong but unwarranted public perception that this form of storage of compressed hydrogen is dangerous. There are no emissions except heat and water vapour from the vehicle. Boil off is one of the factors that affects the liquid hydrogen storage tank where the content of the tank slowly heats up despite the best insulation, resulting in hydrogen gas needing to be released from the parked vehicle. Cars that are driven a great deal do not get into this situation because they can use this hydrogen gas for driving before it is released from the tank system.

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Automotive Technology Roadmap While the boil off phenomenon does not occur with the pressurised tank system, there are issues about the maximum allowed pressure that has been limited to 350 bar. However, a breakthrough occurred in the spring of 2002 when the German Technischer Uberwachungsverein (TUV) approved a 700-bar tank for the first time. The system was validated and certified according to the regulations of the European Integrated Hydrogen Project (EIHP) and also complies with the US industry standard NGV2 and the German guidelines for pressure tanks. The tank is the result of the co-operation started in 2001 between GM and Quantum Fuel Systems Technologies Worldwide, a company that specialises in the design, development and testing of advanced hydrogen technologies for applications in the automotive industry. Its TriShield concept is noted above all for its seamless, hydrogen-impermeable inner shell, its high performance casing of carbon composite material and its patented protective armouring.

Methanol Although methanol requires on-board reformation at a temperature of around 260C to produce hydrogen, a methanol-fuel fuel cell is 30% more efficient that a normal combustion engine. There are very few emissions from the vehicle, but while methanol is a popular alternative in Europe, it is a non-starter in North America because of its toxicity, ground water contamination risk, invisible flame characteristics, and negative rating by environmentalists. Used as a denaturant in alcohol, methanol is extremely poisonous when taken internally by drinking or inhaling vapours. The key benefit is that it can be transported, stored and handled much like gasoline or diesel fuel, allowing the existing infrastructure to be used.

Gasoline reformation Onboard gasoline reformation requires very high temperatures (600C), is less efficient and produces more emissions than methanol. The benefit of being able to use the existing fuel and distribution infrastructure is offset by the fact this approach does not offer independence from imported oil.

Metal hydrides Metal hydrides are another possibility for hydrogen storage because they are safe and offer very high storage capacity and performance. Currently available rare-earth metal hydrides have a hydrogen content of 1.5-2.5% by weight, making them more volume efficient than compressed gas; however, the weight of a metal hydride system capable of a 300-mile range in a minivan weighs twice as much as compressed hydrogen. Metal hydrides require delivery of gaseous hydrogen for replenishment, as the hydride is a storage medium, not a fuel. This results in significant infrastructure requirements for this fuel, too. The system currently appears to be the most expensive alternative. Currently, after 12-15 days, the hydrogen refuelling temperature of about 250C can no longer be maintained in the tank. This inevitably results in evaporation losses of the liquid hydrogen.

Nanotubes These have significant theoretical advantages but are not yet really into a credible hardware demonstration phase.

Sodium borohydride Sodium borohydride (NaBH4) is the most benign fuel under consideration, a benefit that is offset by the fact that it would require a new infrastructure for distribution and recycling. 168 AutoBusiness Ltd

Powertrain Sodium borohydride is a compound of sodium, boron, and hydrogen. It is used in a variety of chemical industries, including the paper and pulp industries (as a bleach), in wastewater processing and in pharmaceutical synthesis. It is a dry powder that is safe and easy to transport and offers much better volumetric storage density than compressed hydrogen, and so requires less space on board the vehicle for a given range. Sodium borohydride is hydrogenated sodium borate (NaBO2), chemically equivalent to borax. This benign substance is used as a laundry detergent ingredient. The sodium borate (NaBO2) is not consumed in the process, but merely acts as a carrier for the hydrogen. So the in-vehicle process is clean, emitting only heat and water. The idea of using sodium borohydride as a fuel is not new it has long been known that boron hydrides store more energy than similar hydrocarbons. In the 1960s, work on the fuel was abandoned because at that time the fuel was intended for combustion, which represented an insurmountable engineering challenge. The development of catalyst technology for controlled release of hydrogen and of the hydrogen-powered fuel cell has allowed engineers to take a fresh look at this possibility. Sodium borohydride also offers the key benefit of eliminating dependence on oil imports. Hydrogen for this fuel can be generated by sources such as natural gas, wind power, solar power, nuclear, and hydroelectric power stations. It is also non-toxic, non-explosive and nonflammable.

Cost factors
Over the last four years, the price of fuel cell stacks has dramatically fallen while the amount of platinum has been reduced to levels no higher than used in todays catalytic converters. There has also been a further reduction in membrane costs and an overall reduction in materials consumption. This has meant that the cost of a fuel cell stack has dropped from US$3,000/kW to around US$300/kW in 2003 despite only modest automotive production volumes. Further implementation of technology improvements has demonstrated that the fuel cell stacks can cost less than US$50-US$75/kW, a figure not far off the $45/kW that is the US Department of Energys target. Four factors are of key importance: the increases in the fuel cell power density will result in lower material requirements (approximately 1.2 kg of material is used per kW of stack output); costly materials have been reduced in quantity or replaced. For example, platinum catalyst coatings have been reduced from a total of 4 mg/cm2 to less than 0.4 mg/cm2; increases in volume production will result in much more cost-effective manufacturing techniques. Low production volume and the complex chemistry of the polymer electrolyte membrane result in the costs, which are ten to 20 times higher. In addition, several stack manufacturers have developed carbon/plastic structures, which can be moulded, thereby eliminating costly and time consuming machining operations of fine grain graphite separator plates; and production volume alone can reduce fuel stack costs for technology to below US$250/kW.

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Fuel cell advantages

Fuel cell advantages include the following.

Zero emissions Fuel cell vehicles running on hydrogen fuel produce no pollution or greenhouse gases. The only output is water vapour. High Fuel Efficiency Fuel cells convert chemical energy directly into electricity, so they tend to lose less energy, to waste heat, and have efficiencies two to three times higher than IC engines. Equal performance Fuel cell vehicle performance is equal to that of the conventional IC engine. In contrast to the battery-powered EV, with limited range and relatively long recharging times, the fuel cell vehicles are expected to provide long distance mileage, over 250 miles, between refuelling, and should be able to refuel in a matter of minutes. Noise The fuel cell vehicle is quiet with the only noise being emitted from the vehicle auxiliary systems and the tyres. Overall it is quieter than the conventional vehicle. Long Operating Life and Low Maintenance The high temperature operation and friction caused by the moving parts in an IC engine cause significant wear and require high maintenance. Fuel cells on the other hand operate under low temperature conditions and do not require additional moving parts.

Contrary to widespread misconception, though, fuel cell power systems do not necessarily work without producing any emissions. The deciding factor depends on the manner in which the hydrogen has been generated for the purpose of operating the fuel cells. The conversion of water into hydrogen and oxygen by means of electrolysis is truly emissions-free only if the electric power needed for this purpose has been generated by solar or hydro-electric power plants.

Future trends
Hydrogen can take the place of gasoline and is considered a promising future source of energy. If accompanied by appropriate technologies such as the use of water or solar energy, the process is completely environmentally clean. Several countries such as the United Arab Emirates and, in particular, Dubai have stepped up their research efforts in the field of hydrogen technology with the aim of enabling a smooth transition between the era of fossil fuels to the era of regenerative energy technology. However, a particularly challenging issue is the fact that it is difficult to store large amounts of hydrogen in a vehicle. For this reason, todays fuel cell concept vehicles continue to offer a relatively limited range. This challenge demands further research, if for no other reason than to maintain the level of operational comfort and refinement that characterises todays vehicles. Many experts in fuel cell technology believe that there will be an increase by a factor of 2 in fuel cell fuel economy compared to conventional IC engine technology. At the rated power, fuel cell system efficiencies are as high (or higher than) any other identified automotive design options and the high peak and part load efficiency characteristics will allow the fuel cell vehicles to achieve demanding advanced vehicle design goals without radical design compromises.

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Powertrain While there has been a 60% reduction in size over the last four years, it is but the start. Once thinner cooling plates, smaller humidification sections, lightweight clamping materials and smaller manifolds become more commonplace, it will lead to a five-fold weight reduction in the stack. It has been estimated that there will be an additional weight saving of between 3050% in the next few years. Following its preliminary research into fuel cell vehicles, Renault has publicly defined its new avenues of research. The first target involves cooling. Three different avenues are currently under investigation: innovative design of cooling circuits; improvement of stack performance to make the stack easier to cool; and increasing the temperature of the stack to 120C, which paradoxically, would enable the size of the radiator to be decreased. Depending on which of these solutions is in play in 2010 high or low temperature it will also be necessary to devise new power units, an area in which the Renault fuel-cell project research scientists are also working. Renault is also working on new higher-performance systems that will bring about improvements in response times during changes in engine speed (transitional speeds). The key to hydrogens future as an alternative to fossil fuels is having the right infrastructure in place. Due to its volatility, it cannot be achieved using the same technology as for natural gas. According to a study by Ford engineers, hydrogen filling stations capable of supplying 100 vehicles a day with hydrogen, built in sufficient numbers to realise respective economies of scale, could produce this fuel at a cost level that would result in sales prices comparable to current gasoline prices.

Figure 47: Fords Focus fuel cell vehicle

Source: Ford

By means of electrolysis, such filling stations would be producing hydrogen from electricity generated by small hydro-electric power plants or converting natural gas into hydrogen by means of vapour reformation. Once 10-15% of filling stations were equipped with such hydrofilling units, mass motor transportation could be successfully implemented in major urban areas at the least. Naturally, volumes must contribute to bringing down the costs for this new technology to acceptable levels whilst a single natural gas vapour-reformer today costs 1.5m, large production volumes should lower such costs to around 250,000. A successful outcome requires the involvement of governments, the energy industry, car manufacturers and technology companies. AutoBusiness Ltd 171

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Chapter Four
Transmissions

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Transmissions

Introduction
Ricardo Perspective
Legislation is generally recognised as a major driver of emissions reduction: Until recently the emphasis was on NOx reduction but there is now a real shift towards CO2 reduction across all developed vehicle markets for the simple reason that CO2 emissions are directly proportional to fuel consumption. The genuine desire to reduce fuel consumption, particularly off-cycle, in real world situations seems compelling. Indeed, ACEA, the European Vehicle Manufacturers Association, is progressing towards a 140g/km CO2 target in 2008. Whilst there are whole vehicle contributions expected in emissions reduction, it is worth noting that 10% of the improvement required could be met by advanced driveline and transmissions systems. This potential contribution is shown below in Figure 48.

Figure 48: Transmission technologies and trends

TRANSMISSION - TECHNOLOGIES & TRENDS
Current CO2 (2001) Average vehicle weight Reduce Losses (Aerodynamics, Lubricants Rolling resistance, Powertrain Friction) Diesel penetration rises to 50% Gasoline Lean DI penetration 7% Gasoline VVA penetration 15% 5-10% engine downsizing Advanced t/m - 20% penetration Mild Hybrid - 5% penetration 165 g/km -2% -1% -3% -2% -0.7% -1.3% -3.5% -1.6% -1%

c. 140 g/km CO2

Strategic issues for a low CO2 policy: Diesel product desirability: Powerful, clean, refined, low friction
Gasoline strategy matched to segment, delivering real world gains New generation Transmission technology - low CO 2, added desirability Low CO2 solutions for premium sports models: To avoid embarrassment Realistic strategy beyond 140g/km: impact of Hybridisation portfolio

Ricardo plc 2003

Source: Ricardo

It should be noted that in comparison to vehicle-level initiatives such as weight reduction, powertrain technologies offer a potentially more attractive cost benefit route towards improved fuel consumption and lower CO2 emissions. Additionally, Ricardo concurs with a Ford Motor Company view, that Driveline and Transmission Systems (DTS) developments are potentially twice as economically effective in comparison to engine developments in providing fuel economy improvements. This is, in part, due to the historic emphasis placed on engine improvements: thus the DTS has relatively untapped potential to more than contribute to providing future fuel consumption improvements.

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Ricardo Perspective (contd.) Figure 49: Transmission developments

TRANSMISSION - TECHNOLOGIES & TRENDS

Transmissions developments can be especially attractive
25
Engine = $2x per % FE

FWD6 Twin Dry FWD6 Twin Wet Belt CVT FWD6 Converter

20 15 Delta cost 10
Transmission = $1x per % FE

RWD6 Converter RWD6 Low cost Variable compression Camless Engine Variable displacement Variable valve lift

5 0 0 -5 %Fuel Economy Improvement

Ricardo plc 2003
Source Ford Motor Co. 2002

10

15

20

25

Linear (Trendline Transmission) Linear (Trendline Engine)

Source: Ricardo

DTS developments are potentially twice as economically effective in comparison to engine developments in providing fuel economy improvements FWD 6 Twin dry = 6-speed front wheel drive twin dry clutch FWD 6 Twin Wet = 6-speed front wheel drive twin wet clutch FWD 6 converter = 6-speed front wheel drive automatic RWD 6 converter = 6-speed rear wheel drive automatic While the basic range of tasks for vehicle transmissions drive-off, matching of engine torque and speed, and forward and reverse travel remain as they have always been, they have become an ever more important part of the overall package in the quest to reduce fuel consumption and emissions. At the same time, there is the constant customer expectation of improved driving performance and comfort. There are a number of standard transmission configurations. The standard driveline for rearwheel driven vehicles such as those produced by BMW and Mercedes-Benz, is a longitudinally-installed, inline engine/transmission combination. The front-longitudinal driveline, as found on Audi, Chrysler and Volkswagen vehicles, is composed of a longitudinally-installed inline engine/transmission in front-wheel drive vehicles. The front transverse driveline makes use of a transversely installed engine/transmission and frontwheel drive. This is the most common arrangement on vehicles in the small and mid-range segments in all markets. The rear longitudinal driveline is one with a rear engine/transmission and rear-wheel drive as found on the original Volkswagen Beetle and in a modified way on the Porsche Boxster. The preference for manual or automatic transmissions has always been regionally biased. While drivers in North America and Japan have long preferred automatics, European drivers have opted for manual gearboxes. There are signs, though, that automatic transmissions are 176 AutoBusiness Ltd

Transmissions making inroads into this region. Figures produced by ZF, for example, show that while manual transmissions had a 90.7% share in western Europe in 1990, this had dropped to 84.2% in 2000. It is the German market, which has always had a greater acceptance of automatic transmissions that is leading the way. Where automatic transmissions accounted for a 16.7% share in 1990 this increased to 27.8% in 2000. It must be noted, though, that in the highvolume small and medium B and C segments, automatic transmissions accounted for only 1.5% and 4.8% respectively in Europe in 2000. In North America, though, the demand for automatic transmissions has remained virtually unchanged throughout the 1990s showing just a minor variation from 85.5% in 1990 to 84.7% in 2000. Even projected figures for 2010, as researched by Ricardo, show that automatic transmissions will still retain a 78% market share.

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Transmission types
Clutch-by-wire
Although there have not been too many advances in manual transmissions, except for the increased popularity of 6-speed gearboxes, one of the areas that looks like being developed is the clutch pedal. A traditional clutch control opens and closes the vehicles clutch via the pressure or load applied by the driver on the clutch pedal. The pedals position, as well as the force applied, influences the clutchs behaviour. The mechanical or hydraulic link positioned between the driver and the clutch performs the function of transmitting and transforming the control effort in order to render the clutch easy and comfortable to manoeuvre. Until now, this type of clutch control has fully met requirements in terms of simplicity of use, robustness over time, ease of adaptation to different powertrains, limited space taken up under the bonnet, low maintenance and low function cost. However, it is no longer in line with new market requirements driven, for example, by increasingly powerful engines, demands for improved comfort, increased space requirements in the passenger compartment or improvements in passive and active safety. It would seem that clutch control is one of the few remaining mechanical vehicle functions that continues to resist being electrified. However, this is inevitable and in time will result in the networking of all vehicle control functions, such as the electronic throttle, brake-by-wire or electric steering systems. Valeo has been working on a clutch-by-wire system that replaces the mechanical link. The clutch pedal effort is performed by an actuator and the pressure at the pedal level is no longer with the clutch, but with an additional device. A sensor measures pedal position and the data transmitted to an electronic module which subsequently controls the clutch actuator. The clutch is therefore managed electronically. Electronic clutch control allows the ergonomics of clutch control to be upgraded to a level that the traditional systems cannot achieve. In addition, as it is not directly linked to the clutch, additional functionalities to improve driving comfort and increase safety can be added. Benefits to the driver include a reduction in the pedal load and travel. Due to the reduction in the control effort and the electronic transmission of data, it is easier to design a pedal that is less traumatic to the lower limbs in the event of an impact. Clutch pedal positioning is better, which frees up more space around the pedal, and its resistance is adapted to require less effort. Therefore, when impact occurs, the clutch pedal is no longer a danger to the driver. It can also detect when a foot has slipped off the pedal and temporarily replaces the driver for operating the clutch. Another advantage of an electronic clutch pedal is that in the event of missing some gears when downshifting, it can enable only partial engagement of the clutch, with the clutch sliding while keeping the engine speed within its acceptable limits so as to avoid damage to the engine. When the danger is over, complete re-engagement of the clutch is again possible. The system also prevents stalling during the delicate phases of braking or starting and allows gear shifting even if no pressure has been applied to the clutch pedal. This mode makes driving on congested roads or on icy roads much easier. The electronic clutch pedal also informs the driver when it is over-stimulated or worn and needs to be replaced. Getting rid of the mechanical link between the control pedal and the clutch opens up greater design freedom in terms of architecture.

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Transmissions Pedal box architecture: whether it be a suspended-type pedal or a clutch module fixed on the floor of the vehicle, packaging is easier and simpler if it is an adjustable pedal box. Engine compartment architecture: dash panel penetration by the cable or hydraulic link disappears generating acoustic gains. There is no packaging conflict between the brake amplifier and the left rail. Impact management: the thrust of the clutch transmitter that generates recoil of the pedal box no longer exists. Ergonomics/comfort: the travel and the effort of the pedal are shortened.

Clutch operation can be based on several different control technologies, the two main examples being electrohydraulic and electromechanical. Valeo believes that the electromechanical solution is better for reasons of cost, simplicity and robustness. Benefits to the carmaker are seen as follows. Clutch-by-wire is in line with the current trend towards fully electronic controls. Can be integrated with other systems to enhance safety functions. It is a viable alternative to automatic transmissions. Allows greater freedom in clutch design. Greater protection on the transmission. Torsional vibrations can be filtered out through more control over the clutch. Design freedom in terms of the pedal. Access to data on how the clutch is used by the driver.

Automatic transmissions
Automatic transmissions have now reached a highly sophisticated state with excellent shift qualities, electronically controlled driving programmes and fuzzy logic that are based on ambient conditions and driver behaviour. While conventional logic admits only two possibilities, true or false (1 or 0), fuzzy logic reacts in the same way as a human being with the same kind of subjectivity and accepts intermediate positions between the two poles. It is therefore able to take account of a very large number of parameters yet is much easier to develop. Where 3 and 4-speed transmissions were once dominant, they have been replaced by 5speed and now 6 and 7-speed automatics that through recent developments can compete with manual units in their efficiency. Figures produced by ZF show that there is a 5% fuel consumption improvement of the 5-speed over the 4-speed while the 6-speed transmission shows a further 6% improvement over the 5-speed. While the automatic transmission still cannot equal the 96% overall efficiency of a manual transmission, it can achieve over 90%. Although adding a fifth and now a sixth gear has brought with it problems of packaging, these have been somewhat negated by the huge advances in gearbox design. In transverse applications, for example, where axial length is critical, one answer has been to use a double planetary gear set on the main shaft with a Simpson type 3-speed underdrive on a secondary shaft. The 5-speed gearbox that was specially developed by DaimlerChrysler for its executive class models in 2000 showed great advances over the preceding version. The number of components was reduced from 1,160 to 630 and where previous units had used four gearsets and seven selector units, the new one had just three epicyclic gearsets and six selector brake units resulting in a smaller and lighter unit, but still one with the torque capacity to handle the output of the Mercedes-Benz V12 engine. Additional weight was saved with the use of pressed sheet metal parts rather than forgings and castings.

6-speed automatic transmissions The greatest recent advances, though, have been on 6 and 7-speed automatic transmissions. ZFs 6HP26 unit, first seen on the BMW 7 Series in 2001 and the first in the myTronic family AutoBusiness Ltd 179

Automotive Technology Roadmap of 6-speed automatic transmission is of particular note. It featured a new type of gearset devised by French engineer Pierre Lepelletier that actually takes up less room while saving 11 kg over a 5-speed box since it can be produced with around 30% fewer components. On transverse engines, there are even further cost and weight savings as the secondary shaft is now redundant and is dispensed with. In tests carried out by ZF, the 6-speed gearbox showed improvements over the same car fitted with a 5-speed transmission of 2-5% in 0-100 kph tests but also 5-7% in fuel savings in a driving cycle. This was not only due to the lighter weight, but also to the ratio of the long sixth gear that allowed for high road speeds at comparably low engine speeds. A lowviscosity oil especially developed for the gearbox also reduced fuel consumption and pollutant emissions. Another new feature on ZFs 6-speed transmission was the Bosch Mechatronic module, a combination of a hydraulic control unit and electronic module, introduced to reduce the number of cable and plug connections within the transmission. It co-ordinated all shift procedures in the transmission with even greater precision and provided improved drive comfort. The shift electronics were fed with information on the present drive situation by sensors and the transmission software could respond immediately to any changes providing optimised shift points. It therefore covered many variations ranging from very sporty to very economic driving. Intended ultimately to replace the 5-speed gearbox, the 6HP26 was designed for standard driven vehicles and for torque up to 600 Nm (444 lb ft), although different versions have since been developed that can accept torque up to 750 Nm (555 lb ft).

7-speed transmissions 2003 saw the arrival of two 7-speed transmissions, one from ZF and the other from Mercedes-Benz. While the number of gears was the same, this was about the only point of commonality between the two. While the carmaker had switched to the so-called Ravigneaux gearset, named after the French engineer who devised it in the 1920s, ZF remained with the Lepelletier principle it introduced on the 6-speed box. However, another big difference was that the ZF transmission used a wet starting clutch with dual-mass flywheel instead of a converter as it was being specifically aimed at diesels. Neverthess, the ZF transmission was designed for only 600 Nm, 100 Nm less than the 7G-Tronic. The increased spreading from 6.04 for six speeds to 7.28 on the ZF, compared to the 6.0 on the Mercedes unit, improved acceleration behaviour as well as emissions reduction and fuel consumption. It was also smaller and lighter compared to a 5-speed automatic transmission although Mercedes claims that at 89 kg, the ZF box is some 7 kg heavier than its 7G-Tronic. The 7G-Tronic is currently manufactured at 200-300 units a day at the DaimlerChrysler Untertrkheim plant near Stuttgart although in full capacity, production is expected to reach around 2,800 a day by 2005. This is important technology for Mercedes-Benz who has invested around 400 million on this site. From September 2003, the 7G-Tronic became standard equipment in the 8-cylinder models of the E, S, CL and SL-Classes at no extra cost.

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Figure 50: Mercedes-Benzs 7G-TRONIC automatic transmission

Source: Mercedes-Benz

Licenses for the Pelletier gearset have also been taken out by Aisin AW, Ford (US), GM (US and Europe), Jatco and Volkswagen. The impact of this new development over the next few years is likely to be seen on virtually every car, except for the smallest ones with transverse engines. A niche development over the last few years is automatic transmissions that have been converted to allow the driver to have some manual override. These generally apply to highperformance sports cars or sports saloons where the driver is handed control and can shift one gear at a time, up or down, by moving a lever or pressing paddles on the steering wheel. Both BMWs Selectronic and Porsches Tiptronic fall into this category.

Automated Manual Transmissions (AMTs)

However, the Selectronic and Tiptronic transmissions are not to be confused with automated manual transmissions (AMTs) that also have a very sporting connotation. They are based on manual gearboxes but do not require clutch actuation and, in some cases, gearshifting by the driver. Instead, they have clutch and transmission actuators and transmission and system control which are added to the manual gearbox in modules. Magneti Marelli with its Selespeed has very much been in the vanguard of this technology although it was BMW with its Sequential Manual Gearbox (SMG) that was the first manufacturer to offer such a concept on its high-performance M3. This was based on the ZF S5-31, one of ZFs 5-speed manual transmissions that was adapted for automated shift processes. Modified housing geometry allowed attachment of the electronic control unit and an extensive range of sensors to be fitted directly onto the transmission. For the first time ever, drivers of mid-range BMWs were given the option of a sporty alternative to the traditional method of shifting and disengaging/engaging the clutch. The driver triggered the clutchless shift process using paddles under the steering wheel or using the shift knob on the central console. Gearshifts are conducted sequentially one after another in upshifts or downshifts. Development work was started in 1999 between BMW, ZF and Magneti Marelli and it was ready for limited production volume in 2001 for the M3 E36. In E46 M3, the SMG was developed into SMG II, offering even quicker shift and 11 different modes - 5 automatic modes and 6 manual modes with different speed versus smoothness. At the hottest S6 mode, gearshift takes as little as 80ms. Other AMT examples include the Renault/Valeo Boite de Vitesses Automatisee (BVA) and Citrons SensoDrive that is coupled with the C3 1.6i 16v, C3 Pluriel and C3 HDi and AutoBusiness Ltd 181

Automotive Technology Roadmap subsequently on the 1.4i and 1.6I VTR versions of the C2. Ricardo has also developed a transmission. In Magneti Marellis Selespeed system, which was first seen on a Ferrari, four actuators are used for gear selection and engagement plus throttle and clutch operation. The system monitors engagement, applying a maximum force to engage the gear. If engagement is unsuccessful the system will select the next available higher gear. Loads are quite high. The Ferrari F355 system, for example, which requires six actuators will apply up to 130 kg. The modules for clutch and gearshift actuation are either electromechanical, such as GMs Easytronic system developed by LuK or electrohydraulic such as that developed by Magneti Marelli for Ferrari, and Fiat Auto. The latter system is better suited to sports cars as it allows short shift times although on the negative side is a gearshift with traction interruption that results in significant losses in comfort compared with a powershift automatic transmission. GMs Easytronic is an add-on system without any modification to the 5-speed gearbox. The external manual shift mechanism is omitted and replaced by the gearbox actuator using exactly the same flange area. The clutch pedal is also deleted and replaced by the clutch actuator, which also contains the power and control electronics for the entire system. A selfadjusting clutch (SAC) with reduced release load is used so that the actuation forces are not unnecessarily high. This LuK system dispenses with a gearbox input speed sensor and a position sensor on the clutch slave cylinder, with resultant cost savings said to be around half that of an automatic and a continuously variable transmission (CVT) box. However, advanced software strategies have been required to achieve good quality. Electromechanical systems are generally seen as the better solution and with the advent of 42-volt electrical systems in the future, a more suitable way to go. The clutch and gearshifting control will be via electric motors that will only use energy during shifting, making them more efficient than hydraulic power. Only in sports cars that need extremely short shift times, will hydraulic actuation be used. The basic fuel consumption of vehicles equipped with AMTs is virtually identical for similar shift patterns to those fitted with standard manual gearboxes. On the electromechanical systems favoured by LuK, for example, the actuator energy consumption on the average cycle is only little more than 10 watts, which is scarcely noticeable in fuel consumption.

DualTronic Parallel Shift Gearbox (PSG)/Twin Clutch Transmission (TCT)/Double Clutch Transmission (DCT), Direct-Shift Gearbox (DSG)
In answer to criticisms that the upshift in AMTs is intrusive when being accelerated hard (as the moments of deceleration cause the driver and passengers to surge forward) has led to the development of the twin-clutch gearbox. This is a twin-clutch gearbox with dry clutches and electromechanical actuators that generally has the same fuel consumption benefit as an AMT while also offering the same comfort as a good automatic transmission. It was first put into production by BorgWarner, which called it DualTronic with the Audi TT 3.2 DSG (Direct-Shift Gearbox) being the first model to use it. This gearbox is now following the Tiptronic and Multitronic as a further milestone in transmission technology at Audi. This transmission principle, however, is not unknown territory for the German carmaker since it was first used in a very rudimentary form in the Audi Sport quattro S1 World Championship rally car in 1985 and by Porsche in the sports racing 956s of the same era. Automotive Products had developed the idea in the early 1980s, calling it the hot-shift gearbox while Chrysler resurrected the principle for the ESX3 concept in 2000, calling it the EMAT (electromachanical automatic transmission. Generally, though, industry prefers the term DCT or dual clutch transmission, although it is also known as the Parallel Shift Gearbox (PSG). Unlike conventional gearboxes, DCT uses two clutches one clutch connects to the odd gears (1st, 3rd and 5th) while another clutch connects to even gears (2nd, 4th and 6th). This enables it to shift far smoother and faster than a conventional gearbox. For a gearshift the new target gear needs to be engaged in the inactive part of the gearbox before the torque is moved from one clutch to the other without torque interruption. The driver can only feel this torque handover. 182 AutoBusiness Ltd

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Upshift takes just 8ms, 10 times quicker than BMW SMG II which had been the fastest automated manual gearbox currently available. Downshift is less impressive, because the gearbox needs to wait for the throttle blip to match gearbox speed with engine speed. Changing down a gear therefore takes 600ms. Changing down a few gears can be more complicated. The most complicated is from 6th to 2nd (both are controlled by the same clutch while the distance between the two gears is the longest). It needs to change to 5th (controlled by another clutch) temporarily before 2nd is selected. This takes 900ms. Many manufacturers are working on these gearboxes ZF, Ricardo, Prodrive reflecting the further evolution of synchromesh manual transmissions towards powershift. A number of solutions are being offered such as wet or dry clutches and hydraulic or electromechanical actuators. Where an active interlock system is used, it enables both gearbox units to be shifted with only one gear actuator which can be identical to one used for the LuK Auto-Shift Gearbox (ASG). Since this is compatible with the manual shift module, an actuator family has been created that can be used with the manual gearbox, the ASG and DCT. There is some debate about wet or dry clutches being the better solution. Apart from dry clutches being far more common as launch devices, their characteristics remain almost unchanged during their service life. Even after overloads, they return to normal within a short time. On wet clutches such as Hondas own CVT system, though, the oil is destroyed during overloading and the shift quality is dramatically reduced. Multi-plate clutches, though, are both very expensive and complicated and need to be carefully designed if they are to engage and disengage smoothly. DualTronic offers the advantage that it can be based on manual transmission components and it also offers a certain advantage in terms of drag losses since the transmission only has two powershift elements. There are also certain benefits regarding installation in cars with a front transverse arrangement. The disadvantage is that gearshifts are only possible to a limited extent over two speeds and with additional control required. This is particularly negative in downshifts that in practice occur very often. Another disadvantage is that tip switch shifts initiated spontaneously by the driver lengthen the overall shift time due to gear selection. In normal gearshifts that can usually be prevented by a pre-selection process.

Electric Shift Gearbox (ESG)

According to LuK , which gave a presentation at the AVL conference in Graz in September 2002, an advance on DCT is the ESG, Electric Shift Gearbox. The starter generator is connected to a gearbox input shaft parallel to the axis. It not only makes starting and generation possible, but also regeneration (of brake energy), whereby both clutches are disengaged meaning that the engine does not cause drag torque losses during regeneration. More energy can be recovered through this than with a conventional crankshaft starter generator. If further extended, the air conditioning compressor could even be connected to this electrical engine without an additional electric motor. This connection offers possibilities such as regeneration into the air conditioning system without converting mechanical energy and vice versa; equally air conditioning at standstill is also achievable. Key benefits of AMT include the following: improved driving comfort through optimised gear shifting; improved fuel economy to meet CAFE regulations; improved emissions levels to comply with the 140 g CO2/km goal; easy installation in the existing driveline; reduction of torque interruption when mated to the PSG/TCT; protection of driveline in the event of undesired manoeuvres; and low costs.

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Continuously Variable Transmissions (CVT)

CVT has struggled to be accepted over very many years prototypes were tried as early as 1897 although it was not until 1959 that DAF offered a car incorporating what was known as the Variomatic transmission. This was succeeded by the Van Doorne Transmatic, in which the rubber belt that was integral to this type of transmission was replaced by a belt consisting of carefully shaped steel blocks strung on a flexible steel band. Although the Transmatic differed fundamentally from the Variomatic in that the transmission of drive from one pulley to another was now via belt-block compression rather than belt tension, the twin-pulley arrangement remained visually much the same. The engineering advantage was that for a transmission of given size, the Transmatic was capable of handling considerably higher torque, although it was some time before the system was asked to accept a throughput of more than about 150 Nm (110 lb ft), typical of a 1.6-litre C-segment engine. On the downside, though, was that without some form of automatic clutch it could not function as a fully automatic transmission. To overcome this problem without undue cost penalty the Variomatic and early Transmatic systems used a centrifugal clutch. Nevertheless, driveability issues remained a constant concern. It is therefore only recently that there has been growing interest in these forms of transmission, known generically as continuously variable transmissions (CVT) that permit the gearing to be precisely adjusted to the engines needs and be considered as a low-cost option to automatic gearboxes. However, there is still some considerable debate as to whether they really do provide the most appropriate solution. The disadvantage of conventional gearboxes is that they are only capable of providing maximum engine power for certain values of engine speed. The principle behind CVTs is to provide any ratio between vehicle speed and engine angular speed so that the engine can be kept within the most efficient powerband. The current development of continuously variable ratio transmission systems can be classified as belonging to one of the following families: hydraulic systems; systems based on belt transmissions (Transmatic Van Doorne system, Fouillarions system, the Kumm mechanism, the PIV-Reimers and Variomatic); systems based on wheels in contact or traction drives (the most noteworthy being NTD Nutating Traction Drive by Vadetec, Vadetec NT-XA2, Hayes CVT toroidal, Perbury/BTG toroidal CVT, the developments of Excelermatic, Forster, Epicyclic by Jaguar and Torotrak); and oscillating systems (Epilogics infinitely variable transmission).

However, while CVTs can be hydraulic or electronic, only mechanical solutions to date have gone into mass production for cars, either as belt or as toroidal transmissions. Belt CVTs are particularly suitable for cars with front-wheel drive and transverse engine. Japan has shown the greatest interest in CVT technology in recent years mainly due to it being fitted to the countrys micro cars that have 0.66-litre engines with torque capacity limited to 65 Nm (48 lb ft). However, in order for these small cars to accelerate from standstill, the transmissions need a mechanical gearbox stage corresponding to a first gear. After this, the variator takes over with further ratio changes occurring continuously. Fuji Heavy Industries of Japan, Subarus parent, has long believed in CVT having launched ECVT, the first CVT to go into mass production, in 1987 in its B-segment Justy. By using an electromagnetic iron-powder clutch from the start, the clutching current being computercontrolled, it surmounted many of the driveability issues of the centrifugal clutch. It was a solution that Nissan also used when applying the CVT to its B-segment Micra and then with the C-segment Primera. It was with this model in 1999 that a CVT was used for the fronttransverse driveline with an engine having an output greater than 100 kW and a torque of 190 Nm (140 lb ft). Meanwhile, Honda adopted a computer-controlled multiplate wet clutch for starting from rest that it fitted to a C-segment Civic with a 1.6 litre engine that developed a maximum 140 Nm (103 lb ft) of torque. The programming was specifically aimed at achieving a good match with the engines best specific fuel consumption, and it was claimed that the 184 AutoBusiness Ltd

Transmissions CVTs fuel economy in the urban cycle was 15% better than that achieved with a conventional 4-speed automatic. Further developments undertaken in Japan included a second generation version of Subarus ECVT known as E2CVT launched in 1997 and the I-CVT a year later. Apart from showing an improvement in terms of response and comfort, performance and fuel consumption, it also had an improved torque capacity of 130 Nm (96 lb ft). Honda, meanwhile combined the CVT belt-and-pulley with a torque converter, judging the engineering advantages to outweigh the extra cost, a solution adopted by Mitsubishi on its HSR-VI concept car which was powered by a gasoline direct injection engine. Nissan also displayed its Hyper CVT-M6, intended for installation in D-segment production cars with engines up to 2.0-litre capacity. These were all significant developments as it allowed manual selections to override the basic control programming. The driver was therefore able either to allow the vehicle to operate in its most economical auto-CVT mode or to select one of six positions, each of which would hold a preset overall gear ratio subject to safety constraints. The reason for this development was that it was believed that it would overcome one of the objections towards the CVT the lack of perceptible gearshift jumps giving the impression that acceleration was relatively leisurely as the subjective perception of acceleration is closely tied to a rising engine note. It was ZF, though, that first suggested utilising a torque converter with a CVT, subsequently developing the ecoTronic family of CVTs that varied in size and torque capacity and originally included the CFT13 (130 Nm/96 lb ft), CFT18 (180 Nm/132 lb ft) and the CFT25 (250 Nm/184 lb ft). This family was extended in late 2001 with the addition of the CFT30 (300 Nm/221 lb ft) and the VT1F. Differing from the rest of the ecoTronic family, this transmission relies on a wet clutch rather than a torque converter but is only able to handle torque ratings up to 175 Nm (129 lb ft). Of a very compact design, the VT1F is suitable for applications in vehicles of the lower mid-range class and in small vehicles, such as the current BMW Mini.

Multitronic
Until Audi showed in 1999 that it was possible, conventional wisdom held that around 180 Nm was the limit for CVTs due to the inability of the band to accommodate any extra torque. Working with LuK, Audi showed its solution to the perennial torque problem in 1999 when it showed that it had successfully mated a CVT system with a 6-cylinder 2.8 litre engine developing 195 ps (143 kW) and, more significantly, 280 Nm (206 lb ft) of torque. The basis of this leap in CVT technology was a new link-plate chain, a new variator and an oil-cooled multi-plate clutch rather than the usual torque converter all controlled by an even more sophisticated level of electronics. Rather than use the Van Doorne companys steel thrust belt, which was used by all CVT systems that were currently on the market, Audi opted for a link-type chain that it had codeveloped with LuK since 1994. LuK had bought the patents for the belt from PIV, a machine tool company based in Bad Homburg in Germany that had developed the technology for heavier industrial use. The chain consists of 1,025 individual links and 75 pairs of pins serving as cradle links, all made of high-strength steel. It is 37 mm wide, 715 mm long and weighs around 1.7 kg. Achieving a higher degree of efficiency, it also reduces the radii of the tracks and has a higher torque capacity for a comparable installation space. The multi-disc clutch enables a wide range of starting characteristics from ultra-gentle edging along on an icy surface to full-out acceleration. It can even be used in a warming-up programme to bring the catalytic converter up to light-off more rapidly with temperaturedependent speed increase upon clutch engagement. The lack of a torque converter is compensated for by the variator with its wide spread and infinite number of transmission variants. Another important feature was that the multi-disc clutch provided pre-defined creep behaviour to give the characteristics of a stepped automatic fitted with torque converters. However, the creep torque on the multitronic is adaptable enough to be varied or matched to external conditions. AutoBusiness Ltd 185

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The gearbox has a drive-off ratio of 12.7 and an overdrive one of 2.1. This results in the large gear ratio spread of 6.0 that can provide a sporting and dynamic drive-off while achieving a more favourable fuel consumption level and greater refinement at lower engine speeds. One of the key features differentiating multitronic from conventional CVT systems is engine speed tracking. Where the engine speed on CVTs tends to increase quickly in response to the throttle being opened the so-called rubber band effect or slipping clutch syndrome the multitronic manages to regulate both the engine speed and the transmission ratio so that the engine speed response is similar to that of a car with manual transmission. There are three phases in this electronically-controlled process. When the throttle pedal is pressed, the variator reduces the ratio (underdrive). The engine speed rises spontaneously but unlike geared automatic transmission, imperceptibly and without jerking. Phase two sees the actual engine speed tracking process where the engine speed continues to rise steadily according to a defined strategy, along with increasing road speed. In the final phase, the electronics correct the ratio to optimise the performance or fuel consumption, depending on the individual drivers priorities based on analysis data stored immediately beforehand by the system. If the driver then moves his foot off the accelerator, the electronics shift up towards a higher ratio (overdrive), again entirely without any jolting. The system is also able to detect if the vehicle is ascending or descending and even towing a trailer. This has been made possible by adapting Audis Tiptronic dynamic shift programme (DSP) which is capable of identifying and assessing the driving style at any given time. However, it works better on the multitronic as it can adapt to changing requirements more flexibly than a geared automatic transmission as it is free from gearshift jolting. The stored maps vary from being suitable to the more aggressive driver to one who is more conscious about fuel consumption. Another distinguishing feature of multitronic is its light weight. It is 20 kg lighter than ZFs 5speed transmission and even lighter than that companys lightweight 6-speed box. 7 kg alone is saved due to the use of magnesium for the transmission casing. It is also 98.5% recyclable. However, from a marketing viewpoint, it is Audis claims of a 10% improvement in fuel consumption over the 5-speed multi-ratio automatic transmission and a marginal one over the manual gearbox that is most important. An A6 2.8 with multitronic is also 1.3 seconds faster from 0-100 kph (0-62 mph) than an automatic and even one tenth of a second faster than a 5speed manual. Following the success of the Audi multitronic, there has been a general demand for CVTs for more powerful engines with a target being around 500 Nm (368 lb ft) which both ZF and LuK have been working on. Current research at LuK shows that there is potential for a torque increase to nearly 400 Nm 295 lb ft) through further development of the LuK chain while the 500 Nm target will require structural enhancements such as the arrangement of the variator in a power split drive train.

Infinitely Variable Transmission (IVT)

Infinitely Variable Transmission (IVT) is often mistaken for being a type of CVT. Functionally the two have much in common inasmuch as it automatically selects whatever transmission ratio is right for the combination of circumstances and driver demands. However, it goes beyond in eliminating the starting device in such a way that the stepless adjustment of ratio is continuous from reverse to full forwards. This creates the phenomenon of a powered neutral between reverse and forwards, a mode which makes it possible for any style of start to be achieved under full control. It is this phenomenon that justifies the description of infinitely variable, an expression which cannot be correctly applied to the CVT. It has high transferable power, good comfort and quick adjustability, while its fundamental advantage is a higher torque capacity than a CVT. IVT uses a torque-controlled full toroidal traction drive in a two-regime configuration. There are two essential components. One is the variator that consists of two rotors with toroidal 186 AutoBusiness Ltd

Transmissions surfaces facing each other, one connected to the input shaft and the other to the output, that envelope a third roller which can have its axis moved so that it bears against one rotor at a greater radius from the centre and thus against the other rotor at a correspondingly smaller radius. By such means a range of ratios as great as can be found elsewhere is achieved. Hydraulics is used to vary contact forces within the whole assembly, enabling rapid torque changes to occur. The second essential component is the traction fluid in the variator that lubricates and cools the discs and rollers. Nissan has been experimenting with just such a system for years and has put its own version, the Extroid CVT, into small scale production for the Japanese market-only Cedric and Gloria luxury saloons. The main proponent of this technology is the UK company Torotrak which has carried out a great deal of experimentation on vehicles of all sizes including 17 tonne trucks and large US 4WD vehicles. There is a claimed improvement in economy of 17% compared with the most advanced current conventional automatics, with a corresponding reduction in carbon dioxide. It provides an extremely efficient operating regime for the engine at all times, whatever the speed or load, and being made from a smaller number of easily machined components, it is also less expensive to manufacture, although this last claim is subject to debate. For all these perceived benefits, though, the technology has not been embraced by the automotive industry. There is still a general suspicion about durability, although Torotrak rebuts them, while another problem is that the torque needs to be transmitted between the two surfaces through the traction fluids that at the same time must protect the surfaces. They are still expensive and have not yet completely satisfied the OEMs when it comes to the viscosity characteristics over the required temperature range. Compared to CVTs, toroidal transmissions also require more space and are heavier. The jury is therefore still out as to whether they will ever become established in the mainstream car industry.

Figure 51: Torotraks series 3a transmission

Source: Torotrak

Antonov Automatic Driver (AAD)

Another novel transmission system is the Antonov Automatic Driver (AAD) that has been developed by Antonov Automotive Technologies (AAT) since 1991. At the heart of this technology is a very simple idea. Gear changes are made by two forces that are naturally occurring in the transmission, forces which replace the energy-consuming components of current automatics. One force is the axial thrust generated by meshing helical gear teeth that seeks to disengage the gears axially along their shafts. The other is the centrifugal force AutoBusiness Ltd 187

Automotive Technology Roadmap created by all rotating bodies. The functioning is best understood if this balance between the centrifugal force and axial thrust is followed in the example of the clutch. In acceleration, torque is applied to the input shaft. The axial thrust from the ring gear keeps the clutch open and there is a rotation speed reduction, creating first gear or direct drive. In transition, the axial thrust equals the centrifugal force and the clutch starts to slip. As this slippage increases, axial thrust decreases. Part of the power goes through the clutch which brings about the progressive elimination of the thrust force and the closing of the clutch. The ratio progressively reduces to direct drive and an upshift to the next speed is achieved. In cruise no speed reduction through the gears the centrifugal force is greater than the axial thrust (zero) which keeps the clutch closed. In a downshift, the axial thrust is greater than the centrifugal force. The balance between the forces starts to change when the input torque rises to the point where the centrifugal force is not sufficient to keep the clutch closed. Slip in the clutch begins, and increases until the speed-reduction ratio of the gear is reached. At this point the one-way clutch is engaged and axial thrust is generated in the ring gear, increasing so as to open the clutch totally, thus achieving a smooth downshift. The clutches have a self-protecting character that prevents damage from high temperature. When in slip, the temperature of the oil between the clutch plates increases, reducing its viscosity. The less viscous oil is naturally pressed out from between the plates, locking the clutch. The process described provides automatic shifts in a 2-speed module, which cannot cover the required ratio range for a modern car. To create AADs of 6 or 9 speeds one further planetary gear is added. The ingenuity of Anotonov is such that multiple forward speeds are made available with a minimum of modules, for example, two modules in the new 6-speed AAD. The AAD principles are applicable to a wide range of vehicles and technologies for both on and off road use and to other vehicle applications or for static installation. It is a low cost, low weight concept that offers high fuel efficiency and is capable of universal application and is not limited to any specific engine torque category. It uses conventional components and current manufacturing technologies, allowing it to be produced in existing transmission plants. It also dispenses with the need for a high-pressure, high-flow hydraulic system and a torque converter. AAT launched an electronically controlled 6-speed version at the Paris Salon in September 2002 in which the shift points are fixed electronically and shift quality tuned as desired. The transmission management can also be integrated with other powertrain and dynamic control systems. The advantages of AATs latest electronically controlled 6-speed transmission are: only uses current manufacturing technologies and components industry estimates US$650 per unit production cost; six forward and two reverse speeds are achieved with two simple planetary gears; two-shaft arrangement 250 mm length and around 45 kg weight; three signals for shifting control; low pressure and flow high efficiency; market standard shift quality and features; all internal and external start devices are possible; unlike CVTs and toroidal devices, AAD automatics do not require ultra-high precision engineering and can be entirely manufactured using existing processes; and the gearbox can be integrated with other powertrain and dynamic control systems.

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Transmissions User benefits compared to a conventional 4-speed automatic are: up to 20% fuel efficiency; faster acceleration; higher top speed; greater responsiveness and quicker kickdown; improved wheel dynamics; and during shifting, power to the wheels is never interrupted

AAT and Honda have reached agreements on both a non-exclusive licence and technical services under which the Japanese OEM may use Antonovs parts. Production licences are held by Gajra, an Indian transmission manufacturer, NZWL, a fast-growing German transmission specialist, and Sitma, a French transmission specialist.

Summary
In Europe, the market share of manual transmissions appears under threat as AMTs challenge in the A, B and C segment cars with engines from 1.0-1.8 litres and from 5 and 6 and 7-speed gearboxes using the Lepelletier gearset on executive class cars with torque capacities from 300 Nm (221 lb ft). Between 2003 and 2010, the market share of manual transmissions market in Europe can be expected to drop to around 49% according to a report published by Ricardo in July 2003. Its position will be usurped by fully automatic transmissions (from 12 to 18% respectively), double clutch transmissions (from 0 to 16%) and automated manual transmissions (from less than 1% to 11%). Even the CVT is expected to increase its market share increase from around 1% to 6% in the same period. The most attractive market sectors for the double clutch transmissions, according to Ricardo, will be the C and D segments, SUVs, sports cars and niche vehicles, its power shifting features give it a significant advantage over the first-generation AMT. As seen on the Volkswagen Golf R32 and the Audi TT 3.2, a wet clutch is used but over time dry clutch examples will begin to be used. While the DCT has many advantages it can utilise the existing manual transmission manufacturing base in Europe, it is lighter and less expensive than an automatic on a like-forlike basis, and the shift comfort bears no comparison with the first generation AMT there are still some disadvantages. These include commonisation problems with standard manual transmissions (MTs) and an associated increase in cost. There are also cost, weight and size issues when compared to MTs and AMTs nor does it have a limp home capability. However, all this is likely to be outweighed by the significant positive impact it has on fuel consumption around 5% according to Ricardo and around 10% according to Volkswagen. From 2010, Ricardo sees the third generation AMT accounting for around 20% of the market in Europe. By this time, enhanced features will include six speeds, compact gear selection mechanisms, multi-path gearing, an optimised clutch concept, optimised energy consumption and it will be shorter and lighter In the US and Japan, automatic transmissions are predominant, accounting for 86% of the market in North America and 63% in Japan, which is a little bit more fractured as 19% is accounted for by manual transmissions and 18% by CVTs. However, there are a number of drivers that could cause the transmission mix to change. In North America it is the continued growth in light truck sales and the demand for greater fuel economy in this type of vehicle that will enable a slight shift away from the planetary gearbox. However, by 2010 Ricardo believes that ATs will still account for 78% of the market with 5speed gearboxes accounting for around 75-80% of the total. The 6-speed will take an increasing share by 2010, especially in front and rear longitudinal driveline configurations with torque greater than 350 Nm (260 lb ft). The 4-speed automatic transmission will have more or less disappeared by this time. At this time 5 and 6-speed manuals will account for 10%, CVTs for 7% and DCTs for 5% of the market.

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Automotive Technology Roadmap In Japan, Ricardos forecast shows that there would be more of a shift away from the AT so that it would account for just 50% of all sales in 2010. However, the marker for manual transmissions would shrink from 19% to 10% with the biggest winner being CVTs that would more than double their market share to 38%. DCTs would account for just 2% of the market. Continued congestion in Japan is likely to kill the trend of automation in the K mini car and truck sectors while Japanese OEM and tier-one commitment to CVT will continue unabated. Future generations of this type of transmission are likely to be able to accept the increased torque of a diesel engine. Despite the benefits of CVTs, though, and their acceptance in Japan, they still look only to have a niche future. They are expensive, costing about 105% more than a manual gearbox of equal capacity, and they are also quite large. They also still need a starting device. Another inhibiting factor is that manufacture of the belt requires something special in skills and apparatus, and their supply which require the use of highly specialised alloy steels worked to very exacting dimensional tolerances appears to be severely constrained and may never be easy. In the rest of the world, specifically China, but also including India, the Pacific Rim and South America, 5-speed manual transmissions are expected to have the majority of market share. AMTs, especially once the twin-clutch system is perfected, will account for the remainder. AMT applications are predominantly intended for cost-sensitive segments such as light commercial vehicles, mini and small cars and lower middle models. The sports car is the exception for which comfort is of less concern than shifting speed and a sporty image. Manual 6-speed gearboxes, automatics and CVTs will all have very minor roles in these regions. For all the benefits of the toroidal transmissions and the Antonov Automatic Drive, it seems that there is still great reluctance by virtually all the OEMs and the transmission companies with regard to adopting this technology. This is partly due to a fear of devoting resources to a different type of transmission that might have long-term problems, and partly due to the substantial developments taking place with standard automatic transmissions and CVTs.

Ricardo Perspective Figure 52: Timeline of transmission trends

TRANSMISSION - TECHNOLOGIES & TRENDS

2000 Std Manual G-Box Gearchange Actuation (Man) AMT-1 (Torque Interrupt) 2005 2010 CO2 / emissions reductions Environmental / peer pressures DRIVES SHIFT AUTOMATION Torque interrupt unlikely to find universal customer acceptance. OEM continued development to utilise facility / engineering base Emissions during shifting Torque interrupt likely to continue to be applied in Sports Car / Utility platforms Next Generation AMTs powershift :-Reduced part carry over -Clutch to clutch shifting -Pre-select time for next ratio

AMT-2 M-Plate (Powershift) Dry Clutch Flywheel AMT-3 M-Plate (Powershift)? Wet Clutches CVT-2 (Split-Path) Input Damper CVT Selector Mech Flex Plate Torque Convertor Auto-Trans (Fixed Ratio) H-Speed Trans (EV/Hybrid) Ricardo plc 2003

Split path CVT providing higher torque capacity Unit cost, efficiency, weight, ratio spread being improved with new 6 speed transmissions Torque converters unit cost, efficiency, weight, driving application of multi-plate clutches

Source: Ricardo

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Aichi Steel
Steel products
Address Aichi Steel Corporation 1 Wanowari Arao-machi Tokai-shi Aichi-ken 476-8666 Japan Tel: +81 52 604 1111 Fax: +81 52 603 1835 Internet: http://www.aichi-steel.co.jp Senior Officers Yuji Shibata, President Products Specialty steel, stainless steel shapes, spring steel, structural alloy steel bars, forged products, electronic and magnetic parts. Plants Germany, Indonesia, Japan (5), USA Sales Group: 152.02bn (1.18bn, 31 March 2003) (Year to 31.03.03) Employees Group: 2,535 (31.03.03) Aichi Steel Works manufactures and sells specialty steel, forged products, electronic and magnetic parts and is an affiliate of Toyota Motor. Aichi Steel is a market leader in the area of speciality steel bars, stainless steel shapes and spring steel. Aichi Steel has a growing presence in fields other than automotive, such as ships, railway trains and electronics related industries. The company is also developing in the medical and information processing equipment markets. Aichi Steel has five plants in Japan. It also has two wholly owned subsidiaries in Kentucky (USA), one in Duesseldorf (Germany) and one in Jakarta (Indonesia). The company has joint ventures in the Philippines, Thailand, China and the USA. In addition, Aichi Steel has five sales offices in Japan. Toyota holds a 27.59% stake in Aichi Steel.

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Recent Developments Corporate strategy Aichi Steel has been expanding in Asia and North America in recent years through strategic alliances and organic investment. At the same time, the company has been expanding into new and existing markets through the development of innovative products, again this is often achieved through partnerships and strategic alliances. Since 2000 Aichi Steel has been developing its MAGFINE bond magnet technology. Aichi Steel is likely to see the benefits of possible widespread application of this technology in the near future. Aichi Steel has used the MAGFINE to design a DC motor that realizes a 50% weight reduction. Weight reduction and efficiency improvement of DC motors are important challenges, especially in the automotive industry, because even one vehicle uses more than 50 units of DC motors for wipers, fuel pumps, seats, windows and mirrors etc. Acquisitions In March 2003 Aichi Steel acquired the land of the former Toshiba Gifu factory from Toshiba Corp. Aichi Steel will use the site for mass-production of its electronic and magnetic components. In the new site, Aichi Steel plans to construct a production line of Magnetic Impedance (MI) sensor elements first, and then build a mass-production line of the neodymium anisotropy bond magnets in the near future. The MI sensor production line is expected to begin operations in March 2004. Aichi Steel plans full-scale operations within 2005 at the latest, expecting 10 million units of MI sensor element production per month, and sales of around 10bn (77.3m, 31 March 2003) per year. Joint-ventures In April 2002 Aichi Steel signed a joint venture agreement with Sumitomo Corp., Toyota Tsusho Corp. and Shanghai Automotive Forging works, a subsidiary of Shanghai Automotive Industry (Group) Corp. The joint venture aims to meet increasing demand for automotive forging parts in China and to export forgings to Southeast Asian countries. Operations began in June 2002. The company estimates initial sales of around 10,000 tons; it plans to expand production facilities to boost sales to 27,000 tons by 2006. In March 2001 Aichi Steels subsidiary Aichi USA, Inc. jointly established a forging company in Kentucky (USA) with Koyo Seikos subsidiary, Koyo Corporation of USA. Aichi USA holds the majority 51% share in the company. The new company, called Kentucky Advanced Forge, LLC, manufactures and markets forged crude materials for precision shapes. It plans to produce 4,000 tons or 16 million units per year. Kentucky Advanced Forge had a capital investment of US$7.6m (8.65m, 31 March 2003). In November 2000 Aichi Steel announced that it had joined forces with Nippon Steel and Toyota Motor in the area of technological development of special alloy steel bars and wiring. The three companies will jointly develop new technologies such as innovative materials, production methods and parts. Other objectives will involve weight reduction and rationalization of production processes based on integral production concepts and methods in special alloys and parts. The aim of the partnership is to establish a competitive edge in the special alloys, forging and automobile parts sectors. Investments In December 2003 Aichi Steel began operations at a new 2.5bn (19m, 31 December) plant in Aichi. This will produce automatic transmission parts for Toyota and other tier one suppliers such as Aisin AW at a rate of around 340,000 units a month. In November 2003 the company established a fully-owned subsidiary in Jakarta, Indonesia which will produce engine and transmission parts based on half-finished parts made in the Philippines and China, for supply to Japanese OEMs operating in Indonesia. In September 2002 Aichi Steel announced that it had completed a sinter-forged connecting rod production line at its Louisville Forge and Gear Works (LFG) plant in Kentucky (USA), with the technical support of Toyota Motor. LFG intends to use this opportunity to expand its forged automotive component business in the USA. In March 2002, as a result of the development of bond magnets for automobiles, Aichi Steel constructed a full-scale volume production furnace, with an annual production of 200 tons. By continually investing in plant and equipment, Aichi Steel enhanced capacity to 700 tons by the end of 2002 and by the end of 2003 the production systems annual 194 AutoBusiness Ltd

Company profiles production will have improved by more than 3,000 tons. In February 2001 Aichi Steel established a new company to research and market magnetic impedance (MI) sensors. The company, Aichi Micro Intelligent, had a starting capital of 20m (0.188m, 28 February 2001) and conducts research with Japanese, American and European users to develop products that use the MI sensor. The MI sensor is 10,000 times more sensitive than a conventional magnetic sensor. In June 2000 Aichi Steel established a European subsidiary in Duesseldorf (Germany). Aichi Europe GmbH had a capital investment of 100,000 and began operations in August 2000. The subsidiary imports and sells hot and cold rolled special alloy steel.

Contracts In August 2001 Toyota began using Ecoscut-Steel, developed by Aichi Steel, in its vehicles. Aichi Steels subsidiary in the USA, Louisville Forge and Gear Works, LLC has been producing hot-forged automotive components, including engine crankshafts and suspension parts, for delivery to Toyota Motors subsidiaries and other automobile manufacturers in the United States. New Product Developments In May 2003 Aichi Steel made available the press-forming technology of the worlds strongest bond magnet, MAGFINE. Currently only Aichi Steel has the technology to press-form bond magnets. In April 2003, Aichi Steel used the MAGFINE to design and prototype a DC motor, which is 50% lighter yet equal in cost compared with conventional models. The DC motor was exhibited at the Motor Technology Show hosted by the Japan Management Association in April 2003. The MAGFINE is a neodymium-base anisotropic bond magnet with a magnetic property 25 MGOe of the maximum energy product, which means its performance is over six times higher than ferrite magnets. The MAGFINE is expected to replace ferrite magnets and neodymium-base isotropic bond magnets as a magnet for motors. MAGFINE bond magnets are manufactured using Aichi Steels mass production technology, the AAM (aichi-anisomagnet) process. In August 2001 Aichi Steel announced it had developed a lead-free steel, called EcoscutSteel, for cars, which is expected to significantly reduce the cost of mass-produced parts. The new free cutting steel technology can be applied to many different kinds of steel, and may become the foundation for producing environmentally friendly steel for cars in the future. Aichi Steel has been developing magnetic impedance (MI) sensors, which are 10,000 times more sensitive than conventional magnetic sensors. Financial Overview In the year to end 31 March 2003, Aichi Steel Corporation reported an 8.7% rise in sales to 152.02bn (1.18bn, 31 March 2003) from 139.81bn (1.21bn, 31 March 2002) the previous fiscal year. Operating income came in at 1.92bn (14.8m, 31 March 2003), which was a fall of 5.1% on the previous years 2.02bn (17.5m, 31 March 2002). Aichi Steel recorded a net profit of 1.86bn (14.4m, 31 March 2003), a rise of 195.1% over a profit of 631m (5.47m, 31 March 2002) achieved a year earlier. In the first nine months of fiscal 2003/04, ended 31 December 2003, Aichi Steel Corporation reported sales of 120.15bn (908m, 31 December 2003). Operating income came in at 2.31bn (17.5m, 31 December 2003) and pre-tax at 1.13bn (8.5m, 31 December 2003) but the company experienced a net loss of 465m (3.5m, 31 December 2003). Outlook Despite the net loss suffered in the first nine months of the 2003/04 fiscal year, demand for Aichi Steels speciality steel products remains buoyant, due in part to growing demand for small trucks. The loss resulted from a one-off charge of 1.4bn (10.6m, 31 December 2003) associated with production disruption caused by an explosion at Nippon Steel, a supplier of AutoBusiness Ltd 195

Automotive Technology Roadmap coke gas to Aichi Steels Chita ironworks. The only concern at present appears to be that being experienced by numerous similar suppliers of speciality steels in Japan and elsewhere, namely a shortage of suitable scrap for new steel production. This was constraining Aichi Steels output in the opening months of 2004. On a more positive note, Aichi Steel could see the benefits of a much broader application of its MAGFINE technology in the next few years. This could have important weight reduction and efficiency benefits for DC motors, especially in the automotive industry, as the average vehicle uses more than 50 DC motors for a variety of applications, including wipers, fuel pumps, seats, windows and mirrors.

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Aisin Seiki
Engine, chassis, brake, suspension and steering components
Address Aisin Seiki Co. Ltd 2-1 Asahi-machi Kariya Aichi 448-8650 Japan Tel: +81 566 248441 Fax: +81 566 248003 Internet: http://www.aisin.co.jp Senior Officers Akihiro Wada, Chairman Kanshiro Toyoda, President Motoyasu Tanaka, Vice Chairman Mikio Natsume, Executive Vice President Products Electronic products, brake and chassis, engine, drivetrain and body related products Plants Belgium, Canada, China, France, India, Indonesia, Japan, Mexico, Taiwan, Thailand, UK, USA Sales Group: 1,410bn (10.9bn, 31 March 2003) (Year to 31.03.03) Parent: 555.3bn (4.29bn, 31 March 2003) (Year to 31.03.03) Employees Group: 42,500 (2002/03) Aisin Seiki, an affiliate of Toyota Motor, is a global supplier of transmissions, brakes and water pumps. It also has systems capability in chassis and steering as well as non-automotive interests in markets such as domestic products and medical equipment. In the year ending March 2003, 95.2% of Aisins sales were generated from the automotive market. Toyota holds a 24.5% stake in Aisin, which has remained a core Toyota keiretsu member in the restructuring that has taken place over the last two years. Toyota is Aisin's leading customer, contributing around 70% of its sales in 2002/03. Aisins key consolidated subsidiaries, which supply the automotive sector, include the following. Aisin Takaoka Co. Ltd engine-related products and brake and chassis-related products. Aisin Chemical Co. Ltd moulded plastic automotive parts, automotive friction materials, paints, adhesives and moulding sand adhesives Aisin AW Co. Ltd automatic transmissions and car navigation systems Aisin AI Co. Ltd manual transmissions, transfers and attachments.

The company organises its automotive businesses into five operating segments: Engine Products, which accounted for 9.4% of Group sales in the year to 31 March 2003; Drivetrain Products, which generated 42.3% of sales; Brake and Chassis Products, 20%; Body Products, 18.3%; and Information Related Products, 5.2%. Apart from Toyota, Aisins other customers include: Daihatsu, DaimlerChrysler, Ford, General Motors, Honda, Isuzu Motors, Mazda, Mitsubishi Motors, Nissan, Renault, Suzuki Motor and Volvo.

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Recent Developments Corporate strategy In the late 1990s the majority of Aisins growth had been organic; investing in new facilities both in the Americas and Europe. In more recent times Aisin has formed a number of strategic alliances in order to expand its capabilities and grow its operations, particularly in Southeast Asia. In 2000 it announced it was planning to continue focusing on expanding its operations outside Japan, with a particular emphasis on increasing its manufacturing presence in North America and growing its brake and chassis and drivetrain business. It has done this by opening new production plants in Europe, North and South America. In common with many Japanese automotive component suppliers, Aisin has been slower to develop modules than the larger European and North American suppliers. However, it has become a supplier of complex systems to its customers and has a longstanding development role within the Toyota Group. Additionally, Aisin assembles a range of components within its core areas of expertise, with it a broad platform and some of the key skills required by a module supplier. It is currently concentrating its module development activities on door modules and brake modules. Acquisitions Up until July 2001 the majority of Aisins growth had been organic rather than being driven by acquisition. However, in recent years the company has boosted its global capabilities through strategic acquisitions. In February 2003, Aisin Seiki announced it would acquire two U.S. automotive brake makers fully owned by Sumitomo Electric Industries Ltd. SEI Brakes Inc., based in Lebanon, Ohio, and SAFA LLC, based in LaGrange, Georgia, were acquired in April 2003. Aisin conducted the deal through Advics Co., a joint venture 40% owned by Aisin and 20% each by Sumitomo Electric, Denso Corp. and Toyota Motor Corp. Advics hopes the acquisition of the brake makers' manufacturing plants will boost its sales in North America. In November 2002, Aisin AI acquired a 5% stake in Toyotas Polish subsidiary, Toyota Motor Manufacturing Poland Sp., The plant manufactures manual transmissions and Toyota sought Aisin AIs help due to its experience in transmissions. In September 2002, Aisin AI Co. purchased manual transmissions supplier, Mazda Engineering (Thailand) Co., a Mazda Motor Corp. subsidiary. Providing manual transmissions to joint plant facilities of Mazda and Ford in Thailand it expects sales of 1.6bn (13.30m, 30 September 2002) in the year to December 2002. But Aisin AI targets annual sales of more than 5bn (41.57m, 30 September 2002) in five years for its new factory. In June 2002, Aisin Seiki acquired a 53.1% share in Toyota subsidiary Hosei Brake Industry Co. Aisin Seiki and Hosei Brake have similar lines of brake parts and this acquisition was made to increase production efficiency. In fiscal 2001, Hosei Brake generated sales in the region of 40bn (334.48m, 30 June 2002). In July 2001, Aisin seized an opportunity to diversify its operations with the purchase of Nissans 23.4% stake in producer of torque converters and transmission parts, Exedy Corporation. It also manufactures clutches, and holds a 10% share in the global OEM clutch market, while Aisin holds a 6% share. The two companies will use each other's manufacturing bases in the USA to increase the ratio of local output and boost cost competitiveness. In September 1999, Aisin played its part in the consolidation of Toyota Group holdings by acquiring a 1.88% share in Akebono Brake Industry Co. from Toyota Motor Corp. for 510m (4.5m, 30 September 1999).

Joint-ventures Since 1997, Aisin has formed several joint-ventures in Japan and Southeast Asia that have helped to broaden the company's customer base in the region. The most recent have included: In March 2003, Aisin Seiki boosted investment in Tangshan Aisin Gear Co., a Chinese transmission-producing joint-venture, to make it a subsidiary. Aisin purchased an additional equity stake of some 65% in the joint venture from a state-owned Chinese company for 3.6bn (27.8m, 31 March 2003). It now has a 97% stake in Tangshan AutoBusiness Ltd

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Company profiles Aisin. The move reflects Aisin's decision to reinforce production and sales operations in China with the aim of capitalizing on the Chinese auto market's rapid expansion. Tangshan Aisin makes 170,000 transmissions annually for delivery to Toyota group companies and local automakers. Aisin hopes to lift the Chinese unit's annual production to 500,000 units in fiscal 2007. In April 2001, Aisin established a joint-venture in China with Toyota Tsusho and two local firms to produce door locks. Aisin has a 60% interest in the venture, which will supply Toyotas Tianjin unit. April 2001 also saw the announcement of a new joint-venture, called Advics Co., between Aisin Seiki (40%), Toyota (20%), Denso Corporation (20%) and Sumitomo Electric Industries (20%), to develop composite brake systems instead of individual brake parts, to meet the demand from carmakers for complete brake systems. The move should also enable the company to compete more effectively against the sector leaders. Advics expects to generate sales of 250bn (2.27bn, 30 April 2001) in fiscal 2005.

Investments Aisin has recently expanded its operations in Europe as well as North and South America. In the late 1990s Aisin opened new plants in Kentucky, Belgium and North Carolina. The company continues to grow globally, more recent investments include: In February 2004 Aisin Seiki established a new company, Aisin Automotive Casting LLC) to produce aluminium engine components, including pumps and pistons, in Clinton, Tennessee (US). This will start operations in August 2005. In April 2003, Aisin Seikis subsidiary Aisin Kyushu Co. announced plans to invest 800m (6.18m, 31 March 2003) in the enlargement of its main plant to 15,500 square metres from the current 10,500 square metres in August 2003. The move is aimed at increasing the output of power seat adjusters primarily for Toyota Motor Kyushu Inc, a manufacturing subsidiary of Toyota Motor Corp, based in Miyata, south western Japan. In December 2002, Aisin was considering setting up a plant in China for the manufacture of automatic transmissions for Toyota Motor Corp. Aisin AW has set up a project team to study supply of its products to Toyota in China following a request from the car maker. Toyota hopes to obtain the transmissions from Aisin Seiki in preparation for the manufacture of a luxury model in China from around 2005. In November 2002, Aisin World Corp. of America established its presence in Canada. Aisin Canada Inc, based in Woodstock, Ontario, plans to start production in August 2003. It will manufacture auto body parts including belt mouldings and windshield trim for Toyota and Lexus models. Also in November 2002, Aisin invested 8.1m in its Chinese subsidiary Tangshan Aisin Gear Co (TAGC) to expand its manual gear production. Aisin Seiki aims to boost the annual output to 190,000 units from 140,000 units produced in 2001. The move follows an increasing demand for its gears which will be installed in Toyota's first Chinese-made car VIOS, introduced on 8 October 2002. In August 2002, the European branch of Aisin Seiki invested 12m in the construction of a new plant in Pisek, Czech Republic. Construction began in April 2003 and production is due to start in September 2003. Initially it will create 70 jobs but this figure is expected to double over three years. It will manufacture oil and water pumps for car engines for delivery to Toyota Motor Corp.'s European production sites and local automakers such as Renault SA of France. Sales of 3.7bn (31.8m, 31 August 2002) are targeted for 2004. The new operation is Aisin's second European production site and will be run by Aisin Europe SA. Aisin Seiki now makes engine parts at a U.K. production subsidiary, mostly for export to other parts of Europe. The firm decided to relocate those operations to the Czech Republic to expand deliveries and reduce foreign exchange risks. After the move, the U.K. site will specialise in chassis parts. Also in August 2002, Aisin Seiki announced plans to establish VVT (variable valve timing mechanisms) production units in both Europe and the USA to meet the growing demand for VVT from carmakers in these regions. Aisin plans to increase its annual production of VVT to 4.0m units by 2005, four times its VVT turnout in 2001. The company already produces VVT at its plant in central Japan and supplies BMW, Renault and Daihatsu Motor. In June 2002, Aisin announced its plan to establish its first production base in South America to serve the expanding South American market. The factory, based in Brazil, will produce door latches, doorframes and other auto body parts, operations are expected to begin in January 2003. 199

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Automotive Technology Roadmap In December 2001, Aisins joint-venture Advics, announced plans to set up a wholly owned unit in Michigan, USA. Advics North America Inc. will develop and sell automotive brake systems, including anti-lock brakes, traction control systems and stability control systems, to the North American market and was established in April 2002. Sales in North America for Advics were given as US$240m (275.86m, 31 March 2002) in March 2002, a figure which is now expected to double to US$500m (574.71m, 31 March 2002) by 2005. In October 2001, Aisin established two new North American manufacturing subsidiaries: - Aisin Brake & Chassis, Inc. in Indiana (USA) will produce brake and chassis related products, such as hydraulic brake boosters. The US$19m (21m, 31 October 2001) facility was due for completion by the end of June 2002. Production is scheduled to launch in January 2003. - Aisin Manufacturing Illinois, LLC, exclusively manufactures automotive body related products, such as sunroofs and slide door modules. Aisin is investing US$5m (5.53m, 31 October 2001) in the factory, which was due for completion in May 2002. Initial production was planned for July 2002. In March 2001, Aisin announced that its US subsidiary, Aisin Automotive Casting, located in Kentucky, had invested US$49m (55.8m, 31 March 2001) in a new casting facility. Production of 130,000 automatic transmission parts and other large aluminiummade parts at the facility began in April 2001. This figure is expected to increase to 400,000 by 2005. In February 2001, Aisin Takaoka founded Aisin Takaoka Foundry Bangpakong Co. Ltd in Thailand for the manufacture of foundry products such as exhaust manifolds and brake calipers.

Contracts Recent contracts include: In September 2002, Aisin AW Co. secured a contract to supply automatic transmission systems to Porsche AG and Volkswagen AG. Aisin AW plans to expand sales to other carmakers and expects future annual sales of 100,000 units of the transmissions. Also in September 2002, Aisin Seiki began supplying the Australian unit of Ford Motor Co. with engine parts. Aisin Seiki plans to provide Ford Motor Co. Australia Ltd. with parts for 100,000 units of its 4,000-c.c. Falcon sedan annually. Three types of parts are being provided, including variable valve timing gears, which regulate combustion inside an engine, and oil pumps. In July 2001, Aisin Takaoka stated that it had begun supplying Nissan with 1,000 units per month of stainless pipes for engine emission gas. In May 2001, Aisin AW announced it had won a contract to supply 20,000 gasolineelectric motor hybrid automotive systems to Ford in the USA, for inclusion on the Escape HEV sport-utility vehicle. A 2003 launch for the vehicle is planned. In April 2001, Aisin Seiki won a contract to supply BMW with 200,000 variable valve-lift timing mechanisms (VVT) between April 2001 and March 2002. These valves help boost fuel economy and cut emissions. The deal is expected to strengthen Aisins presence in the USA and Europe.

New Product Developments Aisin's recent technological developments in the brakes area include a long-stroke brake master cylinder and variable ratio brake pedal system, a brake control modulator, a squeal reduced brake assembly, a high performance brake disc rotor and a disc brake pad. Other recent developments include: At the Tokyo Motor Show 2001 Aisin AW introduced NAVI-MATIC, a new automatic transmission assisted by a navigation system. This is the world's first system, which predicts and controls automatic transmission gear shift by analysing information on the road ahead using a car navigation system. Gear shift control according to the road form or condition eliminates needless gear shifting and enables smoother driving. A hydroformed suspension member: a one-piece structure that provides improved driving stability, increased stiffness and reduced weight. A DVD navigation system, co-developed with Alpine Electronics: includes map area and AutoBusiness Ltd

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Company profiles destination information for 15 countries, the broadest selection in the industry. It supports menus and guidance in English, German, French, Italian, Spanish and Dutch as well as the industry's quickest search for border crossing routes a feature that is in great demand in Europe. As the European market grows, annual sales of around 30,000 DVD units are anticipated. An exhaust manifold with integrated catalyst, which facilitates rapid catalyst heating and reduced exhaust emission.

Financial Overview In the year to end 31 March 2003, Aisin Seiki Group reported a 15.2% rise in sales to 1,410bn (10.9bn, 31 March 2003) from 1,222bn (10.59bn, 31 March 2002) the previous fiscal year. The main reason for the increase in sales is Advics Corp. has operated for a full year and sales of automatic transmission systems and navigation systems have increased. Operating income came in at 80.6bn (623m, 31 March 2003), which was an increase of 32.9% on the previous years 60.6bn (525.13m, 31 March 2002). Aisin recorded a net profit of 48.0bn (371m, 31 March 2003), a rise of 87.1% over a profit of 25.65bn (222.27m, 31 March 2002) achieved a year earlier. The company attributed this large increase to the booking of extraordinary profit, as it ceased management of part of its employees public pension assets on behalf of the government. In the first nine months of the 2003/04 fiscal year, ended 31 December 2003, Aisin Seiki had group sales of 1,162bn (8.8bn, 31 December 2003) and operating and pre-tax profit of 57.33bn (433m, 31 December 2003) and 57.25bn (432m, 31 December 2003) respectively. Net profit amounted to 23.82bn (180m, 31 December 2003). Outlook Aisin Seiki was forecasting group sales of 1,580bn (11.9bn, 31 December 2003) for the 2003/04 fiscal year, with pre-tax and net profit of 80bn (605m, 31 December 2003) and 30bn (227m, 31 December 2003) respectively. The company has a broad product range that is at odds with the increasing specialisation of the automotive supply industry. Like Denso, another Toyota Group affiliate, Aisin will need to strengthen its European operations further in order to become a global company capable of offering its services widely outside the Toyota Group. It will also have to invest further in developing its modules and systems capabilities. Nevertheless, Aisin is large enough and has strong technology and modern plants to ensure competitiveness in the face of growing competition. The company's deep and growing involvement in electronics will help it to develop added-value components, systems and modules although it is clear it will have to begin to invest more in developing modules and systems capabilities if it is to broaden its customer base more.

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American Axle and Manufacturing

Axles, propeller shafts, chassis components and forged products
Address American Axle and Manufacturing 1840 Holbrook Avenue Detroit MI 48212-3488 USA Tel: +1 313 873 5163 Fax: +1 313 974 2249 Internet: http://www.aam.com Senior Officers Richard E. Dauch, Chairman & CEO Joel D. Robinson, President & COO Michael K. Simonte, Acting CFO Products Drivelines/chassis systems, differentials, front and rear axles, propeller shafts, steering and suspension, systems and modules Plants Brazil (1), Mexico (1), UK (2), USA (14) Sales Group: US$3.68bn (2.93bn, 31 December 2003) (Year to 31.12.03) Employees Group: 12,000 (2003) American Axle and Manufacturing (AAM) designs, engineers and manufactures driveline systems for trucks, buses, SUVs and passenger cars. AAM is the principal supplier of driveline components to General Motors for its light trucks, SUVs and rearwheel drive passenger cars. In addition to its 14 locations in the USA, AAM also has offices and facilities in Brazil, Germany, Japan, Mexico and the UK. General Motors is AAMs main customer and accounts for over 80% of its sales. Other customers include BMW, DaimlerChrysler, Delphi, Ford, Nissan, Renault and Visteon.

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Recent Developments Corporate strategy AAM now has 23 facilities compared with five or ten years ago; has 75 customers in 12 countries compared with two in two; has replaced almost 80% of its product range with new products; has almost doubled top-line sales revenues; and has cut the net debt/capital ratio to below 40%. AAM now claims a 36% share of the US$9.5bn (7.57bn, 31 December 2003) driveline market, embracing axles, driveshafts, steering linkages and nonaxle forged products. In recent years, AAM has focused on expanding its customer base. In 1994 General Motors represented 99% of its business. While reliance on GM light vehicle production in North American remains high (just 18-19% of revenues currently derive from outside GM), these foundations have cemented a base for growth with other OEMs. AAM has recently ramped up production of steerable beam front axles and rear axles for the new Dodge Ram Heavy Duty pickup program, a significant contract gain, and is quoting on new business opportunities totalling around US$800m (637.3m, 31 December 2003), 80% of which is outside GM. Of this US$800m (637.3m, 31 December 2003), which represents production contracts through 2005-07, 40% represents opportunities with foreign or transplant OEM opportunities and 55% is aimed at cars and crossover vehicles. AAM has achieved this change through acquisitions and aggressively pursuing new customer contracts. AAM has been globalising its operations in recent years and has particularly focused on increasing its presence in South America. The company is currently focusing on increasing its content per vehicle. The companys recent strong financial performance facilitated Blackstones orderly exit strategy from the company. After sponsoring AAMs recapitalisation in 1997, with an ownership level approaching 82%, Blackstone subsequently reduced this position to around 12% as of October 2003. The financial investor placed 8m shares at US$27 (31.0, 31 March 2002) per share in March 2002 and 7.5m at US$30.21 (26.0, 31 October 2003) per share in October 2003. In early December 2003 Blackstone completed its withdrawal from AAM by selling its remaining 6.5m shares to Credit Suisse First Boston. These were subsequently resold in a public offering. Acquisitions AAM acquired two forging companies in 1999. Colfor Manufacturing, Inc. and MSP Industries Corporation joined with AAMs two original forging operations in New York and Michigan to form a Forging Division totaling nine plants. Joint-ventures In October 1999 AAM established a joint-venture with Hubner Industria Mecanica Ltda. of Curitiba, Parana in southern Brazil. The joint-venture company, AAM do Brazil Ltda., produces forgings and driveline components for international vehicle manufacturers. Investments April 2002 saw the groundbreaking of AAM's new global headquarters in Detroit (USA). A new 202,000 square-foot building is located on a 19-acre industrial campus, consolidating many former corporate departments that were formerly scattered. In late 2003, it was announced that American Axle was nearing completion of the phase one expansion to its Rochester Hills, Michigan (US) technical centre. When completed, the centre will have testing equipment for more than 75 functions. The expansion will incorporate a state-of-the-art Road Load Simulator, which will be used to test and validate chassis and module assemblies and components In 2001 AAM expanded its Silao (Mexico) facility to include a forging facility. The Guanajuato Forge facility was located next to the existing Guanajuato Gear & Axle facility constructed in 1998. Production began during 2002. In June 2000 AAM opened a new facility at Cheektowaga, New York (USA). Around 120 AAM associates are engaged in the machining of net-shaped gears. The gears are shipped to the facility from AAMs Tonawanda Forge plant a few miles away. Contracts In November 2003, it was announced that American Axle had secured a new driveline systems contract. The contract, estimated to be worth around US$30m annually for 204 AutoBusiness Ltd

Company profiles vehicles that will launch in model year 2005, includes front and rear axles, driveshafts and TracRite(R) differentials. In October 2003, American Axle announced that it has been awarded a new driveline systems contract, new transmission components business, and its first production line intent contract for its SmartBar(TM) technology. The launches for these programs are set to take place in 2004-2005, and are expected to generate around US$40m (34.4m, 31 October 2003) when in full production. In October 2003, AAM announced that it has recently launched production of the front and rear axles that it is supplying to Chevrolet for use on its 2004 Chevrolet Colorado and GMC Canyon vehicles. The vehicles incorporate newly designed front axles and AAM's state-of-the-art rear axle design. Both systems feature PowerLite(R) aluminum housings and PowerDense (TM) gear technology. AAM is currently producing the driveline system for Chevrolet's all-new SSR (SuperSport Roadster). The Chevy SSR, the world's first retractable-roof sport truck, features AAM's rear axle system with AAM's PowerLite(R) aluminum carrier and PowerDense(TM) hypoid and net shaped differential gears, multi-link rear suspension design and a helicalgear limited slip differental. Production began in August 2003. In August 2002 AAM reported that it had secured a contract to supply rear axle shafts for a future model year Chrysler Group vehicle. The axle shafts will be produced at AAMs Detroit Forge plant. In April 2002 AAM secured a contract to supply the precision machined carriers for transmission and oil pan products for the new Ford Amazon passenger cars produced in Brazil.. AAM was selected by General Motors in November 2001 to provide front and rear axle systems for a future General Motors light-duty Sport Utility Truck. The aluminum front axle system was designed specifically for weight reduction and longer life. The PowerDense rear axle system is smaller, lighter and stronger than conventional systems, and features an electronic vehicle stability system. In October 2001 AAM received its first contract to supply DaimlerChrysler with driveshafts. It was selected as the supplier of front and rear driveshafts for the new heavy-duty Dodge Ram pickup truck program.

New Product Developments Product development has remained at the heart of AAMs renaissance. Annual R&D expenditure has risen by around 11% over the last three years, reaching US$54m (51.5m, 31 December 2002) in 2002 although this only represented 1.6% of net sales. A second expansion of the companys R&D facility in Rochester Hills, Michigan is currently underway and due for completion in 2005. R&D efforts are being focused on vehicle electronics capabilities and applications and these will be increasingly integrated into existing and new products. Critical areas of R&D focus include: new 4WD/AWD systems incorporating power transfer units (PTUs) and advanced driveshafts designed specifically for the crossover vehicle segment; I-Ride independent chassis suspension modules that convert FWD car and crossover vehicles to AWD without significant vehicle architecture alterations; the electronically actuated SmartBar stabiliser bar; new TracRite family of electronic locking differentials; and PowerLite axles. New products in the development pipeline also include electric driveline systems for hybrid electric vehicles. AAMs management believes that these axle products increasingly complement electronically-controlled engine and transmission units. Financial Overview AAM had sales of US$3,683m (2,934.2m, 31 December 2003) in 2003, up from US$3,480m (3,320.3m, 31 December 2002) in the previous year. Operating income was US$346.3m (275.9m, 31 December 2003) against US$311.2m (296.9m, 31 December 2002) and the margin increased to 9.45% from 8.9%. Pre-tax income was US$303.2m (241.6m, 31 December 2003) against US$273.8m (261.2m, 31 December 2002) in 2002 and net income was US$197.1m (157.0m, 31 December 2003) compared with US$176.1m (168.0m, 31 December 2002).

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Automotive Technology Roadmap Outlook AAMs renaissance from an unsightly collection of GMs poorly-performing axle manufacturing assets in 1993 has been based on solid, if simple foundations lean manufacturing, exemplary quality and technological leadership in product, process and systems areas. AAM has new business awards that will generate over US$40m (31.9m, 31 December 2003) of revenues annually, starting in 2004/05. The gross new business backlog stood at around US$956m (821.8m, 31 October 2003) at the end of October 2003 for the 2003-06 period. The net new business backlog is US$481m (413.5m, 31 October 2003) through 2006. AAM believes that a revival in RWD cars in North America, especially at Chrysler and GM, should yield dividends given that the company claims to be the premier rear wheel drive developmentcapable company in the world. AAM should have significant opportunities with all the OEMs that are refocusing RWD as an application. AAM has extensive products on the shelf and technology and already has a couple of exclusivity contracts on AWD conversions with a foreign OEM. The company is also getting a lot of interest out of Europe and is quoting on a few passenger car programs in the region, as well as in South and North America.

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ArvinMeritor
Sunroofs, axles, exhausts and electrical systems
Address ArvinMeritor, Inc. 2135 West Maple Road Troy MI 48084-7186 USA Tel: +1 248 435 1000 Fax: +1 248 435 1393 Internet: http://www.arvinmeritor.com Senior Officers Larry D. Yost, Chairman and CEO Dan Daniel, Senior Vice President, Light Vehicle Aftermarket Thomas A. Gosnell, Senior Vice President, Commercial Vehicle Systems Juan De La Riva, Senior Vice President, Light Vehicle Systems Products Axles, access controls, body systems, braking systems, chassis component systems, clutches, door modules, drivelines, exhausts systems, ride control, roof systems, shock absorbers, suspension, transmissions, wheels, window regulators, plus air, oil and fuel filters. Plants Argentina, Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Italy, Japan, Mexico, Netherlands, Philippines, Singapore, South Africa , Spain, Sweden, Switzerland,Taiwan, Thailand, Turkey, UK, USA, Venezuela Sales Group: US$7.8bn (6.73bn, 30 September 2003) (Year to 30.09.03) Employees Group: 32,000 (2003) Through joining forces, ArvinMeritor aimed to widen its light and heavy vehicle product range and become a global provider of integrated solutions for light and heavy vehicle chassis, drivetrains and exhausts as well as roof and door modules and systems. Meritor had traditionally been a strong player in the heavy vehicle systems industry, as well as the light vehicle systems sector, whereas Arvin's activities had been predominantly focused on light vehicle systems. ArvinMeritor has over 150 plants in 27 countries across Asia/Pacific, Europe, North America and South America. The company currently generates around 66% of its sales in North America, 28% in Europe, and 6% in the rest of the world. The companys primary customers include DaimlerChrysler, Fiat, Ford, General Motors, Navistar, PSA Peugeot Citron, Renault, Volvo and Volkswagen. ArvinMeritor consists of five product-focused business groups: Commercial Vehicle Systems; Commercial Vehicle Aftermarket; Light Vehicle Systems; Light Vehicle Aftermarket; and Roll Coater. For financial purposes, the company has three reportable operating segments: Light Vehicle Systems (LVS); Commercial Vehicle Systems (CVS); and Light Vehicle Aftermarket (LVA). Business units that are not focused on automotive products are classified as "Other." The LVS division generated about 55.9% of the Groups sales in fiscal 2002/03; CVS, 31.1%; and LVA, a further 10.8%. The remaining 2% of the Groups sales was generated by other activities. ArvinMeritor is a global supplier of integrated systems, modules and components for light vehicles, trucks, trailers, speciality OEMs and the aftermarket. ArvinMeritor was created in July 2000 when Meritor Automotive Inc., a global supplier of components and systems for light, commercial and speciality vehicles, merged with Arvin Industries Inc., a leading world manufacturer of exhaust systems and ride control technology.

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Recent Developments Corporate strategy Following the merger of the two companies, ArvinMeritor has combined many of its operations, and realigned its activities and cost structure. The company is looking to reduce its fixed costs, and to create operational and functional synergies wherever possible. To reflect the decline in its major markets in November 2000, ArvinMeritor announced a US$90m (103m, 30 November 2000) restructuring plan to realign its operations. This includes plans to consolidate manufacturing and engineering operations, close selected facilities and reduce the global workforce in a move to cut costs and improve operational efficiencies. In this way, ArvinMeritor expects to be able to concentrate on core businesses, which in turn should increase the companys revenue base. In July 2003 ArvinMeritor announced its intention to commence a tender offer to acquire all the shares in Dana Corporation. ArvinMeritor believes that one of the benefits of the acquisition would be expansion of content per vehicle by developing a complete undercarriage and drivetrain system technology capability to serve both the light and commercial vehicle industries, based on a strengthening of the powertrain product portfolio. However, after months of uncertainty, ArvinMeritor finally abandoned the bid during the first quarter of fiscal 2004, after Dana's board of directors unanimously rejected its increased offer of US$18 (15.9, 31 July 2003) per share. In early 2004, the companys president and COO, Terry ORourke, resigned from the company. ArvinMeritor is currently searching for a new chairman and CEO to replace Larry Yost, who is retiring later in 2004. Acquisitions In December 2002 ArvinMeritor announced that it would acquire the remaining 51% interest in German high-end exhaust systems supplier Zeuna Strker GmbH & Co. KG. The transaction is expected to close in the second quarter of fiscal year 2003. Zeuna Strker was incorporated into ArvinMeritors Light Vehicle Systems (LVS) Air and Emissions Technologies (A&ET) product group as of 1 January 2003. Divestments In September 2003, ArvinMeritor announced that it would close its Light Vehicle Systems (LVS) exhaust facility in Franklin, Indiana (US). In July 2003, it was announced that ArvinMeritor had signed a definitive agreement to sell its Light Vehicle Systems (LVS) Columbus, Indiana (US), exhaust tube manufacturing operation to AK Tube LLC, a subsidiary of AK Steel Corporation. In January 2003 ArvinMeritor announced it would close its Light Vehicle Systems (LVS) Apertures facility in Gordonsville, Tennessee (US), by August 2003. In October 2002 ArvinMeritor announced that it had reached an agreement to dispose of its off-highway axle business. In January 2003, it was reported that ArvinMeritor had completed the sale of the business to Resilience Capital Partners LLC together with Wynnchurch Capital, for an undisclosed sum. In May 2002 ArvinMeritor sold its exhaust accessories manufacturing operations, based in Fort Laramie, Ohio (USA). In June 2001 ArvinMeritor sold its 50% stake in Purodenso Co. to its partner in the jointventure, Denso Corporation. Based in Tennessee (USA), Purodenso produces air, oil and fuel filters, and had sales of about US$100m (106m, 31 December 2000) in fiscal 2000. In April 2001 ArvinMeritor and Kayaba Industry Co. reached a mutual decision to end their joint-venture located in Franklin, Indiana (USA). The shock absorber joint-venture has been unprofitable since its inception in 1998. ArvinMeritor believed that the termination of the venture would allow the company to focus on providing suspension systems solutions through its joint-venture with Kayaba in Europe and its capabilities in Troy and Columbus, also in Indiana, USA. Joint-ventures In October 2003, ArvinMeritor announced a memorandum of understanding with the Volvo Group to create two new joint ventures. The joint ventures will expand 208 AutoBusiness Ltd

Company profiles ArvinMeritors capacity to produce commercial vehicle drive axles. It is expected that in 2004, the two new joint ventures, owned jointly by ArvinMeritor and Volvo, will take over two of Volvo's manufacturing operations in Lyon (France). The new arrangement will result in the manufacture and distribution of more than 100,000 axles annually In May 2001 ArvinMeritor and Dana Corp. teamed up with Ashok Leyland, India's second largest truck and bus manufacturer, to make axles for its vehicles. Ashok Leyland manufactures the new high-quality axles under licence and planned to equip all its vehicles by the end of March 2002. In March 2001 ArvinMeritor and GRA-MAG (a Michigan-based joint-venture between Grammer and Magna) formed an alliance to offer air suspension seats to the US aftermarket. ArvinMeritor agreed to distribute and market GRA-MAG's leading line of air suspension seats. In February 2001, ArvinMeritor announced that its Light Vehicle Aftermarket group had formed a strategic alliance with Flowmaster, a world leader in exhaust technology. ArvinMeritor will distribute Flowmaster's perfomance exhaust products portfolio, adding another brand to its existing range. ArvinMeritor is committed to expanding its capabilities in performance parts and the partnership with Flowmaster positions it to capitalise on this growing segment within the exhaust components business. In February 2000, Arvin increased its share in its exhaust joint-venture, Shanghai Hua Wen Exhaust Systems Company Ltd, from 35% to 55%. The joint-venture supplies exhaust components to Shanghai General Motors and Shanghai Volkswagen. ArvinMeritor's partner in this venture is Xian Hua Group Co., Ltd. (China).

Investments In April 2003 ArvinMeritor inaugurated a new window production site in Sully-sur-Loire (France). With an overall investment of 12m, the plant is expected to generate 130m in sales, predominantly to PSA and Renault. ArvinMeritors global door systems technology centre is already based there. In December 2002 ArvinMeritor announced the opening of a new manufacturing facility in the Wai Gao Qiao, Shanghai Free Trade Zone (China). Initially, the 2,100 square meter facility will employ about 20 people and will assemble and manufacture bus and coach axles and brakes. It is expected to produce US$5m (4.8m, 31 December 2002) in sales in fiscal year 2003. In December 2001 ArvinMeritor began construction of an information technology centre in Columbus, Indiana (USA). ArvinMeritor invested US$8.5m (9.6m, 31 December 2001) in the 48,000 square foot facility. The facility forms the hub of the company's network of worldwide information technology capabilities that encompasses Amsterdam (the Netherlands), Sao Paulo (Brazil) and Troy, Michigan (USA). The facility was inaugurated in April 2003. In May 2001 ArvinMeritor completed an expansion of its wheel assembly plant in San Luis Potosi (Mexico). The expansion was aimed to support ArvinMeritor Light Vehicle System's growing markets in South America. The new facility effectively doubled the plant's size to 194,000 square feet, enabling the plant to produce larger wheels. Increased production will raise employment to 500 persons. Thanks to the expansion, the plant expects to supply more than two million wheels per year for light trucks and SUVs. ArvinMeritor expanded its suspension components capacity through the construction of a new hot coils facility for its light vehicle OEM customers in North America. This was operational by the end of 2001. The company also established a new roof assembly plant in Detroit (USA), initially manufactured conventional sunroofs but in the long-term, ArvinMeritor expects it to produce roof modules. Contracts In October 2003, ArvinMeritor announced that it has been named by Hyundai Motor Company as its North American door module supplier for two of Hyundais platforms, beginning production in 2005. At the 2003 Frankfurt Motor Show, it was disclosed that ArvinMeritor Door Systems had recently earned numerous new business contracts with the PSA group to provide electric window regulator motors. These advanced motor products will be supplied in both standard and electronic anti-pinch versions with a production level of about 2.7 million units per year. In August 2003, the group also began production on a modular AutoBusiness Ltd 209

Automotive Technology Roadmap door concept with a major European OEM. The product is a comprehensive modular assembly to which only the mirror, trim panel and outside door skin are added. In September 2003, it was announced that ArvinMeritor had an agreement with a major OEM to provide four modules. The modules will be assembled in Detroit, Michigan (US), with annual sales of about US$305m (263.1m, 31 September 2003). ArvinMeritor will begin production on a wheel-end module, a strut module and a full cross-car module in July 2004. The fourth strut module will begin production in August 2004. In the same month, ArvinMeritor announced that Zeuna Strker European exhaust systems will develop and supply a European diesel emissions system to six major light vehicle OEMs. The system, which meets EUR04 regulations, will be featured on 12 vehicles and generate an estimated US$300m (258.8m, 30 September 2003) in annual revenues. Production is scheduled to begin in 2004. ArvinMeritor supplies the hot end exhaust system on both the Cadillac CTS, Sedan, XLR crossover vehicles. In December 2002 ArvinMeritor announced that it had been selected by the Volvo Group to supply next-generation air disc brakes for both Renault and Volvo heavy trucks. The four-year supply agreement will begin in 2004 and is valued at more than US$250m (238.5m, 31 December 2002). ArvinMeritors Light Vehicle Systems (LVS) business group supplies the full exhaust system four variants of the PSA/Fiat Lancia MPV, assembled at Sevel Nord (France). It also supplies the BMW X5 with a modular sunroof on a just-in-time basis to the BMW plant in Spartanburg, South Carolina (USA).

New Product Developments Recent innovations include: In November 2003, ArvinMeritor announced that it would offer a unique emissions solution to the passenger car market with the introduction of its Metal Cat Catalytic Converter. The high-performance catalytic converter uses a unique 200 cell per square inch high-flow metal catalyst and is compact for use in small and mid-size cars and trucks. At the 2003 Frankfurt Motor Show, it was announced that ArvinMeritor has carried its roof module development a step further with a module that features removable roof panels, which feature on the Smart Roadster. It is also developing a composite roof with a spoiler sunroof for the MCC Z-44, as well as a multi-panel sunroof for the Porsche Cayenne. At the 2002 Paris Motor Show, ArvinMeritor unveiled its Air2Air air management system. The systems components form a complete air management system, including the air inlet duct to throttle body, air filtration and the exhaust emission system from manifold to tailpipe. According to ArvinMeritor, benefits of the system include superior performance, reduced NVH, full-system integration and weight optimisation, In March 2002 ArvinMeritor introduced new technologies targeted at meeting the October 2002 and 2007 stringent emission regulations for commercial vehicles. The EliminatorTM is a passive system, designed as a stand-alone solution that will replace a trucks existing muffler. The active system, EliminatorTM with I.R. TechTM, a diesel particulate filter with Intelligent Regeneration Technology, is a self-regenerating soot filter system that consists of a diesel burner, electronic controls and a high-durability particulate filter.

Financial Overview Sales for the fiscal year ended 30 September 2003 were US$7.8bn (6.73bn, 30 September 2003), up US$906m (781.4m, 30 September 2003), or 13%, compared to the previous year. Operating income totalled US$309m (266.5m, 30 September 2003), representing a decline of US$34m (29.3m, 30 September 2003) compared to fiscal year 2002. Results were favourably impacted by the gain on the sale of the exhaust tube manufacturing facility, but undermined by higher steel costs, product launch costs, higher engineering investments, pricing pressures and measures in Mexico. Net income for the year was US$136m (117.3m, 30 September 2003), up from US$107m (109.1m, 30 September 2002) in 2002. Included in 210 AutoBusiness Ltd

Company profiles net income were the effects of changes in accounting principles of US$4m (3.45m, 30 September 2003). ArvinMeritors Light Vehicles segment reported sales of US$4.36bn (3.76bn, 30 September 2003), up from US$3.60bn (3.67bn, 30 September 2002) in 2002. Operating income for the segment dropped from US$186m (189.6m, 30 September 2002) in 2002 to US$147m (126.8m, 30 September 2003). Sales for the Commercial Vehicle Systems segment increased to US$2.42bn (2.09bn, 30 September 2003) in 2003 from US$2.25bn (2.29bn, 30 September 2002). Operating income rose to US$122m (105.2m, 30 September 2003) in 2003 from US$88m (89.7m, 30 September 2002). ArvinMeritors Light Vehicle Aftermarket division generated sales of US$845m (728.8m, 30 September 2003), down from US$875m (891.9m, 30 September 2002) in 2002. Operating income for the group came in at US$31m (26.7m, 30 September 2003), down from US$66m (67.3m, 30 September 2002) in the previous year. In the first quarter of 2003/04, the company reported sales of US$2.2bn (1.75bn, 31 December 2003) and net income of US$19m (15.1m, 31 December 2003), compared to the prior years first-quarter net income of US$32m (30.5m, 31 December 2002). Sales increased US$471m (375.2m, 31 December 2003), or 28%, as compared to the prior years first quarter. Foreign currency translation, driven primarily by the stronger euro, favourably impacted sales by approximately US$135m (107.6m, 31 December 2003), and the companys acquisition of Zeuna Strker added sales of US$203m (161.7m, 31 December 2003) in the first fiscal quarter Operating income for the first quarter of fiscal year 2004 was US$49m (39.0m, 31 December 2003), which included US$16m (12.7m, 31 December 2003) of costs related to the withdrawn tender offer for Dana. Light Vehicle Systems (LVS) sales were US$1.25bn (995.9m, 31 December 2003), up US$348m (277.2m, 31 December 2003) or 39%, from the first quarter of fiscal year 2003. Operating margin declined to 2.5%, from 4.7% in last years first quarter, due to premium product launch costs, higher pension and retiree medical costs, the consolidation of the Zeuna Strker business and a stronger euro. Commercial Vehicle Systems (CVS) sales were US$685m (545.7m, 31 December 2003), up US$113m (90.0m, 31 December 2003) or 20% from last years first quarter. Operating income was US$32m (25.5m, 31 December 2003), or 33% higher than the same period last year, and operating margins improved to 4.7%, from 4.2%. Light Vehicle Aftermarket (LVA) sales were US$198m (157.7m, 31 December 2003), up slightly from US$197m (188.0m, 31 December 2002) in last years first quarter. LVA operating margin fell to 0.5%, from 3.0% in the prior years first quarter. Outlook ArvinMeritors latest sales outlook for fiscal year 2004 is US$9.0bn (7.17bn, 31 December 2003), up from previous guidance of US$8.6bn (6.85bn, 31 December 2003), as a result of higher sales in the LVS business and reflecting current foreign currency exchange-rate expectations According to the company, it remains focused on taking costs out of its businesses, while continuing to invest in our future growth, by offering engineering and technology that meet customers requirements. It is continuing to look for ways to improve return on invested capital by reducing fixed costs and focusing capital on those activities that add value to shareholders. Failure of the Dana bid means continued reliance on organic growth opportunities and, possibly, the emergence of a stronger competitor in some areas if Dana ultimately ends up in the hands of another, competing automotive supplier. The company is now able to concentrate on core businesses, which in turn should increase the companys revenue base. Longer term, the company is looking to organic growth from outsourcing of systems and modules among OEMs for door, suspension and roof to drive above average growth. It remains to be seen whether a new CEO/COO team in 2004 results in any fundamental shifts in corporate strategy.

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Autoliv
Safety Systems
Address Autoliv Inc. World Trade Center Klarabergsviadukten 70 107 24 Stockholm Sweden Tel: +46 8 587 206 00 Fax: +46-8-24 44 79 Internet: http://www.autoliv.com Senior Officers S. Jay Stewart, Chairman Lars Westerberg, President and CEO Magnus Lindquist, Vice President and CFO Products Safety systems and manual seatbelts; airbags and airbag triggering devices; integrated child restraints; steering wheels; load bearing components Plants Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hungary, India, Indonesia , Italy, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Philippines, Poland, Romania, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, UK, USA Sales Group: US$5.301bn (4.223, 31 December 2003) (Year to 31 December 2003) Employees 37,000 (31 December 2003) During 2003 Europe accounted for 56% of sales; North America, around 30%; Japan 7%; and the rest of the world, the remaining 7%. Autoliv's customers include BMW, DaimlerChrysler, Ford, General Motors, Nissan, PSA Peugeot Citron, Renault, Toyota and Volkswagen. Autoliv Inc. is a worldwide technology leader and supplier of automotive safety systems with around one third of the global market for car occupant restraint products. Autoliv Inc was formed in May 1997 by the merger of Autoliv AB and Automotive Safety Products (ASP), a division of Morton International that manufactured various types of airbag inflators and modules for the North American, European and Asian markets. For reporting purposes Autoliv divides its products into two groups - airbag products (including steering wheels), and seatbelt products (including seat components). In 2003 Autoliv had around 80 wholly or partially owned production facilities in 29 countries, consisting of both component factories and assembly factories and including joint-venture operations. In addition, the company had eight technical centres around the world, including 19 test tracks, more than any other automotive safety supplier.

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Recent Developments Corporate strategy In recent years Autoliv has increased its global market share through acquisitions and joint-ventures. The 2002 acquisition of Visteon's restraint systems operations was an important milestone for the company. Although Autoliv controls a third of the US airbag market, prior to the acquisition the company had not been able to offer the North American market full systems capability in the restraint business. The purchase established Autoliv's presence in the US safety electronics market and expanded its global share. Cost pressures resulting from increasing raw material prices and falling sales led Autoliv to implement a cost efficiency programme at the end of 2000. The rationalisation also included the closing, selling and downsizing of several plants in the USA, Asia and Europe. The closures have resulted in increased outsourcing to external suppliers, which the company believes will lower overall manufacturing costs. In another effort to lower costs, Autoliv is relocating production of certain products to countries where labour costs are lower. This has created around 4,000 additional jobs, boosting the proportion of employees in such countries to 19% in 2000, from 8% in 1999. In August 2001 Autoliv began to relocate the main part of its Swedish airbag operations to Poland. In the same month Autoliv announced the relocation of its airbag cushion cut and sew operations from Ogden, Utah (USA) to an existing plant in Queretaro (Mexico). In January 2004 Autoliv announced the closure of its plant in Landgraaf (Netherlands) as part of its strategy of moving more production to eastern Europe and other low-labour-cost countries. Seatbelt production is being moved from locations such as from Sweden to Estonia; from Great Britain to Poland and Spain; from Germany to Poland and Romania; from France to Turkey and Tunisia; from the USA to Mexico; and from Japan to Thailand. Acquisitions In July 2003, Autoliv announced that it was to acquire the German seat belt company Protektor, which specialized in seatbelts for niche markets, such as seatbelts for buses, heavy trucks, forklifts, agricultural vehicles and other special-purpose vehicles. In May 2003, Autoliv acquired the steering wheel assets of the Hiroshima-based Nippon Steering Industries (NSI), a joint venture between the privately held Japanese automotive parts company KIW and Autoliv's own steering wheel company in Japan, Autoliv-Izumi. Autoliv also acquired KIW's assets in steering wheels. In April 2002 Autoliv completed the acquisition of Visteon's Restraint Electronic business. The operations represented around US$150m (166m, 30 April 2002) in annual sales. The takeover involved 350 employees at Visteon's advanced engineering centre in Dearborn, Michigan (USA) and at the company's electronic manufacturing facility in Markham, Ontario (Canada). In June 2001 Autoliv made Autoliv Romania S.A. a wholly owned subsidiary by acquiring the remaining 10% from the local partner Metaloplast. The move was in line with Autoliv's strategic transfer of labour-intensive production to low wage countries. Autoliv Romania acts as a subcontractor to Autoliv's German operations, in addition to having sales to leading Romanian carmaker Dacia. In March 2001 Autoliv increased its stake in the Livbag inflator operations in France from 66% to 83%. As of May 2000 Autoliv acquired OEA Inc., the world's second largest supplier of airbags initiators and Autoliv's main supplier of products. OEA also manufactured inflators for airbags and Intelligent Firing Squibs, the next generation of initiators. Headquartered in Colorado (USA) OEA employed 1,700 and had operations in both North America and France. In order to access the Russian market Autoliv bought a 49.5% stake in the Estonian seatbelt maker Norma Group in October 1999. This was increased to 51% in February 2000. As of January 2000, Autoliv acquired the Japanese steering wheel manufacturer Izumi. Izumi had about 20% of the steering wheel market and its customers included Daihatsu, Isuzu, Mazda, Mitsubishi, Nissan and Suzuki. The deal included Izumi's 50% stake in Nihon Steering Industries. As of April 2000 Autoliv acquired the seatbelt operations of NSK, the Japanese 214 AutoBusiness Ltd

Company profiles ballbearing company. A 40% interest in NSK's Asian seatbelt operations was also acquired and Autoliv had the option to purchase the remaining 60% in two steps, on 1 April 2002 and 2003. Divestments In February 2002 Autoliv sold its French steel component company, Autoliv Composants S.A. to EM Technologies. The company represented around US$38m in annual sales and a workforce of 370. Joint-ventures In September 2002 Autoliv formed a joint venture in China. The new company is called Autoliv Maw Hung Vehicle Safety Systems and is based in Changchun. It is 59% owned by Autoliv and 41% owned by Maw Hung Industrial Corporation. In November 2000, Autoliv formed a joint-venture with Korean automotive supplier Mando Corporation. Autoliv holds 65% of the shares in Autoliv Mando Corporation, which is expected to hold a 35% share of the Korean market for automotive safety products within the next few years. Investments In November 2003, Autoliv began construction of a new 11,000 square metre facility in China in order to cope with the sharp increase in car production in the country. The plant, which will be Autoliv's second airbag plant and sixth production facility in the country, is being built on an adjacent site to an existing facility in Shanghai. It will not only include facilities for airbag module production but also a test and development centre. The investment is set for completion by mid-2004. In June 2003, Autoliv opened a new plant in Malaysia. It is hoped that the new facility, located about 25km south of Kuala Lumpur, will improve operational efficiency by relocating two Autoliv joint ventures into the new building. In January 2003, Autoliv opened a plant for seat belts in Jelcz-Laskowice (Poland). The plant, encompassing 37 000 square metres of land, will produce seat belts as a subcontractor to Autoliv Germany, delivering mainly to BMW, DaimlerChrysler, Ford, Opel and Volkswagen. In 2002 Autolitv opened a new airbag and seat belt plant near Seoul (South Korea). Autoliv expects to see strong growth in Korea, looking for its sales to grow there from US$40m (38.2m, 31 December 2002) in 2002 to US$150m (143.1m, 31 December 2002) in 2004. In June 2002 Autoliv began manufacturing airbags in Shanghai (China). In November 2001 Autoliv's subsidiary, Autoliv Mando Corporation of Korea, began construction of a new plant for the production of airbags and seatbelts for Korean carmakers. The initial phase encompassing a 10,000 square metres facility to house the head office, manufacturing, marketing and R&D activities, was scheduled for completion in August 2002. The second phase adds 5,000 square metres to the site and is scheduled to begin construction in 2005. Contracts The following contracts represent the company's first orders for automotive electronics in North America. In 2000 Autoliv was awarded a contract in North America to supply 1.2 million rollover sensors, beginning in autumn 2003. Autoliv is also to supply one million occupant weight-sensing systems per year to meet new US regulations for advanced airbags, also starting in autumn 2003. The contract covers five car lines and is believed to be the largest contract awarded for this technology to date.

Other recent contracts include: Smart frontal airbags, knee airbags, side airbags, seatbelts and restraint electronics for the BMW 6-Series. Smart frontal airbags, knee airbags, side airbags, inflatable curtains and seatbelts with pre-tensioners on Peugeots new 407. Provision of inflatable curtains for Saturn and Chrysler Cirrus/Stratus models. Supply of safety systems to the Renault Laguna including the inflatable curtain for 215

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Automotive Technology Roadmap head protection, new frontal airbag system and side airbags for chest protection in rear seats. New Product Developments Approximately 10% of Autoliv employees work in R&D. As part of its Total Safety System Concept, Autoliv has widened its scope of research, by starting to develop both 'pre-crash systems' aimed at preventing collisions and 'post-crash systems' aimed at increasing survival chances after a vehicle accident. Components and subsystems are designed increasingly to interact with each other as a system. As an example, seat belt pretensioners and frontal airbags are tuned to each other via the same Electronic Control Unit (ECU) to give the best possible protective effect. The ultimate aim is to develop a system that can identify and provide protection to car occupants in collisions with various types of vehicles and objects up to a collision speed where there is still a survivable space in the vehicle's passenger compartment. In December 2001 Autoliv formed an alliance with Indigo Systems, an advanced technology firm manufacturing infrared cameras and telecommunications devices. The alliance is intended to develop affordable infrared devices for automotive applications, providing drivers with broader and longer night vision than conventional headlights. Tiny cameras detect heat from animals and humans allowing the driver to perceive pedestrians and animals outside the normal range of vision. The information could be displayed on a screen that can be stowed in the instrument panel during daylight hours. At the international vehicle safety conference ESV (Enhanced Safety of Vehicles) in Amsterdam (The Netherlands) in June 2001, Autoliv presented a new system to protect pedestrians when struck by cars. Autoliv has concentrated on head injuries, which account for the majority of fatalities. In the new Active Hood pedestrian protection system, sensors in the front bumper send signals to two actuators which lift the rear part of the bonnet. This gives the bonnet sufficient deformation to ease the impact of the pedestrian's head with the bonnet and reduce the risk of contact with hard engine and structure parts underneath. Autoliv has developed an anti-sliding bag that prevents occupants from sliding under the seat belt. The frontal airbag also improves protection by keeping the occupant in a more-upright position. The bag was developed in cooperation with Renault and is being fitted in the 2- and 3-door Megane . Financial Overview In the year ended 31 December 2003 Autolivs net sales rose 19%, from US$4.443bn (4.239bn, 31 December 2002) to US$5.301bn (4.223bn, 31 December 2003). Airbag sales rose 14% to US$3.608bn (2.874bn, 31 December 2003); this was attributed largely to higher inflatable curtain sales. Seatbelt sales increased 32% to US$1.693bn (1.349bn, 31 December 2003). Operating profit rose by 28% to US$423m (337.0m, 31 December 2003) and reported net income grew 47% to US$266m (211.9m, 31 December 2003). Outlook Many analysts were fretting about safety equipment suppliers a couple of years ago, pointing to aging products, especially front airbags and seatbelts for which piece prices were falling. But this underestimated the ingenuity of suppliers like Autoliv for developing an extended range of new products such as side airbags for head, chest and abdomen protection, inflatable curtains etc. It also overlooked the tightening of government legislation, especially in North America. For example, in December 2003, the Alliance of Automobile Manufacturers and the US Insurance Institute for Highway Safety announced a new voluntary industry safety commitment for enhanced side-impact protection through the use of side airbags and inflatable curtains. This calls for at least 50% of all vehicles marketed in the US by Alliance members to meet the side-impact criteria by September 2007, rising to 100% by September 2009. Autoliv believes the positive impact of the latter development is still 1.5-2 years away but will result in 216 AutoBusiness Ltd

Company profiles a significant boost to demand for both side airbags and inflatable curtains. Piece prices are likely to fall as the market gathers pace, but the company remains confident that margins will be enhanced. On the back of these trends, Autolivs growth prospects appear strong.

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AVL DiTEST
Testing equipment
Address DiTEST Fahrzeugdiagnose GMBH Alte Poststrae 152 A-8020 Graz Austria Tel: +43 316 787 689 Fax: +43 316 787 1460 Internet: http://www.avlditest.com Senior Officers Gerald Lackner, President Werner Oratsch, Vice President, Financial Administration Products Emission tester for diesel and petrol engines, universal engine speed measurement and clamp on transducers, diagnostic tools for light and heavy vehicles Plants Austria, France, Germany Sales No details available Employees No details available AVL DiTEST was established in 1999 as a subsidiary of AVL List. AVL DiTEST provides vehicle workshops and test centres with equipment to diagnose vehicle failures. AVL DiTEST aims to fulfil all legal requirements for official tests and to make them easier. AVL DiTEST was founded in 1999 as a legally independent, 100% affiliate of AVL List GmbH. AVL List is the world's largest privately owned and independent company for the development of powertrain systems with internal combustion engines as well as instrumentation and test systems. AVL DiTEST is represented in more than 50 countries worldwide.

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Recent Developments Corporate strategy Having only been established as an independent company in 1999, AVL DiTEST has been growing steadily, through the establishment of subsidiaries in France and Germany. The company has partnerships all over the world enabling it to supply locally. In 2002 AVL DiTEST became a key player in vehicle diagnostics through the acquisition of Grundig Instruments and Pierburg Hermann. Joint-ventures AVL DiTEST has a joint venture in China with Xiamen Hitec Engine Diagnostic Equipment Co., Ltd. Investments In 2000 AVL DiTEST established two subsidiaries, AVL DiTEST GmbH (Germany) and AVL DiTEST France S.A.S. New Product Developments AVL DiTESTs product developments include the following: Modular System DiGIS Integrated AVL Emission Tester AVL Diagnoses AVL Measurements and Clamp on Transducers

Financial Overview AVL DiTEST is a 100% affiliate of AVL List, which is a privately held company. As such, AVL DiTEST does not publish any financial information about itself. Outlook As an affiliate of the broader AVL Group, AVL DiTEST has a relatively low public profile, but it is clear the company has built a niche position in the vehicle diagnostics area, a growth segment across most vehicle manufacturing areas of the world. Global expansion is continuing through a network of partnerships, and acquisitions have also played a part in the companys expansion. The acquisition of Pierburg Instruments was a major step and has positioned the company well for further growth in mainland Europe and North America.

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Ballard
Fuel Cells
Address Ballard Power Systems Inc. 4343 North Fraser Way Burnaby British Columbia V5J 5J9 Canada Tel: +1 604 454 0900 Fax: +1 604 412 4700 Internet: http://www.ballard.com Senior Officers Dennis Campbell, President and CEO David Smith, CFO Lee Craft, Vice President, Operations Products Fuel cell modules, fuel cell engines, subsystems and components, electric drives for fuel cell and other electric vehicles, complete fuel cell powertrains that combine Ballard fuel cell engines with electric drives, carbon fibre products used in automotive and fuel cell applications Plants Canada, Germany and North America Sales Group: US$119.6m (95.3m, 31 December 2003) (Year to 31.12.03) Employees Group: 1,240 (31.03.03) Ballard Power Systems is the world leader in developing and manufacturing zeroemission proton exchange membrane (PEM) fuel cells for transportation and power generation applications. Ballard is commercialising fuel cell engines for transportation applications and electric drives for fuel cell and other electric vehicles. In 2003 the Transportation division generated 86% of sales. DaimlerChrysler holds a 16.8% stake in Ballard and Ford holds a 19.1% stake in the company. In December 2002 a syndicate of underwriters led by RBC Capital Markets and CIBC World Markets bought an equity stake in Ballard for Cdn$156m (94.4m, 31 December 2002). Ballard Power Systems Inc. has four principle subsidiaries: Ballard Power Systems AG (BPS) a German corporation that develops PEM fuel cell engines. Ballard Power Systems Corporation (BPSC) a North American corporation, which develops electric drive systems and power electronics. Ballard Generation Systems Inc. (BGS) a Canadian federal corporation formed to develop PEM fuel cell stationary products. Ballard Material Products Inc. (BMP) a North American corporation which develops and markets carbon fibre products for use in the automotive and fuel cell markets.

Ballard operates in three market segments, Transportation, Power Generation and Material Products. As part of restructuring in 2002 Ballard combined three of its four divisions (Transportation, Power Generation and Electric Drives and Power Conversion) into a single functional organisation. The restructuring was designed to increase efficiencies and to reduce costs. The Material Products division was not affected. Ballard has an 85% world market share of fuel cells and supplies its products to 10 out of the worlds top 15 automakers. Its fuel cell customers include; Cinergy, GM, Honda, Hyundai, Mazda, Mitsubishi, Nissan, Volkswagen and Yamaha.

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Recent Developments Corporate strategy Ballard has been developing PEM fuel cells and PEM fuel cell systems since 1983 and this has been the companys primary business since 1989. The company has grown primarily through product innovation as the demand for cleaner and more efficient vehicles has increased. Ballard continues to benefit from new legislation relating to emissions standards as governments become more and more concerned with environmental issues. Ballards subsystems and components, including electric drive systems, power electronics and carbon fibre products, provide the company with an opportunity to generate near-term revenues and support the ongoing development and enhancement of fuel cells. In December 2002 Ballard announced a five-year plan for the business. It included a significant reduction in cash consumption, organisational restructuring, which included a cut of 400 jobs, and funding for the development of Ballards next generation light-duty PEM fuel cell engine. The funding was to come largely from Ballards partners Ford and DaimlerChrysler. Ballards partnership with these two OEMs has played a major part in the companys past success and will continue to play a key role in its future. In December 2003, Ballard completed an agreement with DaimlerChrysler and Ford that requires them, at Ballards request, to make an equity investment in Ballard of a total of CDN$55m (33.9m, 31 December 2003). Ballard has stated its goal is to convert its technology leadership into market leadership by being the leading supplier of high quality, low cost PEM fuel cell products, and to be the first to offer these products in mass markets where they have the potential to capture a large market share. Acquisitions In November 2001 Ballard acquired or received the right to acquire all of the interests of DaimlerChrysler and Ford in XCELLSIS (now BPS AG) and Ecostar (now BPSC), so that Ballard now controls and will ultimately own 100% of BPS AG and BPSC. Joint-ventures To help the company transform its technology leadership into market leadership Ballard has formed strategic alliances with transportation industry leaders. Ballard's major automotive collaboration was a four-year agreement, signed in March 1993 with DaimlerChrysler. In December 1997, Ballard and DaimlerChrysler announced that they would expand their alliance to include Ford. The Vehicular Alliance is for the development and commercialization of PEM fuel cells, PEM fuel cell engines and electric drive systems. Together with the two OEMs, Ballard formed XCELLSIS GmbH (now BPS AG), and Ecostar Electric Drive Systems L.L.C. (now BPSC). In November 2001 the Vehicular Alliance was strengthened as Ballard acquired DaimlerChryslers and Fords interests in XCELLSIS and Ecostar, these businesses have now been integrated into Ballards organisation. In July 2000, Modine and XCELLSIS signed a co-operation agreement to develop components for fuel-cell engines in buses, cars and trucks. Then in November 2001 the same two companies signed a second agreement to develop components for hydrogen-powered vehicles. Introduction of this technology is expected to centre around fleet vehicles such as buses, taxis and delivery vans. Contracts Thirty Mercedes-Benz Citaro buses, powered by Ballard heavy-duty fuel cell engines, were delivered in 2003 to the ten participating cities in the European Fuel Cell Bus Project. In October 2003 Ballard said that it plans to strengthen its ties with Honda and other major Japanese carmakers. The company also indicated that Toyota, which is moving ahead of other Japanese companies in fuel cell development, will also be potential client In June 2003 Ballard received a US$1.75m (1.53m, 30 June 2003) order from a new major automotive customer for Ballard fuel cell products. A Ballard fuel cell engine powers the Mitsubishi Grandis minivan. In December 2002 Ballard signed an agreement with Honda for the supply of up to 32 of its Mark 902 fuel cell modules and support services to support Hondas fuel cell vehicle 222 AutoBusiness Ltd

Company profiles customer demonstration programmes in the USA and Japan. These will be supplied between 2003-2005. During 2002 Ballard also received orders from Nissan for Mark 902 fuel cell modules, PEM fuel cell engines and support services. Also in 2002 Ballard received a US$1.88m (1.89m, 30 November 2002) order from a new automotive customer for Ballards fuel cell engine and support services. The contract will include Ballards light-duty fuel cell engine, featuring the Mark 902 fuel cell module, application engineering, integration and vehicle launch support. A Ballard fuel cell powertrain is used in the Mercedes-Benz A-class, unveiled in October 2002. A Ballard fuel cell powertrain is also used in the Ford Focus FCV, unveiled in March 2002. Ballard supplies electric drive systems to DaimlerChrysler, Ford, Mazda and Nissan for development and testing in their PEM fuel cell-powered vehicles. In October 2001 Ballard was awarded a five-year contract to supply an automotive customer with carbon friction material for automotive transmissions.

New Product Developments In the year to 31 December 2003, Ballard spent US$103.9m (82.8m, 31 December 2003) on research and development, down 9% from the 2002 figure of US$113.7m (108.5m, 31 December 2002). Ballard's research and development headquarters are located in Burnaby, a suburb of Vancouver, British Columbia (Canada). The facility is used for fuel cell and fuel cell systems development, assembly and testing, and for heavy-duty fuel cell engine activities. Through 2003-2005 Ballard plans to bring to market automotive PEM fuel cell products for testing by DaimlerChrysler, Ford and other automotive customers according to their roll-out plans. As part of its five-year plan, Ballard received an additional financial commitment from DaimlerChrysler and Ford. The OEMs agreed in principle to provide combined funding of up to US$97m (92.5m, 31 December 2002) to support the development of Ballards next generation light-duty PEM fuel cell engine. The funding is expected to be primarily between 2005-2007. Ballard has a research and development agreement with DaimlerChryslers Research and Technology group that will accelerate R&D activities and ensure work is coordinated and focused on achieving commercialisation of PEM fuel cell products. Currently there are four active projects under this agreement:

PEM Fuel Cells membranes, gas diffusion layers, membrane electrode assembly, catalysts, fuel cell plates Fuel Cell Systems fuel cell system design, monitoring and control systems Fuel Processors Direct Methanol Fuel Cells

Financial Overview In the year ended 31 December 2003, Ballard reported sales of US$119.6m (95.3m, 31 December 2003), an increase of 31% as compared to US$90.9m (86.7m, 31 December 2002) in the previous year. The improved sales for 2003 primarily reflected higher product revenues from the Transportation market segment. The Transportation segment reported sales of US$102.8m (81.9m, 31 December 2003) compared to US$74.4m (71.0m, 31 December 2002). Ballard reported a pre-tax loss of US$124.3m (99.0m, 31 December 2003), compared to a pre-tax loss of US$147.2m (140.4m, 31 December 2002) in 2002. The net loss in 2003 amounted to US$125.1m (99.7m, 31 December 2003) compared to a net loss of US$148.4m (141.6m, 31 December 2002) the previous year.

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Automotive Technology Roadmap Outlook Ballard had a successful year in 2003, lifting sales by 31% and reducing cash consumption by 66%, although pre-tax and net losses persisted, partly as a result of investment write-downs and restructuring costs. The company continues to remain confident that fuel cells are the automotive propulsion technology of the future, although it also acknowledges that a significant development during 2003 was the growing importance of internal combustion engine hybrid electric vehicles as a bridging technology to fuel cells. As a result of this, Ballard is discussing strategic alternatives within its alliance, that could provide DaimlerChrysler and Ford with greater involvement in the development of fuel cell systems and the integration of those into their vehicles. Ballard acknowledges that it also has to develop a more flexible approach with key customers and prospects that might include the sale of fuel cell components and the licensing of its technology in the context of a long-term strategic relationship.

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Behr
Air conditioning and engine cooling systems
Address Behr GmbH & Co Mauserstrae 3 70469 Stuttgart Germany Tel: +49 711 8960 Fax: +49 711 896 4000 Internet: http://www.behr.de Senior Officers Dr. Markus Flik, CEO Klemens Schmiederer (Deputy), Air Conditioning Product Division Dr. Andreas Thumm (Deputy), Engine Cooling Product Division Dr. Hans Glckl, Production Manager Products Air conditioning systems, engine cooling systems, exhaust cooling systems, fan clutches, thermostatic control devices Plants Brazil, Czech Republic, France, Germany, India, Italy, Japan, South Africa, Spain, USA Sales Group: 2.8bn (Year to 31.12.02) Employees Group: 16,300 (February 2004) Behr has 25 production operations in countries throughout Europe, North and South America, South Africa and India. Majority-family owned Behr GmbH & Co. is one of Europe's largest producers of air conditioning and engine cooling systems. The automotive industry generates around 95% of the companys sales. A recent focus for Behr has been increasing its sales outside Germany. In order to support its global presence, Behr has established four new subsidiaries: Behr India, Behr Japan, Behr South Africa and Behr Schweden.

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Recent Developments Corporate Strategy In recent years Behr has been pursuing a policy of globalisation with the result that the company's sales generated outside Germany increased from 35% in 1993 to almost two thirds in 2002. Behr aims to work independently in its core regions, and to form joint-ventures in peripheral areas. Another area on which Behr has been focusing is the development of integrated modules and systems, which it has expanded through a number of strategic joint-ventures. In 2002, Behr launched what it described as a comprehensive cost offensive, designed to achieve a more cost-effective product design, more efficient business processes, costoptimized purchasing and lower overheads. Behrs aim is to cut its costs by 250m by 2005. As part of this strategy, Behr plans to relocate some parts of their German manufacturing operations to other, lower cost, countries. Acquisitions Although Behr is focusing more on organic growth than on growth through acquisitions, it has nevertheless made some purchases: In April 1999, Behr GmbH expanded its interests in South Africa and acquired FederalMogul Corporation's South African heat transfer business. First year sales of Behr South Africa were around 56.2m, and are expected to double in the medium-term. During the first half of 2001 Behr acquired the 35% share in Behr America held by the diesel engine manufacturer, Cummins. Behr is now the sole owner of the US-subsidiary. In February 2002 Behr acquired the Dayton Thermal Products operation in Ohio (USA) from DaimlerChrysler. Chrysler continues to hold a minority interest in the plant for a further two years, after which time Behr will assume full ownership. This purchase marked a significant step for Behr into the key North American passenger car industry. It gives the company a 10% market share in air conditioning and engine cooling systems in the USA. Dayton Thermal Products employed 2,000 people and had annual sales of around US$600m (693.2m, 28 February 2002). Behr plans to invest around US$100m (115.5m, 28 February 2002) in the plant over the coming years, modernising the facilities and installing new technologies. It sees the plant as a key growth platform for its North American business.

Joint-ventures In February 2004, Behr announced a new joint-venture with Shanghai Automotive and Sanden Corporation. Shanghai Longhua Industrial Co will also be a partner. The new company will be called Shanghai Sanden Behr Automobile Air Condition Co (SSB) and focus on the development, production and marketing of refrigerant compressors for car and truck HVAC systems. Behr has a 17.5% share of the venture. Output in 2004 is targeted at 1.4m compressors with a sales target of Rmb1.6bn (155m, 10 February 2004). SSB is aiming to generate sales of around Rmb3bn (300m, 10 February 2004) by 2010. In January 2003, Hella, Behr and Plastic Omnium announced their intention to create an equally-owned joint company, HBPO, to design, develop and produce front-end modules, beginning in early 2004. Hella and Behr will transfer the Hella-Behr Fahrzeugsysteme joint venture to the new company. HBPOs sales in 2004 are expected to be 350m, with 550 employees on eight production sites in Germany, the Czech Republic, Slovakia, Spain, Mexico and South Korea. In October 2003 Behr and Shanghai Automotive Co agreed to establish a 50:50 joint venture Shanghai Behr Thermal Systems Co. This commenced operations on 1 January 2004, specializing in the development, manufacture and marketing of automotive air conditioning and engine cooling products. The sales target for 2004 is 24m but after five years the joint venture aims to generate sales of around 100m. In February 2002 HBF formed a 50/50 joint-venture with Samlip (South Korea). This has won contracts for front-end modules from Hyundai and Kia, and plans to build three production plants in Korea. It expects to produce 500,000 front-end modules per year at these plants from 2004. Behr has a joint-venture with Hella KG Hueck & Co., called Hella-BehrFahrzeugsysteme GmbH (HBF). The joint company produces front-end modules in 226 AutoBusiness Ltd

Company profiles Meerane (Germany). Behr and Hella have a second joint-venture: Behr-Hella Thermocontrol GmbH. This uses mechatronics (electronic control of the thermal systems). Behr also has a strategic cooperation agreement with Kolbenschmidt Pierburg to develop cooled exhaust gas recirculation systems. In February 2000 Behr and ContiTech formed an agreement to collaborate in producing modular air conditioning fluid systems. As part of the deal Behr sold a 51% stake in the air conditioning hose assemblies company, Kuhner GmbH, to ContiTech, a division of Continental. In April 2000, Behr formed an air conditioning joint-venture with Sanden Corporation (Japan). Behr contributes its development and component know-how for HVAC modules and systems to the joint-venture and Sanden brings its technological expertise in compressors. In October 2000, Behr signed a 50/50 joint-venture agreement with Toyo Radiator Co. Ltd of Japan. The venture supplies Japanese OEMs with engine cooling systems. The two companies plan to extend this cooperation in order to manufacture and market Toyo's products in Europe.

Investments In February 2001, Behr inaugurated its new climatic wind tunnel at its development centre in Stuttgart-Feuerbach (Germany). The company invested 12.3m in the project, which is the world's most advanced facility of its kind. During 2001 Behr America began production at a new plant in Webberville, Michigan (USA). In summer 2001 production of condensers began at a new plant in Montblanc (Spain). In autumn 2001 Behr opened a new office in Shanghai (China). The company hopes to be able to establish partnerships with local Chinese automotive partners following the success of opening an office in Japan. In mid-2002 production of front-end modules began at a new HBF plant in Bratislava (Slovakia). In autumn 2002 HBF began production at a new plant in Spain. Behr has been expanding its plant in Hradiste (Czech Republic). It is relocating a number of production lines to the facility and is starting to manufacture new products. In October 2002, the construction of a new headquarters and technology centre in Troy, Michigan was completed. Behr also built a new climatic wind tunnel there that began operations in mid-2003. These facilities provide Behr with the necessary technical expertise to expand its operations further in North America. Contracts HBF was awarded the contract to develop and produce the front-end for the successor for the Mercedes-Benz Vito/Viano model and production started on a JIT, in-sequence basis in 2003 at the DaimlerChrysler plant in Vitoria (Spain). HBF had complete responsibility for the module development, supplier quality, management of changes, and integration into the vehicle. It uses the first module carrier to include hybrid technology and is made out of metals and plastics In 2002 HBF started manufacturing front-end modules for the Volkswagen Groups Touareg model and the Porsche Cayenne at its plant near Bratislava (Slovakia). HBFs 2002 joint-venture with Samlip has won three contracts from Hyundai and Kia for front-end modules. Behr is supplying parts for several cars launched in 2002, including models built on the Volkswagen Polo platform and Peugeot 307 platform. Behr has received its first series production contracts for its innovative Four-Zone-AirConditioning system. In September 2000, Behr revealed that it was supplying General Motors with an engine cooling module including heat exchangers, blowers and wiring harnesses for the Corsa model. Behr has the contract to supply the BMW X5 model with a radiator module (brazed aluminium radiator, Denso condenser and two fans).

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New Product Developments Behr invested 175m in R&D in 2002, representing around 6.2% of sales. The company has developed a four-zone air conditioning system as well as a non-idling air conditioning system for commercial vehicles. Another system, the Exhaust Gas Recirculation (EGR) cooler, helps to reduce fuel consumption and exhaust emissions, and is used in the 3-litre Volkswagen Lupo. Behr is developing integrated sub modules, which consist of key heating and air conditioning elements and essential air ducts. These thermo structure modules form the core of a vehicle's ventilation system. The HBF joint-venture has developed a prototype of a fullyintegrated front-end module, significant because the cooling system is integrated into the frontend structure - representing an industry first. This should help future cars meet tougher crash legislation. Financial Overview In 2002 Behr increased its sales by around 25% to 2.8bn as a result of the initial consolidation of the new Dayton Thermal Products plant in the US. Sales of air conditioning products (excluding the new Dayton facility) grew by 8% from 2001 to 1.1bn. Sales of engine cooling products rose 6% to 966m from 925m in the previous year. In the first half of 2003 Behr had sales of 1.52bn, up 18% on the same period in 2002, the acquisition of Dayton contributing almost 16 points to this growth. Behr had predicted full year 2003 sales of 3bn in March 2003, but has subsequently lowered this expectation a little to take into account the impact of the weak dollar. Outlook Behr faces a major challenge in the next few years to globalise with its customers and continue to offer innovative solutions that save costs. The recently-announced joint ventures in China indicate the commitment Behr is willing to make in the former area. The group has successfully expanded in an industry downturn, in part helped by the strength of its customers, but also by the growing demand for the high end systems and components that the group delivers. Behr has strong growth prospects in North America, as well as a strengthening foothold in Asia. The group is a technology leader in an expanding sector in Europe with the prospect of share gains during the any downturn. The new joint venture with Plastic Omnium in the front-end module business enhances capabilities in this area, Behrs HVAC expertise and Hellas lighting and electronics technology now being married to the French suppliers bumper, impact absorption and pedestrian protection capabilities.

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Benteler
Axles, sub-frames and structural components
Address Benteler AG Residenzstrasse 1 33104 Paderborn Germany Tel: +49 5254 810 Fax: +49 5254 13666 Internet: http://www.benteler.de Benteler Automobiltechnik GmbH & Co KG An der Talle 27-31 33102 Paderborn Germany Tel: +49 5254 810 Fax: +49 5251 408346 Senior Officers Hubertus Benteler, President, Benteler AG (Holding) Nizar (Nick) Ghoussaini, Director, Benteler Automobiltechnik GmbH Products Chassis components and modules, compressors, control arms, exhaust manifolds and down pipes, fluid management tubes, suspension members, and impact and safety components Plants Benteler Automotive: Argentina, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Italy, Mexico, Portugal, Spain, Switzerland, UK, USA Sales Group: 3.29bn (Year to 31.12.02) Automotive: 2.39bn (Year to 31.12.02) Employees Group: 16,937 (2002) Benteler Automotive: 11,528 (2002) Benteler AG is a family owned company that produces structural components for the automotive industry. The company sees the most potential for growth in the coming years in its chassis modules business, in which it is becoming a leading global player. Benteler AG operates through four independent companies, under a holding organisation. These companies deal respectively with automotive components, machinery manufacture, steel/pipes and trade. Benteler Automotive accounted for 70% of the Groups total sales in 2002 and operates through six business units: Chassis Modules; Chassis Components; Safety and Structural Solutions; Exhaust Systems; Tubular Components; and PD&E Automotive. Benteler Automotive has 42 sites in 18 countries throughout Asia, Europe, and North and South America. The company's main customers include Ford, General Motors and DaimlerChrysler.

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Recent Developments Corporate Strategy In the period following the company's reorganisation, Benteler has been reviewing its long-term strategy and focus for its resources and investment. It views innovation and the ability to integrate with OEMs as vital for its success. Relationships with other supplier companies are also necessary, whether in the form of joint-ventures, alliances or simply as sub-suppliers to Benteler. Benteler Automotive is transforming itself from a components supplier to a chassis module designer and supplier. The company is also expanding its global presence, mostly by forming strategic alliances with companies in other countries. Benteler Automotive is particularly focusing on Asia where it is looking to cooperate with Japanese suppliers in order to have a foothold in this market. It has also recently established a new joint venture in China. As a result of lower demand in the North American automotive industry, Benteler announced plans to lay off about 70 people at its metal stamping plant in Goshen (US) as of January 2004. There were also several redundancies at the group's Swiss operations in St. Ursanne during 2003 due to a reduction in orders Acquisitions In April 2001 Benteler Automotive agreed to acquire 100% of the NedCar subsidiary PD&E Automotive BV. PD&E, based in the Netherlands, is an automotive engineering centre employing 365 engineers. It has capabilities in full vehicle development, specialising in body, powertrain, suspension, electrical/electronic and interior trim systems and modules. Benteler intends to manage PD&E as an independent business unit. Joint-ventures Benteler is part of a global alliance with Tenneco Automotive and Continental Teves that produces modular chassis systems. These systems incorporate Tenneco's ride control technology, Continental Teves brake systems and Benteler's sub-frames and structural components. In line with its strategy of expanding its global presence, Benteler has also formed alliances with firms in Asia. In January 2002 Benteler Automotive established a joint venture with Shanghai Huizhong Automotive Co., Ltd. (China) to produce chassis components in China for several different vehicle manufacturers. Benteler has a cooperative agreement with Aisin Takota (Japan) to manufacture chassis components. Benteler and Aisin design hydroformed components such as sub-frames, cross members, manifolds and axles and Aisin produces them in Japan. Production began in 2000. In May 1999, Benteler agreed to set up a US$19m (18.2m, 31 May 1999) joint-venture with Shanghai Huizhong Automotive Manufacturing (China). Shanghai Huizhong has exclusive contracts to supply car components to General Motors' Buick cars produced in Shanghai, as well as to Volkswagen Santana models.

Investments Benteler invested 147m in 2002, with around 56% of this money destined for plants outside Germany. The company plans to invest more than 500m by the end of 2003 in order to fulfil the requirements of new automotive contracts and boost sales. The main focus centred on the expansion of production facilities as well as the establishment of new plants and locations within close proximity to customers. The Automotive division invested 112m or 76% of total capital expenditures in production equipment and systems, primarily due to new orders. Within Europe, Bentelers recent investments include the following: In November 2002, Benteler acquired the Volvo Chassis Centre in Ghent (Belgium). The manufacturing facility produces chassis modules for the Belgian Volvo assembly plant, also situated in Ghent. In December 2001 Benteler Automotive announced plans to open a new manufacturing plant in the Ford supplier park in Cologne-Niehl (Germany). This now produces front and rear suspension modules, and corner modules on a just-in-time basis for the new Ford Fiesta and Fusion models. AutoBusiness Ltd

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Company profiles In 1999, Benteler opened a new production plant in Melfi (Italy). In early 2000, a plant in Mr (Hungary) began production, through the cooperation of Benteler with a local partner. The facility was opened in November 2002. The plant, which employs around 150 people, produces pipes for motor compartments.

Outside Europe there have also been investments: In December 2002, Benteler announced plans to build a new facility in Opelika, Alabama (USA). The building is to cover 144,000 square feet and is set for completion by September 2003. It is expected to employ 150 people when fully operational. Through a joint-venture company with Shanghai Huizhong Automotive Manufacturing Co. Ltd. (China), Benteler is investing in a plant in Shanghai that will produce chassis components. Production began in 2002. In May 2001 Benteler Automotive announced plans to move its North American headquarters and advanced engineering and technical centre to a new 80,000 square foot location in Auburn Hills (USA). The facility was opened in March 2002. Benteler Automotive opened a new Asia-Pacific base in Tokyo (Japan) in late 2000. The company wants to win chassis contracts with major Japanese carmakers such as Nissan and Mazda. Benteler also plans to establish other regional offices in Japan: in Hiroshima, Utsunomiya, and Nagoya.

Contracts Benteler Automotive has contracts for the Spartanburg (USA)-built BMW X5 and for the DaimlerChrysler PT Cruiser in Mexico. Benteler Automotive supplies a hydroformed frame to the new Jaguar X-type, launched in February 2001. This supports the fully independent torsion-controlled link rear suspension. Benteler Automotive supplies the front and rear suspension members and control arms for the Ford Focus model. It is also a supplier to the new Fiesta model. In 1999, Benteler Automotive's Swiss operations received a six-year contract to supply lightweight steering components to Audi. New Product Developments In recent years Benteler has been focusing on transforming itself from a components supplier to a full module designer. To achieve this, Benteler has increased its chassis module capabilities, and has developed chassis modules that integrate the axle, suspension components, brake components and control functions in one unit. The company is also involved in researching new joining processes for metal as well as developing its metal processing techniques, such as hydroforming. Benteler's impact and safety division is continuing to improve designs, using lightweight materials. Recently, Benteler made a significant contribution to the safety component in Chrysler's PT44. Financial Overview In 2002 Benteler generated sales of 3.29bn, up 11% on the previous year. However Benteler's pre-tax profits fell around 3% from 82.7m in 2001, to 80.3m in 2002. The company noted that all divisions except automotive achieved weaker results. Automotive sales amounted to 2.39bn in 2002, 16% higher than in the previous year helped by consolidation changes, most notably the majority-owned joint venture in China. Although not quantified, profits also improved. Outlook Benteler continues to expand its development and manufacturing expertise relating to readyto-install modules, components and parts for body, chassis and engine. In 2003 the company believed it could again generate double-digit revenue growth despite increasing political and AutoBusiness Ltd 231

Automotive Technology Roadmap macroeconomic insecurities. This was to be driven by the Automotive division. Benteler's experience in the assembly of relatively large complex modules acquired at its new assembly operations in emerging markets together with its well respected capabilities in its core frame and axle areas, make it a strong and attractive partner for the development of future axle and corner modules. Benteler believes that with its expertise in logistics and assembly it is in a strong position to lead future outsourced axle module projects.

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Bosch
Electrical and electronic systems
Address Robert Bosch GmbH Robert-Bosch-Platz 1 70839 Gerlingen-Schillerhhe Germany Tel: +49 711 811 0 Fax: +49 711 811 6630 Internet: http://www.bosch.com Senior Officers Franz Fehrenbach, Chairman Dr Bernd Bohr, Chairman, Business Sector Automotive Technology Products ABS, ESP and conventional brake systems, airbag components, electrical equipment, electronic components (including control units, semiconductors, starters and alternators), engine management, gasoline direct injection units, diesel direct injection units, transmission management, lighting technology, small motors, mobile communication Plants Argentina, Australia, Austria, Belgium, Brazil, China, Czech Republic, Denmark, France, Germany, Hungary, India, Italy, Japan, Malaysia, Mexico, Netherlands, Poland, Portugal, South Africa, South Korea, Spain, Turkey, UK, USA Sales Group: 36.3bn (Year to 31.12.03) Automotive: 23.6bn (Year to 31.12.03) Employees Group: 232,000 (January 2004) Robert Bosch GmbH is the second largest independent automotive supplier worldwide after Delphi. It is a global leader in the supply of antilock braking systems (ABS) and controls around 50% of the diesel direct-injection systems world market. The company operates in three broad divisions: Automotive; Industrial; and Consumer Goods and Building Technology. The automotive division is divided into the following business units: automotive electronics; energy and body systems; car multimedia (Blaupunkt GmbH); chassis systems; diesel systems; energy systems; gasoline systems; and automotive aftermarket. Automotive technology operations generated 65% of Bosch's 2003 sales, down from 67% in the previous year. At the beginning of 2003, Bosch manufactured its products at 236 locations in more than 50 countries worldwide. Seventy two percent of the company's 2002 sales were generated outside of Germany. The NAFTA region is Bosch's largest market for its automotive products outside Germany, accounting for about 20% of sales.

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Recent Developments Corporate strategy Technological innovation has consistently driven Bosch's success, and it has used joint-ventures and strategic acquisitions to broaden its technological know-how and global presence. Its 3-S programme (standing for sicher = safe, sauber = clean, sparsam = economical) for the development of automotive products has been in place for over 25 years; the focus on quality and efficiency is given as part of the reason for the success of its automotive products. In 2001 Bosch stated that it was aiming to triple its sales in North America by 2010. In March 2002 the company said that despite the economic downturn, it was still confident of reaching this target but that it would probably come later than originally targeted. Bosch plans to achieve this sales growth through increasing the market for its current products as well as expanding its product capability in terms of complex modules, safety devices and electronic systems, particularly in the areas of airbag and brake systems, engine management and navigation systems. The depreciation of the dollar has undermined recent reported sales growth in North America 2003 local currency sales in the region rose 6% but converted into euros declined 11%. Eastern European countries such as Hungary and the Czech Republic are also being targeted for increased investment. For example, Bosch has relocated part of its Hildesheim (Germany) plants production activities to the production facility in Miskolc (Hungary). The project was completed around August 2003. As a result, Bosch was reported to be cutting around 830 jobs at the German facility. In 2003, Bosch produced around 3.5m ESP systems, a figure that is expected to rise to 4m in 2004. The company also produced around 6m common rail and unit injectors in 2003, a level that is forecast to rise to 7m in 2004. Acquisitions In April 2003 Bosch announced that it has entered into an agreement to buy 30% of the share capital of Buderus AG, Wetzlar from Bilfinger Berger AG. Bosch formerly held a 17% share in Buderus AG, a holding which has now increased to over 95% subsequent to the deal having been approved by the European Commission in July 2003. A relatively minor part of its business makes automotive castings. With effect from May 2001 Bosch acquired the Rexroth industrial hydraulics business, formerly part of the Mannesman Atecs Group. In April 1999, Bosch increased its stake in Zexel Corporation from 30% to 50.4%. Zexel was renamed Bosch Automotive Systems Corporation on 1 July 2000, and took over Japanese sales activities from Bosch K.K. In October 2001 Bosch Automotive Systems signed a memorandum of understanding to merge with Bosch Braking Systems Company (Japan) and Bosch Electronics Corporation on 1 July 2002. The merged company is called Bosch Automotive Systems and has annual sales of around 330bn (2.99bn, 31 October 2001), making it one of the largest Japanese car parts suppliers. Divestments It was reported in November 2003 that Bosch has sold its chemical air quality sensors business to German electronics manufacturer and automotive supplier Paragon AG, in Delbrueck (Germany) as it is no longer considered part of the core business. The deal takes effect in 2004 In August 2003 Bosch Automotive Systems Corp. agreed to sell its automobile torque control equipment business to Toyoda Machine Works Ltd. On November 1, 2002, the Brose Group took over Boschs lock system activities, however the two companies are working together in the area of lock systems with vehicle access rights. In November 2000, Bosch agreed to sell its radial piston pump operations to Moog, Inc., of the USA. The antitrust authorities made the sale of this operation a condition of its purchase of the Rexroth industrial hydraulics business, in order to prevent a dominant market position.

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Company profiles Joint-ventures In November 2003 Bosch and Weifu High Technology Co. Ltd of Wuxi (China) agreed to form a joint venture for the development and manufacture of diesel injection systems for the Chinese market. The companies will invest 270m by 2008 and expect sales to grow from 100m annually to 1bn over the same period. The Bosch Group will hold a 67% percent share in the new company, Wuxi Weifu Group will hold the remaining 33% and the joint venture started operations at its Wuxi headquarters at the beginning of 2004 with about 1,500 staff In April 2003 Bosch established a joint-venture with Denso for car navigation and car multimedia development. The new company, headquartered in Kariya City, Aichi (Japan), with an office is Hildesheim (Germany) is called Advanced Driver Information Technology Corporation. Each company owns 50% of the venture. In January 2003, Bosch and Weifu High Technology Co. Ltd.of Wuxi (China), signed a letter of intent on the establishment of a joint venture company. The purpose of the joint venture is development, application and manufacturing of state-of-the-art diesel injection systems for the Chinese market. Negotiations were expected to be concluded by mid2003. In July 2002, Bosch signed an agreement with RusPromAvto to adapt, develop and produce diesel fuel equipment, antilock brake systems, energy systems and fuel injection systems. In July 2002, it was reported that Bosch had signed an agreement with Dialog Semiconductor Plc, to develop and qualify high voltage options for CMOS technology. In June 2002, it was reported that Bosch and PSA Peugeot Citroen had signed a cooperation agreement to co-develop a technical innovation plan, concentrating on security, comfort, pollution-reduction and reducing fuel consumption. In May 2002 Bosch Automotive Systems announced plans to set up a joint-venture in Japan with Aisin AW. The new company manufactures 400,000 metal belts a year, used in continuously variable transmissions (CVTs). In February 2002 Bosch Automotive Electronics signed a technology transfer agreement with Philips Electronics (Netherlands) to manufacture discrete semiconductors for high current automotive applications. In November 2001 Bosch signed a brake technology alliance with Hyundai Mobis Company (Korea). This cooperation agreement covers design, production skills and quality control for electronic brake systems. In September 2001 Bosch and Michelin announced a long-term strategic partnership to develop integrated tyre, electronic braking and stability systems. There is no capital exchange and the partnership combines the R&D and marketing expertise of Bosch's Chassis Systems Division with Michelin's Passenger Car and Light Truck Tyre Division. They expect to reduce current braking distances by 15% by 2005. In October 2002 it was reported that the two companies had set up joint-venture to develop systems to improve road safety. The company is to be called Integrated Safety Systems and is based in Paris. In April 1999, Bosch formed a 50/50 joint-venture with Magneti Marelli to produce headlights. Automotive Lighting GmbH, based in Austria, is the world's second largest headlights maker, with 15% of the market. In October 2000 Magneti Marelli gained majority control of the venture, now called MM Automotive Lighting Business (MALB). Bosch has a minority stake, which does not include voting rights. Bosch and ZF Friedrichshafen have a 50/50 steering systems joint-venture, based in Schwbisch Gmnd (Germany), called ZF Lenksysteme GmbH. Investments Bosch has been investing in new facilities and expanding existing sites within Europe. In May 2002 Bosch announced plans to invest HUF24bn (99.0m, 31 May 2002) in expanding its plant in Hatvan (Hungary) that produces automotive electronic control systems. In April 2002 Bosch Automotive Systems announced planned investment of R$400m (187.3m, 30 April 2002) in Brazil between 2002 and 2006. In February 2002 Zexel Valeo Climate Control Corporation said that it planned to build a plant to produce compressors for automotive air conditioning systems in Humpolec (Czech Republic) with US$53m (61.2m, 28 February 2002)-worth of investment. In May 2001, Bosch Sanayi ve Ticaret announced plans to invest 447.6m in a new 235

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Automotive Technology Roadmap production facility in Bursa (Turkey) by 2004. The plant will produce unit injector systems for diesel motors and will employ 4,700 people by 2004. In March 2001, Bosch Diesel announced plans to invest around 230m over two years in expanding its automotive parts unit in Jihlava (Czech Republic). It is planned that the unit will have five assembly lines for high pressure diesel pumps by 2003, which will make it a leading producer in this area. Bosch has recently constructed a new Automotive technology development centre in Abstatt, near Heilbronn (Germany)

Outside Europe, Bosch has also been making investments: In September 2003 Bosch Korea announced it is to invest more than Won 100bn over the next few years in the expansion of its local operations. Bosch aims to increase the local output of its injectors for the common-rail fuel-injection system for diesel engines as the Korean government has sanctioned the sale of diesel-powered passenger vehicles as of 2005 In April 2002 Bosch announced plans to invest around US$22m (24.3m, 30 April 2002) in new manufacturing equipment for its brakes plant in Clarksville, Tennessee (USA). The company said that this was as a result of new orders from customers.

Contracts Bosch began the supply of complete brake systems for Ford's new 2004 F-150 pick-up trucks in September 2003. The system features Bosch's master cylinder, front and rear disc brake calipers; front hub, rotor and bearing assemblies; rear rotors, drum-in-hat parking brake and wheel speed sensors. Bosch supplies the Smart City Coup and Smart Cabrio with the ESP as standard. Bosch is supplying its Common-Rail system to Opel for use on its Astra 1.7 CDTI model. This second-generation accumulator injection system with a pressure of 1,600 bar optimizes the fuel combustion, thereby dramatically reducing the engine's exhaust emission. Bosch is currently supplying the world's first contrary-motion screen wiper system with two electronically controlled motors for the Volkswagen Groups Touran model. BMW is using Bosch's gasoline direct injection system in the new 12-cylinder engines of its 7-series range. In August 2002, Bosch was awarded a contract for the brake systems on General Motors next-generation full-sized trucks. Bosch will produce some parts and will be in charge of the overall system as the Tier 1 integrator. Bosch supplies the first electronically controlled reversing twin-motor wiper system for the new Volkswagen Phaeton. Bosch is also supplying the model with a number of other systems and components including an engine management system, the electronic stability program, the airbag control system and the instrument cluster. In September 2001, Bosch announced that its Sensotronic Brake Control (EHB or 'brake-by-wire' system) was to begin series production on the new Mercedes-Benz SL passenger cars. New Product Developments In 2003 Bosch invested 2.2bn in automotive R&D, up 8% from the previous year. Research and development expenditure in automotive operations represented 9% of sales. Around 16,000 people worked in automotive R&D at the end of 2003, up 500 from the end of 2002. In 2003, Bosch filed a total of 2,748 patent applications, up from 2,622 in the previous year. Recent product development has broadened Bosch's automotive product portfolio: Bosch has developed the Generation Airbag 9, a modular control system allowing variable expansion for the control of occupant restraint devices. In the event of an accident, the system selects the best possible restraint devices, such as airbags or seat belt tensioners, from those available and activates them if necessary. Bosch has developed an innovation called Electronic Battery Management (EBM). Incorporated in the new Audi A8, it controls the whole electrical economy of the vehicle. AutoBusiness Ltd

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Company profiles It serves to guarantee optimal energy supply throughout the vehicles essential systems, whether it is in motion or stationary. Bosch has developed a system for large trucks that significantly reduces the amount of nitrogen oxides in diesel exhaust. It is hoped that the system will be available from 2004. Bosch and DaimlerChrysler have jointly developed Sensotronic Brake Control (SBC), an electro-hydraulic braking (EHB) system. Bosch has developed sensor technologies for windscreen wipers and parking distance systems. It has designed a prototype system for a wireless vehicle-to-vehicle warning system (WARN) that alerts drivers to road conditions 1-2km ahead. Blaupunkt has developed the TwinCeiver concept. Combining new double receive circuits and new antenna technology on a single semiconductor chip, it evaluates the digital signals of two antennas and combines them into one strong, interference-free signal. Blaupunkt has also developed the Woodstock DAB52. The radio processes not only the traditional wavelengths, but also the signals of digital audio broadcasting and therefore offers radio sound of CD quality. Blaupunkt has introduced its new radio navigation system TravelPilot DX-R52, a wellequipped car radio with CD player, as well as a complete navigation system for routing searches in traffic.

Financial Overview In 2003 Bosch Group sales increased by just under 4% to 36.3bn. The increase was attributable partly to some newly consolidated businesses, primarily Buderus, which was consolidated for the first time from mid-2003 but also to solid organic growth. Unfortunately, this revenue growth, especially outside of Europe, was largely erased by the increasing strength of the euro. In real terms, assuming unchanged exchange rates, Bosch achieved an internal growth of about 7% and, including consolidation changes, total growth of 10%. In North America, total sales in local currency increased by 6%, but converted into euro there was a decline of 11%. In Asia, sales in local currency reached an almost 20% increase, but converted into euro, just 6% remained of the sales increment. Automotive sales of 23.6bn were up just 1% but would have been 8% higher without currency movements. No details of 2003 profits have been given to date but the company has referred to a pre-tax result that reached almost 5% of sales, ie around 1.8bn. Outlook Competition in Boschs core product areas has intensified in recent years but its strong market positions in chassis components, especially braking systems, and engine, powertrain and electrical/electronic parts have been cemented over many years and remain both robust and resilient. As well as successfully defending its presence in traditional market areas Bosch is also nurturing new core areas for future growth. Next generation vehicle navigation systems and other telematics equipment both promise to be major growth markets. Growing reliance on sales outside Europe is almost inevitable and is a fundamental part of Boschs corporate strategy. The company has been targeting a tripling of sales in North America by 2010, to around US$15bn (12.0bn, 31 December 2003), and this is likely to represent just under a third of the projected growth for the group as a whole in the same period. Substantial percentage growth is also expected in Asia and Eastern Europe although this is from a low base. The appreciation of the euro is undermining reported sales growth outside Europe but this should not disguise the real progress being made. The fact that automotive sales in China rose 33% in 2003, even on a euro basis, speaks volumes for this progress.

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Brembo
Brakes
Address Brembo S.p.A Via Brembo, 25 24035 Curno Bergamo Italy Tel: +39 35 605 111 Fax: +39 35 605 400 Internet: http://www.brembo.it Senior Officers Alberto Bombassei, Chairman and CEO Stefano Monetini, General Manager Products Brake systems, brake-by-wire, calipers and discs Plants Production is principally carried out in Italy, Spain, Mexico, Poland, Brazil, Germany and South Africa Sales Group: 633.1m (Year to 31.12.03) Employees 3,575 (2002) The Brembo Group is a leading supplier of high-performance brake systems. It specialises in wheel side assemblies, brake calipers, discs and integrated engineering services. Its main customers are in the highend passenger car market and automotive and motorcycle racing markets. It also sells branded parts through the Brembo, Breco and Norbit brands. At its headquarters in Curno (Northern Italy) Brembo SpA coordinates manufacturing operations throughout Europe, South America and Africa, and sales offices in Japan, the UK and the USA. Brembo's brake discs account for around 40% of sales. Its flagship products, braking modules, generate around 10% of sales. These assemblies incorporate 30 to 50 parts and are responsible for slowing a vehicle down. Brembo is the sole brake systems supplier to Ferrari, Lamborghini, Maserati and Porsche. It also supplies higher volume carmakers such as BMW, DaimlerChrysler, Fiat, Nissan, Renault and Volkswagen.

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Recent Developments Corporate strategy Compared to its competitors, Brembo has not been so badly affected by continuing pricing pressure from carmakers, because its customers are mainly at the top end of the market and are more focused on technology than cost, Brembo's link with Formula One, as well as massive R&D investments, have kept it at the leading edge of technology. Its strategy is to convert rising numbers of customers for discrete brake parts into buyers of more expensive and profitable braking modules. Significant organic growth was complemented by a policy of growth by acquisition implemented in late 1999. This strategy brought new opportunities for revenue growth and introduced new technologies into the company. In fiscal 2000 sales grew 30%; 7% acquisitive and 23% organic. Acquisitions In February 2004 it was reported that Brembo plans to buy Bradi SpA, an Italian braking system manufacturer that has been in liquidation since January 2003. In July 2000, Brembo announced its acquisition of AP Racing (UK), a specialist producer of brake and clutch systems for racing applications, for 41.6m. Also in February 2000 Brembo acquired 100% of Alfa Real Minas, a Brazilian company that produced over two million brake discs and drums for passenger cars annually. As well as expanding the existing production levels and customer base in this region, Brembo has broadened its product range, in order to continue to satisfy existing customers. Divestments In June 2001 Brembo sold its 60% stake in Stepal, which fully controls Fonderia Regali, to the Italian holding company, Hopa. Situated in Travagliato in the Brescia province of Italy, Fonderia Regali is a foundry specialising the production of unfinished brake discs for the replacement market. Joint-ventures In November 2003 Brembo announced a new joint venture with DaimlerChrysler for the development, production and sales of ceramic brake discs. This 50:50 venture, Brembo Ceramic Brake Systems SpA, became effective in late January 2004. Forecast production volume is 15,000 units per year of ceramic carbon by 2006. In July 2002, Brembo launched a joint venture with Yuejin Motor Group Corporation of Nanjing (China), for the production of brake calipers and braking systems. Brembo has a 35% stake in the new company (Nanjing Yuejin Automotive Brake System CO, Ltd). In March 2000 Brembo announced a joint venture with leading Swedish rolling bearings supplier SKF, to develop brake-by-wire systems for the high-performance end of the car market. Brembo and SKF have said that they expect to have a brake-by-wire system in volume production on a European luxury car by 2004. The combination of Brembo's expertise in brakes and systems integration with SKF's capabilities in bearing, linear actuator and sensor technology, seals and high power density actuators creates a potentially strong player in the brakes-by-wire market. In March 2000 Brembo gained European Commission approval for a joint-venture with the AI Group (owned by the South African company DFI) and Lemfrder, a division of ZF Friedrichshafen. The joint-venture company, called Auto Industrial Brake and Chassis Investment Holdings Ltd, produces brake discs, steel uprights and hubs and assembles complete corners. Investments In May 2002 it was reported that Brembo was to invest around 15m in the construction of a new facility n the Katowice Special Economic Zone in southern Poland. The plant produces brake discs and is expected to employ some 280 people at full capacity. This facility has been running since the end of January 2004. In the first half of 2001 Brembo opened a ceramic composite disc plant near Munich (Germany). The facility has a capacity of 30,000 discs a year.

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Company profiles Contracts Brembo supplies brakes for such vehicles as the Aston Martin DB7, the Dodge Viper and the Mercedes-Benz M-Class. The Ferrari Enzo and 360 Modena Challenge models feature Brembo's composite ceramic material discs. Brembo supplies the braking system on the new Mercedes-Benz SLR McClaren. New Product Developments Brembo currently dedicates 6% of its investments to R&D, and employs over 350 engineers. Brembo has been focusing its R&D resources in the following areas: Ceramic composite discs: The carbon composite brake discs are 60% lighter than ordinary grey iron brake discs. The discs also improve braking performance and are designed to have the same life expectancy as the vehicle itself. At ten times the price of regular discs, ceramic composite discs have, in recent times, only featured on Formula One cars. However, they have now been adapted for use on the road in the Ferrari Enzo and other models. Brembo holds 80% of this market. Brake-by-wire: Brembo has teamed up with Sweden's SKF, Johnson Electrics (Hong Kong) and an unnamed electronics supplier to develop a brake-by-wire system. Brakeby-wire replaces traditional mechanical linkages with electronics. The brake pedal generates an electrical signal that triggers electrically operated actuators in the brake of each wheel.

Financial Overview Brembos sales in 2003 totalled 663.1m, up 11.9% from 565.8m in 2002. The groups gross operating income amounted to 100.2m, compared with 90.3m in 2002. The profitability recovery was attributed to the constant attention to the containment of operating costs. Brembo posted a Group net income of 27.5m, 35.8% higher than in 2002. Outlook Brembo has an unusually strong brand in the OE and aftermarket sector and a strong technological position at the demanding top-end of the European car market. It is a leader in the development of new high-end brake products such as ceramic discs, which open up the possibility of further strengthening the groups product premium in the medium term. Until recently, progress towards this development appeared to have been slower than originally hoped. Brembo is growing quickly and has a strong position in the brake module market but faces short-term problems resulting from steeply rising raw material prices, most notably for scrap and cast iron. This may restrain financial growth in 2004.

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Continental
Tyres, brakes, suspension systems, corner modules
Address Continental AG Headquarters Vahrenwalder Strae 9 30165 Hannover Germany Tel: +49 511 938 01 Fax: +49 511 938 81770 Internet: http://www.conti-online.com Senior Officers Manfred Wennemer, Chairman Martien de Louw, Director of Passenger Car Tyres Dr Wolfgang Ziebart, Vice Chairman and Director of Continental Automotive Systems Dr Alan Hippe, Financial Director Products Brake systems, electronic powertrain and chassis components and systems, electronic safety systems, electronic comfort systems, electronic suspension systems, diaphragm materials, hoses, interior trim, ISAD technology, moulded parts, power transmission products, sealing systems, Sidewall Torsion Sensor system, tyres, tyre pressure monitoring systems, vibration engineering Plants Austria, Belgium, Brazil, Czech Republic, France, Germany, Hungary, Japan, Mexico, Portugal, Romania, Slovakia, South Africa, Sweden, UK, USA Sales Group: 11.5bn (Year to 31.12.03) Employees Group: 68,829 (2003) The group supplies almost all major vehicle manufacturers. Continental AG produces passenger car and commercial vehicle tyres as well as brake systems, electronic chassis systems for passenger cars, Integrated Starter Alternator Damper (ISAD) technology and technical rubber and plastic products. It is now focusing on becoming a supplier of global chassis systems. Through the alliance formed in February 2002, Continental and Yokohama Rubber Company now form one of the worlds largest tyre producers. Tyres accounted for around 45% of Continental's 2003 sales. Continental Automotive Systems has around a 29% share of the electronic brake system market in the NAFTA region, and accounted for 40% of total Group sales. In March 2004 Continental announced its intention to acquire Phoenix AG and has launched a public tender offer at an offer price of 15 per share for all outstanding shares of Phoenix. Claas E. Daun, the major shareholder of Phoenix AG and chairman of the company's supervisory board, has already committed to accept the takeover offer for his shareholding in Phoenix (22.28%). In addition, an agreement has been reached with the management board of WestLB regarding the purchase of their shareholding (14.83%) in Phoenix. The company is currently organised into three main business groups: Tyres (Passenger Car Tires, Commercial Vehicle Tires, and Continental Tire North America); Continental Automotive Systems (Continental Teves, Continental ISAD, and Conti Temic); and ContiTech. Continental currently has plants in Europe, North and South America, and South Africa, and is looking to increase its presence in Asia. Including joint ventures and alliances, Continental has around 80 plants in 36 countries.

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Recent Developments Corporate strategy Known primarily as a tyre manufacturer, Continental is now focusing on developing its position as a supplier of global chassis systems. This shift in focus began with the company's acquisition of the ITT brakes and chassis division in 1998, now known as Continental Teves. This division is the global market leader in disc brake systems, number two in anti-lock braking systems (ABS) and in brake actuation, and a major producer in the growing Electronic Stability Programme (ESP) systems market. The 2001 acquisition of Temic provided Continental with the capabilities to integrate all a vehicle's electronic components into one system. Continental has been expanding its capabilities and global presence through joint-ventures and acquisitions, with a particular focus on Asia. The company is continuing to transfer production from high-cost countries to lower-cost ones, and is developing its e-commerce solutions. In January 2002 Continental announced that it was consolidating its global tyre business by giving the passenger car and commercial vehicle tyre divisions global responsibility. The Group believes that these measures will result in additional synergies and a more effective management structure. Continental is working to improve the profitability and efficiency of its global operations. As part of ongoing restructuring measures, the company has recently closed its plant in Guadalajara (Mexico) and its tyre production plants in Gislaved (Sweden) and in Traiskirchen (Austria). The company said that these closures were necessary due to weaker demand for tyres. This follows earlier plant closures in France and Scotland. Acquisitions In March 2004 Continental announced its intention to acquire Phoenix AG. Continental views the proposed takeover as a significant step in its strategy of further developing its ContiTech division, which is one of the world's leading players in technical elastomers with sales of approximately 1.8bn. In October 2003 Continental announced that it had purchased the wheel sensor operations of Nagano Japan Radio Co., Ltd (NJRC). In addition, Continental and its Japanese joint-venture partner Nisshinbo Industries purchased NJRC's subsidiary in China, NJRC Electronics Co., Ltd. (LYG). NJRC already makes wheel sensors exclusively for Continental Teves at its production facility in China and has been supplying wheel sensors under a license agreement since 1997. In September 2003 it was reported that Continental wants to acquire the majority in its brakes system joint venture in China with Shanghai Automotive Industry Corporation. In March 2003, it was reported that Continental has bought a 30% share in Malaysian firm Sime Darby's tyre activities for US$30m (27.8m, 2 March 2003). It will have the option to buy another 21%, giving it a majority control, in two years. The new company will be known as SDC Tyre Sdn Bhd. In June 2001 Continental concluded its acquisition of a 60% stake in electronics firm Temic Telefunken Microelectronic GmbH from DaimlerChrysler for 398m. Continental had the option to acquire the remaining 40% by 2005 (exercised in early 2002), bringing the total cost of the transaction to between 623m and 633m. Temic (now Conti Temic) has been integrated into Continental Automotive Systems. Temic has around 5,800 employees and had 2000 sales of 1.1bn. In April 2001 Continental signed a letter of intent for the gradual takeover of the majority of the Moscow Tire Plant. Continental plans to invest around US$4m (4.5m, 30 April 2001) to modernise the production at the plant and to supply the local Russian market with the technically high-quality passenger and light-truck Gislaved and Barum brand tyres. In March 2001 Continental Teves acquired a majority interest in Shin-Ei and ShinTec, both brake manufacturing subsidiaries of the Mazda Motor Corporation in Japan. In February 2000, ContiTech acquired 51% of the German vehicle air conditioning hose assembly company, Kuhner GmbH, to expand its automotive air conditioning systems operations. Divestments In February 2001 Continental announced plans to sell most of its ContiTech 244 AutoBusiness Ltd

Company profiles division in order to focus on its core automotive activities. No suitable buyer was found, however, and in September 2001 Continental withdrew ContiTech from the market. In August 2002 Continental said that it was looking to sell five to ten business units, some of which could come from its ContiTech division, with combined sales of between US$300m (305.5m, 31 August 2002) and US$500m (509.2m, 31 August 2002). The company is likely to wait until the market improves before making any divestments. Joint-ventures Continentals European joint-ventures include the following: In November 2003, it was reported that Continental, along with Bridgestone, Dunlop, Goodyear, Michelin, Kleber and Pirelli had formed a joint-venture company that will recycle tyres at depots throughout France. The company, trading under the name of Aliapur, could generate annual turnover of 80m. In September 2002, Continental signed an agreement establishing a joint venture with the Moscow Tire Plant (Russia). The company is expected to produce roughly 1.5m tyres per year after the start-up of production in autumn 2003. Continental intends to supply the local Russian market with high-quality passenger and light-truck Gislavedand Barum-brand tyres. Also in September 2002, Continental acquired a 30% stake in Malaysian company Sime Darby Bhd's tyre operations. Continental took the stake due to the Malaysian supplier's technological capability and Malaysia's outlook as a growth market in the automotive industry. Continental aims to hold some 20% of the market for tyres in Asia within the next few years. In April 2001 Continental Teves signed a contract with SGL Carbon (Wiesbaden, Germany) for the joint development of automotive brake systems based on carbonceramic brake discs. In February 2000, Continental Teves joined the Automotive Distance Control System GmbH (ADC) joint-venture.

However, most of Continentals recent joint-ventures have been outside Europe: In March 2003 ContiTech Air Spring concluded an agreement with South Korean commercial vehicle parts supplier Dae Won Kang Up, to establish a joint-venture called ContiTech Dae Won Airspring Systems. Continental holds a 51% stake in the venture. In February 2002 Continental finalised its agreement with Yokohama Rubber Co., Ltd. (Japan) to set up a 50/50 tyre joint-venture in Japan. Continental and Yokohama also plan to cooperate more closely in tyre production and technological development throughout the world. In January 2002 Continental and Bridgestone Corporation agreed to cooperate in establishing a global standard in run-flat tyre technologies. The two companies have set up a three-year reciprocal development exchange and have cross-licensed their run-flat products. This cooperation should help each company to accelerate their penetration of the global market. In December 2002, it was reported that Yokohama Rubber Co is to joint the alliance. In August 2001 Continental Teves agreed to form a joint-venture with Shanghai Automotive Brake Company (SABC), a subsidiary of the Shanghai Automotive Industry Corporation of China (SAIC). By 2003 Continental expects to have invested around 18m in the new company, Shanghai Automotive Brake Actuation Co. Ltd. (SABA). In May 2001 Continental Teves North America formed a 49/51 joint-venture with Piston Automotive to assemble and sequence brake corner modules for several General Motors luxury car lines and new model products. The new company, Piston Modules LLC, is based in Michigan (USA). In March 2001 Continental Teves signed a wide-range licensing agreement for the manufacture and marketing of ABS systems with the Iranian automotive components supplier, Toklan Toos. The introduction of Continental Teves brake products is in three stages and initially Toklan Toos supplied ABS units to Iran Khodro, Irans largest car manufacturer. In November 2000 Continental Teves formed a joint-venture with the Japanese firm Nisshinbo Industries for the production of brake and chassis systems in Japan and Korea. Continental has a 51% stake in the new company, Continental Teves Corporation. In October 2000, Continental AG signed a technology transfer agreement with Kerman 245

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Automotive Technology Roadmap Tire and Rubber Company (KTRC) of Tehran (Iran). Continental supplies KTRC with new technology for the production of commercial and passenger car radial tyres. KTRC produces tyres for Continental at its plant in Kerman (Iran). In May 1999, the company announced a joint-venture with Delco Remy International in developing the electric motors for Continentals ISAD technology.

Investments In March 2004 Continental announced it is building a new plant in Camacari (Brazil) while planning to expand its production base in Malaysia together with its joint venture partner Sime Darby. Plans are to invest 150m in the first phase, with investments for the total project totalling more than 250m. By 2008 this will create an additional annual capacity of seven million passenger tyres and 700,000 tyres for commercial vehicles. This increase will serve mainly to supply the NAFTA region, where the number of tyres produced in low cost countries is to date still very low. With these measures, this share should increase initially to more than 30%. Even before production gets started in the new plant in Camacari in the Brazilian state of Bahia at the end of 2005 or beginning of 2006, Continental Sime Tyre will start its manufacturing operations in Alor Star (Malaysia). At the same time, expansions are underway in Kuala Lumpur (Malaysia) with the focus on tyres for commercial vehicles. After completion of the passenger tyre plant in Camacari, a plant for commercial vehicle tyres will also be built there, with production starting at the end of 2006 or beginning of 2007. More than 1000 jobs will be created in Brazil and about 200 in Malaysia. In November 2003, it was reported that Continental is looking for a partner in China to set up a tyre factory there. Continental hopes to find one within six months, however should it not, it will reportedly try to set up its own facility in the country. Also in November 2003, it was reported that Continental is constructing a new tyre plant at the Barum Continental site in Otrokovice (Czech Republic). The investment, said to total 74m, concerns the production of high-speed rate passenger car tyres. Construction work at the facility has begun and production is set to commence in September 2004. In October 2003 Continental announced that ContiTech Fluid, a business unit of the ContiTech division, is constructing a 4,000 square metre facility, located in Timioara (Romania). This is expected to cost in the region of 10m and will manufacture air conditioning hoses. The plant's main customer will be Volkswagen. Around 130 jobs will be created by mid-2004, although the number is eventually expected to rise to 400. Series production is scheduled to commence in the second half of 2004. In the same month, Continental announced plans to further expand its manufacturing base in Romania with a new plant at Sibiu for its subsidiary Continental Temic, part of the Continental Automotive Systems (CAS) division. At the same time, Continental will be creating a Research and Development department at the site with 170 employees. Total investment is said to be around 20m. Production of vehicle electronics components is due to start early in summer 2004 with up to 200 employees. Also in October 2003, it was reported that two Hungarian subsidiaries of Continental were making investments, due to the launch of two new products as of 2004. Continental Teves Magyarorszag Ipari will start producing rotation speed sensors and Temic Telefunken Microelectronic Hungary Kft is to begin manufacturing electrohydraulic brakes. Both have invested a total HUF3.4bn (13.3m, 31 October 2003). Both companies expect a full use of capacity by 2008 and dynamic growth. In September 2003 it was reported that Continental was to invest more than SKK300m (7.30m, 30 September 2003) in a facility in Dolne Vestenice (Slovakia). Construction commenced at the end of 2003 and the plant will most probably be put in operation in May 2004. In July 2003, it was reported that Continental wanted to invest 24.3m in its factory in Lousado (Portugal) to build a production line for tyres for sports utility vehicles. Work on the project is scheduled for completion by July 2005. In February 2003 it was announced that Continental Teves is to build a US$3.5m (3.24m, 6 February 2003) plant in Silao (Mexico). The 100,000 square foot facility will manufacture brake actuation components. Production began in January 2004. In February 2003 it was reported that Continental Temic Hungary Kft is to build a 2.6m R&D centre in Budapest (Hungary). In July 2002 Continental Teves announced plans to build a US$22.2m plant in Malines (Belgium). Production of 1.3 million EBS and 70 million hydraulic valves is slated for 246 AutoBusiness Ltd

Company profiles 2003. In May 2002 ContiTech Power Transmission Systems announced plans to construct a new 6m plant in Timisoara (Romania). By 2005 the plant is to produce four million automotive drive belts per year and will employ around 150 people. In July 2001 Continental said that it planned to invest 97.2m in the modernisation of its Continental Matador plant in Puchov (Slovakia). In April 2001, Continental Teves announced plans to invest in expanding production at its brakes plant in Jicin (Czech Republic) over the next five years. In September 2000 Continentals new US$40m (45.5m, 30 September 2000) noise, vibration and harshness centre near Detroit (USA) for its tyre and chassis business was opened. The company said that it planned to expand these facilities within three years. In February 2000, Continental Teves expanded its operations in Hungary with the construction of a new assembly line.

Contracts In November 2003, Continental announced that it is launching production for six new electronic stability control (ESC) programs in North America on model year 2004 vehicles. More than 30 model year 2004 vehicles in North America will now be available with Continental's advanced technology, which Continental markets as the Electronic Stability Program (ESP). The company projects that it will supply more than 3.6 million ESP units to automakers in North America, Europe and Asia this model year, an increase of more than 7% over the 2003 model year. In October 2003, it was reported that Continental Tire North America Inc is supplying tyres to Ford for its all-new 2004 F-150 pick-up truck. In September 2003 it was announced that the new FNR brake caliper from Continental Teves has now been chosen for the new Bentley Continental GT. Continental is supplying a range of components and systems for Volkswagen's new Golf model, including the integrated steering electronics for the new direct shift gearbox, the electronic brake system, multiple V-rib belts and timing belts, and the front-axle suspension strut mounts. In April 2003, it was reported that Continental Temic is to supply Mercedes-Benz with electric fans for its 2004 model-year SUVs. Continental is supplying 18- and 19-inch low-profile tyres to the Chrysler Crossfire model. Continental is supplying Audi with ContiSport Contact tyres for use on its A6 Avant model. In January 2003 it was announced that Continental has been selected by General Motors to provide an advanced crankshaft starter alternator damper including the electric energy system for a gasoline-electric hybrid version of its full-size pickup. The ContiSupportRing (CSR) run-flat system is now being fitted to the Mercedes-Benz Maybach. CSR provides mobility even when a loss of air pressure would usually make it impossible to continue driving. Summer and winter tires from Continental of the size 275/50 R 19 have also been approved for the Maybach. The CSR and the tires are manufactured exclusively for Maybach. Continental Teves is supplying advanced brake technologies to Volvo for use on its first sport utility vehicle, the all-wheel drive XC90. Continental Teves is supplying advanced electronic brake and chassis technologies to Nissan for use on the Titan, Nissans new full-size pickup. Continental Teves is the supplier to Porsche for the electronic chassis technology for the Cayenne. In November 2002, it was announced that Continental Teves is supplying advanced electronic braking technologies to the Chrysler Group for use on the 2003 Dodge Viper VGX. In October 2002, Continental stated that it had won the contract to supply tailgate modules to the 2004 GMC Envoy XUV. The modules will incorporate several control functions as well as movable glass, wiper actuation and latches, and will be sourced from Continental's Manila (Philippines) facility. In July 2002, Continental announced it had been selected to supply its ABS and traction control system (TCS) to the Chrysler Pacifica SUV beginning in 2003. The systems are supplied from Continental's sites in the US and Mexico. Also in July 2002 Continental began supplying tyres to 50% of all Ford Ranger pickup AutoBusiness Ltd 247

Automotive Technology Roadmap trucks. Continental Automotive Systems supplies its Electronic Air Suspension chassis system to the new Volkswagen Phaeton model. Conti Temic supplies the folding hardtop roof control on the Mercedes-Benz SL Roadster. This is the result of complex interaction of mechanics, hydraulics, and electronics. In January 2002 Continental Teves won a contract from Ford to supply the brake system, traction control and stability management system for the 2003 Lincoln Navigator model. In August 2001 General Motors announced plans to install Continentals ISAD system as an option in the 2004 versions of its Chevy Silverado and the MC Sierra models. The latest Mercedes-Benz E-Class, launched in Europe in the first half of 2002, carries a high degree of content from several of Continental's divisions. Conti Temic supplies adaptive cruise control and air suspension, Continental Automotive Systems provides rear brake calipers and hoses, three brands of tyre come from Continental Tyre, and ContiTech's various businesses supply hoses and lines for braking, steering and air conditioning systems. Continental supplies the complete brake system for the BMW Mini. The contract includes the electronic ESP system as well as brake hardware such as hoses and calipers.

New Product Developments Continental AG has been expanding its range of technologies in recent times. Continental has developed a Tyre Pressure Monitoring System (TPMS), which utilises a pressure and temperature sensor affixed to each wheel. Information is electronically transmitted to a receiver module and low tyre pressure can be instantly detected and driver informed. Continentals Intelligent Tyre System consists of ferromagnetic material in the tyre rim and sensors attached to the struts or chassis. These sensors accurately measure all the forces affecting the tyre. Continental aims eventually to integrate the electronically controlled chassis and the Intelligent Tyre into one unit by using its Sidewall Torsion Sensor System. Continental is also cooperating with BASFs subsidiary, Elastogran, to develop the Cellasto emergency tyre. It will be fitted on the BMW 540i model and is a tyre within a tyre, enhancing safety in the event of a puncture. Continental predicts that by 2004 every third passenger vehicle produced in Europe will be fitted with the Electronic Stability Program, which prevents skidding through active braking of individual wheels. Continental has developed electro-mechanical brakes and electro-hydraulic brakes. The company has developed a demonstration compact car that requires just 30 metres to come to a standstill when braking from a speed of 100kph. This is 8.5 metres less than todays best compact car. Continental achieved this reduction in required braking distance by optimising the interaction between the tyres, brakes and chassis. Along with its Adaptive Cruise Control (ACC), which maintains the speed selected by the driver if traffic conditions permit, Continental is developing additional driver assistance systems. With extended environmental sensors and IPAS (Intelligent Power Assisted Steering), which accepts commands from external control systems, the functions available include Lane Keeping Support and Lane Departure Warning. Additional convenience functions - such as active park assist and safety functions such as DSR (Driver Steering Recommendation) for critical driving situations - can also be implemented. Continental has develped two emergency systems for different applications: The ContiSupportRing (CSR) and the Continental SSR. Whilst the ContiSupportRing (CSR) was designed primarily for heavier cars and SUVs, the Continental SSR (SelfSupporting Runflat Tyre) is more suited to sports cars with lower tyre cross-sections. Both systems allow journeys to continue despite tyre failure and can be used in conjunction with proprietary rims.

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Company profiles Financial Overview In 2003 Continental Groups consolidated sales increased by 6.1% over the prior year. Including foreign exchange effects and the first-time consolidation of Continental Sime Tyre as of October 2003, they increased by 1.1% to 11.5bn from 11.4bn in 2002. The consolidated operating result (EBITA) increased considerably by 23.2% to 855.2m in 2003 from 694.3m in 2002. Consolidated net income for the year rose by 88.0m to 314.0m. The Continental Automotive Systems division (CAS) increased its sales by 7.2% over the prior year. Taking into account changes in exchange rates, sales were up 1.3% from 4.57bn to 4.63bn. The division boosted its operating results (EBITA) by 18.5% to 369.5m from 311.9m in 2002. The Electronic Brake and Safety Systems, Powertrain & Chassis, and Comfort Electronics business units all recorded increases in sales volumes. CAS maintains its number one position in the field of hydraulic foundation brakes for passenger cars, and its electronic brake systems product segment is one of the company's fastest growing sectors. Sales volumes of control units for comfort electronics rose by 34% to 17 million units. Sales of the Passenger and Light Truck Tires division increased by 8.4%. Taking into consideration changes in the scope of consolidation due to the subsidiaries in Mexico and South Africa and exchange rate effects, sales went up 3.4% from 3.78bn in 2002 to 3.91bn in 2003. Overall, the EBITA rose by 87.3% from 184.6m in 2002 to 345.8m in 2003. At 1.26bn, sales by the Commercial Vehicle Tires division fell short of the previous year's figure of 1.31bn. Before changes in the scope of consolidation relating to the subsidiaries in Mexico, South Africa, and Continental Sime Tyre, and before exchange rate effects, sales were up 2.8%. Consolidation of Continental Sime Tyre in Malaysia, which was assigned to the division in October, had a positive effect. The Commercial Vehicle Tires division recorded EBITA of 82.4m, below the 2002 figure of 92.9m. Before the above consolidation changes, goodwill impairment and land sale in 2003, however, operating earnings improved by 13m compared with the previous year. The ContiTech division, which is organised into eight business units with global operations, achieved an increase in sales of 3.8%. Taking changes in exchange rates into account, sales rose 2.7% to 1.81bn in 2003 from 1.76bn in 2002. Sales by the Fluid, Sealing Systems, Air Spring Systems and Vibration Control units rose significantly. The Power Transmission and Conveyor Belt Groups were slightly up on the previous year, while Benecke-Kaliko and Elastomer Coatings did not match the 2002 results. Thanks mainly to product innovations and cost-cutting measures, ContiTech increased its EBITA by 2.5m to 144.0m in 2003. Outlook Continental has transformed itself from a supplier of tyres and rubber products to the automotive industry to a systems and module partner, primarily through the acquisition of Continental Teves and through subsequent organic growth. It now aims to become a leading supplier in Global Chassis Management. The intention to acquire Phoenix indicates a renewed willingness to seek bolt-on acquisitions to advance growth in core areas. In the tyre business Continental's performance has been stronger than some of its competitors, underlining the relative success of the company's manufacturing relocation strategy. However the tyre business continues to be very competitive, with many of the characteristics of an overcrowded commodity market, and Continental, as a medium sized player, will have to continue to be innovative in its strategy to ensure that it remains competitive. 2003 results show that Continental is making strong progress in the automotive systems segment, driven by increased deliveries of ABS and ESP. This growth appears set to continue and will help offset lingering weaknesses in mature tyre markets. An indication of growth prospects is given by the fact that Continental projects that it will supply more than 3.6 million ESP units to OEMs in North America, Europe and Asia in the 2004 model year, an increase of more than 7% over the previous model year.

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Company profiles

Corus
Steel and aluminium
Address Corus Group plc 30 Millbank London SW1P 4WY UK Tel: +44 207 717 4444 Fax: +44 207 717 4455 Internet: http://www.corus-automotive.com Senior Officers Jim Leng, Chairman Philippe Varin, Chief Executive Stuart Pettifor, Chief Operating Officer David Lloyd, Executive Director, Finance Products Aluminium sheet, carbon manganese steel, engineering steel, formable steel, strip steel, long, plate and tubular steel products, zinc coated steel Plants France Germany, Netherlands, Norway, UK, USA Sales Group: 7,953m (11,266m, 31 December 2003) (Year to 30.12.03) Employees 49,400 (2003) The Corus Group plc was formed as the result of the 1999 merger between British Steel and Hoogovens. Europe is the most important market for Corus, accounting for over 80% of sales. The automotive sector accounts for around 16% of sales. Corus is Europes number three supplier of steel after Arcelor and ThyssenKrupp. It has around 10% of the European carbon steels market. The trend towards greater rationalisation in the European steel industry led to the merger of British Steel and their Dutch rival, Koninklijike Hoogovens, completed in October 1999. British Steel owns 62% of the Corus Group, and Hoogovens has the remainder. Following the merger, the new group, contrary to speculation in the industry, retained ownership of Hoogovens aluminium division reflecting the growth opportunities it saw for lightweight materials in the automotive industry as well as its wish to become less reliant on the UK's steel industry. However, in March 2002, Corus announced its intention to sell the division. In 2002, Corus completed the sale of its 20% interest in the aluminium business of Aluminerie Alouette. An agreement in principle was also reached in October 2002 for the sale of its aluminium rolled products and extrusions businesses to Pechiney, but it had to be abandoned when the Supervisory Board refused to grant approval for the transaction. Also in 2002, Corus sold its 23.2% holding in the stainless steel business, AvestaPolarit. Corus' focus will therefore now be on its portfolio of products and services in carbon steel. Corus comprises around 20 business units. Amongst those which serve the automotive industry is Corus Automotive. Set up as a customer focused engineering support group, it is staffed by 30 experienced automotive design specialists who work with car makers at the pre-development stage. This team, headed by Professor Jon King, is now located at Warwick Manufacturing Group on the campus at Warwick University.

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Recent Developments Corporate strategy Corus early months were dedicated to the realisation of synergy benefits, the key reason for the merger. In 2000 rationalisation led to 4,700 job losses as well as closures and reductions across the business. In 2002, the UK restructuring programme that was announced in February 2001 was completed, in terms of site closures and re-configurations. Closures included facilities at Ebbw Vale and Bryngwyn (Wales), and lines and mills in Llanwern, Shotton, Teeside and Port Talbot. 2002 also saw the launch of the High Performance Strip project in the UK, with targeted benefits of 150m (230m, 31 December 2002) through service and cost improvements by early-2005. In the Netherlands, the World Class Ijmuiden project, which was launched in September 2001 and targeted margin improvements of 300m by early-2004, secured around two thirds of the target during 2002. In April 2003 it was announced that Corus has conducted a review of its UK asset base, with the aim of sizing the business to the available market whilst eradicating the losses and creating an internationally competitive cost base for the UK businesses. The key findings were: Steelmaking in the UK should be concentrated on three sites which should be developed to meet their continuing requirements. Steelmaking for flat products should be concentrated at Port Talbot, steelmaking for long products at Scunthorpe and steelmaking for engineering steels at Rotherham. Once the necessary investment has been carried out at Port Talbot and Scunthorpe, steel production from Teesside will not be required for the Groups internal demand. In order to try to avoid the closure of Teesside, Corus intends to refocus this site to become a cash generative slab and bloom producer feeding international markets. With steelmaking for flat products in the UK concentrated at Port Talbot, the mills and coating line at Llanwern will be supplied from there. With steel production and primary rolling for engineering steels concentrated at Rotherham, Corus anticipates the closure of steelmaking and hot rolling at Stocksbridge.

These closures and rationalisation measures are expected to result in approximately 1,150 job losses. During 2003 Corus introduced its Restoring Success initiatives, focused on management and leadership, operational performance and financing. As part of the first initiative, a new divisionbased organisational structure has been adopted and 2004 results will be reported according to this structure. Acquisitions In April 2003 Corus agreed with Arcelor S.A. and Sollac Mditerrane a subsidiary of Arcelor, to purchase Sollacs 50% share in Lusosider Projectos Sidergicos S.A. ('Lusosider'), a Portuguese 50/50 joint venture between Corus and Arcelor, for 10.84m. Corus has also agreed with Banco Esprito Santo de Investimento, S.A. of Portugal to sell on to them this 50% share in Lusosider for the same consideration. Corus understands that Esprito Santo Investment intends to sell this 50% share to Companhia Siderrgica Nacional ('CSN') of Brazil. Corus will retain its current 50% holding. In November 2002, Corus announced its intention to acquire 100% of the equity of Precoat International; one of the leading independent precoated steel service centres in the UK. Also in August 2002, Corus acquired Erik Olsson and Soner of Sweden for 9m (14.2m, 31 August 2002). The company is a profiler of steel sheets for roofing and a supplier of pre-engineered industrial and agricultural buildings. In September 2000 Corus acquired a 23% stake in AvestaPolarit, formed through the merger of Avesta Sheffield, a previously 51% owned Corus subsidiary, and Outokumpu Steel. The merger created the world's second largest stainless steel producer with 252 AutoBusiness Ltd

Company profiles production facilities in Finland, Sweden, the UK and North America. Divestments Corus is currently rationalising its operations in North America with the disposal of two service centre businesses, Corus Coil Products and Corus Metals, along with the downstream manufacturing business, Corus Metal Profiles. The sale of Corus Metal Profiles was completed on 9 January 2004. In August 2002, Corus announced that it has agreed to sell its 20% interest in the Aluminerie Alouette smelter to Alcan for US$165m (168.1m, 31 August 2002). In July 2002 Corus sold its stake in AvestaPolarit to Outokumpu for approximately 555m. In March 2002, Corus sold its stake in Galtec to Sidmar for 12m (19.6m, 30 March 2002). Joint-ventures In April 2004 Corus announced a collaboration with ThyssenKrupp Automotive Tallent Chassis Ltd. Corus will provide advanced CAE techniques in order to help its partner accurately predict the fatigue performance of an actual chassis suspension system much earlier in the design process. In May 2002, Corus Hyfo announced the establishment of a joint-venture with Novamerican Steel Inc.The venture, known as Nova Hyfo, serves the North American automotive industry and combines the benefits of using Coruss advanced and unique laser welded tubular product, the Hyfo Tubular Blank with Novamerican Steels high quality tube operations. In January 2002 Corus signed a technical collaboration agreement with Sumitomo Metal Industries for the development of new strip steel products. The alliance combines Corus expertise in galvanising and free-cutting steel and SMIs galvanneal and high strength steels manufacturing technologies. In October 2000 Corus and Wupperman GmbH established Wupperman Staal Nederland BV, to supply galvanised products to a variety of markets in North Western Europe, including automotive subcontractors. Corus has a 30% stake in the jointventure, a galvanising plant in Moerdik (the Netherlands), which began production in early 2001. Wupperman, a family owned company, operates two galvanising plants in Austria. Investments In February 2004 Corus invested US$53m (42.3m) in its aluminium rolling mill located in Koblenz (Germany) as part of the company's efforts to focus on developing high-value products for the automotive industry. The investment is aimed at increasing the plant's production capacity. Corus announced in 2003 that it is supplying Audi's new Lamborghini Gallardo with the world's first production ready aluminium tailor welded blank for use in its front wheel arches. The welded blank, designed to cut vehicle body weight and assembly costs, was introduced in the Lamborghini earlier this year and Corus has supplied more than 1,200 pieces In April 2003, Corus announced that it is commissioning a new R&D facility for studying the next generation of automotive laser welding and brazing techniques. The new facility which represents an investment of over 2 million will be based at the companys R&D centre in Ijmuiden in the Netherlands and already has a full schedule of Automotive R&D programmes. In March 2003, Corus announced that it was installing an additional multi-strand blanking line in order to help meet increased demand, which includes a contract to supply Mayflower Vehicle Systems with 100% of its skin panel blank requirements. The installation of the new line represented a 250,000 investment at the companys specialist Automotive Service Centre in Wolverhampton (UK). This centre is part of the Corus Steelpark, a supply and processing hub in Wednesfield. This investment is in addition to the 30m already invested in downstream facilities at the Steelpark site to help meet demand from the automotive industry for tailor-welded and full-finish skinpanel blanks ready for assembly. In July 2002, it was reported that Corus Hyfo is to supply Laser-welded tubular steel blanks to the tier-one subcontractor Tower Automotive. These are used for the production of hollow-section engine cradles for Lancia's new Thesis model. AutoBusiness Ltd 253

Automotive Technology Roadmap Corus is supplying aluminium sheet and extrusions to Morgan Motor Company for use in its Aero 8 model. The bonnet, doors, back and side panels are produced by Corus in Duffel (Belgium). In October 2000 Corus announced a 50m investment at its Duffel (Belgium) plant for a continuous annealing line with additional surface pre-treatment facilities that will be dedicated to supplying the automotive industry. A significant investment since the company's formation was the 220m (375m, 30 April 2000) investment in the Direct Sheet Plant in Ijmuiden in the Netherlands. Full production of 1.3 million tonnes of steel began in April 2000. The new production facility incorporates leading edge technology in the production of light gauge sheet steel for a range of applications including car interiors. The technology used at the plant enables steps between casting and rolling the steel to be integrated. This shortens the throughput time and reduces environmental impact. The plant created about 140 jobs.

New Product Developments Recent developments include: In March 2003 Corus announced the launch of Notec, a lead-free metallic-coated steel, which is specifically designed to help vehicle manufacturers develop emission-free fuel tanks that meet future environmental legislation and recycling targets for vehicles at the end of their life. Notec is currently being used by MG Rover in its Rover 25 & 45 and MG ZR & ZS models. In October 2002, Corus introduced its new Dupla steel. Its enhanced chemical composition and improved process controls mean that the steel can be formed into high strength bolts and rivets without the need for quenching and tempering, which in turn helps reduce automotive supply-chain costs. In April 2000 Corus introduced the Tubular Blank to the automotive industry. This is a laser-welded, thin-walled tubular product, which can be either conical or tailor-made. It is especially suitable for hydroforming and can expand the range of hydroforming applications. Its specific properties allow the integration of components and thus a more efficient use of materials. The Tubular Blank can lead to weight reduction, a related cost reduction, component integration and can even contribute to better crash performance.

Financial Overview In 2003, Group turnover amounted to 7,953m (11,266m, 31 December 2003), up 11% from 7,188m (11,004m, 31 December 2002), in the previous year. The underlying preexceptional operating loss was reduced by 327m (463m, 31 December 2003) to 66m (93m, 31 December 2003). The group operating loss amounted to 208m (295m, 31 December 2003). The group recorded a net loss after tax and minority interests of 305m (432m, 31 December 2003), down from 458m (701m, 31 December 2002) in 2002. Outlook Despite the companys difficulties with regard to overall capacity and production costs, which are being addressed through the Restoring Success program, Corus continues to invest in its automotive-related manufacturing facilities near Wolverhampton and now has impressive capabilities, including the ability to supply the entire blank to Ogihara for the 206SW bodyside panel. Extensive efforts have been made to broaden and deepen the materials and component service that it offers to the automotive industry through Corus Automotive and this operation is now geared to play an effective partnership role in pre-development, development and production. It is also becoming a solutions provider - a consultant in materials technology, design and manufacture.

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Company profiles

Dana
Axles, driveshafts, filters and piston rings
Address Dana Corporation 4500 Dorr Street Toledo Ohio 43697 USA Tel: +1 419 535 4500 Fax: +1 419 535 4643 Internet: http://www.dana.com Senior Officers Glen Hiner, Acting Chairman Michael J. Burns, President and CEO Robert C. Richter, Vice President and Chief Financial Officer Products Axles, driveshafts, structural components, transfer cases, light modules and systems, assemblies, heavy truck components, offhighway components, gaskets, engine parts and filtration products Plants Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Czech Republic, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Mexico, Netherlands, Poland, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, UK, Uruguay, USA, Venezuela Sales US$7.92bn (6.31bn 31 December 2003) (Year to 31.12.03) Employees 59,000 (31 December 2003) Dana Corporation is one of the world's largest independent suppliers to vehicle makers and the aftermarket. It serves the automotive, commercial vehicle and offhighway markets. In early June 2003 the former Dana Chairman and CEO was approached by his equivalent at ArvinMeritor, Larry Yost, proposing that ArvinMeritor should acquire Dana. Following several months of uncertainty, Dana announced in November 2003, less than a week after ArvinMeritor raised its offer to US$4.7bn (3.92bn, 30 November 2003), that its Board of Directors had unanimously rejected the bid. The company therefore successfully rejected the unsolicited approach from ArvinMeritor. Subsequent to the final rejection of ArvinMeritor's bid approach, Dana announced the sale of its aftermarket operations, which it no longer regards as of core importance. Dana hopes to have sold the division by the end of the second quarter 2004. As of 31 December 2003, the company operated 240 major facilities in 30 countries around the world and supplied OEMs including BMW, DaimlerChrysler, Ford, General Motors and Toyota.

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Until March 2004 the Group divided its operations into three market-focused Strategic Business Units, as follows: Automotive Systems Group: Products drivetrain modules, systems, and related components, including axles, driveshafts, structures, and chassis products, as well as systems-integration services for automobiles and light trucks; 2003 Sales US$3.77bn (3.00bn, 31 December 2003), 48% of Danas total sales; Operations 18,820 people, 68 major facilities Engine and Fluid Management Group: Products sealing systems, thermal management, fluid transfer, and engine power; 2003 Sales US$2.15bn (1.71bn, 31 December 2003), 27% of Danas sales; Operations 15,834 people, 78 major facilities Heavy Vehicle Technologies and Systems Group: Products axles, driveshafts, brakes, chassis and suspension modules, ride controls, related modules and systems, and replacement parts for commercial and off-highway vehicles; and transmissions, transaxles, and electronic controls for off-highway vehicles; 2003 Sales US$1.92bn (1.53bn, 31 December 2003), 24% of Danas sales; Operations 5,545 people, 20 major facilities. In March 2004 Dana announced the combination of its Automotive Systems Group and Engine and Fluid Management Group into a single business unit. Dana said that the new unit, which will retain the Automotive Systems Group name, will enable the company to better focus its strengths and resources on its global, light-vehicle customers. In addition the company is still operating its automotive aftermarket division, but this is in the process of being disposed of and its sales are not listed as continuing operations. Recent Developments Corporate strategy In recent years Dana has consolidated its operations in order to focus on its "foundation businesses" of axles, driveshafts, brake and chassis products, fluid systems, filtration products, bearing and sealing products, and structures. In 2000 Dana launched its Transformation 2005 programme, aimed at transforming the company and its resources to generate improved benefits for Dana employees, customers and shareholders. Dana's longterm focus on building relationships with foreign partners helped lessen the impact of recent production cuts from the Big Three. In late 2001, Dana initiated an ambitious restructuring program that substantially concluded in 2002. In total, the US$442m (352.1m, 31 December 2003) program encompassed the closure or consolidation of 39 facilities, the divestment of 10 non-strategic businesses, and a workforce reduction of approximately 20,000 people. These restructuring actions have improved Danas productivity, as measured by sales per person, by approximately 20% over the last two years. As part of these restructuring measures, Dana announced a number of organisational changes. The Engine Systems and Fluid Systems business units were consolidated into the then Engine and Fluid Management Group, and the Commercial Vehicle Systems unit and the Off-Highway Systems Group were united within the newly established Heavy Vehicle Technologies and Systems Group. Soon after these changes were announced, the company decided also to combine the Automotive Systems Group and the Engine and Fluid Management Group into one unit. The company believes that these streamlining measures will allow it to both cut costs and focus on its core operations, as well as improve its customer focus. In October 2003 it was reported that Dana planned to close 14 plants in its then Engine & Fluid Management Group by 2005, including some that make rubber products. The shutdowns will follow the closing of six other factories in the group by the end of 2003, which was disclosed 256 AutoBusiness Ltd

Company profiles previously as part of Dana's restructuring. In December 2003, Dana also announced that, in a move to focus on the original equipment marketplace, it intends to divest the companys Automotive Aftermarket Group. It is hoped that the divestiture will enable Dana to leverage its historic strengths in product and process technology to the benefit of its OE customers. Acquisitions Recent acquisitions have included: In August 2002 Dana acquired GKN Ayra Cardan, S.A, a Spanish driveshaft manufacturing facility. The facility, which is to be called Spicer Ayra Cardan, currently supplies products for Nissan/Renault, Suzuki and Mitsubishi. The acquisition resulted from a restructuring of the terms of a joint venture with GKN plc that was formed in 1999. Under the new terms, the joint-venture company, GKN Driveshafts Ltd, reverts back to whole ownership by the Automotive Driveline Division of GKN. In November 2000, Dana acquired a minority stake in Getrag Getriebe- und Zahnradfabrik Hermann Hagenmeyer GmbH & Cie. Getrag is a major manual and semiautomatic transmission supplier. In June 2000, Dana acquired 82.27% of Tribometal AS of Dolny Kubin (Slovakia). Tribometal is one of the few suppliers of sliding bearings for internal combustion engines in Slovakia and the Czech Republic. In February 2000, Dana announced plans to purchase Invensys plcs axle manufacturing operation, including its facilities in Australia and South Africa.

Divestments Dana has made many divestments and capacity adjustments to improve its operating efficiencies: In March 2004 Dana said that it was laying off 146 workers at its plant in Dry Ridge, Kentucky (USA). Also in March 2004 Dana said it would lay off about 75 workers at a plant in northern Indiana (USA) that cuts and assembles axle components. The job cuts about half the remaining work force will leave about 80 jobs at the plant in Syracuse. The layoffs, which will be made in May, will affect workers who produce parts for DaimlerChrysler. DaimlerChrysler has decided to make those parts internally. In December 2003 Dana announced its intention to divest its Automotive Aftermarket Group. The Board stated that the key benefit of this action is the enhanced strategic focus it will bring to the company. In September 2003, it was reported that Dana was to sell its axle parts assets to Sypris Solutions Inc. The assets include a manufacturing plant in North Carolina (US) and production equipment in Mexico, Kentucky and Tennessee (US). The sale was completed in January 2004. In July 2003, it was reported that Dana had sold its Greensboro, North Carolina (US) subsidiary to Metaldyne. In June 2003, Dana announced that it had completed the sale of a significant portion of the Engine Management operations of its Automotive Aftermarket Group to Standard Motor Products. Proceeds from the transaction totalled US$121m (105.8m, 30 June 2003). In May 2003 Dana announced an agreement to sell its Parish Structural Products (Thailand) ltd operation to AAPICO Hitech Public Co Ltd, a Thai automotive supplier. The divestment was completed in June 2003. In February 2003, it was reported that Standard Motor Products, Inc. has signed a definitive agreement to acquire the assets of Dana's Engine Management Division for approximately US$120m (111.6m, 28 February 2003). The divestment closed in the second quarter of 2003. In December 2002, Dana completed the sale of its FTE brake and clutch actuation systems operations to HgCapital, a European private equity finance company. The deal included FTE's five manufacturing facilities in Germany, Mexico, and Brazil, as well as its 14 sales offices. The Ebern, Germany-based FTE operations employed approximately 2,850 people. In November 2002 it was reported that Dana had completed the sale of the majority of its Boston Weatherhead industrial hose and fitting operations to Eaton Corporation for US$130m (130.8m, 30 November 2002). In October 2002 Dana announced that it had sold three of its businesses for an undisclosed sum. The businesses included electric brakes supplier, Tekonsha 257

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Automotive Technology Roadmap Engineering Co; exterior illumination producer Theodore Bargman Co and sensor supplier, American Electronic Components Inc. All the businesses were bought by a US based private equity firm The Riverside Co. In September 2001, Dana completed the sale of its industrial polymer bearings businesses to Goodrich Corporation. Dana stated that this disposal reinforces its aim of focusing its energies on those businesses and technologies that are central to its strategy of growth through innovation. In March 2001, Dana sold the Mr.Gasket operations (Echlin) to Performance Products Industries. In January 2001 Dana announced plans to sell its forging operations in Kirkstall, Leeds, (UK), which are the company's Spicer Specialty Axle Division. The operations produce forgings for on-highway axle applications, as well as providing complete axle machining capabilities.

Joint-ventures In January 2004 it was announced that Dana and Germany's Getrag had signed an agreement with Volvo Car Corporation (VCC) for a recently formed Getrag-Dana jointventure company to purchase a 60% interest in VCC's operations in Koping (Sweden). The resulting joint venture with VCC to be known as Getrag All Wheel Drive AB will produce all-wheel-drive (AWD) and chassis systems and components for passenger cars and SUVs. Financial details have not been released. Principal products of the joint venture will include power take-off units, rear-drive units, front-drive units and chassis systems and components. As part of the joint venture, the new company expects to enter into long-term supply agreements with affiliates of Ford. The joint-venture will initially target turnover of 200m, and will aim to become a centre of excellence for allwheel drive components. Getrag is to play the leading role in the industrial management of the new company. In October 2003, it was announced that Dana had signed a formal letter of intent to form a 50/50 joint-venture company with Dongfeng Motor Co., Ltd. The planned joint venture will manufacture and assemble commercial-vehicle axles and components in China. In addition, it will have a research and technical centre for manufacturing, materials, and systems development for medium- and heavy-duty axle products. In September 2003, Dana announced that it has entered into agreements with HyRadix, Inc. to cooperate on the design and supply of small-scale fuel processing systems. As part of the agreement, Dana will apply its design-for-manufacture expertise to the HyRadix Agilon stationary hydrogen fuel processor and further develop the system for high-volume manufacture. In February 2003, it was reported that Dana and Emerson Electric Co had won European Commission clearance for a joint venture to make actuators. Both companies expect to achieve synergies through the alliance. In September 2001 Dana and Riken Corporation (Japan) announced plans to establish a joint production unit and sales unit in Germany. The production unit, that became operational at the end of 2003, produces engine piston rings. The sales unit, set up in 2002, carries products made by the new production unit plus others imported from Riken and Dana. In March 2001 Dana formed an alliance to market engine sealing systems with Japanese sealing supplier Nippon Reinz. Dana already sold sealing products and systems under the Victor Reinz brand in Europe and in the Americas. In September 2000, Dana formed an agreement with Motorolas Automotive and Industrial Electronics Group (AIEG) to provide integrated automotive systems solutions. Motorola provides advanced electronics technology for Dana to incorporate into its advanced chassis, drivetrain and engine systems. In February 2000 Dana established an alliance (Drive Tek) with UK driveline and chassis component supplier GKN plc. The companies jointly developed modular driveline assemblies containing constant-velocity (CV) joints for global car and light vehicle applications. The deal led to the exchange of Dana's CV joint operations for GKN's cardan-jointed propeller shaft business. However DriveTek was not as successful in winning business as had been hoped and in March 2002 Dana and GKN put the jointventure on hold.

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Company profiles Investments In September 2003, Dana announced that it is expanding its global engineering network by opening new Fuel Cell Support Centres in Rugby (UK) and Toyohashi (Japan). Also in September 2003, it was announced that Dana would construct a new manufacturing facility in Kadan (Czech Republic) for the production of automotive heat exchangers. Construction of the 52,000 square foot facility is expected to begin in 2004. Again in September 2003, it was reported that Dana is negotiating to buy Chrysler group's Detroit Axle plant. In May 2003 Dana dedicated a new, state-of-the-art agricultural axle assembly facility in Como, Italy. This replaces an existing operation in Como and increases capacity as well as allowing greater production flexibility based on very advanced assembly processes. In December 2002, it was reported that Danas Spicer Off-Highway Products Division had opened a new R&D centre in Bruges (Belgium). In October 2002 it was reported that Dana was to construct a new state-of-the-art facility, the Automotive Systems Group Technology Centre, in Ohio (US). The facility was completed in November 2003. In August 2002 it was announced that Dana's Spanish subsidiary, Dana Automocion, together with the regional government of Navarre (Spain), and Spanish automotive parts maker AP Amortiguadores was to invest 16.6m in the construction of a Technology Centre for the regional automotive parts sector in Pamplona (Spain). The facility was completed in 2003. In May 2001, Dana began construction of its new 211,000 square foot Structural Solutions facility in Longview, Texas (US). The plant, which was completed in March 2002, is producing structural components for the local General Motors assembly plant in Shreveport, Louisiana (US). In October 2000 Dana's Structural Products Group (SPG) announced plans to build a 156,000 square foot unit in Elizabethtown, Kentucky (USA), for the production of hydroformed components, which are assembled into full frames for the Ford Expedition and Lincoln Navigator. In July 2000 Dana's Plumley Division opened a 50,000 square foot Thermoplastic Sealing Centre in Paris, Tennessee (USA). The plant produces injection- and blowmoulded engineered thermoplastics for cam cover modules, air induction systems, plastic carrier-style gaskets, and various plastic powertrain components. In March 2000, Dana invested over US$2m (2.1m, 31 March 2000) to move its Brazilian Fluid Systems Products division to a renovated site in Diadema, Sao Paulo (Brazil). The division makes fuel rails; throttle bodies; oil and water pumps; hoses and tubes for air conditioning systems, brake systems and hydraulics; plus carburettors and mechanical fuel pumps for the aftermarket. Contracts In March 2004 Dana announced that it had begun supplying rear-axle differentials for the BMW X5 Sports Activity Vehicle (SAV). Dana previously announced that it was supplying the front differentials for the vehicle, beginning June 2003. In March 2004 Dana announced that it had been selected to supply Spicer(R) driveshaft assemblies to Iveco, a company in the Fiat Group, for all of the truck manufacturer's needs in Europe through 2007. In January 2004 it was reported that Dana had been awarded a contract to supply compact cooling modules, consisting of a CT-series radiator and electric cooling fan, for the General Motors (GM) Sierra and Chevrolet Silverado hybrid pickup trucks. In January 2004 Dana announced it is providing a new five-layer thermal-acoustic protective shielding (TAPS) for the exhaust manifold on the new Ford Freestar and Mercury Monterey minivans. This is believed to be the first application of a five-layer fully isolated TAPS on any vehicle in the automotive industry. In January 2004 Dana announced that it would supply axles and maintenance-free propshafts for the new Infiniti QX56 full-size luxury sport-utility vehicle. This marks the first time that Dana has provided components to Nissan for its luxury Infiniti models. Also in January 2004 Dana announced that it had been awarded a multi-year contract to supply a new coupling device designed to work with new, more corrosion-resistant brake lines. The mechanical lock will be used on the brake lines for the redesigned Dodge Caravan and Chrysler Town & Country minivans. Again in January 2004 Dana announced that it would supply the complete independent rear suspension (IRS) module, including a Dana axle and limited slip differential, and AutoBusiness Ltd 259

Automotive Technology Roadmap assemble front corner modules on the high-performance, V-8 rear-wheel-drive 2005 Pontiac GTO. In December 2003, Dana announced that it would supply axles and driveshafts for the new 2004 Dodge Ram SRT-10 high-performance pickup truck. In October 2003, it was announced that Dana has been chosen to supply suspension components, including ball joints and stabilizer arms, for the Honda Fit, Hondas newest vehicle for the South American market. Manufactured in Brazil, the Honda Fit will be exported to all of the major countries in South America. Also in October 2003, Dana announced that it has been selected by Volvo Powertrain to supply Spicerdriveshaft assemblies for Volvo Trucks, Renault Trucks, Volvo Bus Corporation, and Volvo Construction Equipment products in the European market. The five-year supply agreement, which runs through to 2007, provides that Dana will supply Spicer Compact 2000, Spicer PEP, Spicer SPL, and Spicer Italcardano wing-style driveshafts. In September 2003, Dana announced that it is to supply a lightweight aluminium final drive unit (FDU) for a new generation of all-wheel-drive, small-city automobiles that will soon be available in European markets. Production of the vehicle is set to commence in autumn 2004. In the same month, it was announced that Dana's Australian subsidiary has begun providing the front suspension system, independent rear suspension module, and the front and rear driveshafts for Ford Australias new Territory crossover vehicle. Also in September 2003, Dana's Australian subsidiary begun providing a front and rear chassis and drivetrain systems for the Cross Trac all-wheel-drive system on the new Holden Adventra crossover vehicle. September 2003 also saw the announcement that Dana has begun the supply of entire fuel-line sub-systems for PSA Peugeot-Citrons new 1.4-liter DV4 and 1.6-liter DV6 diesel engines. The contract is expected to generate more than US$140m (120.8m, 30 September 2003) in revenue. In June 2003, Dana announced that it has been selected to supply carrier differentials and propshafts to Toyota South Africa for the 2005 Hilux pick-up truck, built on the same platform as the Toyota Tacoma. Dana will manufacture these products at its state-of-theart assembly facility in Uitenhage (South Africa). Production is scheduled to begin in 2005. In April 2003, it was announced that Dana has begun supplying the cylinder-head, camcover module for DaimlerChryslers 4.7L V-8 engine for the Jeep Grand Cherokee, Dodge Durango, Dodge Dakota, and Dodge Ram vehicles. In January 2003 Dana announced that it has won a contract to supply the new Nissan full-size pickup, the 2004 Titan, with front and rear axle assemblies and propshafts. The Titan was introduced in late 2003. Dana is also to supply its proprietary Wave-stopper multi-layered steel cylinder head gasket for the 5.6L V-8 engine that will appear in the vehicle. Also in January 2003, it was announced that Dana is to supply structural systems to Ford for use on its 2004 F-150 Series pickup trucks. In November 2002 Dana announced that it had been selected to supply advanced traction technologies, including complete drive axle and Hydratrak differentials, for MG Rovers new V-8 sports car, the MG Xpower SV, as well as the high-performance V8supercharged version, the Xpower SV Club Sport. In September 2002 it was announced that Dana had won the contract to supply a recyclable cam cover module for the Jaguar AJ 33 engine, featured in the Jaguar XK Sports Cars and S-Type Sedans. In October 2001 Dana was chosen to design and produce front and rear differentials for a future vehicle platform for BMW. The systems will include a variety of lowtransmission-error drive gears; luxury-car-type bearing diameters; low-backlash dimensional control; and noise testing. The systems will be supplied to BMW's North American units. In February 2001 Dana's Perfect Circle Europe Division became a pilot supplier for Renault-Nissan's first diesel engine. It will supply piston rings for the engine, which forms part of the first common platform for the Nissan Micra and the Renault Clio. In January 2001 Dana announced it had won a contract to provide front and rear axle assemblies and front and rear driveshaft assemblies for light trucks and SUVs to be produced in North America by a major Japanese OEM beginning in 2004. The combined annual value of this business is around US$100m (108m, 31 January 2001). AutoBusiness Ltd

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New Product Developments Dana prioritises its modular activities. The group produces corner modules, axle modules and sealing systems, and it pioneered the rolling chassis module. Rolling Chassis Module: Dana currently supplies its rolling chassis module for the DaimlerChrysler Dodge Dakota pickup truck. Dana assembles components from 66 suppliers, including frame, front and rear axles, driveshafts, suspension, steering system, brakes, fuel tank, electrical circuits, wheels, and tyres. This module is the largest that an OEM has ever sourced to a supplier and comprises 30% of the vehicle's total costs. Assembly began in mid-1998: Dana was the first supplier to provide an integrated module of this kind. Rolling Space Frame Module: Dana sees the rolling space frame module as the next step after its rolling chassis module. The rolling space frame module would comprise a series of structural members assembled to support the interior systems, as well as the exterior skin and driveline components of a vehicle.

In March 2004 Dana unveiled a new integrated, full-size light truck independent rear suspension (IRS) module, which it developed in less than 12 months. The module was introduced at the 2004 SAE World Congress in Detroit, Michigan (USA). Key features of the new IRS module include excellent ride and handling, lightweight components, and greatly reduced vehicle-assembly time compared with traditionally assembled independent suspensions. Dana is also working on what the company calls its 'mechatronic' systems. Dana says that 'mechatronics' is a design philosophy that integrates the disciplines of mechanics, electronics and control systems and computers to design products, processes and systems. With this approach, Dana has developed the following features: An air filter to create a cleaner environment inside the car. Anti-lock braking systems. Magnetic pulse welding technology. Fuel cell technology, to produce clean, reliable and affordable energy sources.

Dana is developing components for fuel cell stacks and fuel processors. The company is also looking at ways to reduce the size and weight of components, and cut costs by finding mass production methods. Dana Commercial Vehicle Systems recently launched its new Dana Spicer D-800F and D800W steer axles. These axles provide enhanced steering and manoeuvrability. Dana announced at the 2004 SAE World Congress that its next-generation family of axles, AdvanTek(TM), is now available to customers. The products offer best-in-class noise, vibration, and harshness (NVH), improved fuel economy, and greater durability. Dana's newly-developed Intelligent Cooling (TM) system improves engine performance and fuel economy by regulating coolant flow based on real-time engine temperature, rather than engine speed. The new system allows the engine to operate at higher temperatures, with more uniformity and significantly greater control. Dana has developed an Electric Hydrostatic Steering Assist Module (ESHAM) that offers improved fuel economy savings and adaptability to existing vehicle design. Another of Dana's e-steer technologies is Electric Hydraulic Power Steering (EPHS), which also provides fuel savings and greater efficiency. This is to be produced by the company's recently announced joint venture with Emerson, as is the Electric Power Steering (EPS) motor, hailed to be quieter, more reliable and more powerful than other electric motors. Dana has developed an Intelligent Lubrication (TI) system, which matches real-time engine and transmission oil demands with a controlled and consistent oil supply. The unique design improves durability, saves fuel, reduces cold start emissions and prolongs oil change intervals.

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Automotive Technology Roadmap Dana has introduced its Spicer Unitized Hub System (UHS) that provides lower life cycle costs with the reliability of a fully assembled axle, brake, and hub package. The product is designed to reduce the likelihood of seal leaks or lube replacement for one million miles. Dana has developed a self-dampening fuel-rail system designed to eliminate leaks and ease assembly requirements. The new fuel-rail system, known as the GDFRTM system, is available in number of configurations and features rail bodies that easily can be enlarged or reduced to fit many different engine packages. By virtue of its shape and design, a self-dampening fuel rail eliminates the need for a damper, as well as diaphragms and O-rings. In March 2004 Dana introduced an electronic torque-coupling differential that offers significant enhancements in the mobility of all-wheel-drive vehicles. The differential was introduced at the 2004 SAE World Congress in Detroit, Michigan (USA). In April 2004 Dana opened its new Automotive Systems Technology Center near Toledo, Ohio. This features advanced component and system engineering and in addition to supporting R&D activities across North America, augments technical centres in the AsiaPacific, South American and European markets. Financial Overview In 2003 Dana generated sales of US$7.92bn (6.31bn, 31 December 2003), an increase of % over the 2002 figure of US$7.50bn (7.16bn, 31 December 2002). The company reported income before taxes of positive US$81m (64.5m, 31 December 2003) in the year to end 31 December 2003, compared with a loss of US$114m (108.8m, 31 December 2002) reported for the previous fiscal year. Dana achieved a net profit of US$222m (176.9m, 31 December 2003) in 2003, against a net loss of US$182m (173.6m, 31 December 2002) in 2002. Outlook Dana is confident that it is now well-positioned to change gear and move from restructuring mode to a renewed focus on innovation, technology and other strategic growth opportunities. Full benefits of the recent restructuring programme will undoubtedly be felt from 2004 onwards and if this is coupled with an improvement in markets, especially the heavy commercial vehicle sector, a much-improved financial performance should swiftly follow. Dana has adopted challenging long-term targets with regard to the desired geographical spread of its sales and customer base as well as overall sales growth and is making progress towards them. It has also coupled this strategy with firm financial objectives, which should help prevent profitless turnover expansion, underpin cash flow growth and lower group debt. Fighting off the unwanted approach from Arvin Meritor was a very significant victory for the company and once the aftermarket operations are disposed of, Dana will be sharply focused on its core product range for the light and heavy-vehicle segments.

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Delphi
Most major component areas
Address Delphi Corporation World Headquarters 5725 Delphi Drive Troy MI 48098-2815 USA Tel: +1 248 813 2000 Fax: +1 248 813 2670 Internet: http://www.delphi.com Senior Officers J. T. Battenberg III, President and CEO Alan S. Dawes, Executive Vice President, Director and CFO Donald L. Runkle, Executive Vice President, Chief Technology Officer Products Brake systems, cockpits, drivetrain products, doors, electrical/electronic systems, fuel systems, HVAC, passenger restraint, safety systems, steering, suspension and trim components Plants Around 200 manufacturing plants worldwide Sales US$28.1bn (22.4bn, 31 December 2003) (Year to 31.12.03) Employees 190,000 (2003) Delphi Corporation is the worlds largest and most diversified designer and producer of automotive components, modules and systems. In March 2002 the company changed its name from Delphi Automotive Systems Corporation to Delphi Corporation in order to reflect the breadth of its technologies and services more accurately. The company also sees growth opportunities in non-automotive sectors. North America accounted for 72.8% of sales in 2003 with Europe, the Middle East and Africa combined contributing 22%. Asia Pacific contributed 3.7%. Its global headquarters are in Troy, Michigan (USA) and regional headquarters are in Paris (France), Tokyo (Japan) and Sao Paolo (Brazil). Excluding joint ventures and other investments, Delphi maintained around 317 sites in 41 countries at the end of 2003. Of this total, 171 were manufacturing facilities, 34 were technical centres and 53 were customer centres and sales offices. Delphi supplies almost all car manufacturers. Its major customer remains General Motors, which accounted for 61% of sales in 2003.

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Until October 2002, Delphi organized its businesses into three sectors: Dynamics & Propulsion Systems, which accounted for 46.8% of total sales in 2002, Electronics & Mobile Communications (18.2%), and Safety, Thermal & Electrical Architecture (35%). In October 2002, Delphi announced the realignment of its business sectors, which was effective on 1 January 2003. The company evolved to three reporting segments that were grouped on the basis of similar product, market and operating factors: Dynamics, Propulsion & Thermal Sector (DPTS): includes selected businesses from its energy and engine management systems, chassis, steering and thermal systems product lines (42.3% of sales excluding inter-sector sales in 2003). Electrical, Electronics, Safety and Interior Sector (EESI): includes selected businesses from its automotive electronics, audio, consumer and aftermarket products, communication systems, safety and power and signal distribution systems product lines (49.9%). Automotive Holdings Group (AHG): comprises product lines and plant sites that do not meet Delphis targets for net income or other financial metrics (7.8%).

In November 2003, Delphi announced some organisational changes related to recent restructuring plans. This included the consolidation of product lines managed by Delphi Safety & Interior Systems, a division of the EESI sector, into Delphi Delco Electronics Systems, another division of EESI, and Delphi Harrison Thermal Systems, a division of the DPTS sector. This became effective on 1 January 2004. Delphi Safety & Interior Systems occupant protection business line has been realigned with Delphi Delco Electronics Systems and the new division is now named Delphi Electronics & Safety, which is part of the Delphi Electrical, Electronics & Safety Sector. Integrated closure systems, HVAC electronic controls, cockpits and interior business lines has been aligned with existing thermal product lines and the new division is known as Delphi Thermal & Interior, which is part of the Delphi Dynamics, Propulsion, Thermal & Interior Sector. Recent Developments Corporate strategy Since its flotation, Delphi has been focusing on expanding its customer base and lessening its dependence on General Motors. In 1998 around 80% of Delphis sales were to General Motors. By 2001 this had reduced to 68% and in 2002 this dropped further to 65% and to 61% in 2003. In recent years Delphi has been reorganising and rationalising its operations, enabling it to focus on new technologies and develop more value-added products such as modules and systems. In response to weak automotive markets, pricing pressures and increased operating costs, in March 2001 Delphi announced plans to cut employee numbers by 11,500 (5% of its global workforce), close nine plants and consolidate its operations around the world. These measures were completed by March 2002. In the first quarter of 2002, Delphi took a net charge of US$174m (199.7m, 30 March 2002) in order to restructure other operations in Europe and the USA. By the end of 2002 Delphi had completed over 98% of its 2002 plan that involved the reduction of 6,100 positions through consolidation activities at over 24 facilities in North America and Europe by March 2003. When completed the combined effects of Delphis 2001 and 2002 plans reduced global employment by 17,540. During the third quarter of 2003, Delphi initiated actions intended to address under-performing operations and to reduce the size of its hourly and salaried workforces. As a result of these initiatives, Delphi expects to reduce its US hourly workforce by up to 5,000 employees, the US salaried workforce by around 500 employees and the non-US workforce by around 3,000 employees. The company expects to realise cost savings related to these restructuring initiatives to grow to around US$200m (172.5m, 30 September 2003) after-tax on an annualised basis. Despite these cuts, Delphi is continuing to extend its technological expertise through strategic 264 AutoBusiness Ltd

Company profiles acquisitions, joint-ventures and development alliances. It believes that key areas for future growth are Europe and Asia. Although Delphi still views automotive systems and components as its core business, the company is keen to explore non-automotive areas as well, including aerospace, medical, computers, entertainment and commercial vehicles markets. Acquisitions In November 2003, Delphi acquired Grundig Car InterMedia System GmbH for $39m (32.5m, 30 November 2003), net of cash acquired. Grundig is a full line producer of vehicle audio systems, telematics devices and other vehicle entertainment products, primarily for the European OEM and aftermarket segments. In June 2001 Delphi finalised the purchase of Specialty Electronics, a provider of electronic connector products and interconnect solutions to the automotive and other markets for US$21.8m (25.7m, 30 June 2001). In March 2001 Delphi completed the acquisition of the Vehicle Switch/ Electronics Division of Eaton, including Eatons plant in Gdansk (Poland) at a cost of US$300m (339.9m, 30 March 2001). This added US$150m (170m, 30 March 2001) of Europe-based revenue. In June 2000 Delphi acquired an 18% stake in switch manufacturer Duraswitch, which gave it representation on the Board of Directors and exclusive rights to use and manufacture Duraswitchs switch technology. The acquisition should allow Delphi to extend its capabilities to include device control and human-machine interface. In January 2000 Delphi acquired Lucas Diesel Systems, making Delphi the worlds second largest producer of diesel fuel injection systems, with around a 15% market share in Europe. Divestments Delphi is aiming to be in the top two in each product segment in which it operates and it is selling non-core operations. Recent disposals include: In May 2003, it was reported that various Delphi subsidiaries had agreed to divest assets and the licensing of intellectual property utilized in Delphi's global alternator business, including Delphi's alternator assets located in Poland, to Delco Remy. Additionally, Delco Remy has assumed Delphi's ownership interest in an alternator joint venture in China. In January 2003, it was reported that Delphi has sold its plastic injection moulding plant in Logrono, Spain, to Collins & Aikman for 15m. In December 2001 Delphi completed the sale of its Liteflex FRP composite spring business, which produced drive axle springs for OEMs and the aftermarket. Two China-based joint ventures Tianjin Delphi Suspension System and Xiaoshan Steering Gear Company that produced suspension and steering systems, were sold in September 2001. In June 2001 Delphi announced it had completed the sale of its heavy industrial engine facility in Cheltenham (UK) to Woodward Governor Co. In May 2001, Delphi announced it had sold stakes in three joint-ventures (Componentes Delfa, Flip Chip Technologies LLC, and Delphi NSK Steering) with combined annual sales of around US$60m (70.0m, 31 May 2001), as part of its focus on electronics for cars and light trucks. In March 2001, plans were announced to sell its Ande (France) operations, which produced components for Delphi's composite spring product line, and suspension components. Also in March 2001, Delphi announced plans to sell its French shock absorber plant, DE Carbon.

Joint-ventures In January 2003 Delphi and US company Polk Audio announced they had signed a cooperation and trademark agreement to deliver high-performance Polk Audio-branded OEM audio systems for vehicles. In March 2003, it was reported that Delphi has entered into a strategic alliance with Intier Automotive Inc. to develop complete interior vehicle systems, including advanced electrical architectures and wiring harnesses. In April 2002 Delphi and Torrington formed a joint-venture to develop and market new and improved steering systems for light-duty vehicles throughout the world. In January 2002, Delphi Calsonic Hungary, the joint-venture between Delphi and Calsonic Kansei began production of Delphis Compact Variable Compressor (CVC) in a new plant in Balassagyarmat (Hungary). AutoBusiness Ltd 265

Automotive Technology Roadmap December 2001 saw Delphi announce a fifth joint-venture (called Shanghai Delphi Automotive Door Latch & Security Systems Co.) in the Pudong New Area of Shanghai. The company was relocated from another area of China. Also in December 2001, Delphi signed an agreement with Prospects Corp., which gave Delphi exclusive license to manufacture SmartWindow, Prospects' optical anti-trap technology, for the automotive and truck markets. In November 2001 Delphi and STMicroelectronics announced plans to cooperate on the design and development of smart power IC products for automotive applications. In July 2001 Delphi and Motorola announced they were to jointly develop powertrain control systems based on the PowerPC e500 core for a variety of vehicles. It is hoped this technology will become an industry standard, as the systems are more powerful, yet around 20% smaller than existing systems while reaching emissions regulations. In July 2001, Delphi-Calsonic Hungary, the joint-venture between Delphi and Calsonic Kansei announced it had begun production of compressors for air conditioners in Balassagyarmat (Hungary). Production volume was projected at 1.2m at full capacity. In May 2001 a cooperation agreement was signed between Delphi and TotalFinaElf to research solid oxide fuel cells. Initial studies have involved petrol, diesel, domestic fuel and liquefied petroleum gas and have taken place at Delphi's technical centre in Rochester, New York (USA) and at TotalFinaElf's R&D centers in Europe. It is hoped the companies will achieve enough interest in the product to ensure it will be on the market by the end of 2005. In February 2001, Delphi announced it had joined forces with Renault to develop a common-rail direct-injection system for use on Renault's new 1.5-liter dCi engine. This is in response to rising consumer demand for diesel-fuelled cars in Europe as well as Delphis desire to challenge Bosch's leadership in common-rail technology.

Investments In December 2003, it was reported that Delphi plans to invest an additional US$6m (4.78m, 31 December 2003) in its Coopersville (US) plant to add production capacity for its newest fuel-injector line. In November 2003, it was reported that Delphi-Calsonic, a joint venture (JV) between Delphi and Calsonic Kansei Corporation, is set to invest US$5m (4.17m, 30 November 2003) in expanding its Hungarian plant capacity. In July 2003, it was reported that Delphi is to invest US$11.7m (10.3m, 31 July 2003) in its Wyoming, Michigan (US) plant to expand its line of hydraulic valve lifters and begin manufacture of a new line of variable cam phasers. Output of the hydraulic valve lifters will be boosted from 120,000 units per day to 140,000. The investment is said to be the result of new multi-year contracts with US automakers. In March 2003 it was announced that Delphi is to expand its operations in Matamoros (Mexico). It will manufacture door latch actuators in a brand new facility. In March 2002 Delphi announced plans to build a US$1.2m (1.38m, 30 March 2002) North American antenna test centre in Michigan (USA). In February 2002 Delphi announced that its Chinese joint-venture, Beijing Delphi Wanyuan Engine Management Systems Co., Ltd. had moved to a new, larger plant in the Beijing Economic and Technological Development Zone. In July 2001, Delphi Automotive Systems Pvt Ltd of India, announced it was looking to invest in new operations in India. Delphi has recently opened a technical centre in Bangalore (India). The centre develops microprocessor software used in embedded controls of electronic systems including engine and powertrain controllers, antilock brakes, radios, instrument clusters and air control systems. Delphi has opened a facility in Senica (Slovakia) to produce wiring harness assemblies in order to supply the new Volkswagen Touareg SUV in nearby Bratislava (Slovakia). Delphi has recently built a new factory in Rayong (Thailand) to supply local carmakers with brake calipers and fuel handling systems. Contracts Recent contracts include the following: In December 2003, it was announced that Delphi had further strengthened its growing position in the European electrical/electronic distribution (E/ED) market during 2003 by booking in excess of US$3.6bn (2.87bn, 31 December 2003) in new business with a variety of automotive and transportation companies in the region. The new contracts, earned in the first nine months of the year, cover a wide range of major European 266 AutoBusiness Ltd

Company profiles automakers and commercial vehicle manufacturers, and represent various levels of electrical/electronic integration and optimisation. Also included are several business wins with Tier I suppliers. Though some packages begin in 2004, the majority of the 2003 booked business is expected to ramp up in 2006 and beyond, running through to 2012 In November 2003, it was announced that Delphi had secured several new business contracts and renewed five other contracts across North America and Asia Pacific in the halfshaft market. The new business secured will bring Delphi an additional US$388m (323.7m, 30 November 2003) over the life of the contracts. The new and retained contracts include a variety of small, mid-luxury and light truck halfshaft applications, which utilize standard to premium constant velocity joint technology In September 2003, it was reported that Delphi had been awarded contracts worth over US$335m (288.9m, 30 September 2003) with Renault. Delphi will supply Renault with Delphi Freedom batteries, steering column modules, switches and electrical/electronic distribution (E/ED) systems through 2006. The Freedom battery contracts, which total US$22m (19.0m, 30 September 2003), will supply the current model Renault Megane II, Scenic II, and Clio. The contracts for the E/ED systems are valued at US$281m (242.4m, 30 September 2003) and will be used in the Clio, Twingo and Kangoo models. The remaining contracts for steering column modules and switches are worth some US$33m (28.5m, 30 September 2003) and go towards future vehicle models. The components will be supplied to Renault operations in Europe and South America. In February 2003, Delphi won a contract worth an estimated $160m (148.7m, 28 February 2003) to provide safety restraints systems to a major North American automaker on luxury models beginning in calendar year 2005. In January 2003 it was reported that Delphi has won a substantial order from the Volkswagen Group for body-electronics controllers (ECU). The specially-developed ECU will control body functions such as the windshield wipers, the horn, outside-mirror heating and the turn indicators. Production of the ECU will begin in Hungary in January 2004. In November 2002, Delphi was selected by Volkswagen to provide climate control technology on a major multi-vehicle program. Delphi's Harrison Thermal Systems division provides climate control systems for a Volkswagen application that involves commercial vans and Volkswagens first sport-utility vehicle, the Touareg, It marked Delphi's first thermal management business with Volkswagen in Europe. In November 2002, it was announced that Delphi was to produce a modular door for DaimlerChrysler's Actros truck in Germany. Delphi supplies its MagneRide and TRAXXAR chassis systems for the Cadillac XLR luxury roadster, which entered production in the first half of 2003. Integration of the two systems is part of Delphis Unified Chassis Control (UCC) approach. In July 2002 Delphis Brazilian operations won contracts to supply four Fiat vehicles with advanced climate control technology and several General Motors programmes with variable compressors for air-conditioning systems. Delphi is to design and supply a new cockpit module and a complete vehicle wiring system with integrated electronics to the next generation Mercedes-Benz M-Class.

New Product Developments As of December 2003, Delphi employed more than 16,000 engineers, scientists and technicians. In 2003, it introduced 250 new products and processes, a 34% increase over 2002. Total R&D expenditure for 2003 totalled US$2bn (1.59bn, 31 December 2003). In December 2003, Delphi announced that it plans to open two new technical centres in China and Korea and has committed US$40m (31.9m, 31 December 2003) to begin work on the new facilities immediately. Delphi China Technical Centre Co., Ltd. will be located in Waigaoqiao Free Trade Zone in the Pudong New Area of Shanghai (China) and will develop components and support application and systems engineering for several local customers in the country and transplant automakers in addition to global customers. Initially employing 500 people, it is expected to open in June 2005. The Delphi Korea technical centre will be located in Seoul (Korea) and will be a systems engineering centre which will initially focus on gasoline and diesel EMS systems. The centre is expected to open in June 2004 and will employ 240 employees. It is strategically located to better serve the Korean OEMs with its central proximity to their R&D centres

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Automotive Technology Roadmap Recent projects and product innovations include: Delphi's Quadrasteer four-wheel steering system gives full-size vehicles greater ease of manoeuvrability while driving or pulling a trailer at low speeds, and improves stability, handling and control at higher speeds. Quadrasteer electronically controls the direction of the rear wheels, helping shorten the turning circle on full-size vehicles by 20%. At the 2003 Frankfurt Motor Show, Delphi introduced an all new version of its Quadrasteer system Delphi's MagneRide suspension control technology uses magneto-rheological fluids and valveless dampers. Magneto-rheological fluids consist of magnetically soft particles suspended in a synthetic or silicon base fluid. When current is applied to an electromagnetic coil inside the damper's piston, the rheological properties vary, with particles lining up into fibrous structures. Delphi has worked to become the first supplier to offer carmakers comprehensive Unified Chassis Control (UCC) - an advanced system that enables increased subsystem information sharing and co-ordinated chassis control. UCC integrates two or more electronically controlled chassis systems providing improved vehicle safety, performance, ride comfort and control. Delphis Fuba subsidiary has developed the Gen II TV Diversity Reception System, a mobile TV receiver that improves reception through use of multiple in-glass or composite body structure antennas to provide superior colour TV reception. Delphis Energen 5 claims to improve fuel economy by 5% as it turns off a cars engine whenever it returns to idle. The system restarts the engine almost instantly when the accelerator is pressed. Energen 5 is expected to enter production on a European-made car in model year 2003. Delphi has developed intelligent, maintenance-free in-car air conditioners. Delphi has developed advanced Absorbent Glass Mat (AGM) batteries, giving it access to the 36/42 automotive electrical systems market. The batteries are designed to last twice as long as traditional batteries and are spill-proof.

At the 2003 Frankfurt Motor Show, Delphi unveiled the next generation of its proven Multec(TM) common rail technology, which uses a solenoid injector design to optimize fuel rate, spray shape and accuracy. The common rail system provides the smallest injection quantities, highest precision fuel delivery, and along with closed-loop strategies, results in superior emissions and acoustics performance. In addition to developing next-generation Multec injector offerings, Delphi is developing a unique, piezo-based injector to help OEM's meet Euro V emissions regulations on heavier vehicles, and strict new US emissions regulations. With this system, car makers will be able to improve vehicle performance, and have greater design flexibility as they develop diesel engine systems compliant with more stringent environmental and customer acceptance standards. Some other innovations showcased at the Motor Show include: Vision-based Lane Departure Warning technology: This warns the driver should the vehicle start to drift out of lane, helping to greatly reduce one of the largest causes of accidents. The system can be used as a stand-alone safety aid or integrated with other safety systems as part of Delphi's Integrated Safety Systems strategy. The new system uses a digital camera, mounted in the rear view mirror housing, to look up to 25 metres ahead of the vehicle. This data is supplemented by vehicle speed data and yaw data (so the computer knows if the vehicle is turning) collected from other systems via the vehicle's high-speed databus. Vision-based Interior Sensing System: This provides the ability to sense position as well as providing a more accurate passenger size classification. The system monitors the front seat passenger using a multiple camera system mounted on the windscreen rail, with infrared LEDs providing illumination. Advanced Disc System (ADS) brake technology: This features a simplified design that provides steadfast performance through an assembly that uses fewer components and opens the possibility of downsizing, or completely eliminating, booster components. The technology can reduce the mass of a brake corner assembly by 25% and the system operating pressure by 50%. Maximum Torque Brake: This provides a high specific torque capability, with substantial improvements in thermal management that can lead to benefits in weight, packaging and NVH (Noise Vibration & Harshness / refinement). The brake uses two discs floating on the AutoBusiness Ltd

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Company profiles outside diameter of the hub. A hydraulically actuated piston applies braking force via pads that operate on the outside and inside faces of each disc, providing four friction surfaces. The new technology can therefore provide up to 1.7 times the torque output of a conventional single disc system of the same effective diameter, or similar torque from a reduced diameter. Financial Overview For the year ended 31 December 2003, Delphi reported sales of US$28.1bn (22.4bn, 31 December 2003), a 2.4% increase on 2002s figure of US$27.43bn (26.17bn, 31 December 2002). Operating cash flow fell 3.2%, to US$1.22bn (972.0m, 31 December 2003). The total net loss for 2003 was US$56m, (44.6m, 31 December 2003), compared with income of US$342m (326.3m, 31 December 2002) in 2002. Of the business segments, Dynamics, Propulsion & Thermal generated 2003 sales of US$12.68bn (10.10bn, 31 December 2003), an increase of 1.6% over sales of US$12.47bn (11.90bn, 31 December 2002) in the previous year, while operating income fell to US$344m (274.1m, 31 December 2003), down by 15.5% on US$407m (388.3m, 31 December 2002) in 2002. Electrical, Electronics, Safety & Interior had sales of US$14.42bn (11.49bn, 31 December 2003), a 5.8% increase on 2002 sales of US$13.63bn (13.00bn, 31 December 2002), and operating income for the segment was US$996m (793.5m, 31 December 2003) in 2003, a 2% increase on US$976m (931.2m, 31 December 2002) in the previous year. Outlook Delphis own view of short-term prospects is cautious and its financial performance is likely to remain affected by costs associated with longer-term restructuring. It is clear that Delphi has a very strong position in a number of product areas with promising growth prospects in the future. The company has been at the forefront of developing modules and systems in a number of areas and is regarded by key customers as a leader in this area. This represents a very strong underpinning for the future outlook. Recent pressures on business levels and increased pricing pressures have served as a wake-up call for Delphi and there is acceptance that overhead reductions and improvements in manufacturing processes (through implementation of productivity programmes and streamlining activities) are vital to prospects.

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Denso
Thermal, powertrain and electronic/electric systems
Address Denso Corporation 1-1, Showa-cho Kariya Aichi 448-8661 Japan Tel: +81 566 25 5511 Fax: +81 566 25 4537 Internet: http://www.denso.co.jp Senior Officers Akira Takahashi, Chairman Hiromu Okabe, Vice Chairman Koichi Fukaya, President and CEO Michio Fukuzaki, President and CEO, Denso Europe BV Products Air conditioners/heating systems, antilock brake systems, alternators, car navigation systems, common rail fuel injection systems, electrical and electronic control products, filters, fuel management systems, meters, radiators, sparkplugs, starters Plants Group: Argentina, Australia, Brazil, Canada, China, Czech Republic, Germany, Hungary, India, Indonesia, Italy, Republic of Korea, Malaysia, Mexico, Netherlands, Philippines, Poland, Portugal, Saudi Arabia, Spain, Taiwan, Thailand, Turkey, UK, USA Sales Group: 2,332.8bn (18.0bn, 31 March 2003) (Year to 31.03.03) Automotive: 2,255bn (19.6bn, 31 March 2002) (Year to 31.03.02) Employees 89,380 (December 2003) Densos major customers are Toyota, Honda and Mitsubishi. It also supplies most other Japanese OEMs. Non-domestic clients include Audi, BMW, Cummins, Daewoo, DaimlerChrysler, Fiat, Ford, Hyundai, Jaguar, PSA Peugeot Citron, Renault, Saab, Volkswagen and Volvo. Affiliated to the Toyota Motor Company, Denso is the fourth largest automotive components supplier in the world and number one in Japan. Air conditioners, heating units and electronic and electrical products account for around 60% of Group sales. It also manufactures powertrain control systems, electronic systems, electric systems and small motors. In 2002/03 fiscal year, 95.3% of sales were to the automotive industry. Until January 2002, Denso managed the group's automotive businesses through five semi-autonomous groups but in that month, Densos ITS business was made independent of the Electronic Systems Group and became Densos sixth automotive division. The six divisions are now: Thermal Systems (35.6% of fiscal 2002/2003 sales); Powertrain Control Systems (22.1%); Electric Systems (11.5%); Electronic Systems (14.8%); Small Motors (7.4%); and ITS (2.6%). Other automotive products contributed a further 1.3% of sales with the remaining 4.7% of sales generated by Densos new businesses: Telecommunications; Industrial Systems; Environmental Systems; and Others. Denso operates in 31 countries and regions worldwide through 155 consolidated subsidiaries. Denso employs over 89,000 people at sales offices, technical centres and plants spanning Europe, Australasia, Asia and the Americas. Denso has European regional headquarters in the Netherlands. In the year ending 31 March 2003, 12% of Densos sales were generated in Europe.

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Recent Developments Corporate strategy Denso's ambition is to become one of the top three automotive components suppliers in the world and its globalisation strategy has prevented the company from being badly affected by the recession in Japan. Up until recently, most of Denso's growth has been organic but in the last few years the company has been growing its operations in Europe through acquisition. In addition, Denso's air conditioning business has been boosted by the recent increase in fitment rates of air conditioning in European cars. The strategy of growth through acquisition marked a significant departure for Denso. However, the change in direction was necessary in order to give it a chance of becoming one of the top three automotive component suppliers. Expanding its presence in the European marketplace has been a top priority in this global strategy although investment in new facilities in North America has also been stepped up significantly recently. In Europe, Denso boosted its share of the European starters and alternators markets to around 10% and 15% respectively through the purchase of Magneti Marelli's rotating machines division in 1999. In 2000, Denso increased its share in the car air conditioning market through the acquisition of Magneti Marelli's Thermal Systems Division. Then in July 2001, Denso announced plans to increase production of car air conditioners in Europe to more than three million units per year by 2005 from a current 1.4 million. This should raise its share in the European market from 18% to 28%. Denso has also invested in modularisation as carmakers demand size and weight reductions. It has been closely involved with vehicle manufacturers in the development of systems on cars. In Europe Denso provided the air conditioning for the MCC Smart car project as a subsupplier to VDO in the cockpit area. Due to its lack of expertise in air conditioning, VDO relied heavily on Denso to contribute to the development of the system. Other modular successes include Denso's air-fuel manifold module and its integrated cooling module. Acquisitions. Recent acquisitions include: In November 2002, Denso acquired a 33.4% stake of Doowon Climate Control in Korea. Doowon has a 20% share of the Korean climate control market. In February 2002, Denso acquired Osawa Inc., the largest distributor of aftermarket wipers produced by Nippon Wiper Blade Co., a Denso Group company. In March 2001, Denso completed the purchase of Magneti Marelli Climatizzazione S.p.A. (MMCL), the thermal systems division of Magneti Marelli. MMCL operates in six countries. Its customers include Fiat, Peugeot, Renault and other European carmakers. In October 2000, Denso and its subsidiary ASMO Co. Ltd bought 24% and 16%, respectively, of Poong Sung Electric Co. Ltd, a South Korean supplier of motors, fuel pumps and other electrical automotive components. Renamed Denso PS Corporation, the company supplies Hyundai and Kia Motors.

Divestments In August 2001, Denso sold 51% of Purodenso, its oil filter production subsidiary based in Jackson (USA) to Toyoda Boshoku, a Toyota affiliate. Denso had acquired the 51% stake from ArvinMeritor in June 2000 to give it 100% ownership. Purodenso employed 450 people In response to severe competition in the Australian market, Denso consolidated its two Australian air conditioning production centres in July 2001. The streamlining left Denso with only one air conditioning manufacturer and one producer of instrument clusters and motors in Australia. Joint-ventures In December 2003, it was reported that Denso was planning to increase its stake in its South Korean joint venture Denso Poongsung from 41% to 50%. The stake acquisition involves additional investment of 18bn won. Also in December 2003, it was reported that Toyoda Boshoku and Denso had decided to start producing engine components in Poland on a joint-venture basis. The two 272 AutoBusiness Ltd

Company profiles companies are using TBMECA Poland, a company created by one of Denso's suppliers, as the backbone of their joint venture. Toyoda Boshoku and Denso are expected to control 30% and 20% of the joint venture's capital respectively. In October 2003, it was announced that Denso has signed an agreement with Fawer Automotive Parts Company Ltd. to establish a joint venture for manufacturing car air conditioners. The new company, named Tianjin Fawer Denso Air-Conditioner Co., Ltd., will start production in February 2005 and supply its products to Tianjin Toyota Motor Co,Ltd. and other companies. Denso's investment in the joint venture is estimated to total around 1.5bn (11.9m, 31 October 2003). In August 2003, Denso announced a joint venture for the production of fuel injection pumps for diesel vehicles with Shanghai Pudong "EV" Fuel Injection Co., Ltd. and Shanghai Dong Song International Trading Co, Ltd. Denso will invest US$4.6m in the venture, which is renamed Shanghai Denso Fuel Injection Co., Ltd. The joint venture produces fuel injection pumps for diesel vehicles produced by Chinas OEMs. In April 2003, Denso announced an agreement to establish a 50/50 joint-venture with Blaupunkt GmbH, a subsidiary of Robert Bosch GmbH. The new company, Advanced Driver Information Technology Corporation, will develop navigation and multimedia related components for both parent companies. 1.6m will be invested in the new company, which is headquartered in Kariya City, Aichi (Japan). Also in April 2003, Denso announced that it would set up a joint-venture company for the manufacture of car air conditioning systems in Guangzhou, Guangdong (China) with Guangzhou Automobile Group Component Co. Ltd. Denso will hold the majority 60% share in the new company called Guangzhou Denso Co. Ltd., which will be established in May 2003. The new company aims to be producing 240,000 air conditioners a year by 2006. In March 2003, Denso and Kyosan Denki Co. Ltd. announced plans to set up two jointventure companies, one in North America and one in Thailand. Kyosan Denso Manufacturing Kentucky, LLC represents a 1.8bn (14.2m, 28 February 2003) investment in North America and Siam Kyosan Denso Co. Ltd. represents a 1.3bn (10.3m, 28 February 2003) investment in Thailand. Denso will hold a 30% stake in each company. Both plants will manufacture fuel pump modules and fuel filters among other automotive components. In November 2002, Denso established a joint venture company with Koyo Seiko Co. Ltd., Toyoda Machine Works Ltd. and Toyota Motor Corp. The new company, called FAVESS Co. Ltd., specialises in the development and sales of electric power steering and electric-hydraulic power steering systems (collectively known as EPS). The jointventure company has the aim of becoming the world's leading supplier of EPS. Sales began in early 2003. Denso holds a 10% stake in the new company. In July 2001, Denso established a joint venture with GAC Corporation in Frontera, Coahuila (Mexico) to produce hoses and tubes for car air conditioners and spot coolers. GAC Corporation de Mexico S.A. de C.V is owned 49% by Denso and 51% by GAC. Production began in July 2002. In July 2001, in company with Aisin Seiki, Sumitomo Electric Industries Ltd and Toyota, Denso established a new brakes joint venture. The new company develops and manufactures brake components and brake systems and was capitalised at 1bn (9.1m, 30 April 2001). Aisin has a 40% stake in ADVICS Co. Ltd, whilst Denso, Sumitomo Electric and Toyota have 20% each. In March 2001, Denso formed a joint venture in Saudi Arabia with local company Abdul Latif Jameel Co. Ltd. to produce air conditioning systems. The joint venture, Denso Abdul Latif Jameel Co. Ltd is Denso's first production centre in the Middle East and commenced production of 20,000 units annually in October 2001. Denso has an alliance with Hyundai Automet, a South Korean automotive electronics maker, to jointly develop next-generation car navigation systems. Hyundai Automet has an 80% share of the car navigation systems market in South Korea and started shipping at the rate of one million units per year in 2002. Denso has a joint venture with Toyoda Automatic Loom Works Ltd., called TD Deutsche Klimakompressor GmbH, which produces variable displacement compressors for automotive air conditioners. In April 2000, the joint venture began production at a plant in Saxony (Germany).

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Automotive Technology Roadmap Investments In the third quarter of fiscal 2003/4, Denso established a new company in Vigo (Spain) that will begin to produce products related to car air conditioners and radiators in April 2006. The new company, Denso Sistemas Termicos Espana S.A., will be established with an initial capital investment of approximately 16.5m. In October 2003, it was reported that Denso has expanded the testing facility for car air conditioners at Denso Automotive Deutschland GmbH (DNDE), adding a materials evaluation component into the expanded laboratory. Total investment at the site is estimated at 15m. In July 2003 Denso established Denso Manufacturing Arkansas, Inc, which will construct a new facility at Osceola, Arkansas (USA) to produce heavy equipment radiators from October 2004 and car air conditioners from January 2005. In November 2003, it was reported that Denso plans to invest around US$500m (417.2m, 30 November 2003) in Southeast Asia from 2003 through to 2010, with Thailand as the main investment focus, in order to take advantage of the region's fastgrowing car market. It has already set an initial investment budget of around US$280m (233.6m, 30 November 2003) for 2003 to 2005, to be used to set up new production facilities and increase existing production capacity. In 2005-2010, the company intends to invest another US$200m (166.9m, 30 November 2003) in the region, half of which will be invested in Thailand. In July 2003, Denso revealed that it is to establish a manufacturing facility in Osceola, Arkansas (US) to produce car air conditioners and heavy equipment radiators for its North American customers. At full production in 2008, Denso expects to employ 500 people at the site. Total investment in the new operation is set at US$35m (30.9m, 31 July 2003). In June 2003, Denso announced it would spend US$9m (7.87m, 30 June 2003) on expanding its facility in Battle Creek, Michigan (US). The expansion will allow for a new aluminium radiator line and a new aluminium heater core line. The plant will be increased to 1,070,000 square feet and may employ a further 300 workers In March 2003, Denso announced plans to build a new factory in South Korea for the manufacture of components used in car navigation systems and electric control parts. Construction will begin during 2003 and the facility will be brought on stream in 2005. Denso will make a total investment of 5bn (38.7m, 31 March 2003), which will also cover the cost of expanding an existing facility in South Korea. In February 2003, Denso established a regional headquarters in Beijing (China). The company predicts that by 2010, China will have more than doubled the 3.25 million vehicle output of 2002. Customers are already expanding their businesses in this fast growing market and the company recognises the urgent need to expand its sales and supply systems in China. In January 2003, Denso announced plans to build a car parts supply centre adjacent to the company headquarters in Aichi prefecture, central Japan. The centre's construction project is still under development. In July 2002, Denso established its first manufacturing facility in Turkey. Sales of starters and alternator products began in January 2003 and production of thermal products will begin in February 2004. Denso Otomotiv Parcalari Sanayi Anonim Sirket, based in Istanbul, expects to have 80 employees and sales of 5bn (42.3m, 31 July 2002) for fiscal 2005. In June 2002, Denso established Denso Create Shanghai Inc. in Shanghai, China. The new company will develop software for Denso-related products such as control systems and information system products for automobiles by using Chinese software companies near Shanghai. It is Denso's first development company established overseas. In April 2002, Denso announced that it was to start manufacturing components for diesel common rail systems in its new company in Thailand named Siam Denso Manufacturing Co., Ltd in June 2002, and in Denso Manufacturing Hungary Ltd. in November 2002. In Thailand, production will be shifted from an existing Thai plant to a new US$54m (59.8m, 30 April 2002) facility due for completion in 2004. The Hungarian subsidiary will invest a further US$54m (59.8m, 30 April 2002) on new manufacturing lines. In December 2001, Denso announced plans to build an additional plant in Guadalupe City (Mexico) to begin production in 2003. Denso currently manufactures automotive instrument clusters, actuators and valves in Mexico. The new US$48m (54.2m, 31 December 2001) facility will supply hydraulic pressure products such as variable camshaft timing and oil-flow control valves. The additional capacity will create a further 700 jobs in Guadalupe. 274 AutoBusiness Ltd

Company profiles In October 2001, Denso announced the establishment of a new manufacturing facility in Hanoi (Vietnam) to produce engine-related vehicle parts including air flow meters and swirl control valve (SCV) actuators at a capital investment of around 300m (2.7m, 10 October 2001). The new company, Denso Manufacturing Vietnam Co., Ltd will start production in September 2003. In July 2001, Denso announced it was to build a plant for the production of 150,000 car air conditioning systems per year in Liberec, North Bohemia (Czech Republic). The 4,000 square metre plant will employ up to 1,000 people. The new company will represent the largest Japanese investment in the automotive sector in the Czech Republic (2.93m). In March 2000, Denso established a sales company, Denso Sales Belgium NY, in Vilvoorde (Belgium) aimed at the launch of new Toyota production in Europe. In 2000, Denso Barcelona SA (Spain) expanded its plant to begin manufacturing oxygen sensors, air flow meters and ignition coils. Denso invested 180m (1.8m, 31 April 2000) in capital in a Materials Technical Centre, which opened in Singapore in April 2000. Through this effort Denso intends to increase the local sourcing of materials in Asia and Australasia from 54% to 90% by 2003.

Contracts In September 2003, it was reported that Denso will supply its high-pressure diesel common-rail fuel system to Ford of Europe. It is Denso's first diesel injection contract with a European automaker, and is estimated to be worth more than 100m a year. Various Ford models will be equipped with the system starting in 2005. In 2003, it was reported that Denso had secured a contract to supply wipers for 25% of General Motors next generation of high-volume full-sized pickups. Valeo secured the contract for the other 75%. In fiscal 2001, Denso won a contract to supply air conditioning systems for Volkswagen's Passat. Denso first supplied its integrated air-fuel module for the DaimlerChrysler Liberty, manufactured in September 2001, and the Mazda Demio, manufactured in August 2002. Denso began supplying its first front-end module in February 2001 for the Fiat Stilo. In June 2002, Denso began supplying its latest front-end module for the Daihatsu Copen. In the US, Denso navigation systems are currently available on the following 2003 model year vehicles: Lexus - GS 430, LS 430, SC 430, LX 470, GS 300, RX 300, ES 300, IS 300, GX 470; Toyota - Camry, Landcruiser, Prius, Avalon, Siena; Jaguar - S Type, X Type, XJ Type, and Cadillac - Deville and Seville. New Product Developments R&D expenditures in fiscal 2002/03 totalled 182.9bn (1.41bn, 31 March 2003), or 7.8% of sales. In the area of comfort Denso has been bringing IT to the vehicle by developing adaptive cruise control systems, telematic navigation systems, electronic toll collection systems, fleet management systems with global positioning systems and satellite communications. In the field of vehicle safety R&D efforts concentrated on smart airbags, antilock braking systems and vehicle stability control systems. Recent products include: Multi OS environment for car navigation systems: In December 2003, Toshiba Corporation and Denso announced the joint development of the world's first multi-OS (operating system) environment (software) for car navigation systems. The multi-OS environment provides single-chip support for both micro-ITRON, the operating system for embedded devices, and Microsoft(R) Windows(R) Automotive, enabling the use of advanced automotive systems, provided by micro-ITRON, and multi-media applications such as the Internet, provided by Microsoft(R) Windows(R) Automotive concurrently. Carbon Dioxide Air Conditioner: Uses carbon dioxide refrigerant as an alternative to conventional refrigerant (CFC-12 or HFC-134a). Features include low global warming potential value and a high operating pressure. In December 2002, Toyota launched its fuel cell hybrid vehicle, FCHV, which has this new carbon dioxide car air conditioner. Diesel Particulate Filter: Developed for Toyota Diesel Particulate NOx Reduction 275

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Automotive Technology Roadmap systems (DPNR) in cooperation with Toyota. The DPNR system can remove not only particulate matter but also nitrogen oxides. Two-Layer Flow HVAC Systems: By directing fresh air through the upper level of the passenger compartment, and circulating warm air in the lower half, the system fulfils vehicle heating requirements without increasing fuel consumption. The system halves the 60% ventilation loss in a conventional system and eliminates window fogging. Radiator-Condenser Cooling Modules: Denso has saved space and reduced weight by combining an engine-cooling radiator and an air-conditioning condenser. The module improves the cooling performance of both functions by 10% and improves installation in vehicles. Common Rail Fuel Injection System: for small direct-injection diesel engines, the system has been jointly developed with Toyota and is based on the common rail fuel injection systems for larger engines. Densos know-how, coupled with the rising popularity of the diesel engine due to environmental issues, make this a growth area for the company. Air-Fuel Manifold Module: Denso is one of the first automotive suppliers to add modularity to the engine. The module will integrate the air-intake manifold, the airinduction system, fuel injectors, throttle body, wire harnesses and sensors into one unit. A digital map of the USA for car navigation systems: the map covers all US roads for the first time. It was jointly developed with the US-based companies Geographic Data Technologies Inc. and Navigation Technologies Inc. Denso plans to market it to the USA in the form of a DVD. Integrated Starter Generator (ISG): Introduced in July 2001, the ISG for hybrid vehicles was jointly developed with Toyota for installation in the Toyota Estima hybrid car. The belt-driven ISG integrates the starter with the alternator, allowing the car's engine to turn off when it's not moving. The ISG then instantly restarts the car's engine when the car begins to move. The idle stop function decreases fuel consumption for energy savings. Power-Assist Braking System: An add-on system for ABS, which prevents skids, for small trucks. The composite system comprises wheel-speed sensors, vacuum sensors, a master cylinder hydraulic sensor, a skid-control computer, and ABS actuators, among other items. Voice Interaction Systems: Developed by Denso and Hitachi, Ltd., in collaboration with Carnegie Mellon University (CMU) in Pittsburgh, Pennsylvania (US), the system will allow the driver to access the Internet and obtain necessary information through voice commands.

Financial Overview Net sales for the year ending 31 March 2003 fell by 2.8% to 2,332.8bn (18.0bn, 31 March 2003) from 2,401.1bn (20.8bn, 31 March 2002) in the previous fiscal year. This is due to the 2001/02 results being distorted by a 15-month accounting period for some consolidated subsidiaries. The additional three months of sales for these subsidiaries added 218bn (1.89bn, 31 March 2002) to Group sales in the 2001/02 fiscal year. Excluding the irregular 15-month reporting, there was a 6.9% increase in sales from the previous year. Operating income totalled 159.9bn (1.24bn, 31 March 2003), 19.9% above the 133.3bn (1.16bn, 31 March 2002) achieved in 2001/02. There was a 23.1% increase in operating income excluding the irregular 15-month reporting. Consolidated net income increased 53.5% to 111.0bn (858m, 31 March 2003) from 72.3bn (626.5m, 31 March 2002) the year before. Sales in Europe for the year ending 31 March 2003 were 274.0bn (2.12bn, 31 March 2003), an 11.4% decrease from the previous years 310.96bn (2.69bn, 31 March 2002). Excluding the irregular 15-month reporting period it is a 13.1% increase. Decreased production volume and changed product mix resulted in an operating loss of 4.0bn (30.9m, 31 March 2003) in the year ending 31 March 2003. In the third quarter of its 2003/04 fiscal year Denso recorded sales of 639,093m (4,756.9m, 31 December 2003) and operating income of 61,920m (460.9m, 31 December 2003), a margin of 9.7%. This was despite a continuing operating loss in Europe, where the company ran up a deficit of 1,998m (14.9m, 31 December 2003) (before eliminations) on sales of 82,221m (612.0m, 31 December 2003). This loss was put down to accelerating start-up 276 AutoBusiness Ltd

Company profiles costs in new plants in Hungary and the Czech Republic and the full year loss is estimated at 4,000m (29.8m, 31 December 2003), equivalent to the loss suffered in 2002/03. In contrast, the operating profit in Japan was 53,126m (395.4m, 31 December 2003) on sales of 482,800m (3,593.6m, 31 December 2003) and in North, Central and South America it was 6,768m (50.4m, 31 December 2003) on sales of 129,065m (960.7m, 31 December 2003). These third quarter results took consolidated group sales to 1,865,434m (13,884.9m, 31 December 2003) in the first nine months of 2003/04 and operating profit to 153,538m (1,142.8m, 31 December 2003), a margin of 8.2%. Denso has put these improved results down to higher domestic car production, especially at Toyota, the introduction of tougher emission regulations for trucks and overseas sales expansion. Outlook Full-year 2003/04, sales were forecast at 2,520,000m (18,757.0m, 31 December 2003), up from the previous estimate of 2,440,000m (18,161.5m, 31 December 2003), while income before income taxes and minorities was estimated at 184,000m (1,369.6m, 31 December 2003) and net income at 102,000m (759.2m, 31 December 2003). Densos European activities have received a major boost from the recent rapid rise in the fitment rates of air conditioning in European cars and Densos acquisition of the Magneti Marelli business. The group is building up its mass in key European businesses in an attempt to become a bigger player in a market that is leading many of the engine innovations. It is also working to position itself at the forefront of modules and systems outsourcing. The joint venture with Bosch, Advanced Driver Information Technology Corporation, which will develop navigation and multimedia-related components for both parent companies, marks a new strategy in this area. The venture should help create a new generation of globally supplied navigation equipment that has been developed more quickly and at lower cost.

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Dow Automotive
Plastics and other materials
Address Dow Automotive 1250 Harmon Road Auburn Hills MI 48321 USA Tel: +1 248 358 1300 Internet: http://www.dowautomotive.com Senior Officers William S. Stavropoulos, Chairman and CEO, Dow Chemical Andrew N Liveris, President and COO, Dow Chemical J. Pedro Reinhard, Executive Vice President and CFO, Dow Chemical George Hamilton, President Dow Automotive Products ABS resins, acoustical damping systems, adhesive film, crystalline polymers, engineering resins, glass bonding systems, injection-molded dashmats and underhood barriers, NVH and structural foams, nylon resins, polycarbonate resins, polypropylene foam, polypropylene resins, reaction mouldable polymers, recycle content resins, reinforcing composites, sealants, structural adhesives Plants Brazil (2), Canada (1), France (1), Germany (1), Mexico (1), Spain (2), Switzerland (1), UK (1), US (2) Sales Group: US$32.6bn (30.2bn, 31 December 2003) (Year to 31.12.03) Employees c.1,500 (2004) Dow Automotive is a leading automotive supplier of plastics, adhesives, sealants and related products to vehicle manufacturers, tier-one suppliers and aftermarket customers. These products include resins, engineering plastic materials, fluids, adhesives, sealants, epoxy dampers, structural bonding and reinforcement products, and thermal and acoustical management solutions. The Dow Automotive organisation employs over 1,500 people globally at its world headquarters, European operations, R&D, advanced engineering, sales and manufacturing facilities. Its world headquarters are located in Auburn Hills, Michigan (USA), with European operations in Schwalbach (Germany), Terneuzen (Netherlands) and Meyrin and Freienbach (Switzerland). These locations comprise sales and marketing (including customer account teams), technical service, customer service and other administrative support staff. R&D labs and advanced engineering are located in Auburn Hills and Midland, Michigan, Freeport, Texas (USA) and Sarnia, Ontario (Canada). Additional personnel are employed in more than 40 cities on six continents at global automotive centres, sales offices and manufacturing facilities throughout Europe, South America, South-East Asia, South Africa, India and the Middle East. Dow Automotive operates within the framework of Dow Chemical's Performance Plastics segment. Brands include Betabrace reinforcing composites, Betadamp acoustical damping systems, Betafoam NVH and structural foams, Betaguard sealants, Magnum ABS resins, and Questra crystalline polymers. Its customers include DaimlerChrysler, Fiat, General Motors, Renault and Volkswagen. In 2002 Dow Automotive generated one third of its sales in Europe.

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Dow Automotive operates as a separate business within Dow Chemical Company. Until recently Dow Chemical split its business into seven main divisions. These were (as a percentage of 2003 sales): Performance Plastics (24%); Plastics (24%); Performance Chemicals (17%); Chemicals (13%); Agricultural Products (9%); Hydrocarbons and Energy (12%); and Unallocated and Other (1%). In December 2003 the company announced a new organisation with three global business portfolios: Plastics; Chemicals and Intermediates; and Performance Chemicals and Thermosets. Plastics includes a sub-unit called Automotive, Wire and Cable. Recent Developments Corporate Strategy Dow Automotive came into being as a business group of the Dow Chemical Company in 1988, and in 1999 it became Dow's first industry-focused business unit. In January 2001 Dow Automotive acquired the 50% of Gurit-Essex AG (Switzerland) that it did not already own, which expanded Dow Automotive's product portfolio and global reach. During 2001 Dow Chemical increased its Six Sigma efforts, intensifying its focus on cost reduction. The Group's Six Sigma goal was to create US$1.5bn (1.20bn, 31 December 2003) in cumulative earnings before interest and taxes by the end of 2003. Dow Automotive is looking to reduce costs through consolidating its global manufacturing operations. This strategy led to the closure of a plant in Poplar Bluff, Missouri (USA) in late 2001. Dow Automotive is developing innovative products in order to meet vehicle manufacturers' demands for improved vehicle safety and reduced weight, while also looking to protect the environment by reducing emissions levels and using recycled materials. The company is working together with other companies in order to achieve these goals. Acquisitions In September 2003, Dow Chemical announced that it was to buy the acrylics business of Celanese for an undisclosed amount. Dow has acquired Celaneses acrylics business product line, including intellectual property, inventory and technology for crude acrylic acid, glacial acrylic acid, ethyl acrylate, butyl acrylate, methyl acrylate and 2-ethylhexyl acrylate, as well as acrylics production assets at the Celanese Clear Lake, Texas (US) facility. In January 2001, Dow Automotive announced that it had acquired the outstanding 50% stake in Gurit-Essex AG from Gurit-Heberlein AG (Switzerland). Gurit-Essex has been integrated into Dow Automotive's global operations and doubles the companys adhesive, sealants and body-engineered systems business. The acquisition also expands Dow Automotives presence in Europe and Africa. Divestments In December 2001 Dow Automotive sold its European business in engine cooling fluids to BASF. This deal gives BASF access to the division's customer base and technology, but without any transfer of personnel or assets. Joint-ventures In July 2002, it was reported that Dow Polyurethanes Japan, an offshoot of Dow Chemical Japan, is to work with Sumitomo Rubber Industries (SRI). The two companies have established a joint development agreement to improve the PAX tyre/wheel system's polyurethane support technology. In April 2002, Dow Automotive entered into an alliance with Cyclics Corporation for the development of cyclic butylene terephthalate (CBT) resins for automotive applications. The material development activities are to be focused on a number of structural composites, including vertical and horizontal body panels and truck boxes. In February 2001 Dow Automotive formed an alliance with MRC Polymers, Inc., (USA) to develop a new range of resins that meet the increased demand for recycled materials in the automotive industry. RETAIN polymers are developed using post-industrial and post-consumer material feedstocks and can be used for many different automotive applications. In June 2001 Dow Automotive announced that it was working with Visteon to develop products for insulated windows, interior trim and body panels in vehicles. The companies 280 AutoBusiness Ltd

Company profiles are looking to improve heating and cooling efficiency in vehicles and to reduce interior noise and vehicle weight. Contracts In January 2004 Dow Automotive that a low-MDI formulation of its Betafoam acoustical foam is among the innovative technologies applied to the new 2004 Dodge Durango. Betafoam is injected into the A, B and C pillars and rockers to create an effective acoustical seal that helps manage road and chassis noise, vibration and harshness (NVH). In addition to improving vehicle acoustics, Dow Automotive also wanted to provide a solution that allowed for a more efficient assembly operation. To that end, Dow Automotive developed a low-MDI Betafoam formulation that is applied robotically in the paint shop in a standard ventilation environment. In December 2003 Dow Automotive announced that plastic intake manifolds moulded from its Questra crystalline polymer, have been specified for use on the 1.5L and 1.6L SOHC and 1.6L DOHC Lada vehicles, manufactured in Russia by Avtovaz. These are the first plastic intake manifolds in the Russian market and are the result of a cooperative effort between Avtovaz, its plastics moulding supplier OAO Plastik in Syzran (Russia) and Dow Automotive. In December 2002, Dow was chosen as a materials integrator and one of the key fullservice suppliers for Fords newest manufacturing facility in Bahia (Brazil). Dow is supplying plastic components for the new Ford Fiesta, which is being produced at the site. Dow supplies the vehicle with pellet-to-part manufacturing for more than twenty parts, including the front and rear fascia and several interior and exterior trim components. In January 2002, Dow was selected as the sole brake fluid supplier to General Motors in North America. Dow Automotive and Dow Chemicals Michigan operations have combined efforts to provide just-in-time delivery of brake fluid direct to General Motors for use at all its assembly facilities in North America. Dow Automotive's Betafoam polyurethane foam is used in the General Motors 2003 Cadillac CTS model, helping it to meet safety and noise, vibration and harshness requirements. Dow Automotive supplied the injection moulded ABS/PC alloy used in Johnson Controls all-plastic cockpit module for DaimlerChryslers 2002 Jeep Liberty In March 2001 Dow agreed to supply Michelin with a polyurethane-based inner support wheel that is to be featured in Michelins innovative PAX system. The two companies began joint development work in February 2000. New Product Developments In 2002, R&D expenses totalled US$1.07bn (1.02bn, 31 December 2002). Dow Automotive has laboratories and advanced engineering facilities throughout North America and Europe, which focus on the development of a wide range of products for the automotive industry. In May 2002, Dow added to its R&D capabilities by installing a new polyurethane long fibre injection (LFI) moulding machine at its Sarnia (Canada) R&D facility. Among its many trademarks are PULSE PC/ABS resins, MAGNUM ABS resins, CALIBRE polycarbonate resins, and SPECFLEX polyurethane foams, and these continue to be specified by a broad range of automotive companies. Dow Automotive has developed a new system of making automotive seat covers by replacing the cut and sew operations with in-mould production. A polyurethane-based elastomer is sprayed into a mould and becomes the cover skin in the final seat, moulded over a urethane seating pad. This skin can replicate the texture of fabric, vinyl or leather, without having the costs of sewing the cover. The company has also developed an energy-absorbing material called Strandfoam polypropylene foam. It can be fabricated in various shapes and can be used in a wide range of automotive applications, such as headliners.

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Financial Overview In 2003, the Group posted sales of US$32.6bn (30.2bn, 31 December 2003), up 18% from the US$27.6bn (26.3bn, 31 December 2002) recorded in 2002. Dow's EBIT increased by 190% to US$2.49bn (2.31bn, 31 December 2003) from US$86m (82.1m, 31 December 2002). Net profit for 2003 was US$1.73bn (1.60bn, December 2003), compared with a net loss of US$338m, (322.5m, December 2002) in 2002. The Performance Plastics segment generated sales of US$7.77bn (7.20bn, 31 December 2003) in 2003, an increase of 1% over US$7.1bn (6.8bn 31 December 2002) in 2002. Earnings before interest and tax (EBIT) grew to US$701m (649.4m, 31 December 2003) in 2003 from US$612m (583.9m, 31 December 2002) in the previous year. Outlook Dows automotive business has gradually shifted emphasis slightly from the quality of individual parts to systems quality and the companys technical resources should give it a strong competitive position in meeting auto industry demands. The company has enjoyed successful new product launches in the last two years which have lifted volumes and help offset some market and pricing weaknesses. It has also benefited from lower operating expenses, trends that lifted profitability and which should continue to do so in the short term at least.

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Drxlmaier
Wiring and interior systems
Address Drxlmaier Gruppe LandshuterStrae 100 D-84137 Vilsbiburg Germany Tel: +49 8741 470 Fax: +49 8741 940 Internet: http://www.draexlmaier.de Senior Officers Fritz Drxlmaier, Chairman Hans Dompert, Director Franz-Josef Feldmann, Production Andreas Hentschel, Research and Development Products Wiring harnesses and other electrical parts, wood panelling, polished metal parts, leather parts, multiplex systems, plastic parts, rubber parts, centre consoles, door interiors and complete cockpit systems Plants Group: Austria, China, Czech Republic, Egypt, France, Germany, Hungary, India, Malaysia, Mexico, Poland, Romania, Slovakia, South Africa, Thailand, Tunisia, UK and USA Sales c. 1.3bn (Year to 31.12.02) Employees c. 24,000 (2002) Drxlmaier is a family owned company, which produces complete FunctionalIntegrated interior systems (FIS modules) for the automotive industry. These systems consist of interior trim panelling with integrated electric and electronic components. The company has around 24,000 employees in around 42 locations throughout 17 countries worldwide. Nearly half of Drxlmaiers sales come from DaimlerChrysler, with its other main customers including Audi, BMW and Volkswagen. Drxlmaier has three key business units as follows: DAT Drxlmaier Automotivtechnik business unit for BMW DAS Drxlmaier Automotivsysteme business unit for DaimlerChrysler DFS Drxlmaier Fahrzeugsysteme business unit for Volkswagen/Audi HIB, based in Bruchsal, Baden, Germany is the companys interior trim specialist

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Recent Developments Corporate strategy Drxlmaier's aim is to move from being a medium sized company to a global, integrated system supplier, through innovation and strategic acquisitions. In recent years the company has invested overseas, particularly in Eastern Europe where it has set up manufacturing facilities in several low-cost countries such as Poland, Slovakia, Romania, Hungary and the Czech Republic. More recently Drxlmaier has been looking to increase its business in the growing markets of Asia and in 2003 opened a facility in Shenyang, China. Acquisitions In January 1998, Drxlmaier acquired a 73% stake in Holzindustrie Bruchsal GmbH, a subsidiary of Mercedes-Benz since 1930. Holzindustrie Bruchsal produces wood panelling for automotive interiors, and at the time of the acquisition had annual sales of 148.2m and 900 employees. Drxlmaier acquired a further 27% stake in the company on 1 January 2000, which made the company a wholly owned subsidiary. Investments In early 1998, Drxlmaiers Tunisian subsidiary, METS, spent TD2m on upgrading its plant in Sousse (Tunisia), to introduce a new production line for the Volkswagen Golf model. In April 1998, METS established a second plant in Sousse to make wiring harnesses for German car manufacturers. At the time, METS employed over 2,000 people at its first plant in Sousse, and the inauguration of the new plant tripled the existing workforce. In July 1998, Drxlmaier opened a new technical design and engineering centre in Kings Norton in the UK. In September 1999, work began on a new 21,000 square metre production plant in Landau (Germany). The plant, Drxlmaiers second in the area, began operations in 2000 and created 200 new jobs. In December 1999, work began on a new manufacturing plant in Birmingham (UK). The company has invested 5m (8m, 31 December 1999) in the venture and has created 200 jobs. Drxlmaier chose the site due to its proximity to the Rover Longbridge plant, as well as to several of Britains other main vehicle manufacturers. Drxlmaier has made major investments in Eastern Europe and now has facilities in the Czech Republic, Hungary, Poland, Slovakia and Romania. In 2001 Drxlmaier established a new facility for the manufacture of interiors for the Mercedes-Benz SL Roadster in Achim (Germany). The company supplies just-in sequence to the Mercedes-Benz plant in Bremen (Germany). In 2003 Drxlmaier increased its global presence when it established a new facility in Shenyang, China. In December 2003 it was reported that Drxlmaier intends to open a facility in Leipzig (Germany) for the manufacture of cable harnesses and centre consoles following the establishment of manufacturing operations there by companies such as BMW and Porsche. Divestments In January 2004 Drxlmaier announced it is to close its operations in Crossen, northern Germany with the loss of 30 jobs. Contracts Drxlmaier supplies BMW, DaimlerChrysler and Volkswagen/Audi with a wide range of interior, electric/electronic and trimming parts. For example, DAS supplies leathercovered cockpit panelling for a number of Mercedes-Benz A Class models, the CLK cockpit and the interior of the CL (350 parts per vehicle). It also supplies wood trim for the C, E, CLK, SLK and SL models and wiring harnesses for the C, E and S Class. Customer specific wiring harnesses (KSK) are delivered just-in-time to DaimlerChrysler. Production of modules for the KSK is carried out at low-cost country locations with final assembly at the JIT plants. Drxlmaier also supplies the new VW Phaeton from its facilities in Poland. HIB is supplying the Canada-built Lexus RX300 with wood trim, a contract valued at 10m a year. This was the first international order for the Drxlmaier Group. Since then the company has won more overseas contracts; for example Drxlmaier is cooperating with BMW on the Z4 project from the initial design to manufacture and just-in-sequence delivery to BMWs plant in South Carolina (US). 284 AutoBusiness Ltd

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Drxlmaier won the contract to supply the wiring for the BMW Mini, which was expected to generate sales for the company of 20m (32m, 31 December 1999) per year. Since 2002 the company has been responsible for the development and manufacture of the wiring system, interior and wood panelling for the Maybach limousine. The innovative centre console for the new BMW 7 Series is manufactured just-in-sequence by Drxlmaier to the BMW plant at Dingolfing (Germany); Since the middle of the 1990s, Drxlmaier has concentrated on expanding its capabilities for the development, manufacture and supply of complete cockpit systems. The company supplies the complete cockpit for the Mercedes-Benz CLK model. New Product Developments Drxlmaier supplied the door trim to the Audi A2, using Simultaneous Engineering Process (SEP) to ensure quality control. The new Drxlmaier-Technologie-Zentrum (DTZ) in Vilsbiburg (Germany) provides modern facilities for further innovations and development. Drxlmaier was the lead manager for the development of the interior (apart from the seats) for the new Mercedes-Benz SL, and was also a leading supplier and the co-developer on the interior of the new BMW 7 Series. Financial Overview Drxlmaiers annual sales in 2002 were in the region of 1.3bn, an increase on the 2001 figure, which was approximately 1.1bn. As a privately owned company, Drxlmaier is under no obligation to publish results and therefore no figures relating to profits are available. Outlook Drxlmaiers dependence on its German customers, most notably BMW and Mercedes-Benz, has been the driver of the companys growth in recent years, growth which has pushed sales from around 800m five years ago to over 1.3bn currently. The company is building up its systems competence, particularly in the cockpit area. Its position as a wiring specialist gives it a strong starting point for this work, as much of the systems integration is likely to be wiringbased, but it is an area in which there are a large number of competitors. Current wisdom in the industry suggests that Drxlmaier must continue to expand substantially, broadening its customer base and establishing lower-cost facilities overseas to a greater extent to maintain its attractiveness as a long-term development partner and systems supplier for its core German customers. The contract for the Lexus RX300 is a step in the right direction.

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Eaton
Automotive controls and engine components
Address Eaton Corporation Eaton Centre Cleveland Ohio 44114-2584 USA Tel: +1 216 523 5000 Fax: +1 216 523 4787 Internet: http:// www.eaton.com Senior Officers Alexander M. Cutler, Chairman & CEO Stephen M. Buente, Senior Vice President, and Group Executive, Automotive Richard H. Fearon, Executive Vice President and CFO Products Actuators, controls, cylinder heads, decorative body mouldings and spoilers, engine valves, fittings and adapters, hoses and hose systems, intelligent cruise control systems, locking and limited slip differentials, sensors, superchargers, tyre valves, vehicle electronics Plants Automotive: Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Monaco, the Netherlands, Poland, Spain, Taiwan, Turkey, UK, USA Sales Group: US$8.06bn (6.83bn, 31 December 2003) (Year to 31.12.03) Employees Group: 51,000 (2003) Eaton Corporation is a global supplier of highly engineered products for the aerospace, automotive, commercial, construction, industrial, and semiconductor markets. Eaton organises its business into the following reporting segments: Automotive (21% of the Group's 2003 net sales); Fluid Power (35%), which also has automotive interests; Electrical (29%); and Truck Components (15%). Eaton's customers include most of the worlds leading vehicle makers.

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Recent Developments Corporate strategy In recent times, Eaton has been divesting non-core operations and establishing global relationships with other suppliers. The company has widened its product capability, particularly in terms of modular development. Eaton has also been concentrating on developing intelligent electronic solutions, project coordination and system integration management to both OEM and first tier suppliers in order to meet their demand for increased driving safety and comfort. In its Automotive Division, Eaton is focusing on fuel economy, safety and environmental issues. Acquisitions To strengthen its core product areas Eaton has continued to make a number of acquisitions. In November 2002, Eaton completed the acquisition of the Boston Weatherhead division of Dana Corporation for a purchase price of $130m (130.8m, 30 November 2002). Boston Weatherhead manufactures hose, tubing, and fluid connectors for fluid power systems primarily for industrial distribution, mobile off-highway and heavy-duty truck markets. In October 2001 Eaton acquired the assets of the European part of Donnellys automotive mirror actuator business based in Manorhamilton (Ireland). In March 2001 Eaton acquired Sumitomo Heavy Industries 50% interest in the two companies Japanese fluid power joint venture.

Divestments The company has also closed operations and made divestments. During 2001, Eaton implemented restructuring measures that were needed in order to remain competitive in the challenging economic environment. These did not directly affect the companys Automotive Division. In total Eaton closed 17 manufacturing plants during 2001 and reduced its global workforce by 18%. The most significant change in Eatons automotive operations occurred when the company sold its automotive Vehicle Switch/Electronics Division (VS/ED) to Delphi Automotive Systems for US$300m (341.4m, 31 March 2001), in March 2001. This was done because Eaton believed that it was not in a position to lead the consolidation occurring in the integrated cockpit systems market. The sale also allowed Eaton to reduce short-term debt. In March 2001 Eaton sold the assets of its Trucking Information Services business unit, including FleetAdvisor, a leading transportation logistics management system, to QUALCOMM Wireless Business Solutions, for an undisclosed amount. In December 2000, Eaton spun off all shares in its semiconductor business, Axcelis Technologies, Inc. It is now an independent, publicly traded company.

Joint Ventures On 31 March 2004, Eaton announced it had signed an agreement to form a joint venture with FAW Jiefang Automotive Co., Ltd., in Changchun, China to produce a complete line of medium-duty transmissions for commercial vehicles and buses for the growing Chinese market. FAW Jiefang Automotive Co., Ltd. is the commercial vehicle subsidiary of China First Auto Works Group Company (FAW). Eaton and FAW Jiefang will have equal ownership of the joint venture, which will be called FAW Eaton Transmission Co., Ltd. In the third quarter of 2003 Eaton announced that it, together with Shaanxi Fast Gear Co., Ltd. and Xiang Torch Investment Co., Ltd., had signed an agreement to form a joint venture in Xi'an, China, producing heavy-duty truck transmissions for the growing Chinese market. Eaton has 55% ownership of the venture, called Eaton Fast Gear (Xi'an) Co., Ltd. The joint venture will be formally established upon obtaining regulatory approval. Production is expected to begin in the fourth quarter of 2004. Investments In September 2003, Eaton built a large production plant in Nove Sporice (Czech Republic). Eaton initially invested around US$15m in constructing the facility, which produces fluids for the automotive industry. 288 AutoBusiness Ltd

Company profiles In December 2002 it was reported that Eaton is planning to build a plant near the North Bohemian town of Chomutov (Czech Republic) within the next six years. The plant, producing air-conditioning systems for cars, would create up to 1,000 jobs. In December 2000 Eaton announced plans to expand its Mogi Mirim truck components facility to meet production requirements for its contract with DaimlerChrysler. In May 2000 Eatons Aeroquip business unit announced the establishment of a US$26m, 186,000 square feet plant in Singapore for the manufacture of hose products, including high-pressure spiral and wire-braided hose, and hose assemblies for the AsiaPacific markets.

Contracts In the first quarter of 2004 Eaton was awarded new contracts to supply locking differentials to Hyundai and Kia for several new vehicle programs. These contracts are expected to total approximately $150 million over the next six years. As of 2004 Eaton is to supply gearboxes to Volvo's subsidiary in Brazil . The supplier expects to produce 5,000 gearbox units per year. In October 2002 Eaton was awarded a contract with Volvo for heavy-duty transmissions for the South American market. Deliveries begin in October 2004. In March 2002 Eaton said that it was to supply engine superchargers, intake and exhaust valves, roller rocker arms and lash adjusters for the new Mercedes-Benz M-271 engine. The contract is estimated to be worth around US$375m. In January 2002 Eaton announced that it had won a US$160m contract to supply memory glass and power-folding mirror actuators for a wide range of General Motors pick-up trucks and sport utility vehicles, beginning in 2002. Also in January 2002 Eaton was named as BMWs supplier of fluid hose assemblies for two major production vehicle models. The contract is over a six-year period and is expected to generate total sales of over US$150m. Eaton has a multi-year contract to supply advanced powertrain technology for an undisclosed future General Motors' program. The technology is geared up to improve fuel economy without sacrificing power and performance. Eaton also has a multi-year agreement to supply medium-duty truck transmission components of four transmission models to DaimlerChrysler in Brazil. The contract provides the company with a leadership position in mechanical truck transmissions in South American and European markets that complements the company's strong North American position. New Product Developments Eaton has recently instituted an integrated and disciplined product development and launch process for nurturing new ideas and bringing new products to market. Called PROLaunch (Profitable, Reliable, On-time, Launch of new products), it is a structured system for deciding whether an idea becomes reality, is rejected or is shelved. PROLaunch was rolled out in 2002 as a mandatory component of the Eaton Business System. Currently, all product development projects across the company are being managed through PROLaunch.
Recent innovations include:

ULV Engine Valves: the ultra light valve train systems produce more power from less engine. Less reciprocating mass to drain power, means that more power goes to the flywheel. A Steering Column Module (SCM): a fully assembled and tested steering wheel for immediate installation. It features an integrated column housing that holds indicator signals and windshield wipers, as well as an angle sensor that provides suspension control, an immobiliser and a multiplex node. Electronic Limited Slip Differential (ELSD): one-wheel traction control for high-tech cars, compatible with ABS, stability and traction control systems. VORAD Smart Cruise: cruise control that automatically slows the vehicle in order to match the speed of the car in front and establish distance by interfacing with transmission down shift or electronically activating the brake. Once the traffic clears, it re-engages to the preset speed. Hydraulic Launch Assist (HLA): technology that recovers energy that is normally lost 289

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Automotive Technology Roadmap during braking and converts it into hydraulic power that can be used for acceleration. This technology could result in fuel savings of 25-35%. Financial Overview Group sales in 2003 amounted to $8,061m, (6,830m, 31 December 2003), up 12% from the previous years level. Operating profit was $797m (675m, 31 December 2003), up 22% from $651m (620m, 31 December 2002) in 2002. 2003 net income was $386m (327m, 31 December 2003) against $281m (268m, 31 December 2002). The Automotive Division had sales of US$1.7bn (1.44bn, 31 December 2003) in 2003, 7% higher than 2002s US$1.59bn (1.52bn, 31 December 2002). The Division achieved an operating profit of US$224m (1.78.7m, 31 December 2003) in 2003, a drop of 0.4% in comparison to US$225m (214m, 31 December 2002) achieved in 2002. The Truck Division had 2003 sales of $1.27bn (1.08bn, 31 December 2003), up 9.1% from 2003, and operating profit increased by 87% to $168m (142m, 31 December 2003). Outlook Despite Eatons exit from its switches and electronics division in 2001, the company retains a strong bias towards high technology, high-value added components and systems. It is particularly strong in the engine component and truck businesses although it retains significant interests across a broad range of components. The outlook for the truck industry is positive in the long run, particularly in emerging markets, and 2003 saw a significant bounce in the operating profit performance. The Automotive segment is benefiting from heavy investments made in new product development over the last few years and these have expanded the product range and lifted market shares. Engine air management is an area offering great potential as new engine generations add content to deliver higher outputs and better fuel efficiencies in more compact packages.

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Emitec
Metal substrates for catalytic converters
Address Emitec Gesellschaft fr Emissionstechnologie mbH Hauptstrasse 150 D-53797 Lohmar Germany Tel: +49 224 6109 0 Fax: +49 224 6109 109 Internet: http://www.emitec.com Senior Officers Wolfgang Maus, CEO Juergen Witteneben, CFO Products Metal catalytic converter substrates and systems for petrol and diesel engines Plants Germany, USA Sales c. 220m (Year to 31.12.02) Employees c. 800 (31.03.03) Emitec is a 50:50 joint venture between Siemens VDO and GKN. Emitec is the world leader in the design and production of metal substrates for catalytic converters. At present, metal substrates are used in approximately 15% of catalytic converters. Emitec, established in 1986, is headquartered in Lohmar (Germany). Emitec employs over 800 people at its plants in Lohmar and Eisenach (Germany) and Fountain Inn, South Carolina (USA). Emitec also has research and development centres in Lohmar and Eisenach (Germany). Emitecs most important markets are in Europe, North America and Asia. Emitec has representatives in Japan, China, India and Korea. The companys customers include all major car and motorcycle manufacturers from all over the world, including BMW, Fiat, Volkswagen and Volvo.

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Recent Developments Corporate strategy As global environmental concern has grown and emissions legislation become ever stricter, Emitec has benefited from the early decision of the automobile industry to employ catalytic converters to reduce pollution from exhaust gases. Emitecs parent company GKN aims to position Emitec to take advantage of the long-term potential that is presented by the demand for greater mobility while at the same time meeting higher requirements for emission controls. Investments In January 2001 production began at Emitecs new plant in Thuringia, Eisenach (Germany), the plant has an annual manufacturing capacity of six million metal substrates for high-efficiency catalysts. In Thuringia, Emitec will not only fabricate its developments which have proven their worth all over the world but will also continue to push ahead with the development of modern catalyst systems with the introduction of new process and production techniques. New Product Developments Emitec designs and manufactures metal substrates, which support the catalyst in catalytic converters. The thermal properties of a metallic substrate enable it to reach operating temperatures more quickly than traditional ceramic material. This results in significant reductions in emissions, particularly when engines are started. Catalytic converters employing metal substrate technology can achieve very high cell densities, which provide a more efficient way of complying with increasingly stringent emission legislation. Emitec has always relied upon metal as a material for all new and further developments and this has helped the company develop into one of the biggest manufacturers of metal catalyst carriers in the world. Throughout 2002 the new Test and Development Centre in Thuringia (Germany) continued the development of new cell structures and higher cell densities to meet increasing customer requirements. At the IAA in September 2003 Emitec announced the production readiness of a retrofit diesel particulate filter, jointly developed by Emitec and the Tokudaiji Institute of Automotive Culture. It also showcased its new generation of structured metal substrate catalytic converters with turbulent flow patterns, which it believes will supercede converters with achsial and laminar flow patterns. In January 2004 it was reported that Emitec is focusing on new diesel technologies to meet EU-IV and EU-V emission norms that will be operational from 2005. These technologies enhance efficiencies, reduce catalyst volume and cut PGM loading and cost. As for exhaust gas, the pre-turbocharger catalyst (PTC) and hybrid catalyst provided by EG are fitted near the engine. Financial Overview Emitec is a 50:50 joint-venture between Siemens VDO and GKN and as such its results are consolidated in the two parent companies results. However, in the year to 31 December 2002 Emitec achieved total sales of 220m. In the year Emitec held US sales at the same level as 2001, but sales in Europe declined slightly due to the weaker market and higher sales of diesel engine cars, which are subject to less stringent emission legislation. In 2003 Emitec continued to develop new products for the future but lower sales in the USA impacted performance. GKNs share of Emitec sales were down by 10m (14.2m, 31 December 2003), reflecting the end of several major US programs and a lag before their replacement with new programs. In Germany Emitec sales were broadly unchanged. GKNs share of Emitec, as a result of lower US sales, saw a 3m (4.25m, 31 December 2003) decline in operating profit, in spite of a well-managed reduction of its US headcount and cost base.

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Company profiles Outlook Emitec has faced a more challenging environment in North America in recent quarters although the hiatus in volumes should prove temporary. New products showcased in the final months of 2003 have the potential to deliver renewed growth in the medium term. This applies especially to retrofit diesel particulate filters and the new generation of structured metal substrate catalytic converters.

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Faurecia
Seating, exhausts, interiors, front-end modules
Address Faurecia 2, rue Hennape 92735 Nanterre Cedex France Tel: +33 1 7236 7000 Fax: +33 1 7236 7007 Internet: http://www.faurecia.com Senior Officers Pierre Lvi, Chairman and CEO Laurent Hebenstreit, Interior Systems Vice President Gerard Chochoy, Automotive Seating Vice President Jean-Marc Hannequin, Exhaust Systems Vice President Pierre-Jean Sivignon, CFO Products Exhaust systems, front-end modules, seating, vehicle interior modules and components (cockpits, door panels, acoustics, soft trim, instrument panels, etc) Plants Argentina, Brazil, Belgium, Canada, China, Czech Republic, France, Germany, Hungary India, Italy, Japan, Luxembourg, Mexico, Netherlands, Poland, Portugal, Slovakia, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Uruguay, UK, USA Sales Group: 10.1bn (Year to 31.12.03) Employees 59,000 (2003) Faurecia is the world's third largest vehicle interiors supplier and number one in Europe. It is the world's second largest supplier of front-end modules and number one for exhaust systems in Europe and number two globally. It claims a 30% share of the European market of insourced and outsourced cockpits. Faurecia has four key areas of operations: automotive seating; cockpits; exhaust systems; front-end modules. The group is among the worlds top three companies for six major automotive modules: seating; cockpits; doors; acoustics packages; front-ends; and exhaust systems. Faurecia has over 160 sites in 27 countries throughout Europe, North America, South America and Asia. The majority of Faurecias sales (around 85% of 2002 sales) are generated in Europe, notably France and Germany. Volkswagen and PSA Peugeot Citron are the companys biggest customers. PSA Peugeot Citron owns 71.63% of Faurecia.

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Recent Developments Corporate Strategy In December 2000 the European Commission approved Faurecias acquisition of Sommer Allibert (including SAI Automotive AG). Faurecia is looking to grow its interior capabilities and is achieving this through strategic acquisitions and investments. During the second half of 2000, Faurecia launched its 10 out of 10 plan. This aims to accelerate the companys growth and increase its profitability by systematically upgrading its operating processes to make them more efficient. In 2001 the "10 out of 10" plan achieved improvements worth over 50m (US$4m, 31 December 2001). Unfortunately this did not offset the negative impact of the industry downturn, and in early 2002 Faurecia launched restructuring measures to accelerate its "10 out of 10" plan. These included the closure of five sites in the USA, Germany, France and the Netherlands, as well as 1,800 job cuts. Acquisitions In June 2003 Faurecia acquired the exhaust system businesses of Chang Heung Precision Co, Ltd. The South Korean company had been producing exhaust silencers under license from Faurecia since 1998. This complements the existing joint venture with catalyst specialist Daeki, which was formed in April 2002. The new structure will make Faurecia the second-largest exhaust system supplier in South Korea. With effect from 3 January 2001 Faurecia and SIT (the controlling holding company of the Sommer Allibert group) acquired Sommer Allibert including SAI Automotive for 1.48bn. In June 2001, Faurecia merged with SIT giving it full operational control over Sommer Allibert. The two companies complement each other well: SAI Automotive was the European leader in instrument panels and cockpits, door panels and modules, and acoustics, while Faurecia is the European leader in automotive seating. Together, Faurecia and Sommer Allibert cover the full spectrum of vehicle interior expertise. In November 1999, Faurecia acquired AP Automotive Systems Inc. (APAS) for $340m (337m, 30 November 1999), including debt. This acquisition positioned Faurecia as the third largest vehicle exhaust supplier in North America. Joint-ventures SAS Automotive Systems had 2002 sales of 1.5bn, against sales of 373m in 2001, and produced around 2.7m cockpits (860,000 in 2001). The joint-venture employed 2900 staff in 2002. SAS Automotive Systems was established in 1996 as a 50/50 joint-venture with Siemens VDO to design, develop and produce complete cockpit modules. In October 2002 it was announced that Faurecia had formed a joint-venture with GSK to produce automotive seating at Wuhan (China). The new company, FGW, is 51% owned by Faureca and 49% by GSK. The company is providing complete seats for the Citroen Xsara and Picasso, which are being manufactured by Dongfeng-Citroen Automobile Co in Wuhan. In March 2002 Faurecia formed a joint-venture with South Korean catalytic converter specialist, Daeki Industrial. Faurecia is now the primary shareholder of Daeki Industrial with a 49% stake and has an option to increase this up to 51%. Daeki Industrial is ranked second in its market in South Korea and employs around 110 people. The deal increases Faurecia's presence in Asia and expands its share of the overall exhaust systems market. In July 2001 Faurecia and NHK formed two new 50/50 joint-venture companies in Japan to develop and produce new automotive seating for Nissan. Faurecia-NHK Co., Ltd. will carry out marketing and development activities. Faurecia-NHK Kyushu Co., Ltd. will produce complete seats and is due to begin operations in 2003. In December 2000 Faurecia announced that it was cooperating with Motorolas Automotive and Industrial Electronics Group (AIEG) to supply the diesel exhaust system market with absolute and differential pressure sensors and systems. Faurecia is to integrate Motorolas Tube Mount Delta Pressure Sensor (TMDP) into its exhaust systems. These sensors control the regeneration of particle filter systems and subassemblies. Faurecia has a 51/49 safety joint venture with Autoliv called EAK, which produces seatbelts and passenger airbags. SAI Automotive also has two joint-ventures with Inoac Corporation of Japan to produce instrument panels, door panels and cockpit modules in the USA and in Japan.

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Company profiles Investments In November 2003, Faurecia announced that it is to build a new facility in Wuxi, Jiangsu province (China). The plant, which will produce automotive seat mechanisms and components, will represent a total investment of 25m and will cover a total area of 23,000 square metres. It is scheduled for completion in October 2004, and is expected to employ around 150 staff. In September 2003, it was announced that Faurecia is opening a new R&D centre in Hagenbach (Germany) for the design and development of instrument panels and cockpits. Total investment in the project is expected to reach in excess of 20m. In August 2003, it was reported that Faurecia will invest 36.2m in its production site in Sao Joao da Madeira (Portugal). The Portuguese state is rumoured to be contributing nearly 1m to the investment. The investment project follows two others, involving nearly 74m, to which the state contributed with 10.5m in the last few years. In July 2003, it was reported that Faurecia had been named as one of three European component manufacturers set to invest in operations at the new Rosslyn (South Africa) supplier park. Faurecia, along with Spain's Grupo Antolin and Tensile Rubber Mouldings, is said to be investing some R75m (8.99, 31 July 2003) in setting up production operations in the park. The Rosslyn supplier park is located near the assembly plants of BMW, Fiat, Nissan and Ford, creating savings on logistics and transport. In the same month it was reported that Faurecia is planning to establish a second facility in Pulversheim (France) to manufacture seats for the Peugeot 206 model, starting in November 2004. Total investment is said to be 8m, and the investment is expected to create around 50 jobs. In June 2003, Faurecia announced plans to strengthen SAS, the cockpit joint-venture with Siemens VDO by incorporating four additional cockpit assembly plants from the respective companies into SAS in order to specialize in just-in-time delivery of cockpit modules. Faurecias Gent (Belgium) plant will now be part of SAS. In February 2003, it was reported that Faurecia is to build a 10m plant in Sittard (Netherlands). Faurecia will manufacture front and back seats for the Smart and Mitsubishi New Compact Car, which will be produced by the Dutch car company NedCar. The current Faurecia plant in Roermond (Netherlands), including the 102 employees, will reportedly move to Sittard. The new plant is expected to create 250 new jobs. In November 2002 it was announced that Faurecia has opened a new plant in Legnica (Poland). The facility specialises in the production of felt pieces for the acoustic insulation of vehicle interiors. It is scheduled to reach full capacity by the end of 2003. In September 2002 it was reported that Faurecia had announced plans to invest about 80m Polish zloty (19.7m, 30 September 2002) in the construction of a new facility in Gorzow Wielkopolski (Poland). The factory is expected to be finished in 2003, and should initially create 200 jobs. In March 2002 Faurecia officially opened a seat assembly plant in Deeside, North Wales (UK). The plant supplies complete seat assemblies to General Motors' Vauxhall Motors in Ellesmere Port. At full capacity the plant will employ 230 people and produce 185,000 seats a year on a just-in-time basis. Production at Deeside began in January 2002 with seats for the Astra and production launch for the new Vectra began in April 2002. Also in 2002, Faurecia began series production of a new seat facility in Neuenstadt (Germany). The seat systems are delivered just-in-time to Audi A8 production at Neckarsulm (Germany). In February 2002 Faurecia moved into its new headquarters in Nanterre (France). The General Management of Faurecia, as well as the Seating, Exhaust and Interior Systems Business Groups are moving to Nanterre to join the new Faurecia Headquarters. In June 2001 Faurecia began building its first plant in Hungary with 20m investment. The exhaust systems plant in Vasvar began production in early 2002, and will eventually employ around 400 people. During 2000 production began at four new Faurecia seating plants in France: in Sandouville for Renault; in Sochaux and Mulhouse for Peugeot; and in Valcenciennes for Toyota. In November 2000, Faurecia began building a second seating component plant in Poland in the Walbrzych economic zone. This plant, scheduled to open in late 2001, received 37.5m investment. Also during 2000 the group expanded its existing facility in Poland, at Grojec. In summer 2000, Faurecias joint venture Trecia began operations at an assembly site near Rennes (France). This supplies the Citron Xsara in France and Spain. AutoBusiness Ltd 297

Automotive Technology Roadmap Faurecias new exhaust facility at Heilbronn (Germany) opened during 2000. The site supplies the cold end of exhaust systems on a just-in-time basis for the Audi A6. Also during 2000 Faurecia started-up a new exhaust plant at Bakov, Czech Republic with 10m investment. The new plant, initially established for the new Skoda Fabia, will also supply exhaust systems for the German market.

Contracts Faurecia is supplying Volvo with a complete pre-assembled cockpit module for its S40 model. In July 2003, Faurecia announced contracts with the Chrysler business of DaimlerChrysler to supply complete seats, standard seat frames, instrument panels, centre consoles, door panels and exhaust systems for various future models. SAS Automotive Systems cockpit modules are supplied to around 20 European models, including the Ford Focus & C-Max and the Renault Mgane II. The new Land Rover Discovery will carry an SAS cockpit module, as will the new koda Octavia from 2004. For each of these vehicles, SAS carries complete responsibility for assembly, logistics and sub-supplier management of the module. In 2002, SAS delivered some 2.7m cockpits to OEM customers. Diesel versions of the new Ford Focus C-Max are also fitted with a Faurecia diesel particulate filter, the first German-assembled car to do so. In December 2002 it was reported that Faurecias joint-venture with NHK has received a large order for car sheets from Nissan. The sheets will feature on two models that Nissan will produce at its Fukuoka Prefecture plant. Faurecia has a major contract with General Motors for the seating of next generation midsized Epsilon Platform cars (such as Chevrolet Malibu, Opel Vectra and Pontiac). The annual order is for 750,000 seat sets and the deal is worth approximately $500m (520m, 31 March 2000) a year. Production is due to start in 2003. Faurecia also supplies manual and electric front seat adjusters for the Chevrolet Blazer, Oldsmobile Bravada and GMC Jimmy/Envoy. Faurecia supplies Ford with the exhaust line for its new Focus and is responsible for the design, development, manufacture and integration of the complete exhaust system. Over six years the contract is worth about $800m (850m, 31 December 2000). Faurecia supplies seats on a number of new European cars, including the Renault Laguna, Peugeot 307 and 607, Citron C5, as well as the Fiat/PSA MPV range and the current Renault Espace. Faurecia supplies seat systems to all Audi models launched sine 2001: A4, A4 Cabriolet, A8 and A3. In April 2000 SAI Automotive won a contract to develop cockpit modules for cars based on Fords future mid-range C212 platform. New Product Developments Faurecia has nearly 60 R&D and technical centres around the world. Recent product initiatives include the following: Faurecia has developed an all-in-one plastic car floor that claims to provide better insulation from road and engine noise. It is expected that the floor will be used in a car due for introduction in 2004. Faurecia has developed the BioVolume automotive seating safety system. This enables the airbags and seatbelt to adapt to accident conditions, by detecting the type of seat occupant (presence of occupant, size, and position). The BioVolumes sensors are integrated in the seat without the need for style or structure modifications. Faurecias VARIO rear seat concept is a multi-functional two-third split rear seat bench, with single seat appearance. The outer seats can be moved to create additional space after having lowered the centre seat, which can be used as an armrest. There are a number of additional possible features such as monitors and cupholders. The system is due to become available in 2002. Faurecias Advanced Thorax Care System car seat is an All Belt To Seat (ABTS) lightweight seat module designed to meet expected new EU safety regulations. Faurecia has developed filtration technology that removes 99% of particulate matter from diesel engine emissions, with rising diesel sales and ever-tougher emissions regulations, AutoBusiness Ltd

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Company profiles exhaust treatment is set to be a major growth area. Financial Overview Faurecias consolidated 2003 sales amounted to 10.1bn, up 2.3% compared to 9.87bn in 2002. Excluding sales of catalytic converters, sales increased by 4.5% to 9.50bn and rose by 8.3% at constant exchange rates and on a comparable scope. Over the same period, European automobile production is estimated to have fallen by 2.2%. Operating income for the 2003 financial year came in at 302.8m (3% of sales), representing an increase of 47.2m on the 2002 figure of 255.6m. EBITDA stood at 637.1m (6.3% of sales), an improvement of 51.0m on the 586.1m figure posted for 2002. Net income came to 10.1m, a major improvement on the net loss of 59.1m posted in 2002. Aside from higher operating income, this increase was attributable primarily to the reduction in net financial expense and the decline in restructuring costs. Outlook Faurecias seating and interiors businesses are growing significantly on the basis of a number of new major program wins in Europe and North America. Recent contract wins suggest this momentum can be maintained over the next few years and strong market share positions have been established. However, the real challenge going forward is not to maximise revenue growth but to maintain or lift margins, something that has proved elusive until recently.

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Federal-Mogul
Drivetrain, electrical and rubber components
Address Federal-Mogul Corporation 26555 Northwestern Highway Southfield MI 48034 USA Tel: +1 248 354 7700 Fax: +1 248 354 8950 Internet: http://www.federal-mogul.com Senior Officers Robert S. Miller, Chairman Charles G. McClure, President, CEO G. Michael Lynch, Executive Vice President, CFO Products Powertrain Systems: power cylinder systems, camshafts, sintered products, valves, spark plugs, ignition wires, cables, coils and ceramic insulators Sealing Systems: total engine sealing, total transmission sealing, total axle sealing, cylinder head gaskets, ancillary gaskets, dynamic seals, bonded pistons, heat shields, noise and vibration sealing systems Friction products: brake and friction products, chassis products, driveline products, lighting products, wiper products, fuel system components and systems protection products Plants Argentina, Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Ireland, Italy, Japan, Mexico, Poland, South Africa, South Korea, Spain, Switzerland, Thailand, Turkey, UK, USA, Venezuela Sales Group: US$5.55bn (4.42bn, 31 December 2003) (Year to 31.12.03) Employees Group: 44,900 (2003) Federal-Mogul Corporation is a leading supplier of powertrain and sealing products and systems to the global OE and replacement markets. It supplies the automotive industry and heavy-duty, railroad, farm and industrial markets. Federal-Mogul has two reportable segments: Americas/Asia Pacific (around two-thirds of sales); and Europe/Africa (around one third of sales). Each segment manufactures the following products: powertrain systems (accounted for 33% of 2003 sales); sealing systems, visibility and system protection products (11%); and friction products (8%). In 2003, 53% of Federal-Moguls sales were to the OE market. Federal-Mogul has around a 15% share of the global piston market; a 42% share of the piston ring market; and around a 38% share of the engine bearings market. It also has a strong presence in the gasket/seals markets. In 2002 Europe generated 49% of OE sales, the Americas made up 48%, and the remaining 3% was generated elsewhere in the world. FederalMoguls primary customers include BMW, Caterpillar, Cummins, DaimlerChrysler, Fiat, Ford, General Motors, Nissan, PSA Peugeot Citron, Renault and Volkswagen. At the beginning of 2003, Federal-Mogul operated 167 manufacturing/technical centers worldwide, 59 of which were situated in Europe.

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In September 2001 Federal-Mogul filed for Chapter 11 bankruptcy protection. Federal-Mogul's UK subsidiaries have also filed jointly for Chapter 11 and for administration under the UK Insolvency Act of 1986. No other foreign subsidiaries are included in the filings. In March 2003 Federal-Mogul filed a Plan of Reorganization with the US Bankruptcy Court, and according to the company at the time, was likely to emerge from Chapter 11 late in summer 2003. However, in July 2003, Federal-Mogul filed a motion seeking a four-month extension to its Chapter 11 exclusive period. In November 2003, it was announced that Federal-Mogul had reached an agreement with relevant parties on an amended plan of reorganization filed with the US Bankruptcy Court in Delaware but it appears that emergence from Chapter 11 will not be before mid-2004. Federal-Mogul's success in achieving leading market positions in its core business areas has been seriously undermined by the debt, overlapping operations and difficulties associated with asbestos, which it inherited from a series of acquisitions in the late 1990s (most specifically T&N Ltd). Falling demand for replacement parts has also damaged sales and profits. Recent Developments Corporate strategy During the mid to late 1990s Federal-Mogul operated an aggressive policy of expansion through acquisition, in order to establish a wider geographical presence and to increase its technological capabilities. These acquisitions helped make it a global technology leader in its core business areas of powertrain systems, brake systems and sealing systems. However, this strategy resulted in the group assuming a high level of gearing, which undermined its financial stability. In an attempt to remedy this in March 2000 Federal-Mogul embarked on a strategy of reorganisation and rationalisation in order to concentrate on core operations, improve cost efficiency and facilitate growth. Despite its cost-cutting efforts, Federal-Mogul's financial position continued to deteriorate during 2001. This was attributed to the sharp slowdown in the North American automotive industry, made worse by the events of 11 September 2001. Therefore in September 2001, Federal-Mogul filed for Chapter 11 to protect itself from creditors while restructuring its operations. The company has continued to operate during the restructuring and did not expect plant closures or job losses as a direct result of the filing. In spite of Federal-Mogul's current financial difficulties and some recent retrenchment in Europe, selective investments in Europe are likely to feature strongly in the company's future strategy for growth. Also, in October 2002 Federal-Mogul announced that it was looking to increase its market penetration in Asia. In line with this strategy the group is expanding its technical and sales resources in Japan. The group said that it was looking to increase its sales to Asian customers by at least US$500m (508m, 31 October 2002) by 2010. Acquisitions In September 2001 Federal-Mogul completed the acquisition of an 85% stake in WSK Gorzyce, a leading Polish producer of pistons and other automotive equipment for diesel applications. Federal-Mogul has also agreed to invest US$31.3m (34m, 30 September 2001) in the automotive parts and components maker. Around 80% of production is exported. The company employed 2,500 employees and recorded annual sales of nearly US$50m (53.1m, 31 December 2000). In January 2003, Federal-Mogul announced it had entered into a letter of intent to acquire Honeywell's Bendix friction materials business. The completion of the acquisition is subject to Bankruptcy Court approval and customary conditions, and will occur after Federal-Mogul has emerged from Chapter 11. Divestments Recent disposals include: In July 2003 it was reported that Federal-Mogul had sold its Omega unit, which manufactures power-steering hoses and rebuild kits, to Freudenberg-NOK's AutoBusiness Ltd

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Company profiles replacement components division, Corteco. In March 2003, Federal-Mogul signed an agreement to sell its original equipment (OE) moulded lighting assembly operations to Decoma International Inc. Under the sale agreement, Decoma International acquires manufacturing facilities in Matamoros (Mexico), and Texas (US); and an assembly operation in Toledo, Ohio (US). Decoma International also acquires the customer contracts and supporting manufacturing equipment at Federal-Mogul's lighting facility in Hampton, Virginia (US). In February 2003 Federal-Mogul won approval to sell its North American camshaft business to Asimco International of China for US$28m (26m, 26 February 2003). The sale includes plants in Michigan and Indiana. In November 2002 Federal-Mogul announced the sale of its camshaft manufacturing operation in Saltillo, Mexico to Linamar Corporation. Federal-Mogul Camshafts de Mexico employed around 160 people and in 2001 had sales of around US$12m (12.1m, 30 November 2002). In March 2002 Federal-Mogul completed the sale of its Signal-Stat Lighting Products division to Truck-Lite Company Inc. a subsidiary of Penske Company, LLC, for approximately US$23m (26.4m, 31 March 2002). In April 2001, TCI, Federal-Moguls torque converter business, was sold to Converter Cam, Inc. TCI produced torque converters for high performance automotive aftermarket applications. In March 2001, the company announced the sale of its lightweight Advanced Disc System (ADS) brake concept to Delphi Automotive Systems stating that it did not fit with core activities. About 25 Federal-Mogul employees were transferred to Delphi, in order to continue their work on the ADS project. In July 2000, Federal-Mogul announced plans to sell its oil conditioning system business to Filterwerk Mann + Hummel GmbH. The UK-based Oil Conditioning System (OCS) business manufactures bypass oil cleaning centrifuges for the heavy duty and medium speed diesel engine markets.

Joint-ventures In November 2003, Federal-Mogul announced that it is to produce cylinder liners for a Japanese automaker in a new joint-venture in Europe. Teikoku Piston Ring Co., Ltd. of Japan will own 49.9% of the company, and a holding company, comprised of FederalMogul and a Dereli family-owned company, will own the remaining 50.1%. A new facility had been built to produce the cylinder liners in Gebze (Turkey), by mid-February 2004. In August 2002 Federal-Mogul agreed to form a 50/50 joint-venture with Taiho Corporation of America, a wholly-owned subsidiary of Taiho Kogyo Co., Ltd. (Japan). The new company, TF Global Gaskets LLC, produces multi-layer steel cylinder head gaskets at an existing Federal-Mogul facility in Gordonsville, Tennessee (USA). In November 2001 Federal-Mogul and Teikoku Piston Ring Co., Ltd. formed a jointventure to manufacture high performance steel piston rings. The new company is called United Piston Rings, Inc. and manufactures at Federal-Mogul's Manitowoc, Wisconsin (USA) manufacturing facility. The two companies together invested approximately US$10m (11m, 1 November 2001) in the venture in the first year. Federal-Mogul hopes the cooperation will create more business opportunities with Japanese carmakers such as Honda, Nissan and Toyota. Investments In March 2003 it was reported that Federal-Mogul has begun construction of a new 5,000 square metre production hall in Kunsziget (Hungary). It was set for completion in June 2003. In February 2003, Federal-Mogul Corporation announced that it is making a substantial investment in its Toledo, Ohio (US) Ignition Technical Center, bringing the ceramic development process for its Champion(R) spark plugs in-house in order to increase responsiveness. In October 2002 Federal-Mogul announced the establishment of an Asian regional office in Yokohama, Japan. The group also revealed that Yokohama would be the location of a new technical centre that is scheduled to open in early 2004. In April 2002 Federal-Mogul received investment incentives for the expansion and modernisation of its friction products plant in Kostelec nad Orlici (Czech Republic). The investment will allow the facility to produce 12 million passenger car and six million truck braking system components per year. AutoBusiness Ltd 303

Automotive Technology Roadmap In February 2002 Federal-Mogul announced plans to build a technical centre in Japan incorporating computer-aided design, 24-hour online capabilities between Japan, Europe and North America, applications engineering and engine test cells. The company hopes the facility will enhance its sales and engineering presence in Japan and improve its relationships with Japanese transplants in North America and Europe. In November 2001 Federal-Mogul announced plans to invest PLN390m (106m, 6 November 2001) in its pistons plant in Gorzyce (Poland) by 2005. The company plans to increase its annual production of pistons at the plant from 4 million to 13 million by 2005.

Contracts Federal-Mogul is currently supplying pistons to DaimlerChrysler for use on the Mercedes-Benz Maybach, manufactured in Sindelfingen (Germany). In January 2003 it was reported that Federal-Mogul has been chosen by the Chrysler Group to undertake the manufacturing of the entire sealing system of the 5.7-liter HEMI Magnum V8 engine, which features in the 2003 Dodge Ram 1500, 2500 and 3500 pickups. In January 2002 Federal-Mogul was selected to supply gaskets and dynamic seals for the Cummins diesel engine that will be installed on the 2003 Dodge 2500/3500 series pickup trucks. The deal is expected to generate US$20m (23.2m, 31 January 2002) in sales over three years. In October 2001 Federal-Mogul Corporation was awarded four contracts with a combined value of more than US$20m (22.1m, 31 October 2001) annually to supply powertrain and brake components to North American vehicle manufacturers and first-tier suppliers. In March 2001 a contract was announced for the design and production of pistons for an all-new V8 engine for a Nissan full-size pickup that will be produced in the USA from 2003. In February 2001, the company announced that its Italian subsidiary, Federal-Mogul S.r.l., had agreed to supply carmakers with timer/glow plug systems in conjunction with Nagares S.A. (Spain) The glow plugs and timers are being developed and sold together as systems to provide performance, cost and emissions benefits. New Product Developments Federal-Moguls product development has recently focused on heightening its modules and systems capabilities, concentrating particularly on a reduction of energy consumption and noise pollution. Total expenditures for R&D were US$123.1m (98.1m, 31 December 2003), US$106.7m (101.8m, 31 December 2002) and US$105.7m (119.3m, 31 December 2001) in 2003, 2002 and 2001 respectively. A new thermoplastic sleeve, FlexTrough(TM) 2530, designed to maintain wire assemblies in a flat profile and protect against fluids and abrasion. The sleeve's improved flexibility is made possible by a specially engineered corrugated construction, facilitating complex routing in instrument panels, door harnesses and headliner applications; under carpet and trunk areas; and in other areas requiring a flat, low profile. Three new Fel-Pro 1-Piece Oil Pan Gaskets designed for Performance Chevy Engines. These new molded-rubber oil pan gaskets, unveiled in July 2000, offer leakproof sealing. A total sealing system for Cummins Advanced Heavy Duty (AHD) engine. Wagner ThermoQuiet LT semi-metallic disc brake pads for light trucks, sport-utility vehicles and minivans, which deliver a noise damping efficiency improvement of around 38%. The first use of clear lens reflector optics headlamps on a light-duty truck for the frontend of future-model North American cars and trucks. A forward lighting module (FLM), which incorporates a headlamp assembly into the grille opening reinforcement (GOR). The FLM can be incorporated into the cars front-end structure and offers modular sequencing opportunities In December 2003, it was announced that Federal-Mogul, together with Siemens VDO, is developing a combustion sensor that is integrated into the glow plug in diesel engine applications. This innovative sensor will, for the first time, enable the combustion to be AutoBusiness Ltd

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Company profiles monitored directly in the cylinder. Volume production is set to commence in 2006. Financial Overview Federal-Mogul reported sales from continuing operations for the year ended 31 December 2003 of US$5.55bn (4.42bn, 31 December 2003), an increase of 7% when compared to sales from continuing operations of US$5.18bn (4.94bn, 31 December 2002) for the same period in 2002. Sales from continuing operations were favourably impacted by US$352m (280.4m, 31 December 2003) of foreign currency translation and by favourable sales volumes, which more than offset customer price reductions. Federal-Mogul reported a loss from continuing operations before income taxes and cumulative effect of change in accounting principle of US$133.0m (106.0m, 31 December 2003) in 2003, compared to a loss of US$123.0m (117.4m, 31 December 2002) in 2002. The Company reported a net loss from continuing operations of US$186m (148.2m, 31 December 2003) during 2003, compared to a net loss from continuing operations of US$201m (191.8m, 31 December 2002) in 2002. Sales for the Powertrain segment in 2003 totalled US$1.84bn (1.47bn, 31 December 2003), a 12% increase over the US$1.65bn (1.57bn, 31 December 2002) produced in 2001. Total sales for the Sealing Systems and Systems Protection segment for 2003 were US$620m (493.9m, 31 December 2003), 3% lower than the US$639m (609.7m, 31 December 2002) produced in the previous year. Net sales for the Friction segment increased by 15% from US$374m (356.8m, 31 December 2002) in 2002 to US$431m (343.4m, 31 December 2003) a year later. Outlook Federal-Mogul has used the shelter of Chapter 11 to undertake a major restructuring while continuing to develop its systems capability and pursue growth in Asia and from new technologies. This shelter is now likely to last until mid-2004. Contracts for power cylinder modules reflect a trend towards greater outsourcing of systems and module responsibility to competent first-tier suppliers in the engine area. This offers Federal-Mogul substantial opportunities for increasing the volume and quality of its business in the next few years, although competition is strong.

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Gentex
Electrochromic mirrors
Address Gentex Corporation 600 N. Centennial Street Zeeland MI 49464 USA Tel: +1 616 772 1800 Fax: +1 616 772 7348 Internet: http://www.gentex.com Senior Officers Fred Bauer, Chairman and CEO Garth Deur, Executive Vice President Enoch Jen, Vice President of Finance Products Electrochromic mirrors and windows, LEDs Plants USA (4) Sales Group: US$469m (373.6m, 31 December 2003) (Year to 31.12.03) Employees 1,973 (February 2004) Gentex operates out of four facilities in Zeeland, Michigan (USA); three of which are automotive. In November 2002, Gentex announced plans to expand the manufacturing operations in Zeeland, with the construction of a fourth mirror manufacturing facility, which is scheduled to open in 2005. It also has an automotive sales office in Livonia, Michigan; and automotive sales and engineering subsidiaries in France, Germany, Japan, and the UK. Gentex designs, develops, manufactures and markets products employing electrooptic technology. It is the pioneer and world leader of the electrochromic automaticdimming mirror industry, which accounts for around 95% of the companys annual sales. Gentex also produces fire protection products. Around 50% of Gentex's sales come from outside the USA. The company's main product lines are Night Vision Safety (NVS) rear-view mirrors, which detect and eliminate dangerous rear-view mirror glare. Gentex also produces electrochromic exterior mirrors. Around 56% of Gentex NVS mirrors now have added features such as compass display, temperature readers, automatic headlamp control, remote keyless entry receivers, garage door openers, map lamps, trip functions and global positioning system controls. NVS mirrors are offered as standard or optional on an increasing number of vehicle models worldwide. Gentex shipped 7,132,000 interior auto-dimming mirrors in 2003, up from 6,305,000 in 2002. DaimlerChrysler, General Motors and Toyota each account for over 10% of sales. Other automotive customers include Audi, BMW, Hyundai, Lexus, Nissan and Toyota.

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Recent Developments Corporate strategy In recent years Gentex has concentrated on leveraging its technologies to constantly develop and improve value-added proprietary products. It dominates the market for automatic-dimming mirrors thanks to its electrochromic and electro-optic technologies. Yet only 15% of the global market and 25% of the North American market for light vehicles offer electrochromic mirrors. Gentex is positioning itself to capitalise on an automatic-dimming mirror market that may eventually reach US$2.5bn (1.99bn, 31 December 2003). To attract new customers and break into the medium-priced vehicle market, Gentex has strategically turned the mirror into an advanced electronic module with integrated security, telematics, GPS and safety functions. This strategy has met with considerable success in the last few years, during which the company began shipments of its Night Vision Safety mirrors for a number of mid-sized, medium-priced vehicles, including the Toyota Camry, Ford Taurus, Mercury Sable, Volkswagen Passat, Jetta, Golf and Beetle, Nissan Altima, Hyundai Santa Fe and Sonata and Kia Optima and Sorento. New contracts in 2003 included the Audi A3 and A4, Volvo S40 saloon, and Nissan 350Z, Murano, Quest, Maxima, Titan and Pathfinder Armada models. The company also shipped 3,128,000 exterior auto-dimming mirrors in 2003. Joint-ventures In November 1999, Gentex and Murakami Corporation, a leading maker of automobile rearview mirrors, announced plans to cooperate in order to expand their sales and technology for electrochromic automatic dimming mirrors. Murakami holds a 40% share of the Japanese car mirror market, and currently supplies mirrors to Toyota, Honda, and Mitsubishi, which are respectively Japan's first, third and fourth-largest automakers. As a result, this deal with Murakami gives Gentex the opportunity to increase its presence in Japan. Investments A new manufacturing facility is being constructed in Zeeland, Michigan (USA). This will open in 2005 at a cost of US$40m-45m (31.9m-35.9m, 31 December 2003). In March 2004, Gentex opened a new automotive sales and engineering facility in Erlenbach (Germany) at a cost of US$5m (4.11m, 31 March 2004). In the second quarter of 2000, Gentex opened its third automotive products manufacturing facility. The plant, located in Zeeland, Michigan (USA), increased the company's capacity for manufacturing auto-dimming mirrors to 14 million units. In May 2000 Gentex opened a new automotive sales and engineering office in Paris (France). Gentex France S.A.S. houses sales and engineering operations designed to serve the company's European customers, which account for around 25% of sales. Contracts In 2003 Gentex signed a new contract that will make it the supplier of around 95-98% of DaimlerChryslers mirror demand through to the end of the 2006 model year, both for Mercedes-Benz and Chrysler brands. The company has begun supplying interior automatic-dimming mirrors for the 2004 Peugeot 407, its first mirror program with Peugeot or any French OEM. In November 2002 Gentex began shipping interior, automatic-dimming mirrors for the new 2003 Toyota 4Runner and Sequoia SUVs. In April 2002 Gentex began delivery of automatic-dimming mirrors for the Toyota Corolla and Matrix. This is the first time Gentex mirrors have featured on North American compact vehicles. In March 2002 Gentex began shipping cross-platform interior automatic-dimming rearview mirrors for General Motors Opel Zafira, Vectra, Omega and Corsa models. Gentex is also supplying flat and aspheric (blind-spot-eliminating) exterior automatic dimming mirrors for the Vectra. In December 2001 Gentex began delivery of automatic-dimming rearview mirrors with compass displays for the 2002 Audi A4 and A6 sedans, and the all-road Quattro SUV. The company is also supplying exterior mirrors for the A6. In October 2001 Gentex began to supply Ford with interior automatic-dimming mirrors with telematics functions for the 2002 Lincoln Town Car. In September 2001 Gentex began shipping automatic-dimming rearview mirrors for the 308 AutoBusiness Ltd

Company profiles Nissan Altima as standard on the 2.5SL, and as an option on all other trim levels. Gentex began supplying the 2001 Volkswagen Beetle with electrochromic mirrors in August 2001. The mirrors are delivered to Schefenacker Vision Systems, which places them in housings and sells the final assembly to Volkswagen. Since August 2001 Gentex's compass mirror has been available on the 2002 Ford Taurus SES and SEL models via a popular option package, and as standard equipment on the Sable GS Plus and LS Premium. In July 2001 Gentex began delivery of electrochromic mirrors for the Volkswagen Passat, Jetta and GTI. The mirror was the first to feature the Company's new intelligent light sensors for detecting rearview mirror glare. In the same month Gentex began supplying its automatic-dimming rearview mirrors with a compass for the Toyota Camry and a similar mirror for the Lexus ES 300. The Camry contract was a milestone for Gentex because it represented a breakthrough into the medium-priced vehicle segment. Previously the mirrors had featured solely in the luxury vehicle segment.

New Product Developments In 2003 the company's R&D expenditure totalled US$26.6m (21.2m, 31 December 2003), up 16% from the total in 2002. The company will increase this by a further 15% in 2004. To further its technical leadership, Gentex has formed joint-ventures with key companies. Johnson Controls Inc. (JCI): Gentex and Michigan-based JCI, the global market leader in automotive interior systems and building controls, jointly develop mirrors with valueadded features and displays. Certain Gentex mirrors contain Pathpoint Compass System and Homelink features (controls for garage doors, home lighting, entry locks and security systems). Photobit Corporation: Photobit of Pasadena, California (USA) is the world leader in highperformance CMOS active pixel sensor electronic image-capture technology. Gentex and Photobit are collaborating on rear-vision systems and other products.

Recent product innovations include: SmartBeam, introduced by Gentex in March 2001, is an intelligent high-beam headlamp control system that automates the task of turning on and off headlamps in accordance with the traffic conditions. SmartBeam uses a proprietary image sensor integrated into the rearview mirror. At night SmartBeam automatically turns on the high beams if it is dark enough and no traffic is present. When it detects an approaching vehicle's headlights or a preceding vehicle's taillamps, the system turns off high beams before they distract other drivers. Gentex has received product planning commitments from two North American OEMs for three 2005 model year vehicles. In December 2001 Gentex launched its customised microphone for installation in its rearview mirrors. It is designed to account for road vibration, air movement, blower noise, electromagnetic noise, and to withstand moisture and a range of temperatures. The first volume Gentex microphone application was part of DaimlerChryslers UConnect telematics system, beginning in 2003. New legislation regarding tyre safety inspired the development of Gentex's TyrePressure-Monitoring mirror. According to Gentex this location for the tyre pressure monitoring display offers a number of advantages. The mirror is in the natural line of vision, can be brought to market quickly, is in a consistent location across platforms and is cheaper than redesigning the vehicle interior. Gentex has also been developing its global communications/navigation mirror. The mirror serves as a direct interface for the Onstar System. Controls for in-vehicle safety, security and information services are featured on the mirror. The first generation Onstar mirrors feature operator and emergency call buttons as well as microphone. They are available in seven of General Motors' vehicles. General Motors is the first carmaker to recognise the benefits of offering communication/navigation system interfaces on a rear-view mirror.

In the future increasingly intelligent Gentex mirrors will feature rain sensors, carbon monoxide warning lights and collision avoidance indicators. Gentex is also researching how to bring its electrochromic technology to car windows. AutoBusiness Ltd 309

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Financial Overview In the year ended 31 December 2003 Gentex reported net sales of US$469m (373.6m, 31 December 2003), up 19% from US$395.3m (377.2m, 31 December 2002) in the previous year. 2003 operating income was US$146.6m (116.8m, 31 December 2003), a margin of 31.2% (29% in 2002). The driving force for this growth was the 17% jump in unit mirror shipments to a record 10.3m units, but the rising spec of interior mirrors also lifted the asp (average selling price) to US$43.50 (34.66, 31 December 2003) in 2003. Outlook Gentex is clearly on a roll, dominating a market segment that is expanding fast in volume terms and value terms as value-added electronic features are added to the interior mirror. With an operating margin of over 30% and zero long-term debt on the balance sheet, Gentex is in an enviable position. The company currently estimates that it can potentially achieve a 10-15% per year-over-year rate of growth in unit shipments [of electrochromic mirrors] in calendar 2004 compared with 2003. These are impressive numbers given they are based on J.D.Power & Associates forecasts for light vehicle production changes of +2.5%, -1% and +9% in North America, Europe and Asia Pacific respectively.

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GKN
Driveline components and powder metals
Address GKN plc 7 Cleveland Row London SW1A 1DB UK Tel: +44 20 7930 2424 Fax: +44 20 7930 3255 Internet: http://www.gknplc.com Senior Officers Sir David Lees (to 20 May 2004), Chairman Roy Brown (from 20 May 2004), Chairman Kevin Smith, Chief Executive Nigel Stein, Finance Director Ian Griffiths, Managing Director of GKN Driveline Richard Clowes, Chief Executive of OffHighway and AutoComponents Products Chassis assemblies, constant velocity joints, drive shafts, metal substrates for catalytic converters & cylinder liners, sintered metal components (Sinter Metals, Inc.), universal joints, propshafts, wheels and torque management devices Plants Group: Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Denmark, Finland, France, Germany, India, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands, Norway, Poland, Portugal, Singapore, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, UK, Uruguay, USA Sales Group: 4.58bn (6.49bn, 31 December 2003) (Year to 31.12.03) Automotive: 3.04bn (4.31bn, 31 December 2003) (Year to 31.12.03) Employees 48,000 (2003) GKN plc is an engineering company with interests in the automotive and aerospace sectors. It generates around 66% of sales from its automotive division, which makes components for cars, commercial vehicles and off-road equipment. GKN holds the leading position in the global constant velocity joint (CVJ) market with a 42% global market share. It also holds a 16% share of the Sinter Metals market. GKNs Automotive sector has three major divisions: GKN Driveline: a first tier world leader for automotive driveline products and systems, with a 42% share of the global market for constant velocity jointed driveshafts. GKN's largest division, Driveline manufactures CVJs and related products at 37 plants in 21 countries. Also embraces the torque management devices (TMD) operations that make products for vehicles requiring enhanced traction systems. Powder Metallurgy: comprises Hooganaes, the largest producer of powder metals in the USA and manufacturer of parts for automotive, farm and garden equipment and a small, recently acquired operation in Romania. GKN Sinter Metals is the worlds largest producer of sintered metal components with a 16% share of the global market operating from over 40 locations worldwide. OffHighway and AutoComponents: supplies agricultural, construction equipment and automotive OEMs with power take-off equipment, wheels, structural components and cylinder liners. Also includes GKNs 50% share of catalytic converter metal substrate manufacturer Emitec GKNs automotive customers include BMW, Bosch, DaimlerChrysler, Delphi, Ford, General Motors, Honda, Volkswagen and ZF. In 2002, around 50% of automotive sales originated from Europe, 35% of sales from the Americas and 12% from elsewhere in the world.

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Recent Developments Corporate strategy In recent years GKN had pursued an aggressive growth strategy in order to increase its international presence and broaden its technological capabilities. Through strategic acquisitions and joint-venture agreements it has increased its market share in its core competencies, and penetrated emerging markets such as Asia and South America. In August 2001, GKN demerged its industrial services activities to its Australian partner, Brambles Industries Ltd. The proceeds from the sale were to enable GKN to pursue growth opportunities in the automotive and aerospace sectors. As a result of the restructuring GKN now generates two thirds of its sales within the automotive sector. In early 2004, GKN announced cost-cutting measures that included a further round of restructuring in the Powder Metallurgy operation. However, the most significant development was the reshaping of GKN Driveline. In the period to 2007, GKN will shift around 20% of its global driveline production from high cost to low cost locations (ie China, India, Thailand and Latin America) so that by 2007, 50% of CVJ output will be sourced from these low cost areas. 40% of current CVJ output is in western Europe, with just 20% in the US and 10% in Japan. Details have yet to be worked out, but what GKN believes this significant realignment of its manufacturing network will cost around 150m (225.0m, 31 March 2004), over two-thirds of which will be cash costs. Acquisitions In November 2003, GKN acquired Ductil Iron Powder, a Romanian powder manufacturer. This is intended to broaden the Powder Metallurgy divisions production capacity, lead to lower material costs in Europe and provide a basis for further development in eastern Europe. In March 2002 GKN acquired the remaining 51% of Mahindra Sintered Products Ltd.. (India) from its partner Mahindra and Mahindra Ltd. GKN paid 9.35m (15.3m, 31 March 2002) for the stake, which gives it 100% ownership of the largest powder metals components manufacturer in India. Also in March 2002 GKN acquired more shares in GKN Driveshafts (India) Ltd., increasing its shareholding from 51% to 92.4%. In the same month GKN paid 5.1bn (44.2m, 31 March 2002) to acquire a 33.3% stake in Tochigi Fuji Sangyo, a leading Japanese supplier of driveline components. GKN also has the right to buy additional shares in Tochigi Fuji that would increase its total share to 50.4%. The deal has expanded GKN's presence in Asia and boosted its technological capabilities in torque management. Together the two companies expect to be the world's largest independent suppliers of torque management devices (18% of the global market in 2003). GKN also acquired a 20.4% stake in Tochigi Fuji Industrial (TFI) from Nissan. TFI specialises in parts for powertrain systems In February 2001 GKN Sinter Metals bought The PresMet Corp., a privately owned powder metal parts manufacturer based in Massachusetts (USA). The PresMet Corp. manufactures components for steering columns, engines, and transmissions for customers such as DaimlerChrysler, General Electric, TI Automotive and Visteon. In November 2000 GKN established its first manufacturing presence in Japan through the acquisition of the production assets of Nissan's constant velocity joint and driveline facility at Tochigi for 56m (93m, 30 November 2000). The new wholly owned Japanese subsidiary was named GKN Japan Driveshafts Ltd. In May 2000, GKN completed the acquisition of a further 30% in its Australian jointventure, Unidrive, bringing the group's holding to 60%. Unidrive was a leading Australian manufacturer of constant velocity joints, driveshafts and propeller shafts. Joint-ventures In order to become more established in the Japanese market, the company formed GKN Toyoda Driveshafts, a 49%-owned joint-venture in Japan with Toyota in February 1999. In February 2000, GKN and Dana Corporation agreed to establish a joint-venture company called Drive Tek Ltd, to design and market advanced driveline systems for allwheel and 4WD passenger cars, sports-utility vehicles and light trucks. The deal led to the exchange of Dana's CVJ operations for GKN's cardan-jointed propeller shaft 312 AutoBusiness Ltd

Company profiles business. However, Drive Tek was not as successful in winning business as had been hoped and in March 2002 GKN and Dana placed the joint venture on hold. In September 2003, it was announced that GKN and Toyoda Machine Works Limited (TMW) have completed the formation of two new joint ventures in Thailand. The joint ventures will manufacture and supply driveshafts for a new vehicle for Toyota in Thailand which is due to commence production in August 2004

Investments In 2002, following problems with the supply of the chassis for an important Land Rover model after a supplier went into receivership, GKN Autocomponents took control of the insolvent suppliers manufacturing operation in Wolverhampton (UK). It also assumed the chassis supply contract. In November 2001 GKN's Sinter Metals began construction of a 3,000 square metre production plant in Bonn (Germany). The new plant was scheduled to start manufacture of metal components for the automotive industry in early 2003. In March 2000 GKN Sinter Metals purchased a 15-acre plot of land in Hortolandia, Sao Paulo (Brazil) in order to construct a 97,000 square foot production plant. GKN decided to establish its first manufacturing presence in Brazil to be close to global customers with local manufacturing facilities as well as to realise import opportunities. Contracts GKN is supplying BMWs new Z4 roadster with rear sideshafts. The sideshafts are being produced at GKNs Offenbach plant in Germany and shipped to ZF Lemfoerders axle assembly plant in Duncan, South Carolina. From here the completed modules are transferred to the nearby Spartanburg final assembly line. GKN and its partner TFS are supplying constant velocity jointed (CVJ) driveshafts to Nissan for use on its new four -wheel drive (4WD) variant of the Nissan March launched in September 2002 on to the Japanese market. In December 2001 GKN secured more business producing CVJ driveshafts for the 2002 Ford Taurus and Mercury Sable vehicles starting in January 2002. In August 2001, GKN announced that its then Automotive Driveline Division had been chosen by Toyota to supply the constant velocity jointed halfshafts for the Camry model being marketed in Thailand, Malaysia, Indonesia, Philippines, Taiwan and Australia, beginning March 2002. In January 2000 GKN AutoStructures Ltd., a unit of the AutoComponents Division, was awarded a contract to supply underbody pressed structures and suspension components for the current Ford Transit. New Product Developments Torque Management Systems: At the 2003 Frankfurt Motor Show, GKN Driveline showcased the first production application of an actively-controlled, torque management system actuated by electric motor. The system is designed to electronically control driving torque between wheels on a single axle or between two axles and is said to provide faster and more accurate control of driveline torque than other competing systems. A version of GKNs Electronic Torque Manager (ETM) recently made its debut as part of a limited-slip traction-control option on the 2003/2004 Volkswagen Touareg and the 2004 Porsche Cayenne Intelligent Driveline: GKN Driveline has developed what it calls "intelligent" driveline, centred round an electronically controlled clutch. The system is an electronically controlled coupling for driveline applications for use as a limited-slip differential. It is integrated into the second axle of the vehicle and takes effect as soon as slip occurs in the first axle. This provides the best possible propulsion to the vehicle, even under variable road conditions. It also eliminates the need for constant activation of the brakes, resulting in reduced brake wear, increased occupant comfort and reduced fuel consumption. Lightweight Brake Rotors: GKN OffHighway and AutoComponents has begun replacing cast iron brake components with lightweight rotors made from aluminium alloys and metal matrix composites. To stop the alloys softening at high temperatures, GKN's aluminium brake rotors are reinforced with ceramics. Visco-Lok: GKN partnered BMW to develop Visco-Lok, the variable M differential lock. 313

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Automotive Technology Roadmap The new differential was fitted on the BMW M3 model and significantly improved traction, even in difficult driving conditions, as well as vehicle handling and stability. Financial Overview In 2003 GKNs sales increased 3% to 4.58bn (6.49bn, 31 December 2003) from 4.45bn (6.81bn, 31 December 2002) in 2002. Automotive sales increased 2.9% to 3.04bn (4.31bn, 31 December 2003) from 2.95bn (4.52bn, 31 December 2002) in 2002. GKN Driveline reported sales of 1.94bn (2.75bn, 31 December 2003), compared to 1.83bn (2.80bn, 31 December 2002) in the previous year. Powder Metallurgy had sales amounting to 608m (861.3m, 31 December 2003), a decline of 0.7% compared to the 632m (967.5m, 31 December 2002) produced in 2002. Sales for OffHighway and AutoComponents (including Emitec) totaled 490m (694.2m, 31 December 2003), a small 0.4% increase over 2002s figure of 492m (753.2m, 31 December 2002). Group pre-tax profits declined 7.9% to 246m (348.5m, 31 December 2003) from 267m (408.8m, 31 December 2002) the year before. Outlook The short-term outlook for GKN has recently become a little more challenging and it is clear from the new manufacturing strategy announced in early 2004 that there is need to lower the companys cost base if margins are to be maintained. This strategy will result in significant one-off costs through 2004-07 but the company is confident that annual benefits from restructuring will hit 60m by 2007, suggesting an overall cash payback period of just over three years. Despite this, the companys fundamental strengths in its core businesses remain. GKN Driveline won 70% of all available new CVJ programs in 2003 (ie 29 out of 41) and there is clear potential for further new business from the 24% of global CVJ requirements that are still met from OEMs in-house resources. GKN has also established a global leadership position in the market for TMDs (18% global share) and premium propshafts (17%), both growing markets. The company also expects above-market growth in power transfer units and final drive units as OEMs continue to introduce new niche crossover vehicles that combine 4WD with car-like driving dynamics and comfort. The 300m of torque systems sales in 2003 is expected to grow to 800m by 2008.

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Hella
Lights and electrical components
Address Hella KG Hueck & Co Rixbecker Strae 75 59552 Lippstadt Germany Tel: +49 2941 380 Fax: +49 29 41 387 133 Internet: http://www.hella.com Senior Officers Dr Jrgen Behrend, Chairman Dr Rolf Breidenbach, Director Automotive Lighting (temporary) Martin Stark, Director Automotive Electronics Products Electrics and electronics, front-end modules, tailgate modules, heating and climate controls, lighting systems, overhead systems, drivetrain controls, mirrors Plants Australia, Austria, Brazil, China, Czech Republic, Denmark, Finland, Germany, India, Mexico, New Zealand, Philippines, Slovakia, Slovenia, South Korea, Spain, UK, USA Sales Group: 3.01bn (Year to 31.05.03) Employees Group: 22,500 (2002/03) Hella is a European leader in automotive lighting systems, a specialist in electrical and electronic systems and a leading supplier of front-end modules. The familyowned company also has interests in other interior modules such as cockpits and overhead systems through its expertise in electronics. In addition, Hella makes injection-moulded parts and industrial electronics products. Hella has three main areas of operation: Automotive Lighting; Automotive Electronics; and Automotive Modules. Its lighting division is organised into three product groups: headlamps, signal lighting and interior lighting systems. The automotive electronics division comprises heating and climate controls, body electronics, lighting and electronics driveline regulation and components. Around 38.21% of Hella's 2002-2003 sales were generated outside Germany. Hella has over 35 production plants around the world. Its major customers include BMW, General Motors, DaimlerChrysler, Nissan, Skoda, Volkswagen Group and Volvo. Hella is a private, family-owned company. As of June 2003 Hella's status was changed to form a partnership limited by shares (KGaA), and as a result Hella became a corporation. All the limited partner shares remain in the ownership of the current shareholders. This change gives the company access to the capital markets.

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Recent Developments Corporate Strategy In recent years Hella has focused on developing its electronic capabilities. The company sees the automotive industry's growing use of electronics as increasing Hella's attractiveness to potential partners. Hella was also one of the first suppliers to become involved in front-end modules, integrating its lighting expertise with its electronics and electrical capabilities. The company is continuing to expand in the area of modules, using a network of strategic alliances. More recently Hella has invested in the development of bending light technologies, an area where the company sees potential for significant growth in the next decade. Hella is focusing on becoming a global partner to support its customers. The company is expanding into the lower cost countries of Eastern Europe and Asia as well as increasing its presence in North and South America. Joint-ventures Hella has a development and production agreement with Behr GmbH & Co for front-end modules. Hella provides the lighting and electronics expertise in Hella-Behr Fahrzeugsysteme (HBF), while Behr has the skills in cooling systems and air conditioning. In February 2004, HBF entered a new joint-venture with Plastic Omnium to form HBPO. The new venture aims to produce 2 million front-end modules annually within the next two years. The partners will have a total of eight plants in Germany, Slovakia, Spain, Mexico, Korea and the Czech Republic. In January 1999, Hella expanded its cooperation with Behr, establishing Behr-Hella Thermocontrol GmbH. Based in Stuttgart (Germany), the joint company focuses on developing and producing electronic control and regulating systems, which form an integral part of a vehicles thermal management. In February 2001 Hella formed a 50/50 joint-venture with Leoni AG. The company, Intedis GmbH, based in Wrzburg (Germany), is focused on intelligent circuit systems for the automotive industry. In a bid to reduce any threat to Leonis independence Hella acquired a third of the shares in the investment company Groga Beteiligungsgesellschaft, which owns 17.05% of Leoni, from Deutsche Bank in June 2002. Outside Europe, Hella has also established joint-ventures. Hella has a 50/50 joint-venture with its Brazilian licensee, lighting manufacturer Industrias Arteb SA. The joint-venture, Hella-Arteb SA, is based in Volkswagen/Audi's supplier park, and assembles front-ends for Volkswagen's facility in Sao Jose dos Pinhais. Hella owns 8% of Arteb. In September 2001 Hella and the Japanese Stanley Electric group announced a tie-up agreement focusing on lighting. The two companies work together in development, production, procurement and marketing. They believe that this alliance will increase their international competitiveness. In March 2002 Hella and Stanley Electric formed a 50/50 holding company in Melbourne (Australia) as a further step in the two companies global cooperation. The first Hella-Stanley plant was built in Hungary in 2002 and further jointventure companies are planned. In February 2002 Hella-Behr Fahrzeugsysteme formed a 50/50 joint-venture with Samlip (South Korea). The new company has won contracts for front-end modules from Hyundai and Kia, and plans to build three new production plants in Korea by the end of 2003. It expects to produce a total of 500,000 front-end modules each year at these plants from 2004. In summer 2002 Hella set up two joint-ventures in China: Hella Shanghai General Electronics, and Beijing Hella Automotive Lighting, Ltd. These produce automotive lighting and other components. In February 2003 it was announced that Hella had formed a joint-venture with Taiko Device Techno and Co. Ltd of Tokyo (Japan) to market automotive plug-in and printedcircuit board (PCB) relays. The partnership will allow the two companies to strengthen their market share for these products in Europe and the NAFTA region. In November 2003 Hella announced it has formed a strategic alliance with TI Automotive AutoBusiness Ltd

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Company profiles for the manufacture of fuel pumps for the North American market. A new line of over 400 Hella-branded pumps will be manufactured by TI at its plant in Caro, Michigan (US). Hella North America has formed a strategic alliance with Carter Group, Inc., a minorityowned company headquartered in Windermere, Florida, to produce and market automotive HVAC (heating, ventilation and air conditioning) actuators. Both companies will manufacture actuators with their own trademarks, but Carter Group will be responsible for sales in the NAFTA region.

Investments Hella has made a number of investments in Europe in recent years: In August 1999 Hella, in partnership with Behr GmbH & Co, began production at a plant in Mnichovo Hradiste in the Czech Republic to supply front-ends for Skoda's new Fabia model. The plant employs 200 people. In addition to its front-end facilities Hella also invested in a new production facility in 1999 for the manufacture of signal lamps. The new unit was built at its Paderborn complex in Germany. In October 1999, Hella opened another plant in the Czech Republic in Mohelnice. The automotive lighting plant has 110 employees. In 2002 a new logistics centre was opened at the site at a cost of Kc200m (6.4m, 1 February 2003). A further 100 new jobs were created bringing the total workforce in the Czech Republic to about 715. In February 2003 Hella announced it was re-organising its production in Mohelnice to concentrate on producing headlamps for passenger vehicles. Headlamp production for commercial vehicles will be moved to its new plant in Nove Mesto, Slovakia. In October 2003 Hella opened its second new plant in Slovakia. Hella now has plants in Banovce and Nove Mesto, which manufacture vehicle headlamps and signal lighting. Total investment is around 35m and around 400 new jobs are being created. All output is exported to clients such as BMW, DaimlerChrysler, Ford, Opel, Renault, Volvo and VW. Hella is to invest 3.5m in a new training centre in Erwitte (Germany). The centre will include an administrative building, a workshop and a warehouse. It is currently under construction and is scheduled for completion by mid 2004.

There have also been a number of investments in the USA: Hella opened a lighting production plant in South Carolina (USA) in 1999. The US$30m (26.2m, 31 January 1999) plant created over 200 jobs, and supplies headlights, taillights and interior lights to the automotive industry. In July 1999 HBF opened HellaBehr Vehicle Systems in Plymouth, Michigan (USA) to promote its front-end business with US-based carmakers. The company focuses on the product development, assembly and logistics of front-end modules for local North American customers. In August 2000, Hella announced that it would invest over US$20m (22.4m, 31 August 2000) for a new assembly line to produce electronic throttle-control systems at its North American headquarters in Michigan. This is in response to the growing demand for electronic drive-by-wire accelerator and braking control systems. In 2003 Hella is raising production of accelerator-pedal sensors by over 300% at its Flora, Illinois, US facilities. A US$1m (0.80m, 31 December 2003) production line is being added. Annual production should rise from 450,000 units to 2m units in 2005 as a result. In January 2004 Hella announced expansion to its manufacturing facilities and aftermarket sales operations in North America. The company recently opened a new warehouse in Mississauga, Ontario (Canada) and also announced plans to expand a manufacturing facility in South Carolina (US). Hella North America is to expand production at its York, South Carolina, plant by more than 50% during 2004. The company plans to increase annual production of automotive headlamps and fog lamps from 1.8 million units to more than 2.5 million units.

Contracts Recent models manufactured by Audi, BMW, DaimlerChrysler, Honda, Opel, Porsche and Volkswagen are fitted with Hellas Xenon headlamp system. HBF supplies front-ends to Skoda's Fabia model from its production plant in Mnichovo Hradiste in the Czech Republic. AutoBusiness Ltd 317

Automotive Technology Roadmap HBF has also received the contract to develop and produce the front-end for the successor to the Mercedes-Benz V-Class. It will be the first module carrier to include hybrid technology that is made out of metals and plastics. HBF also has a front-end contract with Volkswagen. Hella supplies the combination rear lamp, the reversing light and centre high-mounted stop light, the reflex reflectors and the complete interior lighting for the new Range Rover. HBFs new joint-venture with Samlip has won three contracts from Hyundai and Kia for front-end modules. Hellas joint-venture with Leoni has developed what it calls an intelligent wiring system for the next-generation Opel Astra. Hella-Behr Fahrzeugsysteme supplies the complete front end (lighting, cooling assembly, carrier and crossmember, crash boxes, air ducts and bumper) for the new Porsche Cayenne and VW Touareg models. On the Cayenne, Hella is also supplying accelerator pedal sensors, the vacuum pump for the braking system and air conditioning (Behr-Hella Thermocontrol). On the Touareg, Hella is again supplying the air conditioning, lighting, pedal sensors, central locking, central electronics, sensors and pumps. The new BMW 5 Series features external lighting, including active front head lamps, and interior lighting by Hella.

New Product Developments Hella employs over 1,500 people in R&D. HBF has developed a prototype of a fully-integrated front-end module, significant because the cooling system is integrated into the front-end structure representing an industry first. This should help future cars meet tougher crash legislation. Hella has also developed headlamp systems using Xenon headlamps. These provide a beam of light that generates 2.5 times as much luminous flux as halogen headlamps, but only consumes two-thirds as much power. Xenon light also generates a colour similar to that of natural daylight. Hella is the European technological and market leader in this area, with a market share of over 60%. Hella has developed DynaView, headlamps that bend when the car goes round a curve, allowing the driver to see hazards earlier and providing more reaction time. When the modified ECE regulations R48 and R98 for headlamps and their installation are published in Spring 2003, Hella believes that this technology will be approved for use on European roads. Hella has already supplied headlamps with static bend lighting for the Audi A8, which came to the market in 2002. The company intends to produce dynamic bend lighting headlamp systems on the basis of swivelling projection modules, including systems for Mercedes-Benz and Opel. Hella is working on the Variable Intelligent Light System (VARILIS), a front-end lighting system that automatically adjusts to different driving conditions. Hella has also developed Molis modular light systems that use LEDs as the light source. In the area of Automotive Electronics, Hella has developed the Passive Entry/Go system, a keyless access and drive authorisation system for cars. A unit inside the car electronically reads a code card carried by the driver. Hella launched 120 new Lambda probe sensors suitable for over 3,400 vehicle types in October 2003. Lambda sensors detect surplus of oxygen in the exhaust fumes of gasoline motors at the inlet of the catalytic converter and transmit data to board computers to maintain a proper air-fuel mix. The probes are either universal or car-specific and can be installed in 60% of all existing models. The probes will be available after approval by TUV. In February 2004 Hella announced that its innovative white light-emitting diodes (LEDs) are to be used on the Audi A8 W12. The white-light LEDs have the same intensity as xenon lamps, but offer greater flexibility for vehicle front-end design. The Audi system includes five LEDs per headlamp making it more visible in dipped (low-beam) modes. 318 AutoBusiness Ltd

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Other new products include image processing systems, expected to be introduced as series products in 2006. Lane recognition is likely to be one of the first image-processing applications in vehicles. Hella claims to be working on this as a top priority and sees further development of the image-processing software as the greatest challenge. As well as lane recognition, future systems are to be developed for active light control, to support the Stop & Go functions in the adaptive cruise control system and even to apply the emergency handbrake. The networking of all environment sensors is seen as the next step in the area of complete driver assistance. Financial Overview Sales in 2002-2003 grew by almost 3% to 3.01bn, compared to 2.94bn in the previous year. After adjustments for currency effects and changes to the scope of consolidation, actual growth was 4.5%. Around 38.2% of Hella's 2002/2003 sales were generated outside Germany. Above average growth of 21.8% was achieved in the Asia/Pacific region where sales stood at 145m, compared to 119m the previous year. Sales in Germany rose by 7.3% in spite of a difficult economic climate to 1.861bn, compared to 1.735bn in fiscal 2001-2002. However, business in the US decreased by almost 19% and stood at 341m. Sales in Europe, but outside Germany, grew by less than 1% to 676m and accounted for 22.3% of sales. As Hella is a privately owned company, exact figures for profitability were not available at the time of writing. Outlook Hella has recently set itself the ambitious target of becoming number one worldwide with regard to innovations, quality of development and production, customer service, international presence and integrative ability for automotive lighting and in the core competence fields of electronicslighting electronics, body electronics/vehicle wiring systems, air conditioning electronics and sensors. Although competition in these areas is strong, it is clear that Hella probably has the technological muscle to make this a realistic target. Hella also has a strong lead in front-end modules and believes there is still great scope for growth in this business, especially following the new link-up with Plastic Omnium. The contracts for the Porsche Cayenne/Volkswagen Touareg appear to bear out this optimism.

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IEE
Sensor systems
Address International Electronics & Engineering S.A. Zone Industrielle - Findel 2b, route de Trves L-2632 Luxembourg Tel: +352 424 737 1 Fax: +352 424 737 200 Internet: http://www.iee.lu Senior Officers Not available Products Anti-trap protection systems, passenger presence detection systems, child-seat presence and orientation detection systems, seat-belt reminder systems, electroluminescent lamps, occupant classification (OC) sensor system Plants Luxembourg, USA Sales c. 68m (Year to 31.12.02) Employees c. 730 IEE operates two facilities in Europe, both in Luxembourg. Its head office comprises the IEE Administrative Centre, R&D Centre and associated manufacturing plant. A second manufacturing plant is located near Echternach in the eastern corner of the Grand Duchy. IEE also has offices and an applications engineering centre in Auburn Hills, Michigan (USA). IEE has customers in Asia, Europe and the USA. To ensure all customers receive local support IEE has partners all over the world. IEEs largest customers are tier one automotive suppliers and OEMs including Alfa Romeo, Audi, Bentley, BMW, Citron, Fiat, Ford, Holden, Hyundai, Kia, Lancia, Land Rover, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Opel, Peugeot, Renault, Rolls-Royce, Saab, Toyota, Vauxhall and Volvo. International Electronics & Engineering (IEE) develops sensor and sensorelectronics systems for the detection of car occupants. These sensor systems are used in cars to control airbag deployment, to activate fasten seat-belt reminders, and to provide anti-trap protection. IEE is an award-winning developer of sensor-based automotive safety products, and the list of applications is growing. IEE is a privately held company. Its majority shareholder (72%) is Investar, which is a 50:50 joint venture between Arcelor and Socit Nationale de Crdit et de l'Investissement (SNCI). IEEs minority shareholder (28%) is Circuit Foil, a subsidiary of Arcelor. IEE has also established LuSense, an independent company division that develops and manufactures products for industrial and medical applications, including customised input devices and configurable keyboards.

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Recent Developments Corporate strategy IEE works in collaboration with its customers to develop sensing systems that meet its customers needs. Safety is one of the most important factors for people when they buy a car, making sensing systems a high growth area. IEE is confident in its own experience of sensing technology and believes that no single technology alone can reliably provide a 100% solution to the problems of safe airbag deployment. For this reason it is developing its own sensing system called the building block approach, rather than trying to compete with other companies that are aiming to produce a single smart airbag system. The company focuses heavily on research and development and is continually introducing new sensing technologies to market. Contracts IEE announced in February 2004 that a Child Seat Presence and Orientation Detection (CPOD) system developed by the company is integrated in the new Mercedes-Benz CClass. The CPOD system detects child seats on the front passenger seat. These special child seats are available from the Mercedes Benz accessory program and are equipped with two integrated transponders. The included Passenger Presence Detection (PPD) functionality detects whether a passenger occupies a seat or not. When the seat is occupied by a child seat and/or not occupied by a passenger the airbag control unit is informed that the deployment of the airbag should be suppressed. IEEs seat belt reminder sensors are fitted to all Saab models and the current Nissan Primera. New Product Developments IEE has research and development centres located in Findel (Luxembourg), Michigan (USA) and Seoul (South Korea) and more than 12% of IEEs total workforce is engaged in R&D. IEEs R&D is focused on the development of improved sensor systems for car-safety applications and measurement electronics, and on car communication interfaces. The company aims to develop new sensor materials and new applications for sensors. IEE research has resulted in the grant of over 50 patents in the last three years. IEE has received several awards for its various product innovations. As noted above, IEE is combining available safety technologies and making them function together. IEE calls this the building block approach. For each specific sensing challenge IEE has developed a discrete technology response, or building block. The following blocks are already available:

Passenger Presence Detection (PPD) Child-seat Presence and Orientation Detection (CPOD) Occupant Classification (OC) Static Out-of-Position Detection

In the near future IEE hopes to introduce a Dynamic Out-of-Position Detection building block for frontal and lateral airbag control. This will be a combined 3D-2D Hybrid Camera System. Its aim is to inform the passive restraint systems by detecting and classifying the occupant type as well as sensing the occupant's position. It is able to distinguish a child in a child seat from an adult person and recognises out-of-position situations. Therefore, the Hybrid Camera enables the airbag control unit to optimally control the passive restraint systems in a car before and during a collision. IEE intends to introduce the 3D Hybrid Camera System to market in 2006. Financial Overview IEE is a privately held company and as such is under no obligation to publish financial results. However, in 2002 IEEs sales exceeded 68m.

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Outlook Although a very small supplier, IEE has developed a strong market niche position in occupant sensors, a growing segment in the smart safety equipment market. New product development has been given a high priority in recent years with the result that a flow of new safetyenhancing products in the next few years seems assured. The 3D Hybrid Camera System, that can detect vehicle occupant type and position within the vehicle, appears to be such a product.

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IMPCO
Alternative fuel products
Address IMPCO Technologies Inc. 16804 Gridley Place Cerritos California 90703 USA Tel: +1 562 860 6666 Fax: +1 562 860 3088 Internet: http://www.impco.ws Senior Officers Robert M. Stemmler, CEO and Chairman of the Board Nickolai A. Gerde, CFO Products Fuel systems, engine systems, components Plants Australia, Japan, Mexico, USA Sales US$74.7m (59.5m, 31 December 2003) (Year to 31.12.03) Employees 373 (31.12.03) IMPCO Technologies Inc. is a global leader in the rapidly expanding alternative fuels industry. IMPCO supplies advanced solutions that support the use of cleanburning gaseous fuels for off-highway and on-highway engines. The company offers a total systems approach and its products are used in the transportation, material handling, power generation and industrial market segments worldwide. IMPCOs fuel system components, fuel systems and complete engine packages are used for a wide variety of applications in both replacement and OEM markets. IMPCOs products improve the efficiency, enhance performance and reduce exhaust emissions by electronically sensing and regulating the correct proportion of fuel and air required by the internal combustion engine. Headquartered in Cerritos, California (USA), IMPCO has four production facilities and 14 offices throughout Asia, Europe, South and North America. In 2003, IMPCO generated 42.9% of its total sales in the US and Canada, 29.1% in Europe, 15.7% in Latin America and 12.3% in the Pacific Rim. The companys goal is to reach combined annual sales of US$240m (229.0m, 31 December 2002) by 2006. IMPCOs customers include some of the worlds largest OEMs and engine manufacturers, including Ashok Leyland, Boss Manufacturing, Caterpillar, Clark, Cummins, Daewoo, Detroit Diesel, Ford Australia, GM Holden, Kohler, Komatsu, Mazda, Mitsubishi, Onan, Still and Toyota.

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Recent Developments Corporate strategy As a result of the need for reduced air pollution, and the cost benefits of gaseous fuels compared to liquid fuels (savings are between 40-60%), IMPCO expects the transportation market to be its fastest growing segment over the next seven years with an estimated three million vehicles either being converted to gaseous fuels or being sold newly equipped for gaseous fuels. IMPCOs future success depends on this continued expansion of the alternative fuel industry, it has not yet gained broad acceptance but with increasing environmental concern it is likely that research into and development of more environmentally friendly vehicles will continue, and the alternative fuel market is likely to become a high growth area. IMPCO is expanding into new markets. It has become a key player in the Mexican market with several major companies, such as Coca-Cola, converting their vehicles to gaseous fuels. Public transportation fleets in major Mexican cities also have active programmes to switch their vehicles over to gaseous fuels. In India, IMPCO and its joint-venture partners are developing integrated fuel management systems for two and three wheeled scooters and taxis, which dramatically reduce exhaust emissions. The Chinese alternative fuel market is growing very rapidly and IMPCOs sales have more than doubled in two years. The market potential in China is in excess of US$1bn (1.11bn, 30 April 2002) and is driven by surging sales of passenger vehicles, as well as strong government commitment to environmentally friendly technologies. Acquisitions In May 2003 IMPCO acquired 50% of BRC S.r.l. located in Cherasco (Italy). BRC has annual sales approaching US$40m (34.0m, 31 May 2003) and is a major global supplier of alternative gaseous fuel products and systems used in automobiles. Combining the resources of the two businesses is expected to improve their respective manufacturing, technical and market/sales capabilities. Joint-ventures In January 2004 IMPCO announced the start up of production of IMPCO products by its joint-venture company in Gurgaon (India) Minda IMPCO Ltd. The start up of production in India is a major step forward to fully integrate IMPCO's manufacturing capabilities worldwide and to further improve the competitiveness and gross margins of IMPCO and its global partners. Initial production in India is slated for the Indian and the Southeast Asian markets with future plans to expand the range and quantity of products produced and for export to other IMPCO world markets. In June 2003 IMPCO announced that it and the State Of Mexico, through the Ministry of Transportation, had signed an historic agreement to work in collaboration in the development and implementation of an alternative fuel programme to convert public transportation vehicles in Mexico to alternative fuels. The emission reduction potential is significant as is the economic benefit since the price for a liter of propane is 50% less than that of liquid fuels such as gasoline. In March 2002, IMPCO announced a teaming agreement with Lotus Engineering to accelerate the development of advanced internal combustion engine technology designs and products that connect the use of clean-burning gaseous fuels such as natural gas and propane in vehicles and equipment to enhance performance and significantly reduce emissions. In 1999 IMPCO announced the formation of a joint-venture with Beru. Beru purchased a 49% stake in Netherlands-based IMPCO Technologies B.V. The joint-venture company is operated as IMPCO-BERU Technologies B.V. Contracts In January 2004 it was reported that IMPCOs subsidiary IMPCO-BERU Technologies BV had supplied LPG engine management systems to Advanced Public Transportation Systems in Holland. The systems are used in the first series of newly designed innovative Phileas buses with hybrid propulsion. Phileas is an integral part of an innovative high quality intermediate public transport system. It combines the advantages of a tram/metro system with the flexibility and the low exploitation costs of a bus system. 326 AutoBusiness Ltd

Company profiles In November 2003 IMPCOs partner BRC received orders from the government in Cuneo Province (Italy) to convert the province's new vehicles to propane. The first 21 vehicles have already been delivered to the Cuneo Provincial Government. In October 2003 IMPCO announced that it had signed a contract with Hino Motors Ltd. of Tokyo (Japan) to develop and sell CNG fuel systems to power buses intended for the Southeast Asian market. Production is scheduled to begin in 2004. IMPCO expects sales for the CNG bus program to exceed US$2.5m (2.12m, 27 October 2003) in its first year and increase to more than US$4-5m (3.4-4.2m, 27 October 2003) when peak production levels are reached. In January 2003 IMPCO reported that Taiwan Taxi, a company that provides taxi services throughout Taipei (Taiwan), formed an 'Environmentally Friendly Taxi Squad,' using 200 LPG cars made by Formosa Automobile and equipped with IMPCO advanced fuel systems. Also in January 2003 IMPCO formed a joint venture with China Natural Gas Corporation (CNGC), a subsidiary of the China National Petroleum Corporation, to market and sell IMPCO gaseous fuel products in Western China. The Chinese potential for gaseous fuel conversions is estimated to be in excess of 500,000 vehicles.

New Product Developments In the year to end 31 December 2003 IMPCO spent US$3.80m (3.03m, 31 December 2003) on research and development, down 17% from the US$4.56m (4.35m, 31 December 2002) spent in the year to end 2002. In 2002 IMPCO opened a new research and development facility in Seattle, Washington (USA) which is dedicated to the research and development of systems and products that support the use of gaseous fuels in internal combustion engines. IMPCO offers products and services for on-highway automobiles, trucks and buses, and offhighway mobile and stationary equipment. The following two products are for automotive customers:

IMPCO Fuel System Components are used to equip internal combustion engines in a variety of application to operate on gaseous fuels such as LP Gas, Natural Gas, Compressed Natural Gas and LNG. Eclipse is IMPCO's newest, advanced fuel system for heavy-duty on-highway trucks and buses.

In February 2004 IMPCO and BRC announced the commercialisation of their first jointly developed product, a specially designed electronic fuel control valve targeted for the transportation and industrial markets in Latin America, USA and Europe. Production, initiated at BRC in Cherasco (Italy) in January 2004, is fully automated and capable of producing over 100,000 units per year. Sales of this new product through IMPCO distribution are expected to exceed US$500,000 (400,224, 28 February 2004) in 2004. Financial Overview For the year ended 31 December 2003, IMPCO reported sales of US$74.7m (59.5m, 31 December 2003), a 9% increase over the US$68.4m (65.3m, 31 December 2002) figure for 2002. IMPCO reported an operating loss of US$0.48m (0.38m, 31 December 2003) in 2003, an improvement compared to the loss of US$2.71m (2.59m, 31 December 2002) in 2002. One time operating expenses, mainly attributable to one time refinancing expenses and organisational reductions of US$1.1m (0.88m, 31 December 2003), and US$0.9m (0.72m, 31 December 2003) of inventory and accounts receivable adjustments and US$0.4m (0.32m, 31 December 2003) of start-up expenses unfavourably impacted operating income in 2003. There was a net loss in 2003 of US$6.90m (5.50m, 31 December 2003), which included US$1.3m (1.04m, 31 December 2003) of one time refinancing costs including non-cash warrants, and US$1.1m (0.88m, 31 December 2003) in inventory and accounts receivable charges from unconsolidated operations. In comparison, there was a net loss of US$36.6m (34.9m, 31 December 2002) in 2002.

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Automotive Technology Roadmap Outlook The IMPCO chairman believes that actions taken through 2003, that resulted in one-time charges of US$4.8m, will position the company for a return to operating profitability in 2004. The balance sheet has also been strengthened through debt restructuring and an equity offering. Consummation of the 50% purchase of BRC Srl in Italy has undoubtedly positioned the company for future growth in global transportation markets. This, and new emission certified fuel systems and engines in industrial markets should underpin the short-term outlook.

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Johnson Controls
Seats and interiors
Address Johnson Controls Inc. (Headquarters) 49200 Halyard Drive, Plymouth MI 48170 USA Tel: +1 414 274 4000 Fax: +1 414 228 2302 Internet: http://www.jci.com Senior Officers John Barth, Chairman, President and CEO Keith Wandell, President, Automotive Group Jeff Edwards, VP and General Manager of North America/Japan Mike Lamach, VP and Managing Director for Europe/Asia Gregg Sherrill, VP and General Manager of Battery Business Products Batteries, door systems, instrument panels, interior systems and components, overhead systems, seating systems, storage systems Plants 275 sites in 28 countries including: Austria, Belgium, China, Czech Republic, France, Germany, Hungary, India, Italy, Portugal, Slovakia, Spain, Sweden, UK, USA Sales Group: US$22.6bn (19.5bn, 30 September 2003) (Year to 30.09.03) Automotive Systems: US$17.0bn (14.7bn, 30 September 2003) (Year to 30.09.03) Employees Group: 119,000 (2003) Johnson Controls Inc. (JCI) is the world's largest independent supplier of automotive interior systems and seating and a leading supplier of vehicle batteries. It makes a wide variety of interior products including seating, instrument panels, overhead components and systems, floor consoles and storage systems, door systems, electronics, cargo management and battery and power management. It also supplies building control systems for education, health, retail, office and government sectors. Johnson Controls organises its operations into two business groups: Automotive Systems Group (75.3% of sales in fiscal 2002/03): most of the groups sales are derived from the manufacture of complete seats, including foam cushions, seat covers, metal frames and mechanisms. Seating is Johnson Controls largest product in Europe. The division is also North America's largest producer of lead-acid automotive batteries. Controls Group (24.7%): non-automotive. JCI has 275 locations in 28 countries worldwide with over 90 facilities serving the European market alone. The Automotive Systems Groups headquarters are in Michigan (USA) with regional headquarters in Holland (USA), Burscheid (Germany) and Yokohama (Japan). In fiscal 2002/03, North America generated 54% of sales, Europe contributed 38%, and the rest of the world made up the remaining 8%. JCIs customers include BMW, DaimlerChrysler, Ford, General Motors, Honda, Isuzu, Mazda, Mitsubishi, Nissan, PSA Peugeot Citron, Renault, Toyota and the Volkswagen Group.

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Recent Developments Corporate strategy Over recent years, JCIs growth in the automotive sector has been fuelled by the growth in outsourcing seating requirements by carmakers. However, further scope for growth in seats is limited as only a small share of the market is left in-house. During the 1990s the group looked for a new growth path in interiors; JCI carried out a series of acquisitions to position itself as a leading interiors supplier. The company believes that these strategic acquisitions have provided the group with a platform for growth in Europe and North America for the next decade. JCI expects future growth in these regions to be driven by new product development coupled with cost competitiveness. Although the current strategy is to grow through renewing products and emphasising cost competitiveness, this did not prevent the acquisition of Varta's Automotive Battery Division in October 2002 and Borg Instruments in June 2003. JCI has sought to capitalise on growth prospects in Asia's seating market. With this in mind the group acquired Japan's Ikeda Bussan in 2000 and is investing in technical centres in Japan and China to support local carmakers. The content of electronics in cars is growing steadily as carmakers have realised that innovative use of electronics is a way to differentiate their vehicles. Therefore JCI has been strengthening its electronics expertise, integrating electronics into nearly every system it develops. It has formed strategic alliances with leading electronics manufacturers to codevelop new systems such as hands-free cellular car phone functions and seating solutions that fight driver fatigue. It has also integrated electronics into its batteries, developing the first anti-theft battery and power-saving battery. JCI has also used partnerships to enhance its modules and systems capabilities. Acquisitions In June 2003 JCI announced the acquisition of Borg Instruments, a privately-held German supplier of automotive electronics associated with driver information systems and products, especially high-end instrument clusters, reconfigurable and other information displays, centre stack display modules, electronic parking assistance and navigation systems. Borgs sales were 55m in 2002 but are expected to grow at over 35% through 2006. Major customers are BMW, DaimlerChrysler, PSA Group, GM, Volkswagen Group and the Ford Group. In October 2002, JCI acquired the Automotive Battery Division of Varta AG, a major European battery manufacturer for US$311.5m (316.5m, 31 October 2002). The acquired business has six battery assembly plants in Europe, located in Austria, Czech Republic, France, Germany and Spain. The Varta Automotive Battery Division consists of VARTA Automotive GmbH and the majority stake in VB Autobatterie GmbH. The 20% stake of Robert Bosch in VB Autobatterie GmbH continues. In August 2001 JCI acquired automotive battery manufacturer Hoppecke Automotive GmbH & Co. KG. The privately held Hoppecke Automotive had manufacturing sites in Germany, the USA and China. It was one of the three largest lead-battery producers in Germany and provided automotive batteries for European carmakers such as DaimlerChrysler, Ford, Peugeot and Volkswagen. In July 2001 JCI acquired the automotive electronics business of SAGEM SA, a French high-technology group, for 500m. SAGEM had estimated sales of 600m in 2001. The purchase was in line with JCI's strategy to grow its electronics business in order to create value added niche features. In November 2000 Johnson Controls bought the remaining 10% of Ikeda Bussan. It acquired 90% of the company in September 2000. Ikeda Bussan was a Japanese manufacturer of automotive seating and the primary supplier of seating to the Nissan group. Johnson Controls and Ikeda Bussan had been partners since 1986 and operated two joint ventures that supply complete seats to Nissan in North America and the UK. Divestments Amid a tough economic environment in North America and Europe combined with declines in vehicle production, JCI implemented a number of cost cutting measures in 2001 and 2002 aimed at eliminating excess capacity.

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Company profiles In June 2003, plans to sell JCI's spark plugs business in France to Beru of Germany were announced In October 2002 JCI sold its shareholding in the Donnelly Corporation to Magna International. In April 2002 JCI announced plans to close one of its Georgetown, Kentucky (USA) plants by February 2003. Production of metal frames for car seats ended in December 2002. Production was shifted to plants in Cadiz (Spain) and Tennessee (USA). In March 2002, JCI consolidated its two Czech automotive component producers, Johnson Controls Automobilove Soucastky AS and Trimco. The merger was aimed at improving communications and creating synergies between the two companies. The merged entity is known as Johnson Controls AS and headquartered in Ceska Lipa.

Joint-ventures In December 1999 JCI launched a joint-venture with Araco Corporation, an auto-body maker affiliated with Toyota, to produce car seat covers for Frances Renault SA at a new sewing plant in Slovakia. Araco holds a 49% stake, with JCI controlling 51%. JCI operates 11 joint venture manufacturing plants in China in four cities supplying interior systems to a variety of vehicle manufacturers in the region. In fiscal 2002-2003 JCI had nonconsolidated sales of US$800m (690.0m, 30 September 2003) in China. Investments In August 2003 JCI said it had purchased a 27,000 square-metre site in Ploiesti near Bucharest (Romania). The company has also purchased 850 square metres of office space and 2,500 square metres of warehousing at an industrial park near Ploiesti. JCI supplies the Dacia-Renault plant in the region. Johnson Controls is to invest US$15m-17m (14.3m-16.2m, 31 December 2002) by expanding its plant at Oconee County (US). JCI will add 50,000 square feet to the facility for the manufacture of battery parts. Bridgewater Interiors LLC, a joint venture between JCI and Epsilon LLC, revealed plans in October 2003 to open a plant in Warren, Michigan (US), to produce seats for Ford pick-up trucks and SUVs. In August 2002 Johnson Controls opened the worlds first production line featuring vlies.tec technology. In a vlies.tec battery the acid is bound in an absorbent glass fleece, instead of circulating freely as in conventional batteries. If the housing is perforated, the acid cannot leak as in conventional batteries. This gives the manufacturer flexibility, as the battery does not have to be housed in the engine compartment. The company invested 20m in a new 5,000 square metre facility, at the existing Zwickau plant acquired with Hoppecke. Here 65 employees are dedicated to production of 1,500 vlies.tec batteries per day, a rate planned to increase to 4,000 per day. In March 2002 Johnson Controls acquired a 39,000 square foot manufacturing facility in Leamington (UK). The site adjoins the company's existing manufacturing facility and will be used for production of car seats for a Honda contract. In April 2001 JCI announced the planned investment of 56.65m in a production line in Romania. The exact location will depend on a number of contracts with Romanian carmakers. Contracts In Europe, JCI supplies an integrated interior program for the new Opel Astra, comprising the instrument panel, seats, door panels, headliner and interior electronics. In 2003 JCI launched the new RailPort Vehicle Personalisation System for the Ford F150 pickup truck. The system allows the driver to customise the vehicle by attaching a variety of modular storage and convenience devices to the overhead system including: compact disc, DVD, cell phone and PDA holders, DVD and CD players, small tool kits, lockable storage bins and other innovations. There were product launches in Europe during 2003 of interior systems for the following vehicles: BMW X3, Mitsubishi Colt, Skoda Octavia, Volkswagen Golf V and Bora and Volvo S40. In North America the company began the supply of interior and electronic systems for several vehicles including the Chevrolet Trailblazer XT, Honda Pilot and Nissan Maxima. In early 2004 JCI announced it had been awarded contracts by GM to supply a number of interior products for the OEM's 2005 crossover sport vans (CSV). The CSV models AutoBusiness Ltd 331

Automotive Technology Roadmap will enter production in the third quarter of 2004 and include the Buick Terraza, Saturn Relay, Chevrolet Uplander and Pontiac Montana SV6. The systems will be shipped on a just-in-time basis from JCI's plants in Suwanee and Norcross, Georgia; and Holland, Michigan. In January 2003 it was announced that Johnson Controls had won the contract from General Motors to supply the cockpit module, overhead system, floor console and door panels for the interior of the 2004 Pontiac Grand Prix. The vehicles are to be manufactured at General Motors assembly plant in Oshawa, Ontario (Canada).

New Product Developments Research and development expenditure totalled US$929m (801.3m, 30 September 2003) in fiscal 2003. During 2003 JCI launched several new products: BlueConnect Telematics Technology was launched on some DaimlerChrysler models, which allows the driver to keep hands on the wheel and connect through a Bluetooth enabled cellular phone; RailPort Vehicle Personalisation System, which uses innovative docking technology to allow the driver to customise the vehicle by attaching a variety of modular storage and convenience devices to the overhead system; JCI's Floor Rail Interior Personalization System, which incorporates an aluminum rail that is integrated into the vehicle load floor and which enables one or more consoles to be moved and positioned in any location along the rail; and Open Seating has recently been launched by JCI. This is a complete seat system that provides a new level of comfort and utility to second- and third-row seats of passenger cars, trucks and minivans. This innovative seating features side bolsters that provide comfort similar to the front row when the seat is deployed and folds completely flat when the seat is stowed In January 2002 JCI revealed a new modular plan which couples its battery technology with its systems integration expertise demonstrated in its interiors capabilities. JCI is in talks with carmakers regarding the development of a battery module that would consist of an injectionmoulded unit that holds the battery, radiator overflow tanks, windshield washer containers and other surrounding systems. In 2002 JCI introduced its vlies.tec batteries to the European battery market. In a vlies.tec battery the acid is bound in an absorbent glass fleece, instead of circulating freely as in conventional batteries. This means that the lead-acid cannot leak out if the housing is perforated, providing a high level of safety. Vlies-tec offers carmakers greater flexibility, as battery installation is no longer confined to the engine compartment, where the heat affects the batterys life expectancy. Other advantages include reduced size and weight, 30% higher product life and a 15% higher cold start performance compared to traditional 12V batteries. Financial Overview In the year to 30 September 2003 sales for Johnson Controls increased by almost 13% to US$22.6bn (19.5bn, 30 September 2003) from US$20.1bn (20.5bn, 30 September 2002) in 2002. Operating income increased around 4%, amounting to US$1.2bn (1.04bn, 30 September 2003) compared with the previous years US$1.12bn (1.14bn, 30 September 2002). The Groups net income grew almost 14%, from US$601m (613m, 30 September 2002) in 2002 to US$683m (589.1m, 30 September 2003) in 2003. The Automotive Systems Group generated sales of US$17bn (14.7bn, 30 September 2003 in 2002/3, up 14% over US$15bn (15.3bn, 30 September 2002) in the previous financial year. However, operating income for the division rose just under 2% from US$863m (879m, 30 September 2002) in 2002 to US$879m (758.2m, 30 September 2003) in the year to September 2003. Growth was the result of new interiors systems business involving seating, instrument panel, overhead, door and electronics systems. Excluding the positive effect of foreign currency fluctuations, actual growth of 7% was achieved for the year. In the first quarter of fiscal 2003/04, JCIs group sales rose 23% to US$6.4bn (5.10bn, 31 December 2003) but operating income was up just 6% at US$262m (208.7bn, 31 December 332 AutoBusiness Ltd

Company profiles 2003). Net income was US$164.5m (131.1m 31 December 2003), a 17% improvement from US$140.5m (134.1m, 31 December 2002) in 2002/03. ASGs sales in the quarter were up 26% at US$4.98bn (3.97bn, 31 December 2003) and operating income was up 6% at US$207.2m (165.1m, 31 December 2003). Outlook JCI expects to achieve record sales and earnings for fiscal 2004 due to strong growth in both the automotive and controls markets. Following the first quarter results, 2004 sales are expected to increase in a range of 13-15% based on automotive growth of 13-18% and controls growth of 5-10%. The positive automotive projection is largely based on new seating, interiors and electronics business totalling US$5.1bn over the next three years, of which the company expects to deliver US$1.9bn in 2004. Operating income for 2004 is anticipated to increase in line, or just below the sales growth. The automotive margin guidance reflects substantial improvements in operational quality and efficiencies, particularly in Europe, offset by higher costs associated with the launch of US$1.9bn of new business and lower pricing. JCI believes the 3% operating margin target in Europe for 2004 is still valid. The longer-term position for JCI appears very favourable. The company has established itself as a global leader in interior systems and is now a key design and development partner for many global OEMs. JCI has shown that it is at the forefront of developing interior modules and is offering a technologically advanced package to OEMs that reduces these costs and improves quality - a strong position for any tier-one systems integrator.

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Knorr-Bremse
Truck brakes
Address Knorr-Bremse AG Moosacher Strae 80 80809 Mnchen Germany Tel: +49 89 3547 0 Fax: +49 89 3547 2767 Internet: http://www.knorr-bremse.com Senior Officers Heinz Hermann Thiele, Chairman Peter Riedlinger, Director Dr Dietmar Straub, Director Jens Theuerkorn, Director Dr Dieter Wilhelm, Director Products A comprehensive range of pneumatic, pneumatic/hydraulic and electronic brake and chassis control systems for commercial vehicles Plants Commercial Vehicle Systems: Austria, Belgium, Brazil, Czech Republic, France, Germany, Hong Kong, Hungary, India, Italy, Japan, Mexico, Netherlands, Russia, Sweden, Turkey, UK, USA Sales Group: 2.206bn (Year to 31.12.03) Employees Group: 10,763 (2003) Employees in Germany: 2,950 Knorr-Bremse AG acts as a holding company for its two core activities: commercial vehicle systems (Knorr-Bremse Systeme fr Nutzfahrzeuge GmbH) and rail vehicle systems (Systeme fr Schienenfahrzeuge GmbH). Knorr-Bremses Commercial Vehicle Systems division is a global leader in the manufacture of truck brakes. In 2002, 76% of the groups sales and 78% of the Commercial Vehicle Systems divisions sales were generated outside Germany. Commercial Vehicle Systems accounted for around 59% of the Groups sales. KnorrBremses automotive customers include DaimlerChrysler, Iveco, MAN and RVI. The Commercial Vehicle Systems division operates through three business units that are responsible for different Centres of Competence: Air Supply (compressors and air treatment) Brake Control and Chassis Management (electronic systems and valves) Foundation Brake (air disc brakes and actuators)

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Recent Developments Corporate strategy The commercial vehicle division of Knorr-Bremse was formally a jointventure with Bosch (20%) and Honeywell (20%) with Knorr-Bremse holding the remaining 60%. Under the agreement Knorr-Bremse controlled joint-ventures in Europe and South America. In January 2002 Knorr-Bremse acquired all of the outstanding shares in Bendix Commercial Vehicle Systems Inc. (USA) from Honeywell, which until then had been responsible for operations in the North American joint-venture as it held 65% of the shares. At the same time Honeywell sold its shareholdings in the European and Brazilian joint-ventures to a financial investor. Knorr-Bremse now has complete operational control of these jointventures. Knorr-Bremse Commercial Vehicle Systems has invested heavily abroad as a result of high German costs. It has been one of the biggest automotive component investors in Eastern Europe, particularly in Hungary, where production costs are much lower. The company has also established contacts with first tier suppliers in the Russian market, and has links with second tier suppliers elsewhere in Eastern Europe. Knorr-Bremse Group also sees significant growth potential in Asia and has been strengthening its position in Japan and India. The division experienced most growth in this region during 2003 with sales increasing by 39.1%. Sales in North America fell 8.3%, but the European commercial vehicle market saw growth of 7.6%. Joint-ventures In March 2002 Knorr-Bremse signed a joint-venture agreement with Tata AutoComp Systems Ltd of India. Knorr-Bremse has a 74% shareholding in the joint-venture and Tata Autocomp the remaining 26%. This gives the company access to the Asian market with plenty of potential for commercial vehicle braking systems. Early in 1999, in a further sign of the worldwide consolidation of the brakes industry, Knorr-Bremse Systeme fr Nutzfahrzeuge merged its operations with the commercial vehicle brakes group of Robert Bosch GmbH. Bosch now has a 20% shareholding in Knorr-Bremse Systeme fr Nutzfahrzeuge. Bosch and Knorr-Bremse work together on electronic brake controls for trucks. Also in 1999, Knorr-Bremse and the Japanese automotive and rolling stock company Nabco Ltd, agreed to cooperate in the area of commercial vehicle braking systems. Knorr-Bremse has been increasing its presence in Japan. It has a joint-venture in commercial vehicle brakes with the Japanese firm, Bosch Braking Systems Co., Ltd. With effect from 1 January 2001 Knorr-Bremse increased its stake in this joint company from 35% to 80%. The joint-venture is now called Knorr-Bremse Commercial Vehicle Systems Japan, Ltd. (formerly JKC Truck Brake Systems). Investments In December 2003 Knorr-Bremse announced that, due to signs of recovery in the North American commercial vehicle market, Bendix Commercial Vehicle Systems is to increase the workforce at its headquarters in Cleveland (US). Mechanical Engineers and IT professionals will be appointed early in 2004 to support the company's growing braking systems business. During fiscal 2003 Knorr-Bremse invested over CZK40m (1.2m, 31 December 2003) in its plant in the Czech Republic, which manufactures brakes for utility vehicles. KnorrBremse took over the company in Hejnice over ten years ago and since that time the business has grown substantially and achieves annual sales of CZK1bn (31m, 31 December 2003). About 85% of the plant's output is exported. In January 2002 Knorr-Bremse acquired the remaining shares in the joint-venture it operated with Honeywell in the USA, Bendix Commercial Vehicles Systems (USA). This gives Knorr-Bremse total operational control in the company and has increased the Commercial Vehicle Systems divisions sales by over 50%. The acquisition of Bendix offers Knorr-Bremse access to the US market with products that are well suited to North American requirements. With the full integration of Bendix into the Group at the beginning of fiscal 2002, Knorr-Bremse became the market leader for braking systems in North America. Following job losses at Knorr-Bremse Commercial Vehicle Systems plant in Kingswood, 336 AutoBusiness Ltd

Company profiles Bristol (UK) between 1997 and 2001, in March 2003 the company decided to invest in its UK operations again by building a new head office and distribution centre in Bristol, which will become operational in early 2004. In December 2002 the company announced it is to build new production facilities for its subsidiary, Westinghouse Brakes, in Chippenham (UK). In April 2001 Knorr-Bremse revealed that it was investing 8.2m in expanding production facilities at its disc brake plant in Aldersbach, Germany. This followed 7.7m investment in the same plant in 1999, when an assembly line for disc brakes and a 2,500m2 logistics centre were built. Knorr-Bremses Hungarian business is the groups largest European production base and exports 85% of its products to Western Europe. Knorr-Bremse invested 2.4m in its Hungarian operations during 2001 as part of its strategy to transfer many operations from Germany to lower cost countries.

Divestments In September 2003 Knorr-Bremse divested its materials handling business unit based in Waidhofen (Austria) via a management buyout, as it was no longer considered core to the business. The unit will become part of IFE Aufbereitungstechnik GmbH (Austria). New Product Developments Knorr-Bremse invested 5.6% (119m) of its 2002 revenue in R&D. The Group employs nearly 1,200 people in this area, over half of whom are focused on developing electronic braking systems. Knorr-Bremse is developing a new electronic stability program (ESP) for trucks in order to strengthen its worldwide market position. The use of the ESP system on trucks can significantly increase safety levels.

Financial Overview In 2003 Knorr-Bremse Group experienced moderate growth of 4.2% with sales of 2.206bn, compared to 2.118bn the previous year. Incoming orders were down by 4.7% compared to 2002. About 69% of sales were achieved in Europe, 24% in the Americas and 7% in the AsiaPacific region. Sales in Europe were up 7.6% at 1.586bn, compared to 1.474bn the year before. However, sales in the Americas fell by 8.3% due to the impact of currency exchanges. Sales in the Asia-Pacific region rose by 39.1% to 153m, compared to 110m in fiscal 2002. This growth was due to the positive economic situation in Japan. Sales for fiscal 2004 are expected to remain static. Outlook Knorr-Bremse has successfully integrated the Bendix Commercial Vehicle Systems business and is now able to offer regionally and globally active OEM customers worldwide service. In Europe the company will continue to benefit from the growing proportion of vehicles equipped with electronic systems and disc brakes as well as improving aftermarket sales. The company also intends to grow by solidifying its position in its core areas and neighbouring areas, such as trailer brakes. Nevertheless, significant revenue growth is proving elusive and, as a result, the focus is on further improvements in efficiency and cost savings, in particular optimisation of internal process structures and logistics.

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Koyo Seiko
Ball bearings and steering assemblies
Address Koyo Seiko Co. Ltd. No. 5-8 Minamisemba 3-Chome Chuo-ku Osaka 542-8502 Japan Tel: +81 6 6245 6087 Fax: +81 6 6344 0814 Internet: http://www.koyo-seiko.co.jp Senior Officers Hiroshi Inoue, Chairman Kohshi Yoshida, President Fumio Morishita, Executive Vice President Products ABS sensors, auto-tensioners, ball bearings, ceramic bearings, constantvelocity joints, drive shafts, electronic component systems, hydraulic hoses, hydraulic pumps, manual steering systems, oil seals, one-way clutches, plastic functional parts, power steering systems, EPS systems, roller bearings and steering joints Plants Argentina (1), Brazil (1), China (5), Czech Republic (1), France (5), India (1), Japan (8), Korea (1), Malaysia (1), Philippines (1), Romania (1), Thailand (2), UK (1), USA (4). Sales Group: 446.78bn (3.454bn, 31 March 2003) (Year to 31.03.03) Employees 6,185 (2003) Koyo Seikos main business areas are the manufacture of ball bearings and steering assemblies. It is the automotive industry's number one bearings manufacturer and the second largest steering systems manufacturer. It pioneered electric power steering (EPS) and currently has a 48% share of the global market. The company divides its business into four areas, although the majority of sales are generated by two of the divisions: Bearings (56.3% of sales in fiscal 2002/03) and Steering Systems (just over 35.4%). Its bearings division supplies mainly the automotive industry, but also produces bearings for use in applications such as computer hard drives. The other two divisions are Automotive Components, and Mechatronic and Factory-Automation Products (non-automotive). The Automotive Components division manufactures electronic components for engines, transmissions, wheels and other vehicle systems, as well as multifunctional unit products. Koyo Seiko has a global network of production bases, sales offices and technical centres, which spans Europe, Asia, and the Americas. It employs about 6,200 people in eight plants in Japan and in 37 affiliates around the world. In 2002 57.4% of Koyo Seiko's sales were made in Japan; 27.6% in Europe; 9.7% in North America; and 5.3% in the rest of the world. Koyo Seiko supplies Toyota and other Japanese car manufacturers such as Daihatsu, Mitsubishi, Nissan and Suzuki. It also supplies Audi, PSA Peugeot Citron, Renault and Volkswagen.

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Recent Developments Corporate strategy In recent years, amid tough economic conditions in Japan, Koyo Seiko has improved the efficiency of its production systems, emphasised the development of new products, particularly EPS, and expanded operations overseas where the markets are more buoyant and the production costs lower. In 2002 Koyo Seiko and three partners established a specialist EPS systems company, FAVESS Co. Ltd (Japan). Facilities have already been augmented in Europe and the company has plans to increase production lines in the US. Koyo Seiko plans to boost global production of EPS systems to 10 million power steering units by fiscal 2007, an increase of 170% compared to fiscal 2002. More recently Koyo Seiko has announced plans to establish a joint venture based in Fujian Province, China for the manufacture of steering columns. The company has agreed to form a partnership with Fuji Kiko Co and a Taiwanese supplier and will initially supply Japanese automakers operating in China. The joint-venture will then expand sales to North American and European manufacturers in the region. Acquisitions In September 2003 Koyo Seiko said it is to buy a 51% stake in its joint venture with Northrop Grumman Corp. (US) for about 9bn (70m, 1 September 2003) to make it a wholly owned subsidiary. The joint venture makes power steering systems for automobiles. The purchase of the full stake in the joint venture, TRW Koyo Steering Systems Co., is designed to strengthen the company's steering business in the United States. In May 2001 Koyo Seiko acquired a 23.7% stake in Fuji Kiko from Fuji Spinning. Aimed at strengthening the company's hold in the EPS market, the deal makes Koyo Seiko the second largest shareholder in Fuji Kiko, a producer of shock absorbing columns for steering systems. Together the two firms began production in the USA and are investigating joint production in Europe where demand for power steering systems for subcompact cars is growing. In April 2000 Koyo Seiko bought a 51% share in PSA Peugeot Citrons steering systems operation for 18.4m. This expanded Koyo Seikos European market share and strengthened its partnership with the French carmaker. The Japanese company's wholly owned subsidiary, Koyo Steering Europe S.A.S. signed a stock purchase agreement to obtain shares in the new joint-venture, whose estimated sales will be around 229m. Joint-ventures In November 2003 Koyo Seiko announced plans to establish a joint-venture based in Fujian Province, China for the manufacture of steering columns. The company will form a partnership with Fuji Kiko Co and a Taiwanese supplier. The joint venture will produce 600,000 units annually by 2007, with sales of about 1.2bn (9.4m, 3 November 2003). The joint venture will initially supply Japanese automakers operating in China and will later expand sales to North American and European manufacturers. Koyo Seiko will own 20% of the joint venture, and Fuji Kiko and the Taiwanese company will each own 35%. Toyota Corporation will own the remaining shares. The facility is scheduled to start manufacturing in May 2005 and will cost about 850m (6.7m, 3 November 2003). In March 2002 Koyo Seiko and Tokyo-based Somic Ihikawa Co. Ltd. established a jointventure company in France. The venture, named Saint Etienne Automotive Corporation began producing joint parts for steering systems in May 2002, to supply Koyos steering systems plant in France. Koyo Seiko holds a 25% stake in the joint-venture. In April 2001 Koyo Seiko launched a joint-venture with the Mitsubishi Electric Corporation in Slany (Czech Republic) for the production and sale of electronic units for power steering. The venture, in which Mitsubishi Electric holds a 90% stake and Koyo Seiko the remaining 10%, is targeted to meet the rising demand for power steering in smaller cars in Europe. Production began in 2002. In March 2001 Koyo Seiko and Aichi Steel Corporation (also an affiliate of Toyota) announced plans to form a joint-venture to produce and sell forged parts for bearings. The joint-company is based in Georgetown, Kentucky (USA). Koyos US unit owns 49% of the new company, called Kentucky Advanced Forge LLC. Production began in April 2002 and annual sales are anticipated of 7m. The venture supplies Toyota and 340 AutoBusiness Ltd

Company profiles General Motors as well as other US carmakers. In September 2000 Koyo Seiko and Toyoda Machine Works, Ltd (TMW), agreed to carry out a joint development of electric power steering (EPS). The energy consumption of EPS is a sixth that of hydraulic systems. The two companies decided to combine their technological capabilities and development and personnel resources in relation to EPS in order to respond with increased speed and efficiency to the demand for energyefficient steering products. In October 2002 the joint-venture was consolidated when Koyo Seiko and TMW established a specialist EPS systems company, FAVESS Co., Ltd in cooperation with Denso Corporation and Toyota Motor Corporation.

Investments In October 2002 Koyo Seiko established FAVESS Co. Ltd (Japan). Koyo holds 45% of the shares in the new company, Toyoda Machine Works Ltd 35%, Denso Corporation 10% and Toyota Motor Corporation 10%. FAVESS will develop and market EPS systems worldwide. In August 2002, Koyo Seiko announced that it will open a car-steering system production unit in the Czech Republic in 2005. The move will enable Koyo to supply EPS systems for Toyota, Peugeot and Citron brand cars being manufactured by PSA Group and Toyota Motor Corp. in their joint-venture facility at Kolin in the Czech Republic. In February 2001, Koyo Romania announced to plans to increase production rates by 25% in 2001, lifting the subsidiary's total output to 70 million ball bearings in 2002. Koyo Seiko has had a 51% stake in the Alexandria bearings factory since March 1998. In December 2000 Koyo Seiko announced plans to start production of steering parts in Thailand in 2001. The parts are shipped to Koyo Steering Systems in the USA and assembled into EPS systems to supply General Motors. Koyo Seiko plans to raise its Thai subsidiary's annual capacity from 50,000 to 300,000 over three years. Contracts In 2001 Koyo Seiko won an order for 300,000 steering wheel modules a year from General Motors. As well as the output from the new joint-venture facility in Kentucky (USA), Koyo Seiko will export steering modules from Japan to meet the order. Koyo Seiko has also secured a contract from PSA Citroen Group for about 800,000 steering systems. The company has invested over 2bn (16m, 1 January 2003) in building new production facilities in France. In addition, it was reported in 2003 that Koyo Seiko was to build another power steering production line at its company in France in order to fulfil its recent order from DaimlerChrysler to supply the Mercedes-Benz A-Class with electric power steering mechanisms. The company is to invest about US$8.5m (8.2m, 3 January 2003) and increase production at the site by 50% to one million units annually. Koyo Seiko has so far supplied such mechanisms to PSA Group but now hopes that this expansion in business will lead to contracts from other European and US vehicle manufacturers. Koyo Seiko announced in November 2003 that it has received a contract worth 3335bn (259m 275m, 1 November 2003) for electric power steering systems from BMW for the Mini. Koyo Seiko's recently expanded French subsidiary in Dijon will supply 220,000 units per year starting in September 2006 for five years. The company forecasts that it will achieve sales of 181bn (1.4bn, 1 November 2003) from electric power steering systems in fiscal 2007. In 2005 Koyo Seiko will commence car-steering system production in the Czech Republic to produce 300,000 units of car EPS systems a year for 1-litre petrol-engine cars and 1.4-litre diesel-engine cars under the brand names of Toyota, Peugeot and Citron. This will follow the opening of joint car manufacturing between Toyota Motor Corp and PSA Group. Koyo Seiko aims to increase the share of its electric powersteering systems in the European market to 40% by the end of 2005. New Product Developments Koyo Seiko places considerable emphasis on maintaining a superior R&D capability. Much of the R&D is performed at Koyo Seiko Headquarters Engineering and Technical Centre in Japan. The company also has a technical centre in North America that supports the ongoing customer engineering requirements of the bearing and steering sales divisions throughout the USA. Another centre of this kind is located in Europe. AutoBusiness Ltd 341

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One of the companys most recent products is its Clean Pro3 Bearings. These are high performance bearings with a uniform coating of a special fluorocarbon polymer film of submicron thickness over the entire bearing surface. As a result, the bearings produce less friction, and benefit from improved durability. Koyo Seiko formed an alliance with FAG Kugelfischer Georg Schfer AG and Mecos Traxler AG in April 2000, to jointly develop digital magnets for turbomolecular pumps. It is intended that this technology be marketed in Europe. Koyo Seiko has recently developed the technology for a highly durable type of variator that make it possible to install continuously variable transmission (CVT) systems in large vehicles like trucks and recreational vehicles (RVs) with 5.5-liter engines. The new device is a fulltoroidal variator, made from a roller positioned between a disc that transfers power from the engine and a disc that transfers the power to the axle. This type of CVT would achieve a 20% reduction in fuel consumption compared to a conventional automatic transmission system. Koyo Seiko is currently testing the new variator and hopes that it will be ready for series production by 2008. Financial Overview In the year ended 31 March 2003, net sales increased by 10.5% to 446.78bn (3.454bn, 31 March 2003) compared to 404.29bn ( 3.5bn, 31 March 2002) in fiscal 2001. Operating profit rose dramatically to 11.64bn (90m, 31 March 2003) compared to the previous year's figure of 3.41bn (29.6m, 31 March 2002). Net profits rose from a loss of 1.87bn (16.2m, 31 March 2002) in fiscal 2001 to 8.28bn (64m, 31 March 2003) in 31 March 2003. Sales for the half-year to 30 September 2003 were 248bn (1.93bn, 30 September 2003), an increase of almost 13% compared to the same period in fiscal 2002-2003, which stood at 221bn (1.84bn, 30 September 2002). However, net income for the six months was down at 3.9bn (30.4m, 30 September 2003) from 5.35bn (44.5m, 30 September 2002) in the six months to 30 September 2002. Sales for the Bearings division rose 3% in the six-month period to 108.1bn (842m, 30 September 2003), although exchange rate fluctuations and other factors meant the result remained similar to the same period in fiscal 2002. The Steering Products division achieved strong growth for the half-year of 22.6% due to increased sales in Japan, Europe and North America. Sales of 108.8bn (847m, 30 September 2003). Outlook Recent performance has been driven by a 20%+ increase in sales of steering products, much of which originated in Europe, where demand for EPS has taken off quite rapidly, with penetration extending to higher-volume segments of the car market. In contrast, bearing sales have remained fairly flat, especially on the domestic market. Koyo Seiko has placed itself in a strong position from which to compete with major competitors such as TRW, Delphi and NSK in the power-steering field and NSK, SKF and others in the bearings field. The formation of FAVESS enables Koyo to further extend its interests in the EPS field through cost-sharing with other partners, a prudent strategy.

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Lear
Seats and interiors
Address Lear Corporation P.O. Box 5008 21557 Telegraph Road Southfield MI 48086-5008 USA Tel: +1 248 477 1500 Fax: +1 248 477 1722 Internet: http://www.lear.com Senior Officers Robert E. Rossiter, Chairman and CEO James h Vandenberghe, Vice Chairman Donald J. Stebbins, President and COO (Americas) Douglas G DelGrosso, President and COO (Europe, Asia and South Africa) David C Wajsgras, Senior Vice President and CFO Products Door and interior systems, electrical and electronic distribution systems, floor and acoustic systems, instrument panel systems, overhead systems, seat systems Plants 283 facilities across Europe, North and South America, Asia/Pacific region and India. Sales Group: US$15.75bn (12.55bn) (Year to 31.12.03) Employees 110,000, of which 34,000 in Europe (2003) Lear has made 17 major acquisitions since 1994 although the last major one, UTA Automotive, was in 1999. These acquisitions have accounted for around two-thirds of net sales growth in the last five years. As a result of global expansion, sales outside the US and Canada have grown from US$2.7bn (2.31bn, 31 December 1997) in 1997 to US$5.9bn (5.63bn, 31 December 2002) in 2002; in particular, sales in Europe have risen from US$1.9bn (1.63bn, 31 December 1997) to US$4.5bn (4.29bn, 31 December 2002) over the period. The company has 283 facilities worldwide in 33 countries, including 154 production/ manufacturing sites, 53 JIT facilities, 43 administration and technical support facilities, ten assembly sites, six advanced technology centres and three distribution centres. Lear Corporation is the leading supplier of automotive interior systems to OEMs and the third largest supplier in automotive electrical distribution systems. It is a fullservice, tier one supplier with research, design, engineering, testing and manufacturing capabilities. Lear has three reportable operating segments: Seating68% of 2002 sales (includes seat systems and components); Interior18% (includes flooring and acoustic systems, door panels, instrument panels, headliners and other interior products); and Electronic and Electrical14% (includes wire harnesses, interior control systems and wireless systems). It supplies all the major car manufacturers, including General Motors, Ford, DaimlerChrysler and Fiat. Other customers include: BMW, Gaz, Honda, Hyundai, Isuzu, Jaguar, Mahindra & Mahindra, Mazda, Mitsubishi, Nissan, PSA Peugeot Citron, Porsche, Renault, Saab, Subaru, Suzuki, Toyota, Volkswagen and Volvo.

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Recent Developments Corporate strategy Lear has concentrated on expanding its R&D capabilities in order to supply a variety of products for a broad range of vehicles. In turn, this has enabled Lear to gain supply contracts in a variety of product areas. Although Lears seating activities are still central to the groups operations, it has recognised that there is more scope for future growth through the development of its interiors business. This has grown through R&D activity as well as strategic acquisitions and joint-ventures to the point that Lear is now able to offer complete interiors and has contracts for them. The company is the total interior integrator for the future GM LeSabre/Deville, which will enter production in 2005, being responsible for design, engineering, sourcing, manufacturing and delivery of the total interior, a contract representing annual sales of US$825m (657.3m, 31 December 2003). In line with the global expansion of the major carmakers, Lear has identified expansion, specifically within Europe, South America and Asia/Pacific Rim, as a key feature of long-term growth. It has strengthened its position in these regions by increasing its manufacturing presence, as well as establishing new global partnerships. This has also allowed the company to widen its customer base. Lear is now able to provide just-in-time delivery to its customers across the world. However, like many suppliers, Lear has been adversely affected by cyclical swings in the automotive industry and because of competition from companies such as Toyota and Honda of Japan. In February 2002 it announced plans to cut 6,500 jobs and close 21 sites by the end of the year in order to reduce its costs. Sixteen of these sites were located in North and South America. These measures followed job cuts in 2001 and the closure of some plants. Lear is also relocating some production to lower-cost countries and is reducing its debt through a stock repurchase programme Lear intends to diversify its customer base and believes that the Asian market presents long-term growth opportunities as demand for vehicles increases and OEMs extend production in these markets. Lear has eight strategic joint ventures which directly serve its largest Asian customers, including Toyota, Honda, Nissan, Mitsubishi Motors, Isuzu Motors and Hyundai Motors and indirectly supplies others that are part of Lear's primary customer base: GM; Daewoo; Suzuki; Ford; Mazda; Renault; and Nissan. The company now believes it is well positioned to expand its business with Asian OEMs, both in Asia and in North America. In July 2003 Lear announced that it intends to increase sales to the Asian OEMs over the next 3-4 years from 7-8% of current sales to up to 18% of total group revenues. This is reflected in the fact that about a quarter of all new orders booked up to 2007 are from Asian carmakers. Acquisitions Lear has made acquisitions that have helped to position it as a complete interior supplier: In May 1999 Lear acquired North American firm, United Technologies Automotive (UTA). This gave Lear electronic and electrical distribution systems capabilities and made it the largest supplier of door panels and the second-largest supplier of floor systems and headliners in North America. Through this acquisition, it created LEED (Lear Electronics and Electrical Division). Through the UTA acquisition, Lear assumed a majority interest in a joint venture with Furukawa of Tokyo (Japan). Based in El Paso, Texas (US), the venture, Lear-Furukawa, produces wiring harnesses for Honda, Isuzu, Mazda and Subaru for the North American market.

Lear has also acquired companies that have consolidated its position as a leading global supplier. 344 In April 2002 Lear acquired a 29% stake in Hanyil Company, Ltd., a South Korean supplier of automotive seats. Hanyil had 2001 sales of US$64m (73m, 1 April 2002). Through the UTA acquisition, Lear assumed an ownership interest in a joint venture with AutoBusiness Ltd

Company profiles DCAC in Wuhan (China). In 2000, the venture began exporting wiring harnesses to Citron in France. In 1999 Lear announced plans to acquire Hyundais seating business, giving its Asia Pacific Operations a strong base in Korea. In February 1999 Lear acquired Polovat (Poland) and the automotive business of Ovatex (Italy), leading suppliers of flooring and acoustic products. Through the UTA acquisition, Lear assumed an ownership interest in a joint-venture with DCAC in Wuhan (China). In 2000 the venture began exporting wiring harnesses to Citron in France. Also through the UTA acquisition, Lear assumed a majority interest in a joint-venture with Furukawa of Japan. The venture is now called Lear-Furukawa.

Divestments In 2002 Lear announced that it planned to cut over 6,500 jobs and close 21 facilities. Some production will be moved to more modern sites. In October 2003 the company announced plans to close its plant in Traverse City in Michigan (US) by the middle of 2004 and move production to Zanesville, Michigan. In March 2001 Lear sold its wire business in Spain for US$35.5m (38.5m, 1 March 2001). Lear sold four European plastic and metal manufacturing facilities for around US$30m (31.9m, 31 December 2000) in December 2000. These non-core businesses were in Italy and Sweden, employed a total of 1,000 people and had external sales of around US$60m (63.7m, 31 December 2000) in 2000. In August 2000 Lear announced plans to sell its sealants and foam rubber business to Acoustiseal, a subsidiary of GSC Industries Inc., for US$92.5m (98.2m, 31 December 2000). In June 2000, Lear sold its exterior mirror operations to a joint-venture it has with The Bing Group, called the Bing-Lear Manufacturing Group. Joint-ventures At the end of 2002 Lear had 31 joint-ventures in 12 countries, of which seven are in Europe. Many of these serve to position the company as a complete interiors supplier. In May 2001 Lear and BERU Group agreed to jointly design and develop Tire Pressure Monitoring Systems, which relay information to drivers through the electronic architecture used for the remote keyless entry system. In a move to supply carmakers utilizing high tech devices such as navigation systems, Lear and Exide Technologies (USA) announced a strategic collaboration in September 2000 to develop and market advanced batteries and electrical packages. This is designed to meet the demands of carmakers that wish to utilise high tech devices such as navigation systems in their cars. In April 2000 Lear announced its joint-venture with Piston Automotive LLC (headquartered in Detroit, USA), called JL Automotive LLC. It will sequence vehicle interior parts for General Motors vehicles. Based at a new facility in Michigan (USA) the venture will sequence door panels, sun visors and headliners. It will supply about 15,000 vehicles per year. Motorola and Lear (through its LEED operations) announced in February 2000 that they are to form a 50/50 partnership to design Internet access and navigation technology for Fords integrated interior systems.

Lear also has joint-ventures that have helped affirm its position as a global supplier. In February 2004 it was announced that Lear is to form a joint-venture with Dongfeng Motor Corporation and Dongfeng Industrial Corporation to form Dongfeng-Lear Car Seat Co. Ltd. About US$22m (17.6m, 29 February 2004) will be invested and Lear will have a 50% shareholding in the joint-venture. In April 2002 Lear formed Nanjing Lear Xindi Automotive Interiors Systems Co., Ltd., a joint-venture with the Xindi subsidiary of Yuejin Motor Group Corporation (China). This will supply seat systems and wire harnesses for future Fiat, Iveco and Yuejin models built in China. In November 2000 Lear formed a joint-venture called Total Interior Systems-America, 345

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Automotive Technology Roadmap with Japanese seat and door panel supplier Takashimaya Nippatsu Kogyo Co. Ltd. Beginning in 2003, it will supply Toyota with seating systems for the Sienna minivan from Lears plant in Princeton, Indiana (USA). In May 2000 Lear announced plans to expand its collaboration with NHK Spring Co. Ltd (Japan), to form a new joint venture to co-develop seat systems for the Asian markets.

Investments Lear has increased its manufacturing presence in Europe through a number of investments. Lear has agreed to open a new plant in Poland as of May 2004 for the production of upholstery parts for car seats and other automotive equipment. The company will lease 8,000-square-metres of production space at a plant in Jarlan. About 500 people will be employed at the facility. In October 2003 Lear said it is to invest US$3.4m (3.2m, 1 October 2003) at its facility in Mor, Hungary in order to fulfil a recent order placed by Porsche. About 100 new jobs will be created at the site, which already employs 750 people. The company's logistics centre in the region will also be upgraded. Lear currently has three facilities in Hungary, in Mor, Gyongyos and Gyor. A new facility in Valls (Spain) opened in 2002, to develop an Intertronics system. In July 2001 Lear announced an investment at its 12,000 square metre facility in Offranville, (France). In November 2000 the company opened a plant in Genk (Belgium) to supply seats justin-time for Ford's Mondeo. Lear announced plans in November 2000 for a seat factory in Madrid (Spain) to supply PSA. Also in November 2000 Lear and Autoliv announced plans to build a plant in Nizhny Novgorod (Czech Republic). Lear has invested US$5m (5.7m, 31 November 2000) in the project, with the aim of producing around 480 seats for Volga cars and 1,100 seats for the Gazelle and Sobol small trucks per year. In May 2000 Lear announced an investment of US$8.5m (9.1m, 31 May 2000) to establish a production facility in Eragny (Val-dOise, France) that will produce seats for 1,500 cars per day. Lear is also planning new plants in Slovakia and France, as well as increasing capacity at its plant in Zweisel (Germany).

Contracts In January 2003 Lear announced that it had received several major new contracts including: a total interior program for GM; cockpit and instrument panel programmes; electrical and electronics systems; and new business with Asian OEMs. In August 2003 the company announced that it is to increase production at its plant in Halol, India, as a result of increased demand from General Motors in the region. Jaguars new XJ luxury sedan, launched at Paris Mondiale 2002, carries significant content from Lear including: seating systems, carpets, headliners and the in-car entertainment system. Lear supplies seating systems to the BMW Z4 Roadster, as it did on the outgoing Z3 model. In January 2002 Lear and BERU were chosen by Ford to supply their jointly developed tyre pressure monitoring system to a future Ford Explorer SUV. In 2001 Lear won a significant contract from Ford Changun (China) to supply seats, interior trim and wire harnesses for the 2003 Ford Ikon model. In April 2001 Lear Corporation Czech (LCC) announced it is to manufacture panels for Mercedes, in a five year contract worth 44m. In October 2000 Lears factory in Offranville (France) announced a contract to produce door panels for General Motors (Opel). This follows an announcement in April 2000 that the factory was going to close. In June 2000 Lear announced it was to supply ultra lightweight rear seats for the 1.2-litre Audi A2. The seats produce a weight reduction of 50%, compared to the 1.4-litre A2.

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Company profiles New Product Developments Lear has developed a number of designs for innovative interior features and its umbrella technology, Intertronics, describes the companys ability to integrate electronics products with automotive interior systems. Intertronics products and technologies are grouped into three categories: Electronic and Electrical Distribution Systems; Wireless Systems and Interior Control Systems and include junction boxes, RKE systems and advanced electronic products and switches. R&D costs amounted to US$176m (167.9m, 31 December 2002) in 2002, down from US$198.6m (224.2m, 31 December 2001) in 2001. Recent developments include: The development of two new polymer materials, to be used in interior trim products, such as door panels, pillars and trunk trim, which offer weight and cost savings, announced September 2000. In March 2000 three new brands were unveiled: Pro-tec Occupant Protection Systems (including technologies such as whiplash protection, child safety, and post-crash care); Sono-tec Vehicle Acoustic Systems (including acoustic absorbers and squeak and rattle control); Enviro-tec (including PVC-free wiring and recyclable PET headliners). The Common Architecture Strategy that makes mass-customisation of vehicle interiors feasible was launched in March 2000. This is based on a standardised common structure that supports the use of interchangeable, modular components built off the same substructures. The TransG concept, which places all driver-operated controls or displays on the central console or instrument panel rather than on the headliner. It also incorporates such features as a low step-up height, a virtually flat load floor and a powered rotation seat that swivels outward. People-Vehicle-Interface (PVI Method) is Lears metholdology for working to understand what consumers want inside their cars, while still meeting governmental legislation. Lear has most recently concentrated on the development of Intertronics, which integrates electronics into a vehicles interior. OASys, an audio system within the headliner that offers improved audio quality, plus space, weight and cost savings. Electronic in-vehicle technology, including Interior Control Systems, Wireless Systems, and Electronic and Electrical Distribution Systems, which allow the electronic operation of comfort and convenience systems, remote keyless entry systems, multifunction turn signal switches, smart junction boxes and an audio amplifier and television receiver. The Access system, an in-car computing system that allows plug-and-play with personal electronics, voice activation and the capability to display three applications on three different screens simultaneously.

Financial Overview Lear posted a 9% increase in net sales of US$15.75bn (12.55bn, 31 December 2003) in the year to 31 December 2003, compared to the previous years figure of US$14.42bn (13.76bn, 31 December 2002). Net income was US$380.5m (303.1m, 31 December 2003) for fiscal 2003, compared to US$13m (12.4m, 31 December 2002) (including the cumulative effect of the change in accounting for goodwill) the year before. The increase in net sales compared to 2002 was due to the benefit of currency exchange and the addition of new business globally, but was partially offset by lower industry production in North America and unfavourable platform mix in Western Europe. The improvement in net income compared to fiscal 2002, excluding the change in accounting for goodwill, reflects the impact of higher sales, operating efficiencies and lower income tax and interest expenses. For fiscal 2004, Lear is forecasting net sales of about US$16.2bn (12.9bn, 31 December 2003). This increase reflects the addition of new business globally.

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Automotive Technology Roadmap Outlook Lear has a clearly defined strategy that is delivering consistent sales growth and placing it in an increasingly formidable competitive position. Its share of the US$191bn (152.2bn, 31 December 2003) interiors market (including cockpits and electronics) looks set to grow, especially as the focus on cockpits and electronics increases. The company is targeting 2007 net sales of around US$18.5bn (14.7bn, 31 December 2003), an estimate that is based on the forward order position, much of which will come from Europe. Lear now has the capability to deliver the five major interior systems seat systems, flooring and acoustic systems, door panels, instrument panels and cockpit systems and overhead systems and is also one of the leading global suppliers of automotive electronics and electrical distribution systems.

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Company profiles

Lotus Engineering
Design and engineering consultancy
Address Lotus Engineering Potash Lane Hethel Norwich Norfolk, NR14 8EZ UK Tel: +44 1953 608423 Fax: +44 1953 608240 Internet: http://www.lotuscars.co.uk Senior Officers Don Graunstadt, CEO David Taitt, Lotus Engineering Operations Director Glenn Wotring, Vice President Operations Don Apple, Vice President Engineering Products Powertrain engineering, vehicle engineering, design consultancy, project management Plants Malaysia, UK, USA Sales No figures available Employees 814 (October 2003) Lotus Engineering, a division of Group Lotus plc., is a world leading automotive design consultancy. The company can take a new car project from its initial concept, through every stage of design, development and testing, and also manufacture the finished product. The company says that since 2003 a Lotus-developed engine has powered 10% of all new cars in Europe. Lotus Engineering is split into five divisions: Powertrain Engineering The Powertrain division has expertise in every area of mass production and specialised powertrain development. Vehicle Engineering The Vehicle division engineers and manufactures whole vehicles, from trucks to racing cars, for low, medium or high volume production. Consultancy Lotus Engineering is experienced in delivering projects for major carmakers. It satisfies both business and consumer needs by taking vehicle propositions rapidly from the recognition of an opportunity, to putting the finished product in the marketplace. Project Management The Project Management division manages large- and small-scale projects, including multinational programmes and prime contractor responsibilities. Lotus Performance Lotus Performance develops and manufactures low-volume, high performance engines for road use and motorsport applications. Lotus Engineering aims to integrate these divisions with each other so that the company can operate as a whole service provider. Due to restrictions of confidentiality Lotus Engineering cannot disclose the clients it is currently working with. However, previous clients include GM, Honda, Kia, Proton, Toyota, Volvo and also its parent company Lotus Cars.

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Recent Developments Corporate strategy Lotus Engineering is constantly striving to develop new technologies that will make cars and engines more economical, cheaper to manufacture and run, and more environmentally friendly. In addition the company also concentrates on improving vehicle handling and reducing noise, so as to make driving cars a more enjoyable experience. Lotus Engineering is partnering with other key players to develop these technologies, and in the case of its partnership with Eaton Automotive, to speed these products to market. Increasing legislation relating to emissions is currently one of the more important driving forces behind Lotus Engineerings current technologies. Primarily, Lotus Engineering researches and develops technologies for its parent company Group Lotus, but the company also continues to win business from many other leading OEMs. Joint-ventures In July 2003 Lotus Engineering signed a licensing agreement with US tier one supplier Eaton Automotive to develop for production Lotus Engineerings Active Valve Train (AVT) system. Lotus Engineering believes that Eaton is the best-placed firm to bring its AVT system to market. Lotus and Eaton hope to have vehicles demonstrating AVT technology within two years and to have systems in production and available for delivery by 2008. An undisclosed major European vehicle manufacturer has already signed an agreement to acquire the AVT system for one of its platforms. In May 2003 Lotus Engineerings American division formed a partnership with US company Honeywell's Garrett business unit. Garrett is a global leader in turbocharging technology. The two companies joined forces to produce a turbocharged demonstrator vehicle tailored for the US market. The objective was to show how vehicle performance and fuel economy could be improved through turbo-enabled engine downsizing. The turbocharged Jeep Liberty debuted at a Garrett-sponsored Ride and Drive event in Detroit (USA) on 12-15 May 2003. In March 2002, Lotus Engineering announced a teaming agreement with IMPCO to accelerate the development of advanced internal combustion engine technology designs and products that connect the use of clean-burning gaseous fuels such as natural gas and propane in vehicles and equipment to enhance performance and significantly reduce emissions. Investments In March 2004 Lotus Engineering opened an office in China to meet increasing demand for its services from manufacturers in the world's fastest growing car market. Lotus Engineering's activity in China has been steadily increasing over the last decade, most significantly in the last two years. It is currently working with several clients on a range of powertrain and vehicle engineering programs, and is in detailed negotiations for further high value projects totaling in excess of 50m (73.6m, 16 March 2004). Contracts In March 2003 Pininfarina unveiled its Enjoy sports car at the 73rd Geneva International Motor Show. The Enjoy is built on the Lotus tub structure chassis, which evolved from the chassis of the Lotus Elise. In August 2002 Lotus Engineering announced that it had been awarded two major contracts for its vehicle and powertrain engineering services. The first contract relates to the full design and development of a family of niche vehicles, each with the capability of being produced at the rate of 10,000 per year. The programme will take advantage of Lotus Versatile Vehicle Architecture (VVA) technology. The VVA vehicle engineering contract is worth 35m (55.3m, 31 August 2002) over several years. Lotus Engineering plans to deliver prototypes of the first radical niche variant to its client in mid-2004. The second major contract utilises Lotus Engineerings Powertrain technology. Lotus Engineering will design and develop a new powertrain product variant that will utilise Lotus patented Cam Profile Switching technology. The Cam Profile Switching powertrain engineering contract is worth 10m (15.8m, 31 August 2002) over several years. Lotus Engineering was heavily involved in the design and built the Opel Speedster Concept Car for the Geneva Motor Show in March 1999. The Speedster became a full production model known as the Vauxhall VX220 and Lotus Engineering was 350 AutoBusiness Ltd

Company profiles involved in its development. Lotus also builds the car on behalf of General Motors. New Product Developments Lotus Engineering operates in an area where the technology or product is not yet ready for production, but where initial research and development has already taken place. These technologies are in need of further research, but they will have clear commercial potential. Some recent technological advances include: In October 2003, at the Aachen Colloquium for Automobile and Engine Technology, Lotus Engineering announced details of its Versatile Vehicle Architecture (VVA) technology. VVA exploits Lotus Engineerings expertise in steel, aluminium and composite body engineering, joining techniques, and vehicle systems integration. The technology offers a fast-to-market, cost-effective approach to differentiated niche products by spreading the development, investment and bill of materials burden across a range of niche vehicle variants. OEMs wanting to introduce niche vehicles must currently either design a new platform or share one already available. Neither of these options is ideal, the first is expensive and time-consuming, the second compromises performance and design. Lotus VVA has been developed to fill the gap in the investment-volume curve to exploit the benefits of producing at medium volumes but for niche markets. Lotus Engineering, together with Eaton Automotive, is currently bringing to market its Active Valve Train (AVT) system. The technology can reduce engine-out emissions and improve fuel economy. Also, simulations show that for a conventional baseline engine with AVT technology on board, the improved operational efficiency increases torque by up to 10%. The fully variable AVT system is several generations ahead of the various mechanical systems introduced by OEMs and it offers a level of valve control never seen before in production engines. Lotus is currently researching downsizing technologies. Lotus believes that smaller engines represent a viable solution to meeting ever more stringent environmental requirements. In May 2003 Lotus Engineering and Garett jointly developed a turbocharged demonstrator vehicle tailored for the US market. The Jeep Liberty, one of the best selling small SUV models in US, was chosen as the base vehicle to be turbocharged because it offered an opportunity to show how a smaller, turbocharged engine performed the same or better than a much bigger V6 engine while offering increased fuel economy. What was actually produced was a turbocharged gasoline 2.4-litre Jeep Liberty that surpasses the performance characteristics of a 3.7-litre V6 Jeep Liberty vehicle with better fuel efficiency. In March 2002 Lotus Engineering released details of Project Eco2s. Using its leading technology in both vehicle and powertrain engineering, Lotus Engineering was able to show that an ultra-low CO2 level of 75g/km can be achieved without sacrificing performance. Projections show that the MY2010 Low Carbon Sports Car Concept (Eco2s) may even exceed the current Elise in terms of vehicle performance, whilst delivering superior economy and reduced emissions. Project Eco2s was developed to meet increasingly stringent environmental legislation. The company was also involved in the ULSAS (UltraLight Steel Auto Suspensions) project. It cuts 32% from the weight of a conventional twist-beam axle, and 17% from a double wishbone set-up. ULSAS has major implications for mass car production. Financial Overview Lotus Engineering is a division of Group Lotus, a private company. As such no financial information about the company is available. However, a UK newspaper report in 2003 stated that Group Lotus made a profit of 2.7m (3.94m, 31 March 2003) before interest charges and tax for the year ended March 2003, on a turnover of 154m (224.7m, 31 March 2003), compared with losses of 16.6m (27.2m, 31 March 2002) and 42.2m (68.1m, 31 March 2001) in the previous two years. A closer look at the figures revealed that the profit was derived from a strong performance from Lotus Engineering. AutoBusiness Ltd 351

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Outlook Lotus Engineering is a highly respected design and engineering consultancy operation at the forefront of a number of developing technologies. These new technologies are developed to make cars and engines more economical, cheaper to manufacture and run, and more environmentally friendly. Sensibly, Lotus Engineering has chosen to partner with other key players to develop these technologies. Despite its relatively small size, the operation has global ambitions, typified by its recent decision to invest more resources in China. Activity in the country has accelerated in the last two years and there are indications this could gather pace further in coming years.

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Magna Steyr
Engineering services and niche vehicle production
Address Magna Steyr AG & Co KG Magna Strae 1 2522 Oberwaltersdorf Austria Tel: +43 2253 600 0 Fax: +43 2253 600 599 Internet: http://www.magnasteyr.com Senior Officers Manfred Remmel, President and CEO Harald J. Wester, Executive Vice President R&D and Technologies Wolfgang Sauerzapf, Executive Vice President Finance Products Complete vehicle assembly, driveline and chassis components Plants Engineering: Austria, Germany, India, Hungary, USA Vehicle Assembly: Austria, France Driveline and Chassis Modules: Austria, Mexico, USA Sales US$2.72bn (2.17bn, 31 December 2003) (Year to 31.12.03) Employees 10,000 (2003) Founded in 2001, Magna Steyr is a whollyowned subsidiary of Magna International Inc. Magna Steyr is one of the world's leading suppliers of total vehicle engineering for OEM customers. The company is also one of the world's leading suppliers of niche vehicle production, assembly and concept development, as well as a leading supplier of powertrain modules and all-wheel drive systems. Magna Steyr was officially launched in March 2001, and is focused on meeting the increasing demand for niche and low-volume, personalised vehicles. Magna International's European vehicle assembly and powertrain groups were reorganised to form Magna Steyr and now work together with Magna International's metal hydroforming and metal stamping group to create a complete chassis on wheels. The new group combines several Magna businesses, including Steyr Daimler Puch Fahrzeugtechnik, Steyr Powertrain, Magna's Chassis Group and Master Precision Division and European Stamping Operations. Magna Steyr is divided into four business areas: Engineering Advanced development; Research; Styling and design concepts; Project management; Development components, systems and modules up to complete vehicles; System integration; Calculation and simulation; Prototyping; On-Road testing; Vehicle trial; Homologation; Vehicle safety; Space technology Vehicle Assembly Mercedes-Benz EClass; Mercedes-Benz G-Class; Jeep Grand Cherokee; Chrysler Voyager; Saab 9-3 Convertible; BMW X3; Complete BodyIn-White; Class A stampings Driveline All-wheel-drive systems: Transfer case, Front axle drive, Rear axle drive; Mass balancing systems Chassis Modules Axle modules; Chassis parts Magna Steyr has eight manufacturing and assembly facilities and eight engineering and testing facilities (including one joint-venture facility with Intier Automotive) in Europe, India, the United States and Mexico.

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Recent Developments Corporate strategy In Europe Magna Steyr is aiming to become the world's biggest car manufacturer without having a brand of its own. To achieve this the company is concentrating on making unique, complex, highly engineered modules that range from sub-assemblies to vehicles that it has completely developed, engineered and assembled. It has made a number of moves to implement this strategy. It was reported in January 2004 that Magna Steyr plans to expand its operations in Asia and especially in China, where it will double the number of its employees to 4,000 in the next few years. The expansion is due to the expected increase of the number of manufactured cars in China to 4.6 million in 2006, compared to the two million units currently produced. However, in December 2003 the companys new chairman, Manfred Remmel, was reported to have said that although China was an interesting market the company would not rush to enter its carmanufacturing sector. In 2003, Magna Steyr assembled 18,807 vehicles, up 29% from the 92,302 made in 2002. Assembly of so-called full-costed vehicles rose 41% to 49,274, a reflection of commencement of Saab 9-3 convertible and BMW X3 output. Acquisitions In March 2002 Magna Steyr announced the acquisition of the Eurostar vehicle assembly facility from DaimlerChrysler. The acquisition gives Magna Steyr capacity to assemble 200,000 vehicles a year. It already assembles vehicles on contract for DaimlerChrysler, Saab (9-3 convertible) and for BMW (X3). The Eurostar acquisition enhanced Magna Steyr's engineering, drivetrain and speciality vehicle assembly capabilities. The purchase is part of Magna Steyr's strategy to become the world's largest speciality brand vehicle manufacturer for various OEMs. Investments To add to its engineering capabilities Magna Steyr built a new engineering and R&D centre employing 400 technicians in St. Valentin (Austria). Contracts It was reported in March 2004 that Magna Steyr appears to be in the running to be selected as the producer of cabrio versions of the new Euro-Cadillac and of Dodge vehicles beginning in 2006. In February 2004 it was announced that Smart GmbH, a DaimlerChrysler group company, had awarded Magna Steyr the contract for developing a substantial part of the completely new all-wheel drive model in its range. The vehicle, which is to be called smart formore, is a compact four-seater, all-terrain SUV. Magna Steyr engineered and now supplies the 4MATIC to the Mercedes-Benz S-Class, C-Class and E-Class line of vehicles. In July 2001 Magna Steyr secured a contract to assemble the new Saab 9-3 convertible model. This commenced in 2003. Magna Steyr replaced Valmet as the assembler of the Saab Convertible model. Magna Steyr is building the BMW X3, which will be for sale to the global market in 2004, at Graz (Austria). Jeep Grand Cherokee is built at the Magna Steyr assembly plant in Graz (Austria). New Product Developments In March 2002 Magna Steyr acquired DaimlerChryslers Eurostar vehicle engineering and assembly facility in Graz (Austria). The Graz Engineering Center now employs 1,200 engineers and technicians and is the largest engineering division of Magna Steyr and is the competence centre for complete vehicle engineering. Magna Steyr has partnered with BMW to develop and supply a new liquid hydrogen fuel storage system for the first serial production hydrogen-powered vehicle, the BMW 745h. The environmentally friendly technology utilises a high vacuum, multi-layer insulation and specialised couplings to keep liquid hydrogen at a sub-zero temperature as it enters the cars 354 AutoBusiness Ltd

Company profiles fuel tank from the storage unit. Financial Overview Magna Steyr is a wholly-owned subsidiary of Magna International and its financial results are consolidated in its parent companys results. However, in the year ending 31 December 2003 Magna Steyr reported sales of US$2.72bn (2.17bn, 31 December 2002), an increase of 42% over the previous years US$1.91bn (1.82bn, 31 December 2002). These higher sales reflected an increase in reported US dollar sales related to the strengthening of the euro against the US dollar, an increase in assembly sales, including the launches of the Saab 9-3 Convertible and BMW X3 programs in 2003 and an increase in the sales of the Drivetrain operations. During 2003, Magna Steyr assembled the Mercedes E-Class 4X2 and E-Class 4MATIC, the Mercedes G-Class, the Chrysler Voyager, the Chrysler Jeep Grand Cherokee, the Saab 9-3 Convertible and the BMW X3 vehicles, whereas in 2002, Magna Steyr assembled the Mercedes E-Class 4X2 and E-Class 4MATIC, the Mercedes G-Class, the Chrysler Voyager, the Chrysler Jeep Grand Cherokee and the Mercedes M-Class vehicles. During 2003, Magna Steyr launched the new versions of the E-Class 4x2 and E-Class 4MATIC, which resulted in lower volumes for these vehicles during the transition period than in the comparable period in 2002. During the third quarter of 2003, the Saab 9-3 Convertible was launched and during the fourth quarter of 2003, the BMW X3 was launched. Assembly and engineering sales increased US$711m (566.4m, 31 December 2003) in 2003 to US$2.38bn (1.90bn, 31 December 2003). Excluding the effect of foreign currency translation, assembly and engineering sales increased as a result of a 41% increase in the assembly volumes of full-cost vehicles in 2003 over 2002, including assembly of the Saab 9-3 convertible and the BMW X3. Assembly and engineering sales also increased as a result of a 21% increase in value-added assembly volumes in 2003 over 2002. Sales at Magna Steyrs Drivetrain operations increased by US$44m (35.1m, 31 December 2003) to US$415m (330.6m, 31 December 2003) for 2003. Excluding the effect of translation, Drivetrain sales decreased in both North America and Europe as a result of both lower volumes on the Pontiac Aztek program and lower all-wheel drive installation rates on the Buick Rendezvous program. These decreases in sales were partially offset by an increase in reported US dollar sales due to the strengthening of the euro against the US dollar. Magna Steyrs operating income increased by 262% to US$47m (37.4m, 31 December 2003) for 2003 from US$13m (12.4m, 31 December 2002) in 2002. The increase in operating income was a result of the launch of several new programs during 2003, including the Saab 93 Convertible and BMW X3 assembly programs, improved performance at Magna Steyrs Drivetrain and engineering facilities in Austria as well as an increase in reported US dollar operating income as a result of the strengthening of the euro against the US dollar, partially offset by launch costs incurred with respect to the launch of the new Mercedes E-Class 4MATIC program, operational inefficiencies with respect to the S-Class, E-Class and C-Class programs and planning and engineering costs associated with the newly awarded transfer case on General Motors next generation full-size pick-ups and sport utilities program. Outlook Magna Steyr appears to be going from strength to strength as new assembly contracts come on stream and output builds. Full year output of the Saab 9-3 convertible and the BMW X3 should lift assembly towards the 200,000 capacity level later in 2004, with around 80,000 of the latter contributing towards this. Engineering work on the four-wheel drive system of the smart formore will also underpin capacity utilization at the Graz, Austria engineering centre until 2006. Magna Steyr has made no secret of the fact that it is looking to invest in additional capacity in the future, and this is likely to be outside Austria. If Magna successfully concludes the acquisition of New Venture Gear from DaimlerChrysler, Steyrs operations and capabilities will be expanded significantly. This may well act as a catalyst for Magna Steyr eventually becoming Magna Internationals fourth public subsidiary, joining Decoma, Intier and Tesma. AutoBusiness Ltd 355

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Mahle
Engine components, systems and modules
Address Mahle GmbH Pragstrasse 26-46 70376 Stuttgart Germany Tel: +49 711 501 0 Fax: +49 711 501 20 07 Internet: http://www.mahle.com Senior Officers Prof. Dr.-Ing. Heinz K. Junker, Chairman of Management Board Peter Grunow, Director of Filter Systems Division Dr. Hans-J. Enning, Director of Valve Train Systems Division Products Pistons, cylinders, engine blocks, cylinder liners, piston pins, piston rings, bearing surfaces, friction bearings, complete power cylinder modules, oil filters, air filters, fuel filters, activated carbon canisters, air driers, oil separators, cabin filters, air intake modules, valve train systems, cast and composite camshafts, rocker arms, cam followers, rocker shafts, valves, valve filters, valve seat rings, and valve guides, cylinder liners, inserts for diesel piston castings, piston pins, precision steel parts, cold extruded parts, precision power metal parts Plants Argentina, Australia, Austria, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Philippines, Poland, Portugal, Spain, Switzerland, Thailand, UK, US Sales Group: 3.25bn (Year to 31.12.03) Employees 31,086, of which 71% outside Germany (December 2003) Mahle is a privately owned company divided into four business areas: Pistons and Engine Components47.4% of sales in 2002; Filter Systems38.5%; Valve Train Systems 13.9%; and Service0.2%. Europe accounted for 57% of 2002 sales, America 30% and Asia/Pacific 13%. The Mahle Group is one of the leading suppliers of pistons, cylinders, filters and other engine components for the global automotive industry. It has 61 manufacturing locations worldwide. The companys biggest customers are DaimlerChrysler and Volkswagen but it supplies most vehicle makers around the world. Sales in the last five years have risen 80% and 10,000 employees have joined the group.

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Recent Developments Corporate strategy In recent years Mahle has pursued an aggressive growth strategy in a bid to become one of the top 50 module and systems suppliers to the automotive and engine industry. It has expanded its modular capabilities through forming joint-ventures with other engine components manufacturers. Mahle has increased its global presence, mainly in the Pistons and Engine Components business unit, through expanding rapidly into Eastern Europe, South America and Asia, where it sees long-term growth opportunities. Mahle Groups most significant action in the late 1990s was the acquisition of a controlling share in Izumi Industries Ltd, the largest independent manufacturer of pistons in Japan. In January 2003 Mahle acquired the remaining shares in the company, which is now called Mahle Izumi Corp. Izumi operates four production facilities in Japan and has holding business interests in China, Indonesia and Thailand. In early 1999, Mahle also formed a joint-venture with Izumi in China. The venture, in which Mahle has a 66.7% share, produces pistons for passenger and commercial vehicles. More recently, the incorporation of the major shareholding in Tennex Corporation into Mahles Filter Systems Business unit has doubled the divisions sales and created the worlds largest producer of automotive filter systems. Mahle expects that growth in the immediate future will come mainly from the Asia-Pacific region, specifically in China, where the company has made most recent investment and also from the companys new majority-owned joint venture with BMW for camshaft production in Berlin (Germany). Restructuring of the companys German operations is also imminent, as the company needs to improve its competitive edge. Some production has already been relocated from Germany to a lower-cost facility in Poland and this is likely to continue with 1,000 job losses forecast at German facilities by 2004. Acquisitions In November 2003 Mahle acquired Chinese piston manufacturer, Chongqing Changjiang Izumi Piston Industries Co. Ltd (CCI), which will in future be called Mahle Engine Components (Chongqing) Co. Ltd. As a result, Mahle has become the second largest piston producer in China with a capacity of 10 million pieces annually. In January 2003 Mahle acquired production facilities in Korea for the production of air induction modules from the Kemso Company, which is a 50:50 joint venture between Siemens and Daewoo. Mahle acquired a 51% share of BMW's camshaft production operations in Spandau, Berlin (Germany) in the first half of 2003. Mahle will supply most of BMW's camshafts from the site, which currently employs 250 people. The facility will ultimately become a wholly-owned subsidiary of Mahle and the company might build a second facility next to the plant to make camshafts for other Mahle customers. Mahle is set to acquire the remaining 49% of BMW's valve train system production activities in Germany in 2004. In November 2002, Mahle acquired the remaining shares of DaimlerChrysler AG in the Mahle Valve Train Systems business sector. The former 25.8% share held by DaimlerChrysler dates back to the mid 90s when the Bad Homburg plant belonging to Daimler-Benz at the time was merged with the Group in return for a share in Mahles valve train systems business. In March 2002 Mahle acquired Brockhaus Canada, Inc. of Ganoque, Ontario (Canada) in an asset purchase acquisition. The acquisition enhanced Mahles module and systems capabilities by enabling the group to provide power cell assemblies as complete modules ready for installation on OEM assembly lines. In October 2001 Mahle took over all the shares of the Mexican joint-venture, MahleDuroplast systemas de Filtracin S.A. The company was founded as a 50/50 jointventure in 1996 and had 2001 sales of approximately US$30m (33m, 31 October 2001). After the shares were taken over the company was renamed Mahle de Mexico Systemas de Filtracin SA de CV. The purchase is part of Mahle's strategy to build its North American filter business. In July 2003 Mahle increased its share in the Japanese Tennex Corporation from 57.72% to 73.1% with the acquisition of all the shares held by Nissan. Mahle has incorporated Tennex into its Filter Systems Business sector, making the operation the largest supplier of filter systems in the world, with annual sales of 1bn. Tennex, a 358 AutoBusiness Ltd

Company profiles former Nissan subsidiary, is a leading international manufacturer of air, oil and fuel filter systems for the automotive industry with seven production plants throughout Europe, Asia and the USA. In June 2001 Mahle acquired the 50% it did not already own of Escorts Mahle Ltd (India) from the Escorts Group. Escort Mahle manufactures automotive components such as piston assemblies, pistons and pins. In February 2001 Mahle bought two new factories in Baden-Wrttemberg (Germany). One of the factories manufactures camshafts and the other is for motor sports activities. In July 2000 Mahle completed the acquisition of Mahle-Parr Filter Systems, Inc. The company is an OEM supplier of gasoline filters with two production bases in the USA.

Recent closures Mahle plans to reduce the number of employees at its Rottweil (Germany) plant from 1,060 to 950. The plant is Mahle's main production facility for commercial pistons, but has been affected by pricing pressures, particularly with the weakened demand for automotive production in the US. In fiscal year 2002 Mahle's German operations continued to show unsatisfactory results. The group has since decided to shed about 650 jobs at its companies in Alzenau, Bad Homburg, Lorsch and Markgrnigen by 2004. Provisions of about 15m have been made for the restructuring. As part of on-going restructuring measures, valve production at Mahle's Bad Homburg (Germany) facility is to be moved to the company's new plant at Wlfersheim (Germany). The modern plant will operate three shifts a day with 470 staff compared to the 760 people currently employed in Bad Homburg, making engine valves and camshafts. Joint-ventures Mahle has recently established a joint venture with BMW AG for the production of camshafts, in which it has a 51% stake. Initially it will involve the main camshaft production plant on the premises of BMWs Berlin facility. The majority of all BMW camshafts are to be manufactured here, under the operational leadership of Mahle. 250 people are currently employed at the site. Mahle has a joint venture with Izumi Industries (Japan) in China. The venture, MahleIzumi (Liaoning) Piston Co. Ltd., produces pistons for passenger and commercial vehicles. In January 2001 Mahle and Brockhaus Shne formed a strategic alliance for the development and production of piston and connecting rod modular assemblies. Mahle acquired a 25.1% stake in Brockhaus Shne, the world's leading manufacturer of forged connecting rods with production plants in Germany, Spain and Canada. This was increased to a 51% shareholding in February 2004. In December 2001, it was announced that Mahle had formed a joint venture with Australian piston manufacturer, Automotive Components Ltd (ACL). Mahle has a 51% majority holding in the newly-formed Mahle-ACL Piston Products Pty Ltd., which will produce pistons and piston rings for customers such as General Motors, Ford, Toyota and Mitsubishi. A new plant is to be built near Melbourne and production will commence in 2003. The new company expects sales of 38m annually. Investments The newest production plant in the Valve Train Business Sector began ramp-up in the Liebertingen (Germany) in mid-2001. An expansion is planned which would increase the output to five million camshafts a year. The subsidiary, Mahle Ventilberieb GmbH, is the single-source supplier of composite camshafts for the diesel engines with common rail technology in PSA Peugeot Citron passenger cars. In November 2003 Mahle announced that it will invest 246m during the coming year. Two new plants are to be built in Wustermark (Brandenburg) and Wlfersheim (Hessen) at a cost of 73m. The new plant at Wustermark will produce camshafts and sales of 80m are expected annually. Most investment will be made in projects outside Germany. The joint venture with ACL (Automotive Components Ltd) of Australia has recently invested A$35m (19.6m, 1 May 2003) in a new plant in Victoria (Australia) for the manufacture of pistons, piston rings, and complete power cell modules. In early 2001 Mahle's first flexible production line in the USA started operations in AutoBusiness Ltd 359

Automotive Technology Roadmap Morristown supplying small-medium volume connecting rod assemblies to US customers. A further production facility in Ramos Arizpe (Mexico) will start production in mid-2002. This location will serve high volume connecting rod projects to NAFTA customers. To strengthen its relationship with Volkswagen, in 2001 Mahle established an Engineering and Sales office in Wolfsburg (Germany). The new offices aim to improve the communication channels between Mahle and Volkswagen, and include technological links to Volkswagen's logistics. In 2001 Mahle constructed a second foundry plant in Krotoszyn (Poland) for the low-cost supply of cast pistons to several of Mahle's piston plants in Europe. The increase in capacity was built in response to growing demand from Mahle's European customers for new generation diesel engines. During 2003 Mahle invested 24.4m (22 January 2004) in the site, including the construction of an aluminium casting plant and has plans to invest a further 14.9m (22 January 2004) during 2004. About 500 new jobs will be created by Mahle at the facility, which supplies VWs plant at Polkowice. In mid-2001 the Filter Systems business invested US$20m (24m, 30 June 2001) in a new state-of-the-art facility in Mogi Guau (Brazil) for the production of air filters and fluid filters. By the end of 2000, in Nanjing, Mahle opened its first wholly owned pistons plant in China. Then in April 2001 Mahle assumed a majority 66.7% share in its joint-venture Mahle-Izumi (Liaoning) Piston Co., Ltd. The plant manufactured an estimated 1.2 million pistons for the automotive market, in 2001. In January 2003 Mahle took over 100% of the shares in the joint-venture and integrated Izumi into the Mahle group. The new company is called Mahle Izumi Corporation. Towards the end of 2000 Mahle started construction of its new corporate headquarters in Bad Cannstatt, Stuttgart (Germany). In the second half of 2000 the Pistons and Engine Components Business sector began production at its new pistons plant in Krotoszyn (Poland). At full capacity, the plant produces six million pistons a year. Around 25% of the plants output is sold to the Volkswagen plant in Polkowice (Poland).

Contracts Mahle has won a significant new order from DaimlerChrysler to supply complete power cell modules, including the completed connecting rod, for V6 engines. The contract is scheduled to commence in 2004 and will run for five years initially, yielding sales of 200m. In 2002 Mahle received a contract to supply piston assemblies, camshafts and oil filter modules for the new generation of diesel engines from PSA/Ford. Mahle has been chosen as sole supplier of pistons and piston pin assemblies for the joint project between BMW and PSA Group for the development and production of a new four-cylinder SI engine family. In October 2002 Mahle announced that Cummins is to use Monotherm pistons on its forthcoming ISX engine. Over the next two years Mahle will introduce these pistons for seven additional engines at three different customers in North America. Six additional programs are set to begin after 2004. In January 2001 Mahle secured a contract to provide General Motors with aluminium pistons for its next generation of V6 engines. The pistons will be produced at Mahles plant in Morristown (USA), beginning in 2003. General Motors expects the production volume of these new engines to eventually reach 600,000 a year. Mahle also supplies the General Motors Corsa model with pistons, valve guides and valve inserts. Mahle supplies the Ford Mondeo model with camshafts and pistons. It also produces valve guides and valve inserts for the Ford Transit. New Product Developments Mahle employs more than 1,500 engineers in R&D centres in Stuttgart (Germany), Sao Paulo (Brazil), Detroit (USA) and Tokyo (Japan). It has invested in developing its capability as an engine module and systems supplier. It is developing a variable valve timing system for a number of its customers. Mahle produces air-intake manifolds with integrated switchable swirlduct valves, exhaust gas recirculation systems and electronic control units. The company has also developed a power cylinder module that comprises all components from the crown of the 360 AutoBusiness Ltd

Company profiles piston to the crankshaft. Mahle intends to broaden the geographical base of its R&D operations by expanding its facilities in Sao Paulo, Tokyo and Detroit. As systems developments are being shifted from the OEM to the module supplier, Mahle has focused on systems developments for air supply and oil filter systems from one source. The intake module is designed to improve performance and emission management and control NVH. The integration of the intake hood and air filter avoided any overlap to create a more compact module. Mahle has also developed an electrical actuator to supplement the module. Replacing vacuum control, the electrical adjustment system can choose between long and short settings of the intake manifold, independently of any underpressure supplied by the engine. Mahles Monotherm pistons are gradually being introduced by OEMs in heavy-duty applications. Compared with conventional aluminium pistons and two-piece steel-aluminium articulated pistons, the Monotherm single piece steel piston offers the benefit of weight reduction with increased load resistance under high pressures and at high temperatures, and at higher specific engine outputs. This concept is now ready for series production. Mahle is also progressing towards series production of light-weight valves made of welded, high alloy steel plate. These valves mean greater engine speeds, less friction loss in the engine and improved acoustics and fuel consumption and hence lower emissions. At the IAA in September 2003 Mahle launched a new all-plastic oil filter, which will be used on the Audi V8 TDI and V6 TDI. This product will have energy and cost-saving properties as weight is reduced in the vehicle and a change of oil is only required every 30,000 kilometres. At the same time Mahle announced that it is developing mechanically fully-variable valve train systems, which it hopes will come into series production within 2-3 years. Other recent product developments include:

Ecoform Pistons: a lightweight piston concept. which reduces the overall piston weight and the oscillating masses. Composite camshafts Chrome ceramic piston rings

Financial Overview In the year ended 31 December 2003 Mahle achieved sales of 3.25bn, a 5% increase on the previous years figure of 3.1bn. Operating profit fell by 10m to 160m in the financial year to 31 December 2003. Sales would have achieved double-digit growth but for currency devaluations against the euro in the markets of North America, South America and Asia. Mahle was able to increase systems sales during the year but most growth is attributable to the consolidation of the Japanese subsidiary, Mahle Izumi Corp. and the majority joint venture with BMW in Berlin (Germany), which contributed 150m and 75m respectively. Mahle is forecasting further growth in sales during fiscal 2004 to 3.5bn. Mahles Piston and Engine Components business unit increased sales by 8.4% on the previous year to 1.59bn. After adjustment for currency fluctuations, growth of 6.3% was achieved. Mahles Filter Systems business increased sales in all its European Group companies but exchange rate changes resulted in a reduction over the previous year by 58.5m, in spite of acquisition-related sales increases of 5.9m. The Valve Train Systems division increased sales by 81.7m, which is due to the integration of the joint-venture with BMW into the Group. After currency effects organic growth of 5.8% was achieved. Outlook Despite some caution for the short term, Mahles longer-term outlook is undoubtedly positive, although it must remain committed to technology as demands for improved fuel economy and engine operating performance intensify. Engine designers are minimising the size and weight of engines to improve fuel economy, but at the same time increasing cylinder pressures and engine speeds to improve performance and power. The combination of these design aims AutoBusiness Ltd 361

Automotive Technology Roadmap means increasing the stress conditions within the power unit with resultant higher loads on components. These components are often required to have properties that conflict with regard to the simultaneous need for strength and compliance under all the operational conditions encountered. This means that suppliers such as Mahle face significant technological challenges, challenges that are magnified by the diversified nature of the engine components sector, with numerous pockets of specialisation. Pressure to supply more integrated engine component systems and modules is also growing. However, Mahle appears well placed to absorb this, its current ability to offer power cylinder or power cell modules typified by recent contracts.

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Mann+Hummel
Filters
Address Mann+Hummel GmbH Hindenburgstrae 45 71638 Ludwigsburg Germany Tel: +49 7141 980 Fax: +49 7141 982545 Internet: http://www.mann-hummel.com Senior Officers Dr Dieter Seipler, CEO Dr Reinhard Rupp, CFO Gerhard Brenner, Managing Director, Automotive OE (till 30 June 2004) Dr Wilfried Lehr, Managing Director (elect) Automotive OE Manfred Wolf, Managing Director, Filter Elements & Systems for Industry & Aftermarket Division Products Air filter systems, cabin filters, intake manifold systems, liquid filtration systems, vacuum systems Plants Argentina, Belgium, Brazil, China, Czech Republic, France, Germany, Italy, Japan, Mexico, Poland, Singapore, Spain, UK, USA Sales Group: 1,128.2m (Year to 31.12.02) Automotive: c. 850m (Year to 31.12.02) Employees Group: 8,754 (2002) Based near Stuttgart (Germany) Mann+Hummel produces industrial filter systems. The automotive industry generated around 75% of its 2002 sales. Mann+Hummel has 41 locations throughout the world but Europe remains its dominant market. Mann+Hummel is a development partner and supplier to the international automotive original equipment and aftermarket industries. Designer of the worlds first thermoplastic intake manifold in 1989, Mann+Hummel is regarded as a pioneer of intake systems. The company was reorganised into three areas in October 2002Automotive OE; Filter Elements and Systems for Industry and Aftermarket; and Industrial Equipment and Components. In May 2003 Mann+Hummel subsequently reorganised the Automotive OE Division. The former Air Filter, Liquid Filter and Intake Manifold Systems Business Units were restructured into eight Product Groups. The Product Groups are responsible worldwide for their particular product sector. The company believes this will give it a much-improved product-related market orientation and will utilise its resources in development and production more effectively on a global basis. The company supplies all major vehicle manufacturers including BMW, Caterpillar, DaimlerChrysler, DAF, Detroit Diesel, Ford, Rover, Scania, Toyota and Volkswagen.

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Recent Developments Corporate strategy Mann+Hummel sees its market as global and it has been expanding its operations into new regions, particularly in the North American market. The companys sales in this region are expected to rise dramatically following the acquisition of Solvays Air Induction Systems and Technical Parts (AIS/TP) in 2002. The acquisition combines two complementary customer bases and has given Mann+Hummel a substantial share of the global market for intake manifolds. As a result Mann+Hummel has recently decided to increase its facilities in Mexico to meet the increased business. The company has continued to invest elsewhere and is well placed to take advantage of new and recovering markets in Asia and South America (particularly in Brazil), Turkey and Eastern Europe. The group also continues to invest in the Czech Republic, which has seen strong growth in sales for the region since 2000. In 2001 the company announced its intention to concentrate efforts in China and Korea and has since formed joint-ventures in the region. Acquisitions In January 2002 Mann+Hummel acquired the Air Induction Systems and Technical Parts (AIS/TP) division of Solvay Group. The division employs over 1,000 people and achieved sales in 2001 of 150m. AIS/TP has plants in seven countries. Mann+Hummel is already present in all of these countries, but expects its customer support to be boosted in France and the USA in particular. Major customers are PSA, Renault, General Motors, Volkswagen, Ford and DaimlerChrysler. In July 2000, Mann+Hummel announced its acquisition of the Oil Conditioning Systems (OCS) operations of the North American company, Federal-Mogul, market leader in oil centrifuges. This purchase strengthened Mann+Hummels portfolio in the area of oil filters and oil conditioning and strengthened the groups presence in the UK. Divestments In October 2003 it was reported that Mann+Hummel is to reduce its workforce of 1850 people in Ludwigsburg (Germany) by 250 and move some filter production to lower cost countries such as Brazil and South Africa. Joint-ventures In October 2003 Mann+Hummel announced it is to form a new joint-venture with WAKO Industrial Co. Ltd of Japan, which should become operational in May 2004. This venture strengthens Mann+Hummels presence in the markets of Asia. The company aims to increase its market share for air and liquid filtration systems in the region. Mann+Hummel has formed a partnership in Poland with Inter Team (Warsaw) for the distribution of filters and filter elements for the replacement parts market. In December 2002 the company announced that it had formed a joint-venture in China with Fawer Automotive Parts Co. Ltd. Mann+Hummel has a 60% shareholding in the joint-venture, which is called Changchun Mann+Hummel Fawer Filter Co. Ltd. The plant, employing 130 staff, is expected to commence production of air and oil filters and centrifuges by mid 2003. The partners expect to invest $24.6m (24.8m, 1 December 2002) in the venture and aim to produce 8 million car filters annually by 2007. Mann+Hummel already has two businesses in China: Shanghai Mann+Hummel Filter, a joint-venture with the Shanghai Automotive Industry Corporation (SAIC) and Mann+Hummel Filter Trading. Mann+Hummel has increased its presence in Asia with a joint-venture in Korea called DongWoo Mann+Hummel Co. Ltd. In December 2002 Mann+Hummel signed an agreement with Electra Hella of Athens (Greece) for the distribution of filters and filter elements. In November 1999 Mann+Hummel announced that Onurhan Otomotiv (Ankara) and Akan Otomotiv (Istanbul) were its new licensed trade partners in Turkey. Mann+Hummel also has license agreements in Chile and South Africa. Investments During 2004 Mann+Hummel is to invest about 6.3m in renovating its administration centre in Ludwigsburg (Germany). Mann+Hummel is to invest 13m in new facilities in Mexico. The company has decided to move its manufacturing operations from Tlalnepantla (Mexico) to a new facility in 364 AutoBusiness Ltd

Company profiles Queretaro (Mexico), and double its plant to 135,000 square feet. The facility should be completed by mid 2004 and up to 100 extra jobs are to be created. The group intends to treble its annual sales in the region, which stood at US$120m (115m, 31 December 2002) in 2002. In March 2003 Mann+Hummel announced its plans to double production in North America following the acquisition of Solvays AIS/TP division. The company plans to build two new assembly lines for air-intake manifolds as well as introduce new European technology, especially in the area of fuel efficiency. The company expects to invest $50m (46m, 1 March 2003) over the next seven years. In 2002 the company began a five-year plan to renovate its manufacturing facilities and head office in Ludwigsburg (Germany). Some outdated facilities are to be sold off and new ones built; others will be fully modernised and refurbished. During 2002 Mann+Hummel invested CZK159m (5m, 1 March 2002) in the expansion of production facilities at its plant in the Czech Republic. The facility produces equipment for Audi, Seat, Skoda and VW and employs about 360 staff. In 2001 Mann+Hummel Australia Pty Ltd was founded to market the companys products throughout Australasia. In July 2001 Mann+Hummel announced that it was increasing its central warehouse capabilities by building a new facility at Wrth/Niederaichbach, (Germany). The new warehouse came into operation in January 2002 and will handle some of the 400,000 filters produced daily at the Marklofen plant. In August 2000 a sales office was opened in Warsaw (Poland). Mann+Hummel Automotive Inc. is one of North Americas largest suppliers of vibrationwelded plastic manifolds. In August 1999, Mann+Hummel Automotive Inc. announced plans for significant expansion in the USA, as it began production of its first air-intake manifolds for a US application: the Ford V-10 engines. Up to eight new injection presses were added to the firms operations.

Contracts Mann+Hummel has several new contracts with Ford and with unspecified vehicle manufacturers. The company is supplying the air filter assembly for the Mercedes-Benz Maybach and plastic intake manifolds for the Audi V8 TDi 4-litre diesel engines. New Product Developments Mann+Hummel invested 6% of its revenue in R&D during 2002. It employs 450 staff worldwide in this area. In February 2003 Mann+Hummel announced new technology to improve oil separation in closed crankcase ventilation systems. The technology uses centrifugal force to separate harmful contaminants and emissions from a vehicles engine oil. A team from Mercedes-Benz and Mann+Hummel designed the worlds first centre-bolted thermoplastic rocker cover for light trucks. The new rocker significantly reduces cost, weight and noise and is used on Mercedes-Benz four and six cylinder diesel engines in the Atego Vario and Unimog light trucks range. Also in partnership with Mercedes-Benz, and with Coko Kunststoffwerk, Mann+Hummel is developing a flat air filter housing for use in heavy trucks. Mann+Hummel has also developed a welded manifold for the new Ford V-10 6.8 litre engine, using a form of nylon, which will improve the engines performance. The company has been developing multi-functional and multi-layered vacuum filter systems in order to meet reduced emissions standards. In November 2003 the company announced that it has produced the first fully-synthetic filter element, which has a product life up to fifteen times longer than that of conventional filters made from cellulose. The new filter is made of 100% polyester and will be available on 6-, 8- and 12-cylinder Otto engines manufactured by Mercedes-Benz. Synthetic filters are more cost-effective as filter replacement is less frequent.

Financial Overview In spite of the generally difficult economic climate, Mann+Hummels sales increased from 990m in 2001 to 1,128m in 2002, mainly as a result of the Solvay acquisition. This AutoBusiness Ltd 365

Automotive Technology Roadmap represented a nominal increase of 13.9% over the previous year, and 19.1% after taking currency effects into account. Results from ordinary activities decreased from 43.2m in 2001 to 33.9m in 2002. Annual net income was also lower, amounting to 20.0m in 2002, compared with 23.5m in 2001. The EBITDA, earnings before interest and tax, rose from 80.7m to 90.1m, reflecting the increase in operational performance. The former Solvay companies contributed 177.2m, which represented 15.7% of total sales. Without this contribution, there was a nominal 4% decline in sales. 2003 results have yet to be announced. Outlook Mann+Hummel was only expecting slight growth in 2003 and therefore the priority has been on consolidating all locations and their capacities. The latest reorganisation of the business units was seen as the first step in that direction. This will be followed by further consolidation and concentration of activities in other important regions. Although a positive start was made in the opening months of 2003, the company noted that in automotive OE it was aware of decreasing schedules and postponement of projects, and a decline in sales and profit was thus expected over the whole year. In the longer term, Mann+Hummel is likely to see more benefits from further outsourcing of responsibility for engine modules and systems to first tier suppliers. Demands on engine component suppliers are increasing rapidly because of the rate of technical change and, more importantly, because of the tightening legislative environment. Mann+Hummels filter business is seeing a switch in product technologies as a result, as well as a move to more complete modules.

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Motorola
Electronics and communications
Address Motorola Inc. Corporate Offices 1303 E. Algonquin Road Schaumburg IL 60196 USA Tel: +1 847 576 5000 Fax: +1 847 576 9159 Internet: http://www.motorola.com Senior Officers Edward J Zander, Chairman and CEO Mike Zafirovski, President and COO David W. Devonshire, CFO Dennis Carey, President and CEO of Integrated Electronic Systems Sector Scot Anderson, President, Semiconductor Products Sector Products Body electronics, powertrain and chassis electronics, semiconductors, sensor and power controls, telematics Plants Motorola has manufacturing operations and sales offices in more than 40 countries worldwide Sales Group: US$27.06bn (21.56bn, 31 December 2003) (Year to 31.12.03) Employees Group: 93,000 (2003) Motorola is the leading global supplier of semiconductors to the automotive industry. Other automotive products include body, powertrain and chassis electronics, sensors and telematics. Motorola also designs and manufactures computer and internet products, modems, satellite communications, phones, pagers and software. Motorola has six separate sectors for reporting purposes: Personal Communications Sector; Global Telecom Solutions Sector; Commercial, Government and Industrial Systems Sector; Broadband Communications Sector; Semiconductor Products Sector; and Integrated Electronic Systems Sector. The automotive interests in the Semiconductor Products group are found in the Transportation and Standard Products division, in a subdivision called Driver Information Systems. In April 2001 Motorola announced the formation of a new automotive communications and electronics group as part of the Integrated Electronic Systems Sector (IESS). The new group is called Automotive Communications & Electronics Systems Group (ACES) and has combined the former Telematics Communications Group (TCG, also part of IESS) and the Automotive and Industrial Electronics Group (AIEG). The ACES group now consists of two businesses, the Powertrain Chassis and Systems Group (PCSG) and the Telematics Communications Group (TCG). PCSG uses its application and engineering expertise to design and sell custom electronic solutions OEMs, including foreign and domestic automobile manufacturers, heavy vehicle manufacturers, farm equipment manufacturers and industrial customers, as well as first tier suppliers to such manufacturers. TCG provides automotive customers with embedded telematics control units, integrated wireless handsets, navigation and driver safety products and systems, as well as various electronic controls for automotive vehicles. ACES has over 25 OEM customers and facilities in more than 18 cities and countries. Customers include BMW, DaimlerChrysler, Ford, General Motors and Jaguar. ACES claims to the market leader for embedded telematics systems and products, as well as pressure sensor systems and products.

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Recent Developments Corporate strategy In recent years Motorolas strategic focus has been expansion into telematics, which involves the development of wireless communication systems providing personalised information, messaging, entertainment and location-specific travel and security services to vehicles. In 1998 it established its Telematics Communications Group, which in April 2001 became part of the ACES group. The Semiconductors Products group is also dedicated to the role of microcontrollers in driver information systems, and ACES is one of its primary customers. Developmental work in this field has been carried out through a series of partnerships with OEMs, other North American automotive suppliers and specialist companies with expertise in specific areas of electronics. Telematics is now Motorolas fastest growing business, despite the downturn in the North American market. In 2001 around 16% of new cars featured driver information systems. By 2008 Motorola expects this figure to have risen to 82%. Motorola has also sought to enhance its modules and systems capabilities in order to supply automotive customers with complex integrated systems as opposed to discrete electronic parts. For example, the creation of the Automotive Communications & Electronics Systems Group enabled Motorola to combine TCG's automotive telematics and software solutions expertise with AIEG's abilities in powertrain, chassis and body electronics, integrating systems and platform, thereby providing better full systems capabilities for its common customer base. In 2002, the company took the following steps to deal with the cyclical nature of the semiconductor industry and difficult economic conditions: trimmed costs; reduced capital expenditure; outsourced more production; and entered partnerships to spread the cost and risk of R&D. Since 2002 Motorola has reduced its headcount significantly. Over 7,000 jobs were cut during 2003 recording US$3.5bn (3.5bn, 30 June 2002) in special charges. By December 2002 all six major segments showed significant improvements in profitability (excluding restructuring costs). This announcement followed 18 months of job losses at Motorola. By the middle of 2003 the companys workforce numbered 93,000 people compared to 150,000 in mid-2000. During 2002, Motorola moved the IESS and ACES headquarters from Northbrook and Elk Grove Village, Illinois, USA to Deer Park, Illinois. The move consolidates two facilities into one. Based upon a re-assessment of the ACES cost structure, it has also established a regional automotive headquarters in Munich (Germany) and closed its facility in Wiesbaden (Germany). In December 2003, it was announced that Motorola had filed a Registration Statement on Form S-1 with the SEC in connection with the proposed separation of its Semiconductor operations into a publicly traded company. The filing was made by SPS Spinco Inc., the temporary name of the entity that will operate the Semiconductor operations following the initial public offering. Joint-ventures In July 2001 Mototrola and Delphi announced an alliance to develop future powertrain control systems based on the PowerPC architecture to meet increasing automotive application demands. Shanghai Motorola Automotive Electronics Corp., Ltd was created as a joint venture between Motorola and Shanghai Instrument (Group) Company to develop automotive electronic control devices. In March 2001 Motorola and Elmos Semiconductor, a leading manufacturer of application-specific integrated circuits for automotive electronics, announced a long-term partnership to jointly drive innovative architectures for the automotive market. The two have joined forces to offer OEMs comprehensive solutions for 8- and 16-bit microcontrollers as well as DSPs, supporting a wide variety of applications. Also in June 2000 Motorola AIEG formed a joint-venture with Amerigon to develop electronic control modules. The two companies design products used to manage the thermal outputs of the climate control seat system. In February 2004 the two companies expanded their product development and manufacturing alliance to include the design and production of a second generation electronic control module (ECM) for launch in 368 AutoBusiness Ltd

Company profiles potential high-volume model year 2006 and 2007 vehicle lines. The new ECMs will be incorporated in Amerigon's next generation Climate Control Seat systems. At the beginning of 2000 Motorola completed its merger with General Instruments Corp., a manufacturer of integrated and interactive broadband access solutions. The merged company, called Motorola Broadband Communications Sector, is part of Motorolas Communications Enterprise business unit.

A number of alliances have strengthened Motorola's foothold in the telematics market. In May 2001 Motorola and Trafficmaster announced a plan to jointly produce the first offboard, dynamic navigation system for the volume market that incorporates real-time, traffic-flow data. Motorola's navigation server, part of the iRadio navigation application, together with Trafficmaster's real-time, traffic flow data create the Trafficmaster T-nav service, which is sold through OEMs, wireless carriers and aftermarket channels. In January 2001 Motorola announced a co-development programme with Navigation Technologies Corporation whereby the latter company provides map data to Motorola for a server-based navigation application using NAVTECH digital maps. The application is part of Motorola's iRadio System. In September 2000, Motorola, BMW, DaimlerChrysler, and Philips Semiconductors formed the FlexRay consortium to jointly develop a standard for high-speed bus systems for distributed control applications in vehicles. In 2001 General Motors and Bosch joined the core members of the consortium. In February 2000 Motorola positioned itself to provide leading automotive navigation solutions to the telematic industries by investing in two prominent development companies: BCI Navigation, SA of Every (France); and Likkuva Systems International, Inc. of Sacramento (USA).

Investments In February 2004 it was announced that Motorola is to open an auto electronics factory in the northern Chinese port of Tianjin with production scheduled to commence in 2005. In March 2002 Motorola opened a new driver research facility in Tempe, Arizona (US) complete with a Class-2 Driving Simulator. Motorola researchers will study how drivers interact with their vehicles and various on-board devices and how they manage and prioritise information while driving. The simulator will test electronic gear that will help drivers avoid accidents and engage in other activities, such as talking on the telephone, more safely. Motorola hopes the investment will allow it to develop products, which manage and deliver information appropriately. A regional automotive headquarters has been established in Munich, Germany. In June 2002 Motorola opened its state-of-the-art automotive headquarters in Farmington Hills, Michigan (USA). This new centre integrates sales, marketing, and application and software engineering operations under one roof and will eventually employ 500 people. Contracts Motorola announced in February 2004 that it is to supply Visteon with microcontrollers (MCUs) for use in the US supplier's powertrain systems. As the semiconductor content in vehicles carries on growing, automotive electronic systems manufacturers are requiring extremely high performance for their powertrain systems in order to control more complex engine and transmission functions, such as multi-point fuel injection and direct diesel injection. Motorola has developed more powerful, highly integrated MCUs for such applications. In March 2003 Motorola announced that it had won the contract to supply MercedesBenz CLK, SL, C and M series vehicles with a Universal Handy Interface (UHI) from June 2003. This will make it possible to use mobile telephones from various manufacturers in one vehicle. The customers will be able to fit the appropriate cradle easily themselves. The mobile phone is linked to the on-board network and can be operated using the multi-functional steering wheel, hands-free system and COMAND operating and display system. Also in March 2003 Motorola and Volvo announced that they had joined forces to produce an advanced chassis controller for the new Volvo S60 R and V70 R models. Using Motorolas technology the vehicles electronic controller communicates with the AutoBusiness Ltd 369

Automotive Technology Roadmap actuators and sensors within the chassis system. This enables the driver to define the ride, handling and comfort of the car. Three settings on the dashboard are available: comfort, sport or advanced sport. In 2002 GM announced that it had selected Motorolas MPC500 32-bit microcontrollers for use in electronic powertrain systems in all GM vehicles worldwide. In February 2002 Motorola's Semiconductors group was selected by SiemensVDO Automotive to supply 32-bit microcontrollers for its integrated powertrain management systems. Motorola will supply more than half of the microcontroller demand for the system. The two companies extended the relationship in 2003 with the nest generation of the powertrain systems. In July 2000 Motorola won a four-year contract to supply Engine Control Units to a leading automotive systems manufacturer for the Chinese markets. Also in July 2000 Motorola IESS was awarded a contract to supply its GSM module technology to a major manufacturer of in-vehicle infotainment devices. In late July 2000, AIEG was awarded a six-year contract with a European OEM to codesign and develop engine control module hardware and software for an engine management system. This contract is expected to generate around US$138m (149m, 31 July 2000) in sales after production begins in 2004.

New Product Developments Motorola has recently developed VIAMOTO, a phone-based wireless navigation system. Avis Rent-A-Car will be the first to feature the VIAMOTO service as "Avis Assist". It equips customers with a Motorola phone that literally 'talks them through' directions to a destination, broadcasting street names and manoeuvres along the way. The Motorola device is equipped with location-based technology that enables the service to know the presence and location of the user. Motorola has recently launched a new software system designed to help drivers focus on the road in critical driving situations and avoid distractions, such as phone calls or navigation systems. The system, called Driver Advocate, recognizes when a driver is making a difficult manoeuvre, such as merging into traffic at high speed or making a sharp turn. In those cases, the Driver Advocate refers incoming calls to voicemail or suppresses vehicle condition warnings. In March 2004 Motorola launched its Integrated Hands Free mobile phone system with Bluetooth wireless technology featuring intuitive user controls designed to help drivers keep their eyes on the road and hands on the wheel. Advanced voice recognition technology is incorporated into the system so drivers can simply speak the telephone number to which they would like to be connected and the technology places the call on the drivers behalf. In September 2003 Motorola launched FS OncoreTM, a breakthrough miniature Global Positioning System (GPS) product. The 200 square milimetre FS Oncore module is used for adding accurate location sensing to virtually any portable electronics product. The GPS receiver, designed specifically for cost-sensitive, high performance applications is capable of supporting autonomous and assisted-GPS functionality, with applications ranging from cellular handsets and accessories to asset tracking and Personal Digital Assistants (PDA). Based around Motorolas Instant GPS single-chip solution, the FS Oncore module is expected to lead a new generation of location and time-aware portable electronic products. Features include cameras that will time- and location-stamp photos, PDAs with maps which will offer real time navigation and E-911 compliant cellular phones that can find friends, family members, restaurants and nearby shops with goods on sale. In September 2002, Motorola introduced Motorola Instant GPS, which it developed with IBM Microelectronics. It is a breakthrough technology for adding accurate location sensing to virtually any vehicle at half the cost of current systems. Motorola Instant GPS is a self-contained, single-chip, assisted global positioning system (A-GPS) receiver. The device is smaller, less expensive and consumes less power than alternative two- or three-chip systems. It is the first single-chip GPS solution in the world, combining Motorolas GPS design with IBMs leading-edge silicon germanium (SiGe) chip-making technology. IBM plans to manufacture new GPS devices for Motorola, with full production parts planned for the second quarter 2003. In February 2002 Motorola and Fonix Corporation, a provider of voice solutions for AutoBusiness Ltd

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Company profiles wireless devices, announced the integration of the Fonix speech Software Development Kit with the mobileGT development platform. The development makes it easy for manufacturers to develop speech recognition applications for telematics, allowing hands-free management of a wide range of systems. In the same month Motorola introduced PI Technology, developed by the mobileGT alliance. Named Black Magic, this object-oriented simulation environment enables telematics applications to be designed and tested by modelling the elements of an automotive telematics application (cars, drivers, telematics servers) and the communications between the elements. The iRadio System was released commercially in 2002. This is an in-vehicle platform that combines entertainment, information, navigation, emergency calling and communication into one driver-friendly system. Server-based navigation enables all the complex routing calculations and large databases of information, including addresses, routing and traffic preferences to be stored in the servers. The information is then downloaded in real-time to the vehicle through a wireless connection. Motorolas E-SWITCH intelligent power switches are targeted at automotive OEMs seeking reduced cost, weight, and size for electronic control modules. Higher reliability for instrumentation and body control can be achieved by OEMs and module suppliers with the replacement of traditional electromechanical relays by an electronic solution in applications such as lighting control, motor control for windows, wipers and seats, HVAC, power steering and door locks.

Financial Overview In the year ending December 2003 Motorolas group sales were down slightly at US$27.06bn (21.56bn, 31 December 2003) compared to US$27.28bn (26.03bn, 31 December 2002) in the previous year. The group recorded a net profit of US$893m (711m, 31 December 2003), which was an improvement on fiscal 2002s net loss of US$2.48bn (2.37bn, 31 December 2002). Excluding special items, full-year net earnings were US$581m (463m, 31 December 2003), or US$0.25 (0.20, 31 December 2003) per share, compared with net earnings of US$279m (266m, 31 December 2002), or US$0.12 (0.11, 31 December 2002) per share in 2002. Sales (before eliminations) for the Integrated Electronics Segment (IESS) were up 3% for the year 2003 at US$2.265bn (1.805bn, 31 December 2003), and the segment made an operating profit of US$161m (128m, 31 December 2003) compared to a profit in the previous year of US$52m (50m, 31 December 2002). Automotive Communications and Electronic Systems Group sales and orders were up compared with the year before. The OctoberDecember 2003 period represented the second consecutive quarter that Motorola announced significant new and replacement business awards with a combined value of more than US$1bn (797m, 31 December 2003) in lifetime value over several years. The awards were in telematics, sensors, chassis, powertrain control and interior electronics. Outlook Motorolas primary strategy is to accelerate growth by increasing market share in existing markets and expanding into related market segments. It expects that increasing market share in existing markets will account for 60%-70% of its growth going forward. For example, ACES business continues to grow as automotive OEMs expand vehicle electronic content of the types currently sold by the group, such as telematics systems, that enable automated roadside assistance, navigation and advanced safety features. The market for telematics systems is expected to grow at a rate substantially above the growth rate for the automobile industry in general. Despite this, Motorola is also seeing significant new business in other application areas, most notably, chassis, powertrain control and interior electronics.

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MTS Systems
Mechanical testing and simulation
Address MTS Systems Corporation 14000 Technology Drive Eden Prairie Minnesota 55344-2290 USA Tel: +1 952 937 4000 Fax: +1 952 937 4515 Internet: http://www.mts.com Senior Officers Sidney W. Emery Jr., Chairman and CEO Susan E. Knight, CFO Larry D. Moulton, Vice President, Vehicle Dynamics and Powertrain Technology Mauro G. Togneri, Vice President, Sensors Division M. Perry Walraven, Vice President, Automation Division Products Testing and simulation equipment Plants France, Germany, USA Sales Group: US$340.1m (293.3m, 30 September 2003) (Year to 30.09.03) Employees Group: 1,650 (2003) MTS has two primary application areas; Mechanical Testing and Simulation (81% of 2002 sales), and Factory Automation (19% of 2002 sales). In the third quarter of 2003 MTS changed the names of these two divisions to the Test Segment and the Industrial Segment respectively. MTS provides solutions for many industries including automotive, aerospace and civil engineering. For the automotive industry MTS offers six types of system solutions: dynamometer systems to test engines and drivetrains; durability systems that produce wear and failure data under accelerated service conditions; vehicle and occupant impact simulators for crash and safety testing; performance systems to determine ride and handling characteristics; noise, vibration, and harshness testing systems to help evaluate ride quality; and motion platform subsystems for human factors research. In addition to development and manufacturing operations in France, Germany and the USA, MTS also has sales and service offices around the world. MTS Systems Corp is the worlds leading supplier of mechanical testing and simulation equipment. The technologies and business processes that form the basis of MTS Systems include measurement and control instrumentation, application software, structural design, systems engineering, and project management. Alongside carmakers and automotive suppliers its customers include industrial companies and government and university laboratories.

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Recent Developments Corporate strategy In the automotive industry MTS Systems has received numerous orders from OEMs and suppliers for its testing equipment. There are increasing regulatory and market demands on OEMs and their suppliers and MTS continues to support their needs by introducing products that meet the changing requirements of the market. Increasingly, carmakers are delegating testing responsibilities to their suppliers, requiring validation testing of components and subassemblies. This shift in the market presents MTS with new opportunities for sales into the auto supplier chain. Due to economic concerns there has been a downturn in MTSs business in North America and Japan but this was offset by strong sales in Europe, Korea and China. MTS has a strategic European partnership with Valeo. Flat conditions in 2002 resulted in productivity-related initiatives, including the sale and closure of a number of facilities in North America. At the end of fiscal 2002, MTS had 15% fewer employees than at the beginning of the year. Profitable growth is being sought through expansion into new markets, for example extending expertise in friction welding from the research market into the production arena. Joint-ventures In March 2001 in support of the automotive industrys demand for improved product quality, shorter time to market, and reduced costs, three leading engineering technology solution providers, MTS Systems, Mechanical Dynamics, Inc., and nCode International, formed The SmartSim Community. In addition to converging development of their analysis software products, joint activities within The SmartSim Community have already resulted in the development of several new products: Empirical Dynamics Modeling (EDM) An MTS/Mechanical Dynamics codevelopment Virtual Test Laboratory (VTL) An MTS/Mechanical Dynamics co-development RPC Pro, featuring nCode technology An MTS/nCode co-development ADAMS/Durability A Mechanical Dynamics/nCode co-development

Contracts In December 2003 MTS Systems announced two large orders together totalling in excess of US$45m (35.9m, 31 December 2003). The orders are both multi-year, international contracts for test equipment, test software and test support. In October 2003 MTS announced the receipt of a multimillion-dollar order from Cheng Shin-Toyo Tire & Rubber Co., Ltd. (CSTC) in China for an advanced tyre testing system. This is the first sale in China of an MTS Flat-Trac Tire Testing System, widely recognised as the premier testing system for the development of new tyres. In July 2003 MTS announced that Dana Corporation had selected SWIFT wheel force transducers for the development of truck axles and other large vehicle systems. The order is valued at around US$250,000 (218,551, 31 July 2003). In May 2003 MTS announced that it had received a 3.5m order for advanced vehicle and component test systems from CITEAN (Centro de Innovacin Tecnolgica de Automocin de Navarra), a new, state-of-the-art automotive testing laboratory currently under construction in Navarre (Spain). In April 2003 MTS announced it had been selected by GIE S2A, a French joint-venture between Peugeot-Citron, Renault and CNAM; and AIOLOS as the sole noise and vibration systems supplier for a new aeroacoustic wind tunnel currently under construction. In September 2002 MTS announced a new virtual testing capability developed in partnership with Mazada Motor Corp. The work involves testing applications in durability and reliability, noise and vibration, and ride and handling. Mazda plans to adopt the new virtual testing capability to achieve a competitive advantage in the automotive market. In May 2002 MTS announced that Bridgestone Tire Company had begun operations of a new multi-million dollar version of the patented MTS Flat-Trac LTR tyre test system. Bridgestone asked MTS to develop a larger, higher performing version with higher load, 374 AutoBusiness Ltd

Company profiles torque and speed capabilities than previous tyre test systems engineered by the company. In April 2002 MTS announced that it had received a multi-million dollar commitment for two new vehicle measurement and test system orders from Idiada, Catulunya (Spain). Idiada is a provider of testing, proving grounds, and engineering services to European vehicle manufacturers. Also in April 2002 MTS announced that five global automotive OEMs selected MTS for RPC Pro software with a combined order value in excess of US$1.5m (1.66m, 30 April 2002). The newly released RPC Pro version 3.0 is the latest evolution of MTS Remote Parameter Control (RPC) software products supporting road simulation system control and vehicle data analysis. In January 2002 MTS announced that its Powertrain Technology Division had been awarded a US$1m (1.16m, 31 January 2002) contract by a major North American carmaker for powertrain engineering and consulting services. Engineers from both MTS and the carmaker will work side by side to design, customise and execute testing regimens to develop powertrains that emit fewer emissions, are more fuel efficient, yet have more power, better reliability and driveability. In January 2002 MTS announced that Valeos Climate Control plant in France had decided to standardise its Noise Vibration and Harshness (NVH) research and development on MTS Noise & Vibration solutions. MTS Noise & Vibration solutions already deployed at Valeo Climate Control include multi-channel measurement and analysis solutions, Sound Quality, Collaborative Reporting, and Vibro-Acoustics predictive solutions. Valeo will use them to improve the overall NVH performance of the climate control system, much faster and easier than ever. In November 2001 MTS received a significant order from Hyundai Motors for a follow-on project designed to provide software tools and professional services to shorten the development time of general vehicle development programmes. The second in a series of orders combines MTSs previously installed physical testing equipment with specialised software products and dedicated process consulting resources, along with integrated software and services from Mechanical Dynamics. In September 2001 MTS announced it had received a US$660,000 (725,594, 30 September 2001) order for an advanced vehicle durability analysis software suite from a Japanese vehicle manufacturer. In September 2001 MTS received a significant order from DaimlerChrysler for software tools to be used to shorten the development time of a specific vehicle development programme. The order combines MTSs specialised software products and dedicated process consulting resources, software from Mechanical Dynamics and MTSs previously installed physical testing equipment. Also in September 2001 France-based Valeo Wiper systems selected MTS as its preferred noise and vibration engineering partner. In August 2001 MTS announced that Korean automotive components manufacturer Duck Yang Industry Company, Ltd., had selected it as the full system supplier for component design validation. Duck Yang, 51% owned by Visteon, designs and manufactures automobile instrument panels. In June 2001 MTS announced orders worth US$3m (3.5m, 30 June 2001) in advanced road simulation systems from two German organisations. In May 2001 MTS announced the receipt of a US$13m (15.2m, 31 May 2001) order from a major international automotive manufacturer for a full suite of vehicle design validation tools. Consisting of a combination of MTSs world leading physical testing equipment, specialised software products and dedicated process consulting resources, and software from SmartSim Community members, the order is the largest of its kind in the companys history.

New Product Developments MTS Systems spent US$19.0m (19.4m, 30 September 2002) on research and development in 2002, representing 5.3% of sales, compared to US$22.5m (24.7m, 30 September 2001) spent in 2001. In October 2003 MTS Systems introduced two automotive safety software products at Testing Expo 2003 North America. Safepass 201 and Safedesign Insight from MTS help address AutoBusiness Ltd 375

Automotive Technology Roadmap challenges in productivity and design quality within the safety engineering market. The products build on MTS' suite of proven testing software and reputation of providing high quality safety testing equipment, including the company's crash, head restraint and seat belt test systems. The new software solutions help customers significantly improve test productivity by automating the test setup process, synchronizing computer-aided-engineering (CAE) models and test data, and capturing setup and results data. In June 2003 MTS announced that it was expanding its product offerings in Europe to include powertrain testing solutions. The new offerings range from complete test cell systems with integrated combustion analysis and dynamometer packages to simple data acquisition and control system upgrades. The products support the full range of powertrain development activities, including cyclic durability testing, driveline testing, and sophisticated virtual testing. New products aimed at the supplier segment of the automotive market in 2002 included a new high-frequency, multi-axial simulation table that provides durability, squeak and rattle, and noise and vibration testing capabilities in a compact package. This configuration is ideal for testing automotive components and subsystems and received an innovation achievement award from the Society of Automotive Engineers. Also in 2002 MTS introduced the new FlexTest SE digital controller, which gives suppliers new options for conducting a variety of simple tests and the flexibility to upgrade easily when their needs become more complex. The new telemetry option on MTSs SWIFT wheel force transducers expands the testing conditions in which these data-acquisition tools can be used, including rugged, off-road environments. MTS also completed installation of the first of a new generation of Flat-Trac tyre testing systems at Bridgestone Tire Company in Japan. This one-of-a-kind system is twice the size of any previous Flat-Trac system and will be used for dynamic, high speed testing of specialised racing tyres and high-performance tyres for light trucks and sport utility vehicles. Financial Overview In the year to end 30 September 2003, MTS Systems reported a 4% rise in sales to US$340.1m (293.3m, 30 September 2003) from US$327.2m (333.5m, 30 September 2002) the previous fiscal year. Income before tax, discontinued operations and cumulative effect of accounting change in 2003 amounted to US$32.5m (28.0m, 30 September 2003), a decrease of 1% compared to US$32.9m (33.5m, 30 September 2002) reported in 2002. Net profit came in at US$20.3m (17.5m, 30 September 2003) in the year to 30 September 2003, up 374% from US$4.28m (4.36m, 30 September 2002) the previous fiscal year. The Test Segment, which includes the automotive testing and simulation business, achieved sales of US$292.0m (251.9m, 30 September 2003) in 2003, up 2% from US$287.0m (292.6m, 30 September 2002) in 2002. The segment reported US$29.1m (25.1m, 30 September 2003) in income from operations for fiscal 2003, flat with fiscal 2002, as reduced general and administrative expenses mitigated lower gross margins. MTS Systems reported sales of US$84.6m (67.4m, 31 December 2003) for the first quarter ended 31 December 2003 and net income of US$7.6m (6.05m, 31 December 2003), compared with sales of US$84.4m (80.5m, 31 December 2002) and net income of US$5.4m (5.15m, 31 December 2002) in the year-ago period. Outlook Although only part of its overall business, MTS Systems has received growing volume of orders from automotive OEMs and suppliers for its testing equipment. This results from increasing regulatory and market demands placed on these companies and MTS continues to support their needs by introducing new products that meet the changing requirements of the market. Increasingly, carmakers are delegating testing responsibilities to their suppliers, requiring validation testing of components and subassemblies. This shift in the market is likely to present MTS with further new opportunities for sales into the auto supplier chain.

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NSK
Bearings, steering and automatic transmission products
Address NSK Ltd. Nissei Building 1-6-3 Osaki Shinagawa-ku Tokyo 141-8560 Japan Tel: +81 3 3779 7111 Fax: +81 3 3779 7431/7445 Internet: http://www.nsk.com Senior Officers Tetsuo Sekiya, Chairman Seiichi Asaka, President and CEO Toshihiko Ono, Senior Vice President Yoshiaki Onose, Senior Vice President Yukio Mitsuhashi, Senior Vice President Toyoaki Yano, Senior Vice President Akira Tanikawa, Senior Vice President Hisashi Machida, Senior Vice President Products Automotive bearings, electric power steering (EPS) systems, half toroidal continuously variable transmission (CVT) components, joints, one way clutches, steering columns Plants Bearings: China (2), Indonesia (2), Japan (7), Korea (1), Malaysia (1), Poland (1), UK (1), USA (6) Automotive Components: UK (1), India (1), Japan (7), Thailand (1), USA (1) Sales Group: 522.8bn (4.02bn, 31 March 2003) (Year to 31.03.03) Employees 23,000 (2002) NSK is the world's leading bearing manufacturer and shares the top position in the world's automotive bearing market with SKF of Sweden. The company is also the world's number one in steering joints and EPS systems, and number two in steering columns. It also makes components for continuously variable transmissions (CVT). In fiscal 2002/03 bearings generated 61.6% of sales and automotive components generated 28.8%. Europe generated sales of 85bn (657.0m, 31 March 2003) (before eliminations) in 2002/03, up 6.5%, but operating losses continued. The company operates around 50 manufacturing facilities in 14 countries around the world. NSK increased its ownership in its Nastech joint-venture companies with the Torrington Company in February 2000. This made it the sole owner of Nastech operations in the UK and the USA. In January 2003 NSK announced that Nastechs company in the USA would in future operate under the name of NSK Steering Systems America, Inc. NSK is divided into three business units: Bearings; Automotive Components; and Precision Machinery. NSK also produces precision components and parts, and electronics-applied products. In fiscal 2002/03 Japan accounted for 53.4% of sales by customer location; North and South America, 15.6%; Asia (excluding Japan), 15.4%; and Europe, 15.6%.

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Recent Developments Corporate strategy NSK has taken decisive action to overcome its steep net losses in the late 1990s, with the implementation of structural and management changes. The focal points of the restructuring of NSKs businesses include: Streamlining and reorganisation of the production system through closure or transfer of production sites. This affects the European operations especially as NSK is moving out of the UK and into continental Europe. This is due mainly to currency issues and lower production costs in countries such as Poland. Focus on growing the automotive bearings, electric power steering (EPS) and CVT businesses. In June 1999, NSK reduced the size of its Board of Directors, introduced an Executive Officer system, and appointed an outside Director, with a view to speeding up its management decision making and enhancing transparency NSK has initiated an optimum global procurement strategy with the aim of reducing procurement costs by 15% over the next three years. In 2002/03 procurement cost reductions amounted to 1.8bn (13.9m, 31 March 2003). In 2001 NSK established the EPS (electric power-assisted steering) Division to strengthen EPS capabilities. The demand for EPS is particularly high in Europe where environmental regulations are strict. NSK is divesting non-core businesses. In July 1999 the company closed its Tamagawa bearings plant in Japan within a programme to reorganise its manufacturing network in Japan. In January 2001, in the UK, the group merged NSK Bearings Europe Ltd. with RHP Bearings, and NSK Steering Systems Europe Ltd. with Nastech Europe Ltd. The integration established a new framework that allows NSK to operate under a unified brand and develop an integrated steering business organisation. As part of a plan to reform its European operations during 1999/2000 the company converted its bearings plant in Peterlee, Co. Durham (UK) to a dedicated automotive bearings facility.

In November 2001 NSK announced further restructuring efforts, which included a reduction of Japanese and European personnel and the planned closure of the Akagi (Japan) plant. In October 2002 NSK also announced plans to spin off its precision engineering business and steering column businesses. The two companies will operate under the names: NSK Precision Co. Ltd and NSK Steering Systems Co. Ltd respectively. NSK aims to speed up the decisionmaking process within these companies to enable them to react quickly to changing market conditions and expand global presence. These cost-cutting measures are undoubtedly working. Phase 2 of the Business Restructuring Plan improved operating profitability in Japan and Europe in 2002/03 by 7.2bn (55.7m, 31 March 2003) and 5.8bn (44.8m, 31 March 2003), respectively. A positive effect of 13.5bn (104.4m, 31 March 2003) across the group was expected in 2003/04. Acquisitions In June 2003 NSK announced the acquisition of NTNs ball screw manufacturing and testing equipment operations. In February 2000 NSK increased its share in its Nastech joint-venture companies with the Torrington Company. As a result, manufacturing bases in the UK and the USA were converted to wholly owned subsidiaries, and its share of operations in Thailand and India was converted to 50%. This was done to strengthen steering operations, create a unified management organisation for steering systems and realise rapid decisionmaking. Divestments In January 2003 Roto Precision Inc. (Canada) agreed to buy NSKs non-core business, Waelzlaeger Industriewerke Bulle AG (WIB) of Switzerland. NSK will continue to sell some of WIBs products for a certain period after the sale. Since 1998 NSK has reduced the number of plants it operates in the UK from nine to 378 AutoBusiness Ltd

Company profiles four. Plants now remain in Peterlee (2), Newark and Coventry. The workforce has been reduced from 9,000 people to 4,700 in the UK and there are plans to reduce this further by 1,200 jobs in March 2004. Production has been shifted to the company's plant in Poland mainly due to the appreciation of sterling and excessive investments. In October 2001 Delphi and NSK terminated their 50/50 wheel-bearings joint-venture in Jambeiro (Brazil). As of 1 April 2000, Autoliv acquired the North American seatbelt operations of NSK. A 40% interest in NSK's Asian seat belt operations was also acquired. Autoliv had an option to acquire the remaining 60% in two steps, on 1 April 2002 and 1 April 2003, but subsequently agreed to undertake the acquisition in one step, in April 2003. Seatbelt sales contributed 20.5bn (158.5m, 31 March 2003) to automotive components sales in 2002/03.

Joint-ventures In April 2002 NSK announced the formation of a 50/50 joint-venture with Timken of Canton (USA) to start production of tapered roller bearings in a new plant in Suzhou near Shanghai (China) in early 2004. NSK has invested US$40m (46m, 1 April 2002) in the project. The two companies, which already have a sales tie-up, are broadening the alliance to include production to take advantage of the anticipated rise in demand for bearings in China as carmakers expand their Chinese operations. In October 2001 NSK established a joint-venture with Siam Motors Co. Ltd (Thailand) to produce automotive bearings including wheel hub bearing units. NSK has a 74.9% share in NSK Bearings Manufacturing (Thailand). The partners invested THB900m (22m, 31 October 2001) in a plant in Chon Buri, which began production in December 2001. Around 90% of the output is used in Thailand by OEMs such as Toyota, Isuzu and AutoAlliance. In 2000 NSK and NTN formed an agreement concerning a type of OEM bearing business and the sharing of brand names on rolling bearings. International standardisation of bearings means that products of different manufacturers are interchangeable. The cooperation aims to increase cost competitiveness and efficiency. In June 2002 the two companies expanded their alliance by establishing a 50:50 joint venture to cover sales, production, technology and parts procurement relating to the large size bearings business. NSK and BorgWarner Inc. (USA) operate a joint-venture which manufactures friction materials and one-way clutches. NSK Warner Co. Ltd supplies Japanese transmission manufacturers and carmakers. Investments In July 2003 NSK stated that it was to acquire full control of the joint venture it has with Timken Co., NSK Torrington. The transaction, now completed, cost NSK about US$146m (148m, 3 July 2002) and gives NSK control of 98% of the shares. The company has been renamed NSK Needle Bearing Co. since the acquisition. To accommodate an order from Toyota in Thailand to supply bearings for a pickup truck, which is going into production in 2004, NSK is to build additional production lines at its bearings factory in the region at a cost of about 1bn (7.7m, 8 October 2003). This will triple annual capacity at the plant to 10.8 million units by August 2004. NSK Brasil plans to invest US$2.5m (2.3m, 1 September 2003) to expand the production capacity of its facility at Suzano, Sao Paulo (Brazil) at the beginning of 2004. The subsidiary currently supplies products to Brazil and Argentina and NSK now aims to export to other South American countries, Central and North America and eventually to other continents. Current production capacity of the Suzano plant is 3.6 million units a month, which NSK will increase to 5 million units. In December 2003 NSK opened a new technical centre in Kunshan City, Jiangsu Province (China), which aims to find solutions to the technical requirements of the growing Chinese automobile, home appliance, precision machinery and IT industries. In March 2003 NSK announced that it is to strengthen its ability to design and manufacture EPS systems in Japan by investing in new heat-processing equipment. The company aims to develop lower cost systems and intends to increase the workforce dedicated to this technology by 30% during 2003. In October 2002 NSK opened a technology centre in the US that also serves as its headquarters there, so as to expand its local automobile-related operations. Situated in Michigan, it is said to have cost 2.4bn (20m, 1 October 2002). AutoBusiness Ltd 379

Automotive Technology Roadmap In August 2002 NSK established a holding company in China. NSK has several production sites and sales offices in China with several new projects planned in the future, including the building of a third facility in Kunshan, the taper joint-venture with Timken and the establishment of a procurement centre and steering production facility. The new steering production company known as NSK Steering Systems China Co. Ltd will be based in Guangdong Province. Production is expected to commence in 2004. In November 2002 NSK announced the establishment of a bearing pre-processing production company in China (Zhangjiang NSK Precision Machinery Co Ltd) as a means of creating dual sourcing capabilities in order to reinforce global procurement capabilities and to increase cost competitiveness. The new facility is expected to become operational at the end of 2003, and is set to create 200 jobs by 2006. NSK has also constructed a new plant in Thailand, located at an industrial complex some 70km south-east of Bangkok. The facility is expected to produce more than 400,000 bearings per month in 2004 and will supply to local factories operated by Toyota and Isuzu. In December 2000 NSK purchased land in Walbryzch (Poland) for the construction of the group's first automotive components plant in Continental Europe. The plant has accommodated increases in orders for EPS and steering columns. In March 2002 NSK announced a Zl170m (46m, 31 March 2002) investment in the NSK-Iskra plant in Kielce (Poland).

Contracts In August 2001 NSK and Timken (USA) agreed to jointly supply tapered roller bearing products and services to Toyota. The Timken Company is a leading international manufacturer of highly engineered bearings, alloy and speciality steels and components. In October 2003 NSK announced it has won an order from Toyota Motor Corp. to supply bearings for a pickup truck, which will go into production in Thailand in 2004. Toyota plans to manufacture 200,000 pickups a year in Thailand. NSK will supply almost all the bearings to be used on the truck's transmission system, engine cooling pump and other parts. New Product Developments As part of the second phase of NSK's restructuring plan the company is committed to reinforcing its global R&D and engineering support system. This will involve upgrading global engineering centres and large-scale investments being made at Fujisawa (Japan) and Ann Arbor, Michigan (US). New facilities are being created in Poland and South Korea, while expansions are underway in China (Kinshan), Singapore, Japan (Fujisawa, Maebashi and Kirihara) and the US (Ann Arbor). The new Japanese R&D centre is set to become the corporate centre for all NSKs R&D activities. Approximately 6bn yen (50m, 31 March 2001) is to be invested in a 60,000 square metre site at the Fujisawa plant. Total R&D expenses in 2002/03 amounted to 8.307bn (64.2m, 31 March 2003), up from 8.036bn (69.6m, 31 March 2002) in the previous year. Financial Overview In the year ending 31 March 2003 NSKs sales rose by 8% to 522.8bn (4.02bn, 31 March 2003) from 480.9bn (4.17bn, 31 March 2002) in fiscal 2001/2002. Operating income rose dramatically from 3.9bn (34m, 31 March 2002) in 2001/2002 to 17.8bn (131m, 31 March 2003) in the year ending 31 March 2003. NSK recorded a net loss of 2.7bn (30.9m, 31 March 2003) for the year, compared to the previous years net loss of 17.7bn (153m, 31 March 2002). Bearing sales rose to 321.9bn (2.49bn, 31 March 2003) from 302.3bn (2.62bn, 31 March 2002), driven by increased business in the automotive sector, while automotive components sales increased to 150.7bn (1.16bn, 31 March 2003) from 128.2bn (1.11bn, 31 March 2002). Increased sales of EPS systems and automatic transmission components were behind this improvement. Group sales for the nine months to 31 December 2003 were posted at 383.5bn (2.9bn, 31 380 AutoBusiness Ltd

Company profiles December 2003). Operating income stood at 16.67bn (124.1m, 31 December 2003) with net income of 9bn (73.6m, 31 December 2003). The Bearings division experienced strong demand from the automotive industry in Japan and overseas and achieved increased sales of 246.1bn (1.8bn, 31 December 2003) with an operating income of 16.2bn (120.3m, 31 December 2003). Sales for the Automotive Components division in Japan were static during the period and weak in Europe but sales to the Americas and Asia rose sharply. The division posted nine-month sales of 94.6bn (703.8m, 31 December 2003) and operating income of 3bn (22.1m, 31 December 2003). NSK Group was forecasting sales of 508bn (3.78bn, 31 December 2003) for the year to 31 March 2004 and net profits of 10bn (74.4m, 31 December 2003). Outlook NSKs financial performance is gradually improving, largely as a result of its Business Restructuring Program (BRP). Operating losses are still being suffered in some areas but a strong recovery is evident in bearings and automotive components. With demand for EPS systems increasing in Europe, NSK is using its strong capabilities in this field to position the EPS system as a growth product, accelerating plans to introduce EPS systems for massmarket automobiles. The company expects demand for its half-toroidal CVT components to increase in Europe where automatic transmission is not widespread and interest in environmental issues is strong. It also expects growth within the USA, as manufacturers in this region are moving to comply with increasingly strict environmental standards.

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Philips
Electronics
Address Koninklijke Philips Electronics N.V Rembrandt Tower Amstelplein 1 1096 HA Amsterdam The Netherlands Tel: +31 2059 77 777 Fax: +31 4075 7319 Internet: http://www.philips.com Senior Officers Gerard Kleisterlee, President and CEO Jan Hommen, CFO Ad Huijser, Chief Technology Officer Theo van Deursen, CEO Philips Lighting Scott McGregor, President and CEO, Philips Semiconductors Products Automotive lighting, customer specific metal and plastic products, including surface treatment, printed circuit boards, electromechanical functions, semiconductor devices for body, braking systems, suspension systems, security systems, transmissions, HVAC and in-car navigation Plants Belgium, Czech Republic, France, Germany, Poland, The Netherlands, UK, USA Sales 29.0bn (Year to 31.12.03) Employees 164,438 (2003) Philips is a leading manufacturer of electrical and electronic products and one of Europe's largest and most innovative companies in fields related to consumer electrical goods. Until year-end 2002, Philips served the automotive industry through three of its six business groups: Philips Components: The Components division supplies the Automotive Infotainment market segment amongst others. Philips Lighting: As well as in homes, hospitals and airports, the division's products feature in 35% of cars. Philips Semiconductors: In the automotive sector Philips is the leading supplier of semiconductors for in-car entertainment systems. Philips is a leader in developing new generations of in car entertainment and information systems as well as in-car networking systems. As of 1 January 2003, the Components Division was dissolved and a restructuring programme was implemented to bring Philips Optical Storage back to profitability. The automotive line of Philips Optical Storage is still a growth area. As of 2003, the results of Optical Storage have been reported under Miscellaneous.

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Recent Developments Corporate strategy In recent years Philips has been negatively affected by the downturn in the economic climate and has been forced to take measures to reduce costs. In 2002, Philips announced cost-saving programmes intended to deliver a 1bn saving by the end of 2003. During 2002, weaknesses persisted in Philips Components and Semiconductors divisions. Philips dissolved Components and repositioned its respective businesses, changing the business model to improve profitability. At Semiconductors, while maintaining the focus on product innovation, the company addressed the unaffordable high cost structure with a number of measures, including the planned closure of the Albuquerque facility at the end of 2003. The new organisational structure, which became effective on 1 January 2003, is expected to streamline innovation and create more value through alignment of related businesses previously grouped in different divisions. At Semiconductors, despite very difficult market conditions, Philips continued to invest in innovation and R&D to drive future growth and to strengthen its product portfolio. Philips expects to see continued growth in its automotive lighting business and its automotive line of the former components division, now reported under Miscellaneous. Divestments In November 2002, Philips Semiconductors announced plans for the phased closure of its semiconductor fabrication operation in Albuquerque, New Mexico (USA) at the end of 2003. The closure is part of Philips stated intention to reduce manufacturing capacity at Philips Semiconductors. The core workers remained in place until the third quarter of 2003, at which time manufacturing was relocated to other Philips sites in North America, Asia and Europe. Joint-ventures In February 2002, Philips and Robert Bosch GmbH signed a technology and dual source agreement to manufacture discrete semiconductors for high current applications. The aim is to use these for leading-edge power silicon switches that will be used in advanced automotive systems for the electronic car of the future. Philips should benefit from substantial revenues over the 10-year life of the contract. Under the terms of the agreement Philips grants Bosch the rights to manufacture Power-MOSFETs using the latest generation Trench Power-MOS process from Philips. Dual source supply for automotive manufacturers and system suppliers will be secured by Philips' semiconductor manufacturing facilities in Hazel Grove (UK) and the wafer manufacturing facilities of Bosch in Reutlingen (Germany). In September 2000, Philips Semiconductors became a founding member of the FlexRay Consortium with DaimlerChrysler, BMW and Motorola. The FlexRay Consortium aims to advance the development and implementation of an advanced automotive communication system. It is hoped this will be a standard for innovative high-speed control applications in the car, such as x-by-wire systems. Volkswagen joined the FlexRay Consortium in August 2003. In March 2000, Philips' Flat Display Systems unit and Johnson Controls formed an agreement to provide entertainment options featured in SUVs and minivans. Under the terms of the deal Philips supplies the AMLCDs for the Johnson Controls' AutoVision rear-seat entertainment system. Several other Philips divisions will supply consumer electronic components for the system. Contracts Philips supplies products to most leading OEMs. BMW uses Philips PACS (Precision Adjacent Channel Selectivity) products. Philips also supplies Continental Teves with automotive sensor chips for ABS systems. New Product Developments In December 2003 Philips introduced a Local Interconnect Network (LIN) I/O slave expander, designed to help manufacturers build cost-effective, fail-safe LIN networks in the car. The UJA1023 device supports up to eight identical LIN I/O slave nodes on a single LIN-bus (and 384 AutoBusiness Ltd

Company profiles even 30 with additional wiring effort), allowing design engineers to simplify the design process and reduce component count for IVNs. In November 2003 Philips announced a new magnetoresistive sensor that will be launched in vehicles in 2004 for automotive angular measurement applications including electronic throttle control (EGAS) and variable valve timing (VVT), which increases fuel efficiency in the car. Jointly developed by Philips and Siemens VDO Automotive AG, the KMA200 is optimised for the harsh environments of the automotive industry. The sensor will provide car manufacturers with a more reliable and accurate solution for automotive angular measurement - reducing the risk of mechanical breakdowns and thus improving overall vehicle safety. Also in November 2003 Philips announced the industrys first 32-bit ARM7-based microcontroller with embedded Control Area Network (CAN) and Local Interconnect Network (LIN) gateway functionality. The robust processing power of the ARM7 core and the flexibility of on-chip CAN and LIN gateway functionality make Philips SJA2020 an ideal solution for the additional computing and memory demands created by complex in-vehicle networks (IVNs). Furthermore, the SJA2020 allows design engineers to reduce component count and centralise communications in IVN systems by replacing several 8-bit microcontrollers with one 32-bit microcontroller to control body applications in the car, including central door locks and power windows. In September 2003 Philips announced a highly integrated dedicated HD Radio processor to meet the growing demand for automotive HD Radio sets. HD Radio technology allows digital radio signals to ride the same airwaves as analog AM/FM radio signals. For stations broadcasting HD Radio signals, a SAF3550-equipped radio provides listeners with high-quality digital AM/FM sound. Also in September 2003 Philips unveiled the latest addition to its line of products geared toward mobile entertainment applications. Featuring a new PAL/NTSC auto-detect/switch, the companys digitally based thin-film-transistor (TFT) video display module is the first-ever to automatically detect and switch between the worlds two major video-signal standards NTSC and PAL. Easily incorporated into rear-seat automotive entertainment (RSE) systems, the module will provide flexibility and cost savings for OEMs and automotive integrators, enabling them to use a single RSE system regardless of the geographic region for which the car is intended. In July 2003 Philips announced the first silicon of its System Basis Chip (SBC) family, expanding its portfolio of in-vehicle networking (IVN) products. Philips' SBCs combine transceiver functionality, voltage regulators and a watchdog, with diagnostics and a fully embedded fail-safe system. The one-chip integration of generic electronic control unit (ECU) functions with the powerful fail-safe system makes it very easy for design engineers to build automotive network nodes that offer excellent protection against network lock-ups and dead batteries. In February 2003, it was reported that Philips and Delphi Corporation had jointly developed the next generation digital tuner for vehicle entertainment systems. The tuner offers the listener clarity and enhanced noise suppression and reduces multipath channel effect, which provides consistent sound quality under various reception conditions. The tuner chipset architecture also provides the interface required for the new digital-quality HD Radio features. Philips' Car DSP (Digital Signal Processor), the SAF7730, enabled Delphi to develop proprietary radio software that will provide world-class reception performance through the use of advanced DSP algorithms. The SAF7730 is a unique single-chip DSP solution with several integrated powerful DSP cores for audio and radio processing. Philips is the global leader in Car DSPs and the company said that working closely with Delphi, the market leader for vehicle mobile multimedia systems, enables both companies to benefit from huge synergies and further strengthens Philips market position. In January 2003, Philips introduced its car radio enhanced selectivity tuner, the TEF6860. Philips' TEF6860 tuner IC alleviates many of the annoying reception problems still associated with car radios, such as adjacent channel interference, AM signal fading, background interference and erratic channel-locking in poor reception areas. The TEF6860, which is the latest product in the PACS (Precision Adjacent Channel Selectivity) family, builds on the technology that has made Philips the leading supplier of car radio tuner ICs. PACS is the AutoBusiness Ltd 385

Automotive Technology Roadmap worldwide standard for high quality car radio reception, and the TEF6860 further improves radio and audio performance, reduces the number and cost of external parts, and achieves exceptionally low power dissipation. The TEF6860 is currently sampling with volume production scheduled for fourth quarter 2004. In February 2002, in a step toward an autonomous driving system, Philips Semiconductors and Netherlands-based MobileEye B.V. developed an SoC for car safety applications such as adaptive cruise control, lane departure warning, forward collision warning, and collision mitigation. The 0.18-micron CMOS device integrates multiple ARM946 programmable CPUs, application-specific sensing and imaging modules, 2.2Mbits of SRAM, and peripherals, and will be manufactured by Philips. Samples produced in 2002 target 2005 car models. In 2002, Philips introduced HiPerVision car lamps. HiPerVision is a new lighting concept developed by Philips using picture-tube technology to achieve an excellent sealing of the bulb. HiPerVision lamps last the lifetime of the car, use less energy, are recyclable and small, and offer greater design freedom. Mercedes-Benz, Audi, Volkswagen and Opel are already using this technology in some of their cars. Financial Overview In the year ending 31 December 2003, Philips sales fell 9% to 29.04bn from 31.82bn in 2002. Income from operations amounted to 488m in 2003, up 16% from 420m in 2002. Cost savings resulted in the significant increase in income from operations. The improvement was partly offset by an increase in pension costs. Philips saw a net profit in 2003 of 695m, compared to a net loss of 3.21bn in 2002. Philips Lighting contributed sales of 4.52bn in 2003, down 7% from 4.85 in 2002, Philips Miscellaneous segment contributed 2.22bn, down 25% from 2.97bn in 2002, and Philips Semiconductors contributed 4.99bn, down 1% from 5.03bn in 2002. Outlook Philips was cautious with regard to overall prospects for 2003, especially as dollar-related currency movements negatively impacted sales and income. This caution proved well founded with regards to sales but profitability improved significantly. Productivity improvements and restructuring programmes introduced in the last two years should underpin longer-term prospects. Automotive-related business remains sound and the companys new technology is keeping it at the leading edge of current developments, especially in the in-car multimedia area. There are also good prospects for volume growth as lighting requirements become more complex, driven by safety, convenience and stylistic issues.

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Prodrive
Powertrain development, vehicle dynamics
Address Prodrive Banbury Oxfordshire OX16 3ER UK Tel: +44 1295 273355 Fax: +44 1295 271188 Internet: http://www.prodrive.com Senior Officers David Richards, Chairman Nick Fry, Group Managing Director Clive Scrivener, Group Finance Director Products Powertrain design and development, vehicle dynamics and motorsport support Plants Australia, Germany, Thailand, UK, USA Sales Group: 125m (177.1m, 31 December 2003) (Year to 31.12.03) Employees Group: c. 900 (31.12.02) Prodrive is well known for its success in the motorsport business but during the 1990s the company began offering its technical expertise and project engineering skills to OEMs and their suppliers. The Automotive Technology division now represents over half of Group sales. Prodrive has the capabilities to be a whole service provider and can take projects through from the initial idea to working prototypes and into production. The company has particular expertise in the design, calibration and testing of powertrains, vehicle dynamics, control and systems integration, vehicle engineering and manufacture. Headquartered in England, Prodrive employs nearly 900 people at its facilities in Australia, Germany, North America, Thailand and the UK. In 2003 Prodrive generated 56% of its sales in Europe, 7% in the USA and 36% in the AsiaPacific region. Prodrives customers include world leading OEMs and tier one suppliers.

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Recent Developments Corporate strategy Prodrive began as a motorsport business, and it is now a leader in that field, but the Automotive Technology division has become more than an equal part of the business. It currently generates over half of the companys sales, and now with separate headquarters, and continuing to expand globally, it is likely to grow even further. A significant step in its expansion was its acquisition of Tickford, a move that enabled Prodrive to offer its services globally. Since then Prodrive has entered into several partnerships and opened up new facilities, including its first in Germany. With joint-ventures in North America, Australia and Europe, Prodrive is in a strong position for global growth. Having already established a strong reputation for its gasoline engine development capabilities, Prodrive is now looking to establish itself further in the area of diesel engine development. To facilitate this Prodrive has been investing in the facilities that will allow it to move into this area of business. For example, in 2003 the company installed a diesel particulate tunnel at its facility in Milton Keynes (UK). Acquisitions In 2001 Prodrive acquired Tickford Engineering, which enabled the company to offer vehicle manufacturers access to a global network of facilities and expertise. Joint-ventures In March 2002, Prodrive announced it would work with Italian transmissions company Graziano Trasmissioni to develop the next generation of advanced automated manual transmissions and driveline systems for high performance cars. The collaboration agreement combines Grazianos skills in the engineering and production of gearboxes and drivetrain components with Prodrives expertise in system design, control, automation, calibration and refinement. Initially the two companies have started developing a new high capacity automated transmission concept for low to medium volume applications where high levels of refinement and driveability are critical. Prodrive and Graziano will share resources at their operations across the world, as well as intellectual property, engineering and commercial opportunities. Prodrive has two joint-ventures in Detroit (USA); Prodrive Badillo and Prodrive Engelhard. Prodrive Badillo specialises in the development of emission control and engine calibration software. Prodrive Engelhard provides a full engine emission system design and development capability from the engine to the exhaust. The two companies work closely to provide a full intake to exhaust emissions capability. Prodrive Badillo also has skills in engine performance enhancements, with a particular focus on supercharging systems for a range of engines. Prodrive Engelhard is specialised in catalyst ageing and has developed its own ageing techniques, which ensure carmakers meet new legislation while lowering the cost of the catalyst. Ford Performance Vehicles (FPV) is Prodrives joint-venture with Ford of Australia, which designs, engineers and manufactures high performance Fords for the Australian market. At its facilities in Melbourne (Australia) FPV can develop new performance componentry including engines, drivetrains and suspension, and manufacture up to 15,000 vehicles a year. Prodrive holds a 51% stake in the joint-venture company. In August 2003 it was announced that the joint venture would continue to develop and manufacture high performance cars following a five-year contract extension. The announcement came as FPV sales hit record levels. Investments In March 2004 Prodrive announced it was increasing the size of its automotive technology operation in Bangkok, Thailand. This operation was established in 2001 and now employs 45 people, a figure that should grow by a further 20% through 2004, with continued strong growth in 2005. Work for Ford has increased significantly and the operation will now be used as a base for exploiting potential growth in China. In June 2003 Prodrive announced it was installing a diesel particulate tunnel at its powertrain test facility in Milton Keynes (UK) to offer a wider range of diesel engine test and calibration services. The tunnel forms part of Prodrives strategy to become a strong player in the development of diesel engines. Together with the companys range of transient test beds, the tunnel will allow Prodrive to measure diesel particulate emissions 388 AutoBusiness Ltd

Company profiles from development engines against all legislative procedures, giving its customers a quicker and easier turnaround of projects. In 2002 Prodrive opened its first office in Germany. During 2002 Prodrive Engelhard invested more than US$4m (3.82m, 31 December 2002) to improve its facilities and add new engine test cells and a vehicle emissions chassis dyno. Also in 2002 Prodrive USA was launched in California (USA) to capitalise on the performance car component market. Prodrives Milton Keynes test facility has seen over 3m (4.59m, 31 December 2002) of investment in recent years to provide the most up to date dynamic dynamometer test cells capable of handling vehicle emissions drive cycle simulation and state of the art automated engine management system test bed calibration. The investments also provided nearly 1m (1.53m, 31 December 2002) of new diesel test equipment to meet rising demand. In 2000 Prodrive moved its Automotive Technology business to new headquarters at a 240-acre site near Warwick (UK).

Contracts In March 2002 Ford Motor Co. selected Prodrive as a preferred supplier for its UKbased engine testing services Previously, Ford worked with around a dozen companies, including Prodrive, to fulfil its testing requirements. Now the work will be consolidated and split between three individual companies in the UK. Prodrive will be handling thermal shock, performance and economy and durability testing, as well as catalyst ageing projects for Ford, Jaguar, Land Rover, Volvo and Aston Martin. Prodrive will run the contract from its test facility in Milton Keynes, where it has 25 engine dynamometer test cells as well as a vehicle emission facility. The Ford Performance Vehicles joint-venture currently builds the FPV GT, GT-P and Pursuit Ute, with an output of around 2000 vehicles a year. The company also develops and builds the V8 engine for these vehicles. New Product Developments Prodrive has global design, test and development facilities, which employ more than 100 engineers, with access to more than 50 engine test cells, including the latest advanced transient dynamometers. In the UK there is a 250-acre proving ground including a 2.5 mile test track; low friction straights; areas for suspension and dynamics performance testing; and a high speed, six lane, mile-long straight. The company also has extensive powertrain test facilities in the UK, North America and Australia. In 2002 Prodrive launched the microproteus range of development ECUs and produced a new ATD demonstrator specifically for an unnamed carmaker. Financial Overview Prodrive is a private company and as such is under no obligation to publish detailed financial information about itself. In 2003 Prodrive reported sales of 125m (177.1m, 31 December 2003), up 21% from 103m (157.7m, 31 December 2002) reported in 2002. EBITA was 5.5m (7.79m, 31 December 2003) in 2003, compared to 2.7m (4.13m, 31 December 2002) in 2002. Outlook Prodrive has established a strong presence in the motorsport and automotive consulting areas and the benefit of recent acquisitions is now showing through. The growth in both sales and profits in 2003 was significant given a challenging environment. The company is being somewhat cautious in its outlook for 2004 and expects continuing challenges in a number of its businesses. Nevertheless, it has also noted an improvement in the European automotive business and believes that if this is sustained, results in 2004 could show further real improvement. The company has a very weak presence in North America but is enjoying AutoBusiness Ltd 389

Automotive Technology Roadmap significant growth in the Asia-Pacific region and its base in Thailand is continuing to grow. Substantial potential for Prodrives expertise could well materialise in China in the next few years, a development that could provide a further significant boost to medium-term growth.

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Ricardo
Engineering consultancy
Address Ricardo plc Bridge Works Shoreham-by-Sea West Sussex BN43 5FG UK Tel: +44 1273 455611 Fax: +44 1273 464124 Internet: http://www.ricardo.com Senior Officers Marcus Beresford, Chairman R.J. Westhead, Chief Executive A.R. Goodburn, CFO Products Powertrain and vehicle engineering technology Plants Czech Republic, Germany, UK, USA Sales Group: 136.6m (197.2m, 30 June 2003) (Year to 30.06.03) Employees Group: 1,578 (30.06.03) Formed in 2003, Ricardo Strategic Consulting (RSC) has already completed a number of high profile assignments. The success of RSC is based upon the philosophy that its consultants understand both the strategic issues of business as well as the commercial and technical issues of the product. Ricardo aims to develop this new core skill in each of its major markets of Europe, North America and Japan. This new service offering is proving its ability to complement the work of the companys traditional technical consulting business. Ricardos principle divisions are; Ricardo Consulting Engineers (engine technology), Ricardo Inc. (North America), Ricardo Driveline and Transmission Systems, Ricardo GmbH (Germany), Ricardo Vehicle Engineering (RVE) and Ricardo Strategic Consulting (RSC). Ricardo plc is a world leading powertrain and vehicle engineering technology provider and strategic consultant. The company undertakes research, design and development, and also provides strategic services to the world's automotive manufacturers. Ricardo technology is also well known in the area of motorsport. From its advanced technical centres in the UK, North America, Germany and the Czech Republic, Ricardo can provide engineering services ranging from individual component design to complete new engine and vehicle programs. Ricardos main customers are the product development and research organizations of the worlds automakers. Ricardo can support its customers in the areas of product design, electronics and control, computer simulation, analysis, prototype manufacture and development testing. The company also provides licenses for its advanced engineering software products, enabling customers to use Ricardo technology in their own research and product development activities.

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Recent Developments Corporate strategy Ricardo is looking to grow through entering new markets and expanding its product portfolio. The company aims to deliver its expertise in every vehicle. In order to achieve this it is largely growing through acquisition and through investment in new technologies. The company now has a very broad product range. Ricardo places high importance on the international aspects of its business and recognizes the value of Germany and the need for it to establish a significant presence in the largest engineering services market outside North America. On 30 June 2003 Ricardo acquired PROTOtechnik-IFT group, a well-established group offering services compatible with Ricardo Consulting Engineers. The German market for automotive engineering consultancy is perhaps the most technically demanding in Europe, driven by the needs of major OEMs including DaimlerChrysler, BMW, Audi, Porsche, VW, Opel, Fiat-GM Powertrain and Ford of Europe. The acquisition of IFT has provided Ricardo with a delivery base on the doorstep of the southern German premium automotive manufacturers and many of their key Tier 1 suppliers including Bosch. In addition the northern Italian car industry is also readily accessible from this base. Control and Electronics is a strategic area that Ricardo sees as being key to significant future growth and the acquisition of Tarragon in February 2003 was in line with Ricardos strategy to significantly grow its electronic systems capability. The market for automotive electronics is expected to grow from 20% to 30% of the cost of a vehicle by 2010. The key drivers for this are increasingly stringent legislation, safety and customer convenience, which have been significant drivers of Ricardos business for the last 20 years. Ricardo is developing its consultancy service to provide advice on strategic issues in the automotive industry. The companys new Strategic Consulting division has made a good start in its first year and already won several important contracts. In 2004 Ricardo aims to extend this service to the USA. Acquisitions In June 2003 Ricardo acquired the Germany-based IFT Group. The IFT companies provide engine systems expertise particularly in the areas of high performance and niche exhaust systems, prototyping, small series production and testing services covering vehicle, engines and related systems, serving a strong, established automotive customer base. The acquisition significantly increases Ricardos presence in Europes leading automotive market, providing the necessary infrastructure, complementary technology and critical mass to deliver full powertrain and vehicle integration programmes from a local German base. The IFT companies employ around 270 people, operating from the headquarters in Schwbisch Gmnd (Germany), customer sites and a small design office in Budapest (Hungary). In February 2003 Ricardo announced it had acquired Tarragon Embedded Technology Limited, an automotive systems software company, for a maximum consideration of up to 5.5m (8.08m, 28 February 2003). Tarragon, based in Cambridge (UK), employs 52 people and is a leading designer and developer of embedded automotive systems software and support tools for the automotive industry. The acquisition significantly enhances Ricardos electronic capability by adding embedded software that, for example, controls engine management systems, telematics, which includes GPS location based systems, and safety critical redundancy systems, such as drive by wire. For the year ending 31 January 2002, Tarragon generated a pretax profit of 350,000 (514,177, 28 February 2003) on sales of 3.24m (4.76m, 28 February 2003). Joint-ventures In January 2003 Ricardo increased its international presence, and more specifically its presence in Japan, with the signing of an exclusive cooperation agreement with the leading Japanese test and emissions equipment specialist Horiba. Under the terms of the agreement the two companies will work together to build an improved consultancy service to the Japanese OEMs and related industries.

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Company profiles Investments In October 2003 Ricardo announced its Chicago Technical Center (CTC) Test Cell Expansion Project, which represents an investment of US$4.8m (4.12m, 22 October 2003) for the company in heavy-duty engine emissions testing. The project will add two new heavy-duty emissions test cells specifically designed for developing engines to US Environmental Protection Agency 2007 emission requirements and will be completed in August 2004. The first phase of the project was completed in September 2001. Phase two of the expansion will add two new test cells at the facility. Test Cell 3 will be operational in July 2004 and Test Cell 4 will be available one month later. In January 2003 Ricardo announced the opening of its Detroit Technology Campus, anchored by a new 77,000 square foot two-storey office and engineering facility expansion and located adjacent to its existing engineering and testing operation in Van Buren, Michigan (USA). Ricardo invested US$12m (11.1m, 31 January 2003) in the design and construction of the new facility. The building is designed to easily accommodate 30,000 to 40,000 square feet of additional space for future growth and expansion. It also complements the extensive powertrain testing operations that remain housed in the original facility. The investment reflects Ricardos confidence in the future success of its growing North American business. Contracts Ricardo was selected by Bugatti as engineering partner for the complete transmission and driveline system for the Bugatti EB 16.4 Veyron, an ultra high performance sports car. The engineering partnership covered the complete permanent all-wheel drive system, comprising the transmission, front and active rear axle, transmission controller, control software, and associated hydraulic system components. Deliveries of production vehicles are due to begin in Spring 2004. In January 2003 Ricardo Inc. announced that it had served as a strategic partner in the development of General Motors all-new HUMMER H2 sports-utility vehicle, which is now in production. Ricardo was responsible for the chassis and powertrain engineering, including associated design, analysis, validation support, production launch engineering and production support of the vehicle. In December 2002 Ricardo announced that it had served as a strategic engineering partner in the development of the Chrysler Groups all new 5.7-liter HEMI Magnum V8 engine for the 2003 Dodge Ram Heavy Duty pickup. Co-located with the Chrysler Group cross-functional team, Ricardo engineers, designers and CAE engineers were responsible for supporting the design, analysis and development of the all-new engine, which launched production in July 2002. New Product Developments In order to maintain its technological edge, Ricardo invests significant sums in its own technology research program. This research is targeted at the future needs of the automotive industry, for example, in minimizing the environmental impact of new vehicles through increasing fuel efficiency, and therefore lowering CO2 levels, and minimizing exhaust emissions. In December 2002 Ricardo announced WAVE v5, the latest addition to its WAVE enginemodelling package. WAVE v5 offers unique capabilities, which can automate routine activities such as preparing the engine flow network. This substantially reduces the development cycle time, creating opportunities for more creative engineering work and increased productivity. In mid 2002 Ricardo completed a collaborative program with Valeo to demonstrate technologies for a 42-Volt mild hybrid diesel vehicle that reduces fuel consumption by up to 30% and also beats future emissions legislation by 50%, while still maintaining excellent standards of performance and drivability. Under the terms of the agreement, the jointly developed mild hybrid vehicle, called i-MoGen (Intelligent Motor Generator), integrates a range of Valeos 42-Volt systems, including the companys integrated starter-alternator, its Heating Ventilation Air Conditioning (HVAC), intelligent engine cooling and other electrical systems. A high output downsized 1.2-litre diesel engine constitutes the core of the powertrain system together with a supervisory controller to co-ordinate system operation, both developed by Ricardo. AutoBusiness Ltd 393

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Based on the cost effective fuel consumption benefits demonstrated by the Ricardo I-MoGen mild hybrid diesel vehicle, Ricardo has been awarded a major collaborative research program, part funded by the UK Department for Transport (DfT) through the New Vehicle Technology Fund (NVTF). The program to design, build and demonstrate a hybrid delivery van will be led by Ricardo, working with a major automotive OEM and two European Tier 1 suppliers. Key Ricardo responsibilities include; vehicle modelling and concept definition, control system design, vehicle integration and overall program management. The program is designed to demonstrate the commercial and environmental attributes of hybrid technology. Ricardos current R&D programmes include advance transmissions, cleaner diesels and a highly fuel-efficient petrol combustion system known as Lean Boost Direct Injection (LBDI ), which has been demonstrated as having the potential to deliver fuel savings in excess of 20% in comparison with current production vehicles. Financial Overview In the year to end 30 June 2003 Ricardo reported total sales of 136.6m (197.2m, 30 June 2003), 5% lower than the 143.2m (221.4m, 30 June 2002) reported for the year to end 30 June 2002. Operating profit came in at 15.3m (22.1m, 30 June 2003) in 2003, down 7% from 16.5m (25.5m, 30 June 2002) in 2002. Profit after tax in the year to end 30 June 2003 was 12.2m (17.6m, 30 June 2003), slightly above the profit after tax of 12.1m (18.7m, 30 June 2002) achieved the previous fiscal year. Outlook Ricardo can now provide engineering services ranging from individual component design to complete new engine and vehicle programs and can support its customers in the areas of product design, electronics and control, computer simulation, analysis, prototype manufacture and development testing. However, despite this existing expertise, Ricardo is still looking to grow through entering new markets and expanding its product portfolio and in order to achieve this it is largely growing through acquisition and through investment in new technologies. Unfortunately, trading conditions were extremely challenging in the second half of 2003 and Ricardo struggled to achieve a breakeven pre-tax earnings position. Order enquiries picked up noticeably in December 2003 but Ricardo is continuing to focus on cost reduction and improved productivity to better align the business to the current trading environment. The company remains confident it is well positioned to return to growth once the market for engineering services recovers.

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Siemens VDO Automotive

Automotive electronics
Address Siemens VDO Automotive AG Im Gewerbepark D80 93059 Regensburg Germany Tel: +49 941 790 02 Fax: +49 941 790 5111 Internet: http://www.siemensvdo.com Senior Officers Wolfgang Dehen, Chairman and CEO of Siemens VDO Automotive, Chassis and Carbody Johann Lttner, CFO of Siemens VDO Dr. Klaus Egger, Executive Director of Siemens VDO Automotive AG Gnter Hauptmann, Executive Director of Siemens VDO Automotive AG Products Braking systems, car body electronic systems, chassis systems, cockpits, driver information systems, engine control electronics, fuel injection systems, fuel tank systems, passenger safety systems, powertrain products Plants Siemens VDO Automotive: Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, India, Indonesia, Italy, Japan, Malaysia, Mexico, Netherlands, Poland, Romania, Russia, Singapore, Slovakia, South Korea, Spain, Sweden, Switzerland, Turkey, UK, USA Sales 8.4bn (Year to 30.09.03) Employees 44,000 (2003) In April 2001 Siemens AG merged Mannesmann VDO with Siemens Automotive, forming Siemens VDO Automotive AG. The new company is one of the world's leading automotive suppliers of electronic and mechatronic systems. Siemens VDO Automotive has three manufacturing business groups: Powertrain; Chassis and Carbody; Interior and Infotainment. In addition there is a Trading division that focuses on the aftermarket. Prior to the merger, Siemens Automotive and VDO were both leaders in the area of modules and systems. Products include cockpit modules, passenger safety systems, integrated air/fuel modules and fuel injection systems. In 2002, 70% of Siemens VDO Automotives sales were to Europe, 29% of sales were to Germany and another 41% to the rest of Europe. The company has around 46 manufacturing and assembly facilities, including 23 in Europe. Siemens VDO Automotive's customers include all the major vehicle manufacturers.

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Recent Developments Corporate Strategy There is strong demand for Siemens VDO Automotives products. The company is looking to become the industrys number one supplier for automotive electronics through developing integrated and innovative solutions. It wants to increase its productivity, its profitability, and its flexibility through a lean organisational structure. Siemens VDO Automotive is looking to expand its position in Asia as well as North and South America, and use strategic alliances to strengthen its systems capabilities. In January 2002, Siemens VDO Automotive Corporation was officially launched in North America, marking the completion of the companys global transition to Siemens VDO Automotive In July 2001, Siemens AG launched Operation 2003. This outlined the measures that needed to be taken by its different business units in order for them to meet the earnings targets for fiscal 2003 set by the Group in December 2000. In order to achieve its goal of integrating VDO and achieving a 1bn productivity increase within three years, Siemens VDO Automotive initiated the Worldclass Improvement Program (WIP). This included systematically incorporating best practice methods, restructuring its R&D activities, and focusing the companys operations and product portfolios on its core competencies. As a result of this, Siemens VDO Automotive has disposed of some operations in Europe and North America that were non-core or unprofitable. More recently, the company has proved willing to acquire businesses that can contribute to its core operations. The purchase of DaimlerChryslers Huntsville facility in Alabama (US) was concluded in the first quarter of 2004. Acquisitions In February 2004 Siemens VDO Automotive signed an agreement to acquire the Chrysler groups Huntsville Electronics operation, a facility that produces automotive electronics products for Chrysler, Jeep and Dodge. Annual sales of instrument clusters, engine and powertrain controllers, car body electronics and vehicle audio products amount to around US$1bn (862.5m, 30 September 2003). In June 2002, the EU Commission cleared the acquisition by Siemens AG's venture capital unit of a stake in First Sensor Technology (FST) GmbH. Siemens hoped to use FST's high temperature sensors in future car gearboxes and brakes, air conditioning systems and other products operating at higher temperatures. Divestments Following the merger between Siemens Automotive and VDO, the company has rationalised its business. In June 2001, Siemens VDO Automotive disposed of part of its Czech automotive wire business, Siemens Automobilova Technika s.r.o., due to losses incurred as a result of losing a SEAT contract. The company sold a 75% stake in its plant in Pilsen (Czech Republic) to Japanese company, Yazaki, and 100% of its plant in Stribro (Czech Republic) to US firm, Alcoa Fujikura Ltd. In July 2001, Siemens VDO Automotive sold three additional wiring harness plants to Alcoa Fujikura Ltd. These plants were located in Seixal (Portugal), Brussels (Belgium) and Puebla (Mexico). Including the Czech plant, the combined workforce was around 5,600 people. Siemens VDO Automotive made these divestments in order to concentrate more fully on developing its core competencies. In May 2002, Siemens VDO Automotive sold its Hydraulik-Ring hydraulic components subsidiary to Hilite Industries, Inc., of Ohio (USA). No financial terms were disclosed. Siemens VDO Automotive said that it wanted to focus its product portfolio strictly on automotive electronics and mechatronics. In 2002, Siemens VDO Automotive sold its air outlet plant to Reum Beteiligungs GmbH. In September 2003, it was reported that Siemens VDO's French unit has sold its automotive dashboard plant in Jarville (France), to Combined Industrial Group Network (Cignet). In October 2003, it was reported that Siemens VDO had sold the assets of an automotive cable division in the Czech Republic to Teleflex Incorporated

Joint-ventures Siemens VDO Automotive has an extensive list of partnerships and sees jointventures as an important way to build on its core strength in automotive electronics. 396 AutoBusiness Ltd

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In March 2003, Siemens VDO Automotive announced the establishment of VW Mechatronic GmbH, a 50/50 joint-venture with Volkswagen AG for the development and production of advanced high-pressure piezo diesel injectors. Siemens VDO is responsible for product and process development, while Volkswagen has built the new facility. The joint-venture is expected to produce around 2m injectors annually by 2005 and provides Volkswagen an alternative sourcing option from Bosch, the current series supplier. In May 2003 Siemens VDO Automotive and Faurecia agreed to expand their 50:50 joint venture, SAS Autosystemtechnik Verwaltungs GmbH, in order to specialise in just-intime assembly of cockpit modules. As of 1 June 2003 the two partners merged four additional existing cockpit assembly plants. Faurecia's plant in Gent (Belgium) and Siemens VDO's plants in Crossen (Germany), Abrera (Spain) and Mlada Boleslav (Czech Republic) have been transferred to SAS, along with around 1,200 employees. The SAS joint venture is regarded as the global market leader in assembly, just-in-time delivery and logistic services for cockpit modules, with a 30% share of the European market of in-sourced and out-sourced cockpits. In September 2001, Siemens VDO Automotive announced a strategic alliance with Goodyear to develop and produce an advanced automotive tyre pressure warning system that will enable vehicle manufacturers to meet the requirements of the TREAD Act in the USA by 2004. This alliance benefits from Goodyears expertise in tyres and monitoring tyre pressure and from Siemens VDO Automotives skills in electronics and driver information technologies. Also in September 2001, Siemens VDO Automotive agreed to cooperate with Cobra AT, a leading provider of alarm systems, in developing and marketing carbody electronics systems In March 2001, Siemens VDO Automotive and Yazaki Corporation (Japan) agreed to cooperate globally to develop and produce electrical systems for passenger cars. The first 50/50 joint-venture, S-Y Systems Technologies, America LLC, was launched in October 2001 in Dearborn (USA) to Ford programmes worldwide. The second 50/50 venture, S-Y Systems Technologies, Europe GmbH, based in Regensburg (Germany) is responsible for BMW and Renault global programmes. A third joint-venture (based in Germany) was for the production of vehicle wiring harnesses. Yazaki originally had a 75% stake of this but now owns 100%. In November 2000, Siemens VDO Automotive and EMS-PATVAG of Switzerland agreed to cooperate to develop an intelligent electronic initiator for airbags with integrated electronic controls. Production is scheduled to begin in 2003. In March 2000, Siemens VDO Automotive formed a joint-venture with Keihin Corp (Japan) to develop and manufacture airbag components, primarily for Honda. The company, KARE Inc, initially produced 300,000 units per year and is 34% owned by Siemens and 66% owned by Keihin. Siemens VDO Automotive has a joint-venture with International Engine Corporation, a wholly owned subsidiary of Navistar International Corporation, to develop diesel fuel injector technology. Siemens owns 51% of the joint company (Siemens Diesel Systems Technology, LLC) and it is expected to reach production levels of four million injectors by 2005. Siemens VDO Automotive has two joint ventures in the area of automotive electronics in South Korea: it holds a 70% stake in Siemens Automotive Electronics Ltd (with Changchun North Electronics Factory) and a 65% stake in Siemens Automotive Systems Corporation (with Seoul City Gas). Emitec GmbH is a 50:50 joint venture between Siemens VDO Automotive and GKN Automotive, which develops and produces metal substrates for automotive catalytic converters. In the field of body electronics systems, Siemens VDO Automotive specialises in electronic security technology. It has two relevant joint ventures: a 50% share in Volkswagen Bordnetze GmbH with Volkswagen and a 25% share in a joint venture with HuF Hlsbeck und Frst GmbH & Co. KG. Siemens VDO Automotive has a co-operation agreement with ZF Sachs in the development of automated manual transmissions (AMT). The automated manual transmission system incorporates electronics, actuators, sensor technology and system functionality. Siemens VDO Automotive has a strategic alliance with Ericsson Mobile Communications 397

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Automotive Technology Roadmap AB. The alliance focuses on the development of integrated in-car communication and information systems and their applications. Investments In July 2003, it was reported that Siemens VDO Automotive would invest US$47.3m (41.7m, 31 July 2003) in the expansion of its Newport News, Virginia (US) fuel-injector plant, creating about 107 jobs. The expansion will take place over a two and a half year period. In September 2003, Siemens VDO Automotive announced that it planned to invest some 100m in Russia over a two to three year period. The investment was on top of a previous 100m project announced earlier in the same month to construct an office building in Moscow, along with one of Russia's largest financial companies, AFK Sistema. In October 2003, it was reported that Siemens and Volkswagen AG had started building a 270m facility for the production of diesel engine pump-nozzle elements in Saxony (Germany). Volkswagen and Siemens are said to have invested 56m in the project, in which the German state has contributed a 84m subsidy. The plant will start production as of end 2004 with an annual output of two million elements. If the plant is profitable, Volkswagen and Siemens will invest a further 130m and double output by the middle of 2007, reaching four million elements annually. In February 2003 Siemens VDO Automotive announced it would expand its diesel injection system plant in Limbach-Oberfrohna, (Germany) during 2003. The plant specialises in production of common-rail injection systems for diesel engines, which use piezoelectronic actuators. Siemens VDO expects increasing demand for the injection systems in the US market, where consumers and companies show growing interest in diesel engines. In October 2000, Siemens Diesel Systems Technology inaugurated a new facility in Richmond, South Carolina (USA). The plant manufactures low-pressure, common-rail digital valve fuel injectors for use in diesel engines designed and manufactured by International Engine Corporation. Contracts Siemens VDO Automotive has won high end and high volume contracts in several areas. S-Y Systems, the joint-venture with Yazaki, supplies the wiring harnesses to the 2003 Ford F-series truck. Siemens VDO Automotive supplies the instrument cluster with TFT for the new Audi A8. Siemens VDO Automotive is the designer and supplier of the seamless cockpit and centre console for the new Range Rover luxury SUV. In December 2001, Siemens VDO Automotive won orders totalling more than 400m for its Tire Guard tyre pressure monitoring system. Siemens VDO Automotive is supplying its electric parking brake to the new generation of the BMW 7 Series. Siemens VDO Automotives common-rail injection system with piezo actuators is supplied to the Peugeot 307. Siemens VDO Automotive supplies the navigation system for the Citron C5 model. Siemens VDO Automotive is supplying a state-of-the-art electronic instrument cluster for the Mercedes-Benz E-Class. SAS cockpit modules are supplied to around 20 European models, including the Ford Focus C-Max and the Renault Mgane II. The new Land Rover Discovery will carry an SAS cockpit module, as will the new koda Octavia from 2004. In each of these vehicles, SAS carries complete responsibility for assembly, logistics and sub-supplier management of the module. In 2002, SAS delivered some 2.7m cockpits to OEM customers.

New Product Developments In 2003, Siemens VDO spent 692m, or 8.3% of total sales on research and development, 398 AutoBusiness Ltd

Company profiles compared to 778m, or 9.1% of total sales, in 2002. Siemens VDO Automotive has test centres in Germany, Brazil, China, France, South Korea and the US. Its developments have included cockpit modules, passenger safety systems, integrated air/fuel modules and fuel injection systems. The company has a strong focus on innovation; around 70% of the products of Siemens VDO Automotive are less than three years old and it is looking to increase the number of its patents and industrial rights from the present 15,000 to more than 25,000 by 2005. Recent automotive product innovations include the following: Siemens VDO Automotive has developed piezo injection technology for gasoline engines. The company has developed an injection system for SI engines that is expected to offer up to 20% lower fuel consumption by comparison with a standard SI engine with intake manifold injection. The Piezo Direct Injection (PDI) process developed by Siemens VDO permits the use of a jet-directed combustion process, where the injection jet transports the fuel directly to the spark plug. At the 2003 Frankfurt Motor Show, Siemens VDO Automotive presented its "CESAR" four-module cockpit design concept. This cockpit concept illustrates how Siemens VDO's cockpit modular construction can provide OEMs with greater interior configuration flexibility to more easily accommodate the growing consumer trend toward customisation. Also at the Frankfurt Motor Show, Siemens VDO Automotive AG displayed EasyControl, a new input system that makes sure the driver's eyes are not off the road. It recognizes the driver's handwriting and converts it into vehicle multimedia system commands. The system integrates a round touch pad into a tactical feedback knob surface. Siemens VDO has unveiled an impulse air charging technology which improves an engine's torque. The charger has been developed in collaboration with Meta GmbH, in Aachen (Germany). It is appropriate for both diesel and gasoline engines. The impulse air charger increases the torque by 30% on average. In motors with exhaust-gas turbo supercharge, the increase in torque could go beyond 50%. The new solution eliminates air insufficiency during intense fuel supply that causes a power decrease specifically at lower torques. Siemens VDO and Philips Electronics have jointly developed a new magnetoresistive sensor, the KMA200, which will be launched in vehicles in 2004 for automotive angular measurement applications including electronic throttle control (EGAS) and variable valve timing (VVT), which increases fuel efficiency in the car. The sensor will provide car manufacturers with a more reliable and accurate solution for automotive angular measurement, reducing the risk of mechanical breakdowns and thus improving overall vehicle safety. Siemens VDO Automotive has showcased a new in-car navigation system. The device features the C-IQ concept to provide flexible up-to-date navigation data for monochrome display navigation. The product's supported DVD as well as its updates will be offered free of charge. The users simply have to call up the map software on the DVD for a particular country and enter an access code. Siemens VDO, together with Goodyear, is developing the second generation of tire pressure control systems. A battery-less system, it is called Tire IQ, and not only measures tire pressure and temperature, but also stores information on the number of miles driven while the tire is under-inflated. Siemens VDO Automotive has developed the world's first heat exchanger cooling module incorporating motors with integrated pulse width-modulated control into series production. The stepless variable speed control optimizes engine cooling with minimum space requirements and energy consumption. The new cooling module from Siemens VDO with a cooling capacity of up to three million litres per hour operates with brush motors and pulse width-modulated control. Where two fans are used, the control system is integrated into the motor of the larger fan also controls the smaller fan. Thanks to this new control concept, the fan speed can be steplessly varied within a range from 800 rpm to a maximum speed of 3,500 rpm. In December 2003, it was announced that Siemens VDO Automotive and Federal-Mogul are to jointly develop a combustion sensor that is integrated into the glow plug. This innovative sensor will for the first time enable the combustion to be monitored directly in the cylinder. Series production is scheduled to start in 2006. The injection system and engine management play a vital role in reducing vibrations, noise, emission of pollutants and fuel consumption of modern diesel engines. Piezo Common Rail injection supports these targets by providing the option of multiple injection. 399

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Financial Overview For the year ending 30 September 2003, Siemens VDO Automotive achieved sales of 8.4bn, down slightly from 8.5bn in the previous fiscal year. Operating profit stood at 418m in 2002/03, representing a massive increase over 65m generated in the previous year. In the first quarter of 2003/04, Siemens VDOs sales fell 4% to 2.04bn, although without currency and consolidation changes, sales actually rose 9%. Disposal of the cockpit module business to the SAS joint venture accounted for the majority of the difference. Profit increased 37% to 100m, as productivity initiatives increased the groups operating leverage and the onboard infotainment systems business lifted earnings. The margin improved to 4.9% compared with 3.4% in the same period of the preceding financial year. Outlook Siemens VDO Automotive has established a strong position in the automotive sector in recent years, primarily through organic growth and joint-ventures. It is the third largest supplier of automotive electronics globally, which is expected to grow from the current level of around US$125bn (102.7bn, 31 March 2004) at above-market rates over the next few years. The group has a leading market position in such areas as engine management (where gasoline HPDI systems are expected to take off rapidly in the near future), navigation and security systems. However the automotive environment has focused the companys attention on bolstering profitability through consolidation, and the group is expected to retain its core focus on electronics-based products through further rationalisation of its businesses. In the medium and long-term electronics based products continue to be an area of innovation, growing added-value and rapidly rising fitment rates over the coming decade. The recent acquisition of Chryslers Huntsville, US facility will provide a significant boost to the companys electronics capabilities in NAFTA as well as adding an additional US$1bn to sales, more than making up for the sales impact of transferring the cockpit business to SAS.

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Tenneco
Exhaust and ride control
Address Tenneco Automotive 500 North Field Drive Lake Forest IL 60045 USA Tel: +1 847 482 5000 Fax: +1 847 482 5940 Internet: www.tenneco-automotive.com Senior Officers Mark P. Frissora, President and CEO Hari Nair, Executive Vice President and Managing Director, Europe Timothy R. Donovan, Executive Vice President, Managing Director, International Operations Kenneth R Trammell, CFO Products Catalytic converters, complete exhaust systems, modules, pipes, silencers, struts and suspension components, tubular manifolds Plants Argentina, Australia, Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, India, Mexico, New Zealand, Poland, Portugal, South Africa, Spain, Sweden, Turkey, UK, USA Sales US$3.8bn (2.94bn, 31 December 2003) (Year to 31.12.03) Employees 19,139 (December 2003) Tenneco Automotive is a leading supplier of exhaust and ride control products to the original equipment and replacement markets. 32% of ride control sales are generated in Europe and 42% of emission control revenues. Tenneco Automotive operates through two main subsidiaries: Tenneco Walker Gillet: a specialist in exhaust management, producing manifolds, catalytic converters, resonators, mufflers and hydroforming tubing. Tenneco Monroe: a group focused on suspension management, producing shock absorbers, struts, vibration control components, load assist products, springs and advanced suspension systems. Tenneco Automotive operates 72 consolidated manufacturing facilities and 12 engineering and technical centres in 22 countries. North America generated around 50% of Tenneco's 2003 sales and Europe generated 39%. Tenneco Automotive's largest OE customers are Ford (13.9% of 2003 sales), General Motors (18.9%), DaimlerChrysler (8.8%) and Volkswagen (11%). Other automotive clients include BMW, Fiat, Honda and Jaguar, Nissan, PSA Peugeot Citron and Toyota.

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Recent Developments Corporate strategy Tenneco Automotives parent company, Tenneco Inc., underwent dramatic restructuring that resulted in the final separation of its automotive and packaging businesses in November 1999. Tenneco Automotive has subsequently operated as a financially independent company. The reduction in its size has led the company to focus more on alliances and smaller acquisitions than on the strategy of active consolidation that it pursued in the mid-1990s. In particular it has formed partnerships in Japan to help provide manufacturing and engineering support for the Asian markets. Tenneco Automotive has invested in its technological capabilities in both emission control and ride control to help OEMs meet Europe's increasingly stringent emission regulations. This strategy has been the driving force behind the company's growth in Europe. Since becoming an independent company Tenneco Automotive has been working to reduce debt by implementing cost reduction plans. In October 2000, the company announced its intention to cut 700 salaried positions by the end of 2001. In January 2001, it was announced that a further 405 jobs would go by early 2002. Then in 2001, the downturn in North American vehicle production and the economic aftermath of the 11 September terrorist attacks, emphasised the need to reduce costs. In December 2001, Tenneco Automotive announced "Project Genesis": its intention to close eight facilities, consolidate or rearrange 20 others, and move production assets in some of its plants. These measures reduced overcapacity and improved the efficiency of its operations. The actions are to completed by the end of the second quarter of 2004 In February 2004, Tenneco announced its intentions to seek more joint venture partners in China, with a view to expand up to 15% annually there for the next five to seven years. Divestments As part of Project Genesis, Tenneco is closing/has closed eight facilities and consolidating or rearranging 20 others. At the end of 2002, Tenneco closed three facilities. The closure of Tenneco Walker's Middlefart plant (Denmark), which manufactured automotive aftermarket exhaust system products, resulted in 280 redundancies. Tenneco also closed its Walker exhaust manufacturing facility in Queretaro (Mexico) affecting 170 employees at the facility, which produced emission control products for OEMs. The production from Queretaro is being consolidated at the company's exhaust manufacturing facility in Puebla (Mexico). The closure of a shock absorber plant in Corlu (Turkey) cut 124 jobs. Tenneco said it will import ride control products for the Turkish market from other Tenneco Automotive facilities in Europe and will continue to distribute aftermarket products from its new distribution centre in Istanbul (Turkey). Joint-ventures In November 2003 Tenneco announced that it had signed a joint venture agreement with China-based Chengdu Lingchuan Mechanical Plant to establish Chongqing Walker Exhaust System Co., Ltd. The new joint venture will supply emission control products and systems to Changan Ford Co. Ltd., the joint venture between Changan Automobile Group Company and Ford Motor Company. Tenneco Automotive will have 60% ownership of the joint venture, which will be based in Chongqing and will initially supply exhaust products for the China-produced Ford Mondeo. Tenneco expects the joint venture company to begin production in 2004. Also in November 2003 Tenneco and Eberspcher International GmbH announced that the companies had signed an agreement to establish Walker-Eberspcher Automotive Exhaust System Co., Ltd, a joint venture in China. The joint venture will manufacture and distribute emission control products and systems for BMW and Audi vehicles produced in China. Production is expected to begin in 2004. The joint venture is 30% owned directly by Tenneco Automotive, 25% by one of Tenneco Automotive's existing majority-owned joint ventures in China and 45% by Eberspcher. The joint venture will operate just-in-time (JIT) final assembly manufacturing operations in Dalian and Changchun (China) at Tenneco Automotive's existing joint venture facilities in those cities. Initially, the Dalian facility will supply BMW 3 Series vehicles produced by 402 AutoBusiness Ltd

Company profiles Brillance in Shenyang. The Changchun facility will supply Audi A4 vehicles produced in the same city by FAW-VW In February 2002, Tenneco formed a co-operative agreement with Vibracoustic GmbH & co. KG, a German manufacturer of pneumatic spring shock absorbers. Together they will jointly develop pneumatic spring shock absorbers for automotive and other applications. In August 2001, Tenneco Automotive formed a joint-venture with Yarnapund Co. Ltd, a Thai exhaust system manufacturer. The joint-venture, Walker Exhaust Thailand Co. Ltd., will supply exhaust systems for the 2002 Isuzu I190 platform light pick-up truck. In July 2001, Tenneco and Tokico formed a strategic alliance agreement to engineer and manufacture shock absorbers and suspension struts for Japanese OEMs. The alliance will leverage the geographical presence and engineering and manufacturing strengths of each partner to serve Japan-based global platforms. The two companies are considering establishing a manufacturing joint-venture in Europe. In October 2000, Tenneco Automotive and Futaba Industrial Co. formed a strategic alliance to design, manufacture and market emission control products. Futaba's engineering and manufacturing presence in Japan allows Tenneco to better support to Japan-based customers. The two companies also agreed to establish a joint-venture at Tenneco's existing site in Burnley (UK). The joint-venture is owned 49% by Tenneco and 51% by Futaba. Tenneco Automotive has a joint-venture with Siemens to develop multi-function, electronically controlled suspension systems.

Investments In April 2004, Tenneco announced that it plans to establish an engineering centre in China within the next 18-24 months. The company intends to invest several million US dollars in the centre, which will add incremental engineering resources to better serve Tenneco's growing customer base in China. The location of the new center has not yet been determined In September 2003 Tenneco announced that it was continuing its Central and Eastern European expansion by opening a manufacturing facility in Togliatti (Russia). The new facility will supply hot-end original equipment (OE) exhaust components, including catalytic converters and downpipes, and cold-end muffler assemblies for the Chevrolet Niva platform, a car built by a joint venture between General Motors and AvtoVAZ, the Russian-based automaker As part of its exhaust manufacturing joint venture in Dalian (China) Tenneco has expanded its operations with a new just-in-time facility in Changchun (China). The new plant is already operational and manufactures exhaust components for the Volkswagen Bora. It also supplies the Volkswagen Jetta and Golf platforms by the end of 2003. In April 2001, Tenneco Automotive opened a new manufacturing facility in Ermua (Spain) to produce shock absorbers, struts and ride control modules. The new 300,000 square foot facility, which replaces an existing Tenneco Automotive facility in Ermua, has better automation and is designed to be more efficient. Tenneco anticipate that the new facility will play a key role in the future growth of business in Europe. In March 2001, Tenneco Automotive increased its presence in Eastern Europe through the acquisition of a manufacturing facility in Gliwice (Poland). The plant began manufacturing shock absorbers for European carmakers in November 2001. Contracts Tenneco Automotive was awarded US$440m (419.8m, 31 December 2002) in OE business in 2002. The companys Asian-based alliances generated around 15% of the new business. Over US$900m of new business was gained in 2003. The introduction of new technologies, success in module supply and increased content in global platforms as a result of new environmental regulations and safety concerns are stimulating growth opportunities for the company. At the end of 2003, Tenneco added a new just-in-time facility in China to manufacture exhaust components for the new Volkswagen Bora. In November 2003 Tenneco announced it had contracts to supply BMW 3 Series and Audi A4 models in China. In October 2003 Tenneco announced that its patented Kinetic suspension technology will be featured on the 2004 Lexus GX 470 sport utility vehicle. Lexus is launching its Kinetic Dynamic Suspension System, a version of the Kinetic Reversible Function 403

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Automotive Technology Roadmap Stabilizer (RFS) technology, as an option on the luxury SUV through a licensing agreement with Tenneco Automotive In September 2003 Tenneco announced it was supplying hot-end original equipment (OE) exhaust components, including catalytic converters and downpipes, and cold-end muffler assemblies for the Chevrolet Niva platform, a car built by a joint venture between General Motors and AvtoVAZ, the Russian-based automaker In August 2003 Tenneco announced that DaimlerChrysler AG had chosen the company as a supplier of advanced emission control systems. The company will develop and produce converter cannings and produce diesel particulate filters for specified passenger cars of the Mercedes-Benz brand. Development and manufacturing will be handled by Tenneco Automotive Gillet at its facility in Edenkoben (Germany). In July 2003 Tenneco announced it had been selected by Ford as the full service exhaust supplier for the Ford petrol and diesel 2007 model year F-Series Super-Duty truck platform. Hot and cold-end exhaust components including mufflers, extension pipes, diesel turbo down pipes, exhaust isolators and petrol light-off converters. In North America, Tenneco currently supplies exhaust components for the Ford F-Series light duty truck, Expedition and Navigator models as well as for Lincoln LS, Thunderbird and Mustang car models. In April 2003, Kwik-Fit selected Tenneco Automotive's Monroe range of shock absorbers for its 900 UK Fast-Fit outlets. The deal is effective immediately. No terms were disclosed. In April 2002, Tenneco Automotive's Walker UK became the exclusive supplier of full line vehicle exhaust systems and components to Independent Motor Trade Factors Association Ltd. (IFA). Tenneco has supplied IFA members with Walker brand exhaust systems parts for many years and anticipates that its annual sales to IFA will increase by 50% as a result of the new contract. Tenneco Automotive will supply IFA from its Walker UK operation in Birmingham. In March 2002, Tenneco won a contract to supply Ford with emission control technology for the mid-model year 2002 S-Type Jaguar and the 2003 XJ sedan. Tennecos Automotive Ultra Thinwall Substrate Catalytic Converter provides improved emission control to meet stringent US and European emission regulations. By July 2001, the Tenneco and Tokico alliance had already won contracts with three leading Japanese OEMs to supply shock absorbers and struts on global vehicle platforms in South Africa, India and North America. In April 2000, Tenneco secured a contract to supply shock absorbers for the Skoda Fabia, with a full annual production target of 900,000 units. The components are manufactured from Tenneco's plants in St Truiden (Belgium) and Hodkovice (Czech Republic). In February 2000, Tenneco was selected as sole supplier of rear shock absorbers and front struts for the Nissan Almera, produced at Sunderland (UK). Tenneco supplies the components from its plants in St Truiden (Belgium) and Ermua (Spain). Tenneco Automotive's new diesel particulate filter for passenger cars is fitted on the Citron C5 and the Peugeot 406. Tenneco also supplies its tubular integrated converter to the Ford Transit and Focus, Peugeot 406, Citron C5 and Opel Corsa models.

New Product Developments Tenneco has a network of engineering facilities across the world. It spent US$67m (57m, 31 December 2003) on engineering and R&D during 2003, unchanged from the previous two years. Tenneco Automotive has recently launched a number of products that help OEMs meet new air quality regulations and requirements. A diesel particulate filter for passenger cars - the filter virtually eliminates carbon and hydrocarbon emissions without affecting engine performance. The filter is already installed on the 2001 Citroen C5 and the 2001 Peugeot 406. Tenneco recently began supplying Volvo with an innovative computerized electronic suspension system, which features dampers developed by Tenneco and electronic valves designed by Ohlins Racing AB. The computerized electronic suspension (CES) ride control system is currently or will soon be featured on Volvo's new 560R, V70R, and 580R passenger cars. A tubular integrated converter - a weld free hot-spun production process results in a AutoBusiness Ltd

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Company profiles 25% cost reduction and a weight reduction of up to 20%. The technology is applied on the Ford Transit and Focus, Peugeot 406, Citroen C5 and Opel Corsa. An oil-free "green" shock - the shock uses pressurized gas instead of oil as a damping medium. As the gas is not affected by temperature the shock has a more consistent damping performance as well as being recyclable and environmentally friendly.

Tenneco Automotive has also been involved in product development alliances, such as the aforementioned Tenneco/Benteler/Continental Teves corner module for the Ford Fiesta. Financial Overview In the year to 31 December 2003, Tenneco Automotive achieved sales of US$3.8bn (2.94bn, 31 December 2003), up 6% over 2002s US$3.5bn (3.34bn, 31 December 2002). The company reported a net income of US$27m (21.51.6m, 31 December 2003) in 2003, compared to a net loss of US$187m (178.41m, 31 December 2001) in 2002. These figures show a 4% increase over the previous year. Outlook In 2004, the company intends to maintain its emphasis on aggressive cost management, topline growth and cash generation to further reduce its debt. The company's long-term goals include reducing SGA&E expense to 10% of sales; improving gross margin to 22% of sales; and generating at least $100m in new business annually. The companys strategy is to capitalize on growth opportunities with advanced technologies and in new markets, such as China and Eastern Europe, while continuing our intense focus on cost management and manufacturing improvement initiatives. The company anticipates that its original equipment book of business in 2004 and 2005 will be about $75m and $315m higher, respectively, than the 2003 book of business. Both major automotive businesses now appear to be strong standalone businesses. Shock absorbers are increasingly being integrated into larger subassemblies and modules. This pattern looks set to continue, and may extend to the exhaust system business as the integration of engine and exhaust areas as a complete optimised system continues. OE exhaust sales represents Tenneco Automotive's single biggest growth element in Europe, a growth strengthened by the growing interest in particulate filters, which promises to further raise content.

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ThyssenKrupp
Steel and metal sub-assemblies
Address ThyssenKrupp AG August-Thyssen-Strae 1 40211 Dsseldorf Germany Tel: +49 211 824 0 Fax: +49 211 824 36000 Internet: http://www.thyssenkrupp.com ThyssenKrupp Automotive AG Alleestrae 165 44793 Bochum Germany Tel: +49 234 919 06 Fax: +49 234 919 6499 Internet: http://www.thyssenkruppautomotive.com Senior Officers Prof. Dr. Ekkehard Schulz, Chairman of ThyssenKrupp AG Dr. A Stefan Kirsten, Director of Finance Dr. Jrgen Harnisch, Chairman of ThyssenKrupp Automotive Dr. Siegfried Buschmann, Vice President of ThyssenKrupp Automotive Products Air suspension systems, body skin parts, crankshafts, grey and ductile iron castings, plastic parts, precision forgings, steering columns, structural components/frames Plants Belgium, Brazil, Canada, China, Czech Republic, France, Germany, India, Liechtenstein, Mexico, Portugal, Romania, Spain, Tunisia, UK, USA Sales Group: 36.1bn (Year to 30.09.03) Automotive: 6.30bn (Year to 30.09.03) Employees Group: 188,800 (31 December 2003) Automotive: 43,045 (31 December 2003) Based in Germany, ThyssenKrupp Automotive (TKA) is one of Europe's largest automotive components suppliers. It is among the top suppliers of air spring and suspension systems, axles and complete chassis systems. TKA is part of the ThyssenKrupp Group, the world market leader in stainless steel. The automotive industry generates around 26% of ThyssenKrupps sales. ThyssenKrupp has three main areas of operations: Steel, Capital Goods, and Services. The group's automotive segment is part of the Capital Goods area and until 30 September 2001 operated through the following business units: Body (21% of the division's 2000/2001 sales); Chassis (38%); Powertrain (26%); and Systems/Suspension products (15%). With effect from 1 October 2001 ThyssenKrupp Automotive now operates through just three segments (Body, Chassis and Powertrain) with a Systems operating group in each of these units, reflecting the importance of this business. In fiscal 2002/2003 the chassis division made up 44% of Automotive's sales, body 26% and powertrain 30%. ThyssenKrupp Automotive Mechatronics GmbH, a subsidiary of the Chassis division, was formed in October 2000. It is aiming to develop and produce innovative subassemblies for active suspension systems and steering systems using new electronics technology. ThyssenKrupp Steel also has significant automotive interests. ThyssenKrupp Automotive has around 130 automotive production sites in 17 countries in Europe, North and South America and Asia. In fiscal 2002/2003, 36% of Group sales were generated in Germany; NAFTA 22%; other EU countries 25%; rest of Europe 5%; Asia 8% and the rest of the world 4%. TKAs main US subsidiary is the Budd Company. TKA supplies high-quality body, chassis and powertrain products to all major vehicle manufacturers on a just-in-time or just-in-sequence basis.

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Recent Developments Corporate strategy Within ThyssenKrupps three main areas of operations, the group now has six business segments: Steel, Automotive, Elevators, Technologies (a portfolio of futureoriented engineering activities to be actively developed), Materials (materials services), and Serv (industrial services and information technology). ThyssenKrupp Automotive is also using strategic acquisitions to expand its technological capabilities, as with the recent acquisition of p.a.d. Karosserietechnik and Mercedes-Benzs steering systems business. The company is also using acquisitions, investments and jointventures to extend its global presence, and is developing its e-commerce solutions in order to improve the efficiency and standardisation of its processes. In view of lower profits in the 2000/2001 financial year and the weak economic environment, ThyssenKrupp announced in November 2001 that it is to implement a strategy called "ThyssenKrupp best". This programme aims to achieve further improvements in operating efficiency and enhance the company's performance in all areas. "Best" stands for "business excellence in service and technology". Then in May 2002, ThyssenKrupp announced restructuring measures of around 100m for the second half of the 2001/02 financial year, aimed particularly at improving the performance of its automotive division. Acquisitions ThyssenKrupp has been actively deepening its design, assembly and modular capabilities in the last two years: In May 2003 the EU commission approved ThyssenKrupp's plans to acquire the French company Sofedit and the purchase was completed in July 2003. Sofedit had eight sites in France and one each in Brazil, Poland and Spain and uses state-of-the-art production technologies such as hydroforming and roll and stretch forming, as well as the newly developed technology of hot stamping. Body and chassis stampings and assemblies are the core businesses of TKA in the USA, Brazil and Germany and the acquisition of Sofedit will improve access to the market for body and chassis products in France, where TKA's business to date has been primarily in the powertrain and steering products area. The acquisition will also intensify customer relations with Renault and PSA. In October 2003, ThyssenKrupp agreed to acquire 60% of DaimlerChryslers steering systems unit, MB Lenkungen, for, according to press reports, around 41m. Initially the company will be run as a joint venture but ThyssenKrupp has the option to buy the remaining 40% in 2005. In February 2003, ThyssenKrupp Stahl acquired the remaining 75.5% of shares in the Spanish hot dip galvanizer, Galmed. ThyssenKrupp Stahl purchased a 24.5% interest in Galmed in 1993; full ownership will give the company direct access to the high-growth Spanish automotive industry. In November 2001, TKA acquired a 10% interest in Valmet Automotive Inc., part of the Metso Corporation (Finland). TKA has an option to buy the remaining 90% interest in Valmet, a leading designer and manufacturer of prototypes and niche vehicles, within two years. The two companies have complementary expertise and by combining their strengths, they will be able to offer car manufacturers complete car projects from product development to series production. In December 2002, ThyssenKrupp confirmed its intention to purchase the remaining 90% of Valmet Automotive in late 2003. However, in December 2003, ThyssenKrupp Automotive informed Metso that it did not intend to acquire the remaining 90% of Valmet Automotive's shares by the end of 2003. TKA continues, however, to be interested in Valmet Automotive and Metso and has agreed to continue negotiations in 2004. In late 2001, ThyssenKrupp Automotive acquired p.a.d. Karosserietechnik GmbH, Neckarsulm (Germany). TKA's systems business and development and engineering capabilities benefit from p.a.d.'s expertise in body, interior and engine development and electrical and electronic assemblies. In May 2000, ThyssenKrupp acquired the North American aluminium foundry, Stahl Specialty Company, for an undisclosed sum. Stahl Specialty Co. had 1999 sales of 130m and has now been integrated into the automotive division of the Budd Co (TKAs AutoBusiness Ltd

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Company profiles main US subsidiary). This purchase is part of ThyssenKrupp's long-term strategy of providing the automotive industry with a wide variety of multi-material casting capabilities. ThyssenKrupp Automotive has also made three bids for businesses that did not reach completion: In December 2003 TKA announced that talks with Opel regarding the purchase of the OEM's Kaiserslautern stamping plant had been terminated, as key issues such as personnel questions remained unresolved. In March 2001, ThyssenKrupp Automotive signed a Memorandum of Understanding with Fiat to acquire Magneti Marellis Suspension Systems and Shock Absorbers business. TKA was to acquire 51% of the business with an option to buy the rest after 2004. The acquisition of MMSS would have enhanced TKAs leading position as a complete chassis and suspension systems supplier, and would have given it a broad expertise in design, engineering and electronic systems. In April 2000, Mannesmann AG rejected ThyssenKrupp's bid of 8.75bn for Atecs Mannesmann AG, selling it instead to Siemens and Bosch. ThyssenKrupp believed that Atecs would have complemented its activities well.

Divestments ThyssenKrupp has also divested itself of some of its automotive-related holdings: In March 2002, ThyssenKrupp Automotive sold its 50% stake in its joint venture Sinterstahl to its Austrian joint-venture partner, Plansee Group. In April 2001, ThyssenKrupp sold its Brazilian iron ore mine, based in Ferteco, to the local ore company CVRD. In March 2001, ThyssenKrupp shut its hot strip mill in Dortmund (Germany). This was in line with the companys strategy of concentrating its iron and steel production in Duisburg on the Rhine, in Germany. In April 2000, TKA sold Walter Hundhausen GmbH, a leading manufacturer of moulded cast parts, to the German steel manufacturer, Georgsmarienhtte Holding GmbH.

Joint-ventures In October 2003, it was reported that ThyssenKrupp has signed an agreement to establish a joint-venture with Chinese Fawer Automotive Changchun Corporation for the production of car and truck steering columns. ThyssenKrupp will hold 60% of the joint venture named ThyssenKrupp Presta Fawer (Changchun) Co Ltd. The joint venture will take over Fawer's steering column production activities in Changchun (China), and will reportedly produce 320,000 steering columns in 2004. In April 2002, ThyssenKrupp Steel signed a comprehensive agreement with Kawasaki Steel Corporation and NKK Corporation (both of Japan) to cooperate in the area of carbon flat steel for automotive products. Co-operation between the two companies resulted in November 2002 in an order for bake-hardening steel sheets, to be used in the process of vehicle manufacture, from Toyota Motor Europe Manufacturing. The value of this contract was not made public. In October 2001, TKA subsidiary, Krupp Drauz, formed a 51/49 joint venture with Karosseriewerke Weinsberg GmbH to combine their expertise in the area of prototype construction. The joint-venture company is called Drauz Weinsberg Prototyping GmbH, Heilbronn (Germany). In February 2001, ThyssenKrupp Steel agreed to form a 50/50 joint-venture with ANSC Angang New Steel Co., a leading Chinese steel manufacturer. In May 2002, the jointventure company began building a hot-dip galvanising facility in Dalian (China) that will serve the local automotive industry. In September 2000, TKA announced a 60/40 joint-venture between its subsidiary Krupp Presta and the Shanghai Huizhong Automotive Manufacturing Company. The jointventure, Krupp Presta Huizhong Automotive Shanghai Co. Limited (KPHAS) will produce steering columns in a plant in a special economic zone near Shanghai. KPHAS will take over Shanghai Huizhong's steering column production for the Volkswagen Santana. Also in September 2000, The Budd Company formed a 51/49 joint-venture with Visteon, called BV Chassis Systems LLC. It produces complete axle modules. AutoBusiness Ltd 409

Automotive Technology Roadmap The Budd Company has a joint-venture in Mexico with Japanese Hirotec Corporation and Sumitomo Corporation. The joint company, Aventec S.A. de C.V., produces exterior automotive body panels. GalvaSud is a Brazilian joint-venture between ThyssenKrupp and Companhia Siderrgica Nacional. This serves the South American automotive industry. ThyssenKrupp Automotive Systems GmbH and Volkswagen do Brasil have a 51/49 joint-venture in Brazil, known as Krupp Modulos Automotives do Brasil. It produces front and rear axles.

Investments ThyssenKrupp has a broad-based investment strategy as it aims to expand its global presence in both established markets and low-cost countries: In February 2004 ThyssenKrupp Presta AG (Liechtenstein), part of TKA, announced plans to enlarge its production site in Ilsenburg (eastern Germany) in the next two years. ThyssenKrupp Presta will expand the Ilsenburg production facilities to 30,000 square metres from 15,000 square metres and will increase the workforce to 400 from 200. After the expansion the company expects to produce over ten million crankshafts annually. In January 2004 ThyssenKrupp Budd broke ground on a new chassis component facility in Hermosillo (Mexico). The 133,000 square foot facility is scheduled for full operation in 2005 and is expected to employ up to 350 people. It was reported that Thyssenkrupp Budd plans to invest US$30m (24.2m, 31 January 2004) in the construction of the plant with which the company will become a major supplier to Ford in Mexico. The plant will be installed inside the industrial park housing Ford's principal suppliers. This park will be increased in size during 2004 with the beginning of the manufacture of the new Futura model. In 2003, ThyssenKrupp invested in several of its facilities. Most of the investment was order-related, and involved the assembly line for the Porsche Cayenne and the new BMW 3 Series at Leipzig (Germany), assembly facilities for chassis components at the Brackwede and Hopkinsville (US) plants, and production lines at the Detroit (US) facility. ThyssenKrupp also expanded crankshaft and camshaft machining capacities in plants across the US, Brazil and Liechtenstein. In December 2002, ThyssenKrupp Automotive announced it had opened a new sales company in Japan and has plans to build a new facility in Hiroshima (Japan) to manufacture steering columns. Also during 2002, the company invested in a new hydroforming plant at its facility in Hopkinsville, Kentucky (US) and new welding lines at its UK facilities in order to fulfil new orders from Nissan, Ford, Honda and GM. In June 2002, ThyssenKrupp Sasa, a subsidiary of TKA's Chassis business, inaugurated its new facility in San Luis Potosi (Mexico). The plant manufactures coil springs, stabiliser bars and torsion bars. In December 2001, ThyssenKrupp Steel began production at a new blanking plant in San Gillio, near Turin (Italy). The tailored blanks are sold to the Italian automotive market. In November 2001, ThyssenKrupp opened a stainless steel plant in Shanghai (China), the result of a joint venture between ThyssenKrupp and Shanghai Pudong Iron & Steel Co., Ltd. In September 2001, Krupp Gerlach (part of TKAs Powertrain operations) began producing crankshafts at its Homburg (Germany) plant using a new fully automated forging line. This is the worlds fastest and highest capacity forging line and lifts the plants annual production capacity to 150,000 tonnes. In April 2001, Thyssen Krupp Steel opened the worlds most modern cold rolling mill in Duisburg-Beeckerwerth (Germany). The 150m plant produces lightweight high-strength steels for automotive applications. During 2001, TKAs chassis plant in Kitchener (Canada) started up production of frame parts for pick-up models using a tube hydroforming line.

Contracts ThyssenKrupps Waupaca Foundry produces chassis components for Ford, DaimlerChrysler, General Motors, Bosch and American Axle. The UK plants of TKA Chassis Products have contracts to equip new Nissan, Volkswagen, Porsche and Ford models with chassis components. 410 AutoBusiness Ltd

Company profiles ThyssenKrupp supplies body modules for the Audi Allroad Quattro model. These include front floor, front wheel arch and side panel frame assemblies as well as front and rear doors. Budd supplies the exterior panels for BMW's X5 sports-utility vehicle as well as the steel frames for General Motors' next generation of SUV. Krupp Bilstein GmbH has a contract with Jaguar to supply active controlled damping suspension for the S-Type model. ThyssenKrupp is responsible for assembling front and rear axle systems for Porsche in Stuttgart (Germany). Thyssen Umformtechnik + Guss GmbH, part of TKAs Body unit, supplies almost all the outer body panels to the new Mercedes-Benz Vaneo. Thyssen Umformtechnik Leichtbau Entwicklungs GmbH (TULE) has designed and built the roof and sidewall modules for DaimlerChrysler's 'Alu-Sprinter'. It is also involved in the production of the standard Sprinter van, making sheet metal stampings for roof, side panels, doors, fenders and large parts of the floor.

New Product Developments ThyssenKrupp employs around 3,000 people in research and development at over 30 R&D centres. ThyssenKrupp invested around 650m in R&D in the 2001/02 financial year. The focus of recent automotive research has been on the development of new steel grades, lightweight vehicle components and innovative mechanical engineering concepts. TKA is also looking to strengthen its position in the modules and systems business. To meet the stringent new requirements for fuel consumption, TKA is working with the Steel division to develop lightweight steel automotive bodywork that combines strength with weight savings of up to 35%. At the 2003 Frankfurt Motor Show, ThyssenKrupp unveiled the new NSB NewSteel Body concept. A steel body-in-white, it was designed independently by the Steel segment specifically for weight optimisation. The weight saving is made possible by an intelligent mixture of conventional stampings and innovative tubular components. ThyssenKrupp has developed electric power-assisted steering (EPAS). In 2001 it unveiled its TubPAS electromechanical power steering system. This uses less fuel than hydraulic steering systems, and is easier to install. Unlike other electrical systems, TubPAS can be used in larger cars, as the drive unit is installed directly on the steering rack instead of on the steering column. TKA views its ability to provide integrated system solutions as one of its major strengths. It has developed complete axles, body modules, door modules, chassis modules, suspension/corner modules, and drive modules. Increasingly ThyssenKrupps automotive manufacturing facilities are integrated in the automaker's production plant, enabling the company to supply the parts on a just-in-time basis. Pedestrian and occupant protection: The acquisition of Sofedit in 2003 means that this is a further area for development. With its "Capot actif" technology (an active engine bonnet which automatically cushions the impact of a pedestrian in the event of an accident), Sodefit aims to significantly reduce the risk of pedestrian head injuries.

Financial Overview In the year to 30 September 2003 ThyssenKrupp's sales fell from 36.7bn in 2001/02 to 36.1bn. Earnings before taxes (EBT) stood at 714m, compared to the previous year's figure of 762m. Net income for fiscal 2002/03 was 512m, representing a significant increase over the 216m produced in the same period the previous year. In fiscal 2002/03 sales for ThyssenKrupp Automotive (TKA) dropped to 6.30bn, from 6.34bn in the previous year. EBITDA was up by 24% from 430m in fiscal 2001/02 to 532m, and net income rose substantially from 64m in 2001/02 to 188m in 2002/03. In the first quarter ended 31 December 2003 ThyssenKrupps Group sales grew 0.46% to 8.74bn from 8.70bn in the same quarter a year earlier. EBITDA grew 0.85% to 593m in the quarter, from 588m in the first quarter the previous year. Net income came in at 166m, an AutoBusiness Ltd 411

Automotive Technology Roadmap increase of 65% over the 141m reported for the same quarter a year earlier. In the first quarter ended 31 December 2003 ThyssenKrupp Automotive reported sales of 1.66bn, an increase of 11% over the prior years first quarter sales of 1.49bn. Income before taxes and minority interest came in at 37m in the first quarter ended 31 December 2003, up % from 20m in the first quarter ended 31 December 2002. Outlook ThyssenKrupp is one of the world's largest automotive suppliers. ThyssenKrupp's ambition has been demonstrated by its successful bids to broaden its competences by acquiring p.a.d. Karosserietechnik a stake in Valmet Automotive and interest in MB Lenkungen. There is potential for substantial growth once the diverse skills and financial strength of the combined group are fully utilised. The group has participated in many major module contracts and has established a strong position as a competent partner for the automotive industry for exterior modules for niche and volume models. Within ThyssenKrupp there is also a great deal of chassis expertise, an area of increasing outsourcing by vehicle makers.

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TI Automotive
Fluid carrying systems
Address TI Automotive Ltd. 12345 East Nine Mile Road Warren MI 48089 USA Tel: +1 810 758 4511 Fax: +1 810 758 1131 Internet: http://www.tiautomotive.com Senior Officers William J. Laule, CEO Chris Kinsella, Finance Director Howard Duxbury, Group Managing Director, International Howard Danbury, President, European Operations Richard Kolpasky, President, North American Operations Products Brake: Brake lines, booster lines, coatings, connectors and Teflon hose Fuel: air ducts, lines, tanks, fillers, fuel and vapour management systems, regulators, sensors, fuel modules, fuel rails, pumps, fuel systems, reservoirs Powertrain: accumulators, air conditioning assemblies, connectors, heater assemblies, power steering lines, oil coolers Other: blow-moulded products, coated steel strip, connectors, dip stick tubes, ducts, hydro-formed components, pushrods Plants 130 manufacturing and customer service facilities in 29 countries across Europe, North America, South America and the Asia/Pacific region Sales Group: c. 2.6bn (Year to 31.12.01) Employees Group: 21,000 (2002) Europe: 7,600 (2002) TI Automotive Ltd. is the world's leading supplier of integrated fuel storage and delivery systems on a global basis. It also supplies brake and powertrain packages. TI Automotives business is divided into three major divisions. The automotive sector has around 88% of the companys total sales, with Bundy Refrigeration and Walbro Engine Management accounting for the remainder. TI Automotive has a 15% share of the fuel storage and delivery systems market, about 40% of the brake and fuel bundles market and 20% of the air conditioning and fluid carrying markets worldwide. Over half of this business is attributed to North America, 40% to Europe, and the remainder to Asia/Pacific and South America combined. The company employs more than 21,000 people at over 130 facilities in 29 countries. Automotive customers include all major vehicle manufacturers

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In a bid to simplify its product portfolio and having identified the automotive division as the business most capable of standing alone, the TI Group began looking for a buyer for the automotive division in August 2000. Then in December 2000, the TI Group merged with Smiths Industries before a buyer had been found for TI Automotive. In July 2001, the automotive division was demerged into a stand-alone Group under a new parent company called TI Automotive Ltd. The new unlisted independent company's equity is split between Smiths Group (19.99%), former TI shareholders (55.01%) and management (25%). Stock in the company is privately held but there is the possibility that the company will be publicly listed in the future. Following its spin-off from Smiths Group, TI Automotive moved its global headquarters from Oxford (UK) to Warren, Michigan (USA) in order to be closer to its major customers. TI Automotive originated from a merger between TI Group's fluid carrying systems business for the automotive and refrigeration industries, known as Bundy, and a North American plastic fuel tank maker, the Walbro Corporation. The acquisition of Walbro gave TI the capability to supply complete fuel storage and delivery systems on a modular basis around the world. In May 2003, TI Automotive announced a reorganisation of the company's global business operations into three major groups: Global Fuel Systems; Global Fluid Carrying Systems; and the Industrial Group. The Fuel Systems group, which comprises fuel delivery components and systems, has approximately 35% of company sales and the Fluid Carrying Systems group, which comprises the company's brake and fuel lines and HVAC business units, has 50%. Finally the Industrial Group, comprised of VARI-FORM, Walbro Engine Management and Bundy Refrigeration, makes up the remaining 15%. Recent Developments Corporate strategy Since the demerger, TI Automotive aims to benefit from no longer having to compete with other TI divisions for capital, as well as maximise on its global customer base and manufacturing presence. TI Automotive is currently focusing on organic growth rather than on growth by acquisition as it already considers itself to have the building blocks it needs to go forward. Sales remain anchored in North America and Europe but the company has expressed a desire to have more sales in South America and Asia, reflecting increased investment by OEMs in those areas. The company has a successful sales and engineering office in Japan, which deals very closely with all the Japanese OEMs, but the main reason for its existence is to make sure the company wins business with those vehicle makers in the US and Europe. If the Japanese OEMs do start to buy more from non-Japanese suppliers, it is clear that TI Automotive will be well placed. A number of operations also exist in parts of South-East Asia, especially in South Korea and Thailand, and these should offer potential for longer-term growth. TI Automotive is also looking to invest in Eastern Europe. Acquisitions Since its spin-off, TI Automotive has made few acquisitions. In January 2003, TI Automotive acquired the electric fuel-pump division of Kolbenschmidt Pierburg AG in Neuss (Germany). The move is designed to enhance the companys global fuel-pump design and manufacturing capabilities and will help TI Automotive meet a growing demand for high pressure fuel-delivery systems, including diesel applications, especially in the high-end of the European market. Terms of the deal were not disclosed.

Divestments TI Automotive is planning to divest its non-core operations (engine management and refrigeration businesses) and will eventually re-channel the proceeds into automotive acquisitions. Investments Significant capital and revenue investments made in 1999 included new satellite plants in Poland and Brazil and powertrain manufacturing facilities in the Czech Republic and 414 AutoBusiness Ltd

Company profiles Spain to meet additional European demand. More recent investment has focused on the establishment of just-in-time facilities adjacent to a number of leading vehicle manufacturing plants. In March, 2004, TI Automotive broke ground to build its seventh manufacturing plant, in Reynosa, Tamaulipas, Mexico. The plant is expected to open later in summer 2004. In July 2003, TI Automotive established an R&D centre for the Asia-Pacific region in Japan. In 2002, TI Automotive invested US$6.3m (6.01m, 31 December 2002) in its Rastatt (Germany) technology and manufacturing complex. The facility handles manufacture and R&D of two recently developed fuel tank systems designed to meet increasingly stringent emission regulations. In April 2002, TI Automotive established new plants in Jablonec nad Nisou and Mlada Boleslav in the Czech Republic. Total investment was around CZK609m (19.9m, 30 April 2002) and 263 new jobs were created. The products are geared for Nissan car plants and suppliers of Saab and Renault cars. TI Automotive expanded production in 2003 to accommodate General Motors Opel models. In August 2001, construction a new building in Warren, Michigan (US) to house TI Automotive's corporate headquarters was completed.

Contracts In April 2004, TI Automotive was awarded a contract to supply the complete fuel system for a new sport-utility vehicle to be built in the US by an unnamed German automaker. The fuel system includes a dual-channel, single-stage (DCSS) pump; fuel lines; a sixlayer, blow-moulded tank, and a fuel delivery module with integrated fine filter and fuel level sensor. TI Automotives newly acquired Pierburg business unit is designing the pump. The contract calls for 125,000 complete fuel systems annually, with production to reach $135m in lifetime sales. Production is scheduled to begin in 2006. In the same month, TI was awarded new supply contracts worth more than $100m from three OEMs in Europe PSA Peugeot Citren, Toyota and Volkswagen. TI Automotive will provide brake line and underbody brake-and-fuel bundles for a new vehicle platform to be shared by PSA Peugeot Citren and Toyota in Europe and built at Kolin in the Czech Republic. The components will be produced at TI Automotives plant at Mlada Boleslav in the same country, with a planned production volume of more than 300,000 units per year beginning in 2005. The company also will supply brake lines for the Peugeot 607, with production to begin in 2004 at TI Automotives plant in Brognard, France. In addition, TI Automotive will supply rigid and flexible brake lines for Volkswagens new Passat. The lines will be produced at TI Automotives plants in Heidelberg, Grifhorn and Neunkirchen, Germany, beginning in January of 2005. In February 2004, TI Automotive was awarded several new contracts with a value of more than US$140m in new brake and fuel line business from several European vehicle manufacturers, including Ford, Fiat, Opel and Peugeot. The new business includes nearly 8m component sets over the next six years, including brake lines and fuel lines for four separate vehicle modules. These components will be sourced from several TI Automotive manufacturing plants in southern and eastern Europe. In January 2004, TI Automotive announced it had recently won contracts in its fuel systems division valued at more than US$1.2bn from OEMs in Europe, Asia and North America. Beginning with 2006-model-year production, the awards include complete fuel systems and subsystems for a range of products, including luxury saloons and SUVs. The contracts cover both diesel- and petrol-powered vehicles. Combined, the contracts involve more than 800,000 units annually. In October 2003, TI Automotive revealed that it has received a contract to supply brake and fuel-tank lines for the BMW Mini. The components will be manufactured at TI Automotives facility in Telford (UK) in volumes of half a million units over the next five years. In April 2003, TI Automotive announced that its unique 'ship in a bottle' (SIB) fuel tank system would be used in the 2005-model Ford GT. Ford plans limited production of the GT in 2004. The SIB system encloses fuel pumps, level sensors, and other components inside a blow-moulded plastic tank to limit fuel evaporation into the atmosphere. The SIB system meets the most stringent evaporative emissions requirements. TI Automotive has a contract to supply its AS6 fuel tank (see below) for a North AutoBusiness Ltd 415

Automotive Technology Roadmap American production vehicle in 2004. In March 2003, TI Automotive won a contract to provide fuel lines for several future fullsized General Motors vehicles. Production for up to 200,000 fuel-line systems annually will take place at the companys Mexico City (US) plant. The fuel lines are designed to meet LEV II emissions requirements and will contain Algal tubing, TI connectors and multi-layer hose. In December 2002, TI Automotive announced that it had secured a contract to provide fuel and brake system components for a future Chrysler Group vehicle. The components are to be manufactured at TI Automotive's facilities in Ossian and Ashley (Indiana, US) and Reynosa (Mexico). In October 2002, TI Automotive was selected to provide brake lines for four premiumplatform Fiat models. The brake lines will be manufactured at TI Automotives plant in Poland. In August 2002, TI Automotive won a contract to supply fluid-handling lines for air conditioning systems on select Chrysler Group vehicles. Production will take place at TI Automotives plant in Mexico. In March 2002, TI Automotive announced supply contracts for fuel and storage delivery systems and brake lines from five major car manufacturers. Together the contracts were valued at around US$500m (574.7m, 31 March 2002). In 2003, TI Automotive will begin supplying Peugeot with underbody brake lines from its Nazelles (France) plant. General Motors has contracted TI Automotive to produce fuel tank systems for trucks and SUVs at its Ossian (USA) plant beginning in 2004. Nissan chose TI Automotive to provide fuel tank systems starting in 2005. Toyota awarded TI Automotive the contract to supply filler pipes to Toyota's Turkish plant in 2004. TI Automotive's Telford (UK) plant will supply brake lines for future MG Rover models starting in 2004. In November 2001, TI Automotive won contracts to supply brake and fuel storage and delivery systems to four major vehicle manufacturers: Ford, Land Rover, Mazda and Volkswagen. Together the contracts are worth over US$350m (399m, 26 November 2001). In April 2001, TI Automotive secured contracts for fuel delivery systems and brake and fuel lines on several Jaguar platforms, including the X-Type saloon. TI Automotive is supplying brake and fuel lines to the X-Type in a contract originally valued at 4.7m (7.6m, 31April 2001) annually at full production and 20m (37m, 31 April 2001) over the full production cycle. In March 2001, TI Group Automotive Systems announced a contract to supply brake, fuel and clutch lines to General Motors/Vauxhalls sports car, the VX220.

New Product Developments A global network of R&D facilities means that all of TI Automotives fuel storage and delivery systems anticipate and meet all global emission targets. The value of fuel systems is also increasing because their design and production has become more complex in order to meet increasing legislative requirements on emission control. The priorities for brake systems are toning development and extending the life of products. The brakes division is also developing a brake quick-connect fitting which reduces both assembly time and the complexity of the product. As regards brake-by-wire, TI Automotive already has the technological capability to manufacture electronic brakes, but expects it could be ten years until promotion of brake-by-wire is financially viable. Most OEMs do not expect to introduce x-by-wire on a large scale until 2010, mostly because of problems with the 42v architecture needed for by-wire systems. In June 2002, TI Automotives Rastatt (Germany) plant launched production of two new blowmoulded fuel tank systems designed to capture emissions that could otherwise leak into the atmosphere: The Ship in a Bottle system moves some components inside the tank to capture vapours that otherwise could leak out at connection sites. The Complete Vapour Recovery System has a moulded cap that encapsulates the tank and exterior components to catch escaping emissions and funnel them back into the fuel system. AutoBusiness Ltd

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In March 2003, TI Automotive introduced the worlds first plastic fuel tank to meet Californias strict Partial Zero Emission Vehicle (PZEV) requirements. The PERMBLOK AS6 tank builds further on the above designs and was developed in partnership with French petrochemical company, Atofina, at TI Automotives research facility in Rastatt (Germany). Financial Overview As a non-quoted company TI Automotive is not obliged to publish financial information about itself. Annual sales are believed to be around 2.6bn and in fiscal 2001 sales in Europe were estimated to be 950.2m. Outlook TI believes that demand for higher-value storage and fuel-delivery systems from the global OEMs will significantly exceed the underlying growth in automotive markets, driven by design requirements, tighter safety and emissions legislation, increasing system performance requirements and greater outsourcing on the part of OEMs. In response to these market drivers, OEMs are replacing metal fuel tanks with composite fuel tanks, for which TI Automotive has a leading global position in the market, coupled with front-rank technology and quality. Estimates indicate that the use of steel in fuel tanks will drop from almost 60% to 41% by 2004. TI itself believes that in Europe some 80% of the market uses composite fuel tanks, but these tend to be mono-layer, suggesting good potential for multi-layer tanks. In North America it believes only 40% of fuel tanks are composite and in Japan it reckons the total at 10%.

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TRW Automotive
Chassis, engine, safety and electronics system
Address TRW Automotive World Headquarters 12025 Tech Center Drive Livonia Michigan 48150 US Tel: +1 734 266 2600 Fax: +1 734 266 5702 Internet: http://www.trwauto.com Senior Officers John C. Plant, President and CEO Steve Lunn, Executive Vice President and COO Joe Cantie, Vice President Finance Doug Campbell, Vice President Engineering Occupant Safety Systems Aly Badawy, Vice President Engineering Steering & Suspension Josef Pickenhahn, Vice President Engineering Brake Products Occupant Safety Systems: Inflatable restraint systems; seatbelt systems; steering wheel systems Chassis Systems: Braking systems; steering and suspension systems Other Automotive: Engine valves; engineered fasteners and components; body control systems Plants Austria, Brazil, Canada, China, Czech Republic, France, Germany, Italy, Japan, Malaysia, Mexico, Poland, Portugal, Singapore, South Africa, South Korea, Spain, Sweden, Thailand, Turkey, UK, USA Sales US$11.3bn (9.00bn, 31 December 2003) (Pro forma, year to 31.12.03) Employees Worldwide: c. 61,000 (2004) Europe: c. 32,200 (2004) TRW Automotive is a global leader in steering suspension, braking, engine, safety, electronic, engineered fastenings and other components and systems for passenger cars, light trucks and commercial vehicles. It also produces aftermarket components. TRW Automotive organises its businesses into three entities: Occupant Safety Systems; Chassis Systems; and Other Automotive. It has more than 200 facilities in 22 countries. TRW Automotive sells its products to almost all major OEMs worldwide. Other automotive component suppliers also use its products.

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In July 2002, defence contractor Northrop Grumman acquired TRW. The deal, valued at around US$7.8bn (7.9bn, 31 July 2002), followed months of debate over a hostile takeover bid originally launched in February 2002. Northrop was only interested in TRW's defence capabilities, and in November 2002, reached agreement to sell the automotive unit to the Blackstone Group, a private investment firm. On 28 February 2003, Northrop Grumman completed the US$4.7bn (4.36bn, 3 March 2003) sale of TRW Automotive to affiliates of Blackstone. Blackstone and management owned 80.4% of the business while Northrop retained 19.6% On 14 November 2003 the company announced that it had filed a registration statement with the U.S. Securities and Exchange Commission relating to a proposed initial public offering (IPO) of shares of its common stock. On 3 February 2004 TRW Automotive went public with an IPO. The company was expecting that the move to sell between 24m shares at US$28 (22.4, 29 February 2004) and US$30 (24.0, 29 February 2004) each would raise approximately US$659m (527.6m, 29 February 2004). Part of the proceeds will be used to buy back stocks held by an affiliate of private equity company Blackstone Group, which controls TRW, while part will be used for debt repayment. Recent Developments Corporate strategy Separated from the TRW Group, TRW Automotive can now concentrate solely on the needs of automotive customers. The company aims to use the opportunity to capitalise on its position as a global leader in automotive safety. Before its spin-off, TRW Automotive achieved significant growth through focusing on increasing its global presence, particularly through investment in growing markets. Most notably it gained new footholds in Eastern Europe and the Asia/Pacific region (particularly Thailand and China). Similarly, its investments in Mexico demonstrate its commitment to the markets in Central and South America. The company formed joint-ventures and made at least one significant acquisition. TRW has achieved growth through increasing its product capability and technological knowhow, particularly in terms of modules and systems. It has placed increased emphasis on technological advancement, especially in the area of electronics. TRWs strategy for achieving this goal has been to acquire companies within the required fields of expertise. Its acquisition of LucasVarity in 1999 concentrated TRWs focus on its automotive business and made it the largest independent automotive supplier based in North America. LucasVaritys expertise in braking complemented TRWs steering and suspension business, and the deal also brought significant technological synergies in safety and engine components and systems, through LucasVaritys antilock braking and fuel-injection systems. Acquisitions Since the acquisition of LucasVarity in 1999, TRW has made only a few major automotive acquisitions: In June 2003, TRW Automotive and Thales announced that the former had acquired sole ownership of Autocruise, manufacturer of the radar-based Adaptive Cruise Control (ACC) sensor operating in the 77GHz frequency domain. The Autocruise ACC system was introduced on the Volkswagen Phaeton in 2002 and the company has also received series contracts to provide ACC sensors for MAN trucks and development contracts with a number of other OEMs. Autocruise has become a wholly-owned subsidiary of TRW Automotive and will supply TRW's next generation AC20 radar sensor, which in July 2003 was undergoing vehicle testing and will soon be available to the automotive market. Also in June 2003, it was reported that TRW Automotive plans to acquire 40% equity in auto component manufacturer Goldwyn. TRW would be buying out the 40% stake currently held by non-resident shareholders in the company. In December 2002, TRW Automotive acquired TRW Marzocchi Automotive Pumps. The transaction concluded the joint-venture begun in 1997 between TRW and Marzocchi Pompe of Bologna (Italy). TRW Marzocchi Automotive Pumps is a world-leading AutoBusiness Ltd

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Company profiles producer of automotive gear pumps for application in electrically powered hydraulic steering systems (EPHS). TRW Automotive will continue to operate the business as TRW Automotive Pumps. Divestments Although TRW Automotive has invested heavily in emerging markets, it has also had to divest non-core businesses. In February 2004 it was reported that TRW Automotive Aftermarket would move manufacturing activities from its plant in Luton (UK) to its plant in Frydlant (Czech Republic) to reduce costs. TRW said the move would cost 71 jobs in Luton. The plant produces steering systems. In January 2004 Universal Automotive Industries, Inc., a manufacturer and distributor of aftermarket brake parts, announced that its Universal Automotive, Inc. subsidiary had completed the acquisition of certain North American business assets of TRW Automotive Inc.'s Kelsey-Hayes Company subsidiary, based in Livonia, Michigan (US). The purchase cost US$11m (8.86m, 31 January 2004) in cash plus additional contingent payments. In June 2003 TRW and Tokai Rika announced that Tokai Rika would purchase TRW's 60% stake in their joint-venture Quality Safety Systems Company (QSS) based in Tecumseh, Ontario (Canada), which currently employs 800 people in two plants and has turnover of over US$100m (87.5m, 30 June 2003). The two companies formed the seat belt joint-venture in 1986 to provide Tokai Rika with a North American manufacturing base from which to serve its traditional customers in North America and to expand TRW's base of knowledge and experience in supplying to Japanese OEMs. In October 2002, TRW Automotive's Czech subsidiary announced that it would end production at its factories in Dolni Kralovice and Zruc nad Sazavou, both in the Czech Republic. Both sites had ended production by April 2003, primarily due to the strength of the Czech crown. TRW Autoelektronika exports around 95% of its output from the Czech Republic. Also in October 2002, TRW Automotive announced its intention to close its seatbelt plant in Angers (France). The plant employed 153 staff.

Joint-ventures TRW Automotives recent joint-ventures serve to expand its geographical spread and access related new technological expertise: In February 2004 TRW Automotive and FAWER Automotive Parts Company announced the expansion of the scope of its existing 60/40 (TRW/FAWER) joint venture to include the manufacture of airbag modules and steering wheels. The company has in the process, changed its name to TRW FAWER Automobile Safety System Co. This expanded joint venture will now, in addition to chassis modules and braking systems, also manufacture airbag modules and steering wheels for the FAW group and other key customers in Northern China. The venture represents an investment of $38m (30.4m, 29 February 2004). In October 2003, TRW Automotive announced a joint venture with Group Michelin to bring advanced tire pressure monitoring systems (TPMS) to market worldwide. The new joint venture, EnTire Solutions, LLC, will concentrate on direct TPMS for passenger cars and light trucks. TRW Automotive and Shanghai Automotive Industrial Corporation (SAIC) and its Yanfeng subsidiary established a joint-venture in February 2001 to produce airbags for vehicle makers in China. In August 2000, TRW Automotive and the SAVVA Group of Companies (Russia) announced a partnership to provide automotive safety systems for the Russian vehicle market. SAVVA will make use of TRWs seatbelt technologies and manufacturing knowhow at its seatbelt production facility in Russia. In March 2000, TRW Automotive established a 50/50 Canadian-based joint-venture with Linamar Corporation, to supply machined and assembled engine components and modules. TRW agreed to develop and market a safety system with medical products manufacturer Biosys AB, Gothenburg (Sweden). The system alerts vehicle drivers when they are feeling drowsy and consists of a sensor installed in the driver's seat.

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Automotive Technology Roadmap Investments TRW Automotive has invested heavily in new manufacturing facilities worldwide. The company's new just-in-time facility in Toledo, Ohio (US), to produce chassis modules to support the DaimlerChrysler Jeep(R) platform is instrumental in its drive towards modularisation. Other investments include: In September 2003, it was reported that in the next three years TRW Automotive would invest US$8.7m (7.50m, 30 September 2003) in its Kingsway, Ohio (US) plant to replace old equipment and develop a new product line for Dodge Dakota trucks. Also in September 2003, it was reported that TRW Automotive is in the process of upgrading or replacing about 90% of the equipment at a rotor and rotor hub assembly plant located in Fayette, Fulton County (Ohio, US). The project is for the 2005 model year, which will begin production in summer 2004. For the original program, TRW invested around US$50m (43.1m, 30 September 2003), primarily in equipment. For this next generation, TRW is investing US$10m (8.63m, 30 September 2003). In April 2003 TRW Automotive announced it would make a 1.5m (2.16m, 30 April 2003) investment at its Resolven, Wales (UK) steering systems plant which will safeguard 200 jobs. The move comes after the plant won two important contracts from Ford and Land Rover for future models. These will secure work at the factory until 2007 and it is hoped further contracts will be won on the back of the new systems. The plant employs 650 people and supplies Ford, Nissan, Rover and Land Rover. In October 2001, TRW Automotive began production at a new 7,000 square metre manufacturing facility for braking actuation units in Gliwice (Poland). In July 2001, TRW Automotive announced plans to invest 17m (27.7m, 31 July 2001) to upgrade two facilities in the Midlands (UK) plant. This will create new 150 jobs, which come into line as five new products are introduced at the sites. The plants make various electrical control units for steering, braking and security systems. In June 2001, TRW Automotive opened a US$7m (8.2m, 30 June 2001) brake systems plant in Gliwice (Poland). The plant employs 350 people and reflects TRWs strategy to further its global presence. In October 2000, TRW Automotives chassis systems division opened a US$24m (28.5m, 31 October 2000) manufacturing plant in Bukit Beruntung (Malaysia) to supply chassis and brake modules to Proton for its Waja, GX-41 model. The plant is 4,700 square metres in size and at the time of its opening employed 50 people. In July 2000, TRW Automotives chassis systems division invested US$2.6m (2.8m, 31 July 2000) in a new 35,000 square feet facility in Rayong (Thailand) to supply components and actuation for General Motors Zafira. Production began in May 2000. In May 2000, TRW Automotive opened a US$35m (37.7m, 31 May 2000), 200,000 square foot manufacturing plant for brakes in Santa Rosa (Mexico) to supply carmakers serving Mexico and other markets. The plant employs over 300 people.

Contracts In November 2002, TRW Automotive announced that the new Mercedes-Benz SClass is fitted with its Active Control Reactor (ACR) seatbelt system. The system adds an active element to the vehicle passive restraint systems by detecting potentially hazardous driving situations and automatically pre-tightening occupant seatbelts in order to maximise the effectiveness of passive safety devices such as airbags in the event of a crash. In Europe, TRW Automotive is the supplier for the advanced VCS systems on GMs Opel Vectra, launched in January 2002 as part of the GM Epsilon platform. This was followed by the launch of the Fiat Lancia Thesis in March 2002. In 2001, TRW Automotive introduced its VCS system on the Fiat Lancia Lybra. TRW Automotive is contracted by Ford to design and manufacture suspension control arms and stabilizer bar links for the Ford Expedition and Lincoln Navigator, launched in July 2001. The company also has several chassis module production contracts including: A head protection system for Fords new Range Rover vehicles. Simula and TRW Automotive jointly produce this. Aluminium longitudinal arms, control arms and toe links Porsche Boxster rear axle and suspension module Suspension corner strut modules with brakes, shocks and springs Volkswagen Cross-member steering and corner braking-suspension modules produced in Puebla (Mexico) Volkswagen AutoBusiness Ltd

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Company profiles Four different chassis modules Opel Zafira produced in Thailand Assembly of chassis modules DaimlerChryslers Jeep Cherokee SUV.

In February 2001, Toyota chose TRW Automotive to supply the full foundation brake system for the UK-built Toyota Corolla This was TRW Automotive's first full foundation braking systems contract with Toyota. Calipers and parking brakes are supplied from TRW Automotive's plant in Pontypool (UK) and actuation from its plant in Gliwice (Poland). TRW Automotive also supplies side impact crash sensors for the Corolla from its plant in Marshall, Illinois (USA). By August 2001, TRW Automotive had won a total of US$2.5bn (2.7bn, 31 August 2001) in contracts for electrically powered steering (EPS) products. The company estimates that fitment rate of this technology will be at one in three cars by 2010, and TRW Automotive expected to produce at least 1.3m column-drive EPS systems in 2003. Contracts in this area include: In March 2002, TRW Automotive was selected to supply its pioneering, radar enabled Adaptive Cruise Control on four luxury and mid-range platforms from the Volkswagen Group, including the Phaeton, Volkswagens first luxury Sedan. TRW Automotive is the global supplier of EPS for the Renault-Nissan B-platform, with anticipated total annual volumes of around 600,000. Production cars include the Nissan Micra (March in Japan) and the next generation Renault Clio. In August 2001, TRW Automotive announced that it had secured over US$900m (982m, 31 August 2001) in contracts to supply EPS products to Fiat, for the Stilo model, and Renault, for its Megane. Production of Fiat's system will initially take place in Birmingham (UK), before being transferred to a plant in Livorno (Italy). The Renault system will be built in Pamplona (Spain). The contract should increase the companys sales for the products to US$500m (545.6m, 31 August 2001). EPHS (Electronically Powered Hydraulic Steering) systems for Opels Astra and Zafira models. EPHS systems for the Skoda Fabia manufactured in the Czech Republic.

TRW Automotive Occupant Safety Systems won US$1bn (925m, 31 January 2003) in new safety systems business for up to five years, beginning in 2003. In March 2003, TRW Automotive was awarded a major tire pressure monitoring supply system contract, along with its Norwegian partner, SensoNor. The EnTire Solution, a Tire Pressure Monitoring technology jointly developed by TRW Automotive and its partner Michelin utilises SensoNors SP30 series tire pressure and temperature monitoring sensors. The contract requires SensoNor to supply TRW Automotive with sensors in significant volumes for General Motors trucks and sport utility vehicles including the Chevrolet Silverado, GMC Sierra, Chevrolet Avalanche, Chevrolet Suburban, Chevrolet Tahoe, GMC Yukon and the Cadillac Escalade SUVs. TRW Automotive and SensoNor have worked closely on the development of tire pressure monitoring sensors since 1998. In April 2003 TRW Automotive announced it had secured two new steering systems contracts from Ford and Land Rover for future models. The new Ford contract is for an initial 200,000 units annually, but this could double, and the Land Rover contract is for 66,000 a year and rising. In November 2003 TRW Automotive announced it is supplying rollover curtain or side impact airbags for more than 100 car, light truck and sport utility vehicles for the 2004 model year. The company said that in the 2003 model year, 40% of all passenger vehicles offered headprotecting curtain or side airbags. That number is expected to grow to 47% in 2004. Curtain and side airbags are becoming more widely available as technology advances to meet the unique challenges of rollover and side impact collisions, and TRW holds over 100 patents as it continues to develop and refine these systems. TRW is a leading developer and the first supplier to introduce a safety canopy airbag system for the 2002 Ford Explorer and Mercury Mountaineer and in the 2003 Ford Expedition, Lincoln Navigator and the Explorer Sport Trac. In 2004, TRW will supply additional Ford models as well as systems for BMW, DaimlerChrysler and General Motors. These systems help to protect occupants in the event of side impacts or even vehicle rollovers.

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In December 2003, it was reported that Volkswagen AG has selected TRW's Vehicle Stability Control system for the next-generation Passat due in late 2004. The contract is TRW's first major contract in Europe for its active braking system. In January 2004, EnTire Solutions, LLC, TRW Automotive's 50:50 joint venture with Michelin announced two new customers for its direct tyre pressure monitoring systems (TPMS) - Honda and Fiat. EnTire said that it is now supplying the TPMS to the 2004 Acura MDX luxury sportsutility vehicle (SUV) and that it will also be used for upcoming Fiat models in Europe. In April 2004, TRW Automotive launched its next generation Electric Parking Brake (EPB) system on the new Audi A6. The system, a step in the evolution towards fully electrical braking systems, handles emergency stop and conventional parking brake applications. New Product Developments In March 2003, Goodyear and TRW Automotive signed a five-year agreement to jointly study tires, braking, suspension and steering systems to accelerate product development for vehicle manufacturers. The agreement will initially allow the companies to exchange modelling data related to these systems and the companies expect to develop joint subsystems models that can be used with selected vehicle model software packages. This will enable them to improve existing products and also develop new products. Other recent product initiatives include: Four-point safety belts: Launched in January 2001, the belt has two main configurations an X-shape; or two shoulder/lap belt assemblies that are fastened in a V-shape to a central buckle. Automated Cabin Comfort System: Announced in October 2000, this system maintains a constant temperature in the cars cabin. It is scheduled for production in model year 2004. Keyless Vehicle System: Launched October 2001, the car is able to recognise the fob, to allow the driver to unlock the door and start the engine without using a key. The system is scheduled for model year 2004 production. Tire pressure monitoring devices: As part of a technical cooperation agreement with Michelin, TRW Automotive is developing a system that will inform the driver of tire pressure and warn him/her of unsafe inflation conditions. Initially, TRW Automotive is integrating its TireWatch radio frequency based transmitter sensor with Michelins Pax system and logic software. The companies then plan to produce a standardised transmitter that can be used both with conventional tires and the Pax system. A cold-gas inflator for curtain airbags: The Occupant Safety Systems Division has developed a system that allows the curtain airbags to stay deployed for a minimum of seven seconds and allows the use of less pressure for inflation, and lighter weight fabrics for the curtain airbags. It was utilised by a North American carmaker in 2001, with a production volume of 200,000 units. Production is expected to reach ten million units by the end of 2004. Adaptive cruise control system: Using an automotive radar unit, the cars speed is adjusted to maintain appropriate following distance between vehicles. Rain sensor: This detects how hard the rain or snow is falling and determines how fast to run the wiper motor. Electrically Assisted Steering (EAS) systems: These offer up to 5% more fuel economy, improved vehicle handling (steering system energy requirements reduced by up to 85%) and improved safety, as well as reduced development time and faster assembly. TRW has two main types: Electrically Powered Hydraulic Steering (EPHS) that consists of an electrically driven hydraulic pump, a conventional rack-and-pinion steering, a 12-volt DC electric motor and an electronic control unit; and Electrically Powered Steering (EPS) system, which is an electric system that eliminates hydraulic fluid and all its associated problems.

In August 2003, TRW Automotive said that it is actively addressing emerging consumer concerns with the integration of a variety of complementary active and passive safety 424 AutoBusiness Ltd

Company profiles technologies which together will offer enhanced prevention of, and protection from, vehicle rollovers. Some of these technologies include: Driver Assist Systems - Over the last 15 years, TRW has been active in the development of algorithms to sense the road ahead. These algorithms can measure the lane width, the position of the vehicle within the lane and the curvature of the road ahead. When combined with other sensors on the vehicle, a variety of different applications can be utilized including Lane Departure Warning, Lane Guidance, Drowsy Driver Monitoring and Adaptive Headlights. Active Roll Control (ARC) - Through a combination of hydraulic and electronic technologies, TRW Automotive's ARC system reduces a vehicle's "roll" and provides a softer ride. By actively engaging a vehicle's stabilizer bars only to the extent needed to reduce body roll in cornering, ARC both improves vehicle handling and helps to reduce the risk of vehicle rollovers during cornering manoeuvres. Vehicle Stability Control (VSC) - This is designed to modulate braking and powertrain forces to avoid excessive yaw rates- one of the principal precursors to a leading cause of rollover accidents, the vehicle leaving the road. If integrated with electronically controlled steering, VSC has the added potential to provide "coaching" for the driver during oversteer and understeer situations, as well as during potentially dangerous manoeuvres, so helping the driver keep the vehicle going in the intended direction and maintaining control. Active Control Retractor (ACR) - Available on the Mercedes S-Class, TRW Automotive's ACR is the first active seat belt system on the market. It uses braking and stability control sensor information to pre-tension the seatbelt should the system sense a potential accident. Cold Gas Inflator and Safety Canopy - This new automotive safety technology, which permits the air bag to stay inflated for up to six seconds, provides increased protection in prolonged events such as rollovers. Typical side impact curtain bags remain deployed for up to one second as the gas produced from conventional inflators begins to cool. The system includes a gas distribution technique that achieves faster filling of the safety canopy and more even distribution along the inside of the vehicle from the A to the C or the D pillar.

Financial Overview As a result of TRW Automotive's acquisition by Blackstone in February 2003, it became a privately held company, which was under no obligation to publish its financial results. However, because it subsequently exchanged senior notes, previously issued in a private offering, for registered ones, a process that required filing a publicly available Form S4 with the US Securities and Exchange Commission (SEC), periodic filings are now required. Pro forma sales for full-year 2003 totalled US$11.3bn (9.00bn, 31 December 2003), an increase of US$924m (736.1m, 31 December 2003) or about 9% compared to full-year 2002 pro forma sales. Pro forma operating income for the year was US$579m (461.3m, 31 December 2003), a decline of US$86m (68.5m, 31 December 2003) from the prior year. This decrease reflects a number of factors, including restructuring and other unusual charges. Excluding these factors, operating income improved by US$57m (45.4m, 31 December 2003). On a pro forma basis, the company reported full-year 2003 net earnings of US$93m (74.1m, 31 December 2003). In comparison, the company reported pro forma consolidated net earnings of US$201m (191.8m, 31 December 2002) in full-year 2002. Outlook Over the past few years TRW Automotive has focused its business on a limited number of core product areas and has developed the core skills needed for a first tier supplier. These core product areas have been strengthened by acquisitions, most notably that of LucasVarity. The company is a well-respected partner of the global automotive industry. The airbags and safety systems business is positioned in a fast growing segment of the automotive market. The chassis system is involved in two businesses its brakes and steering systems which are undergoing major technological change and a shift to a more complete systems approach. AutoBusiness Ltd 425

Automotive Technology Roadmap TRW Automotives electronics expertise is a major asset in enabling it to compete in these segments and although the companys major product areas do not have major overlaps, they all benefit from the systems and financial support that the group offers.

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Valeo
Climate control, engine cooling, lighting, transmissions
Address Valeo SA 43, rue Bayen 75848 Paris Cedex 17 France Tel: +33 1 4055 2020 Fax: +33 1 4055 2171 Internet: http://www.valeo.com Senior Officers Thierry Morin, Chairman and Chief Executive Officer Products Climate control and engine cooling systems, clutches and transmissions systems, electrical systems, electronics, lighting systems, motors and actuators, security systems and wiper systems Plants Group: Brazil, China, France, Germany, Ireland, Italy, Japan, Malaysia, Mexico, Portugal, Spain, Sweden, USA, Romania, South Africa Sales Group: 9.23bn (Year to 31.12.03) Employees 68,200 (2003) Valeo is among the worlds top ten automotive suppliers, and is the second largest supplier in Europe behind Bosch. Its operations are wholly focused on the automotive industry. The French company produces components, integrated systems and modules for cars and trucks. In total, Valeo operated 129 production sites as of 31 December 2003, down from 140 at the end of 2002. The group also has 65 R&D centres and nine distribution centres. In 2003, 71% of Valeos total sales were generated in Europe, 18% in North America, 8% in Asia and 3% in South America. Valeo supplies all major vehicle manufacturers but its biggest customers are General Motors, DaimlerChrysler, Volkswagen, Renault-Nissan, Ford and PSA Peugeot Citron.

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Until March 2003, Valeo was divided into five key areas of automotive expertise: Electrical/Electronics; Thermal Systems; Transmissions; Security Systems; and Aftermarket. In March 2003, Valeo became a joint stock company with a Board of Directors and announced ten business units: transmissions; climate control; engine cooling; lighting systems; electrical systems; wiper systems; motors and actuators; security systems; switches and detection systems; and electronics and connective systems, which are grouped under four activites: Electrical and Electronic Systems (53% of total 2003 sales); Thermal Systems (25%); Service (18%); and Transmissions (4%). Valeo merged its aftermarket activities into a single organisation, named Valeo Service, in order to strengthen its position. In May 2003 the company announced the creation of a new strategic Activity for Thermal Systems encompassing the engine cooling and climate control branches, the Zexel Valeo Climate Control venture and the cockpit and front end modules businesses. In December 2001, Valeo announced that a US subsidiary, Valeo Electrical Systems, Inc. (VESI), had filed for Chapter 11 bankruptcy protection after the slowdown in the North American automotive industry resulted in steep losses. In October 2002, VESI emerged from the Chapter 11 bankruptcy protection and since December of that year has revamped a labour contract cut 1,550 jobs and moved or eliminate much of the production at the Rochester, New York plant. VESI was expected to break even on a monthly basis by the end of 2004 and regain full-year profitability during 2005. Recent Developments Corporate strategy After a difficult 2001 due to the economic slowdown, 2002 saw Valeo return to profitability with an operating margin of 6%. The company has cut around 10,000 jobs since March 2001. Twenty-nine factories were sold or closed during 2001, as non-core activities and unprofitable businesses were disposed of in an effort to return the group to profitability. In 2002, Valeo closed seven production sites and disposed of one other. The company opened five plants in lower cost areas. During the first quarter of 2003 Valeo transferred its Wiper Systems activities in Bietigheim, Germany to their new facility, allowing for closure of the old site, sold four wiring sites in India which had been acquired with Sylea, and closed sites at Fort Worth, Texas (USA) (Switches and Detection Systems), Barcelona, Spain (Lighting Systems); and Jablonec, Czech Republic (Wiring). In June 2003 Valeo also announced it was to restructure the Santo Tirso, Portugal and Abrera, Spain facilities, both of which are part of the Electronics and Connective Systems Branch. In March 2004 Valeo announced that it was discussing proposals for the restructuring of its Santo Tirso (Portugal) facility which produces wiring harnesses and for its Madrid (Spain) facility which produces Wiper systems. The Madrid facility is part of the Wiper Systems Branch. Despite the restructuring activities undertaken at Santo Tirso in 2003, volumes have continued to drop significantly and Valeo believes it cannot be competitive as compared with production in lower cost countries, and it is now envisaged to close the plant. The plant of Villaverde in Madrid currently produces both wiper motors and wiper arms and blades but the introduction of new technologies for wiper arms and blades has led to a drop in output in Madrid. The production of these products is no longer competitive and it is envisaged to move production to other Valeo facilities. Production of wiper motors will continue in Villaverde. Despite these actions, Valeo continues to invest in technological development, more lucrative businesses, such as electronics, and production facilities in low-cost countries, especially in Asia, Eastern Europe and South America. For example, a plan to establish a fifth site in Poland (at Chrzanow) for Lighting Systems was announced in the first quarter of 2003. In recent years, Valeo has significantly realigned its business around modules. The company now has four key module divisions: front-end modules, cockpit modules, door modules, and fifth door modules. The company is also looking to become a leader in the design and development of electronics products and systems and has announced plans to increase sales of electrical and electronic products to around 70% of total group sales over the coming years. It is forming strategic alliances to help it achieve that aim.

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Company profiles In September 2001, Valeo unveiled a new approach to customer-led innovation through the creation of five Domains: Seeing and Being Seen, Thermal Energy Management, Vehicle Access and Security, Driveline Systems, and Electrical Energy Management. Each domain grouped together related automotive functions with their underlying technologies and products. The company believed that these domains would enable it to anticipate and exceed customer expectations effectively, and result in creative synergies between different branches of the company. Complementing these domains was Valeos continued emphasis on offering a range of integrated modules, including front-end, door, tailgate and cockpit modules. Valeo has subsequently integrated its systems and services into three new Domains: Driving Assistance, Comfort Enhancement and Powertrain Efficiency. Valeo is heavily involved in rationalising its supply base and had cut its number of suppliers to 2,475 at the end of 2003, down from 4,500 three years before. Valeo is transferring some of its production away from Western Europe and North America to lower cost countries, notably in Eastern Europe. Purchasing in low-cost countries totalled 13% of total production purchases in 2003, an increase of 39% over the 2002 level. A new purchasing office in Shanghai, China played a part in this. Acquisitions A major step came in June 1998 when Valeo acquired ITTs Industries Automotive Electrical Systems business. Another significant move was in May 2000 when Valeo agreed to acquire Sylea and other automotive activities of the Labinal Group for 435m. These activities had sales of 1.4bn in 1999. Both purchases have reinforced Valeos position in electrical and electronics systems. Divestments In addition to the recent closures and disposals outlined above: In October 2003 Valeo announced that its subsidiary, Valeo Vision, plans to sell its heavy vehicle signal lighting activity to a group of investors, in association with some of the managers of the site. Based in Venissieux (France), it is specialized in the design and production of rear lights and safety accessories for heavy vehicles, trailers and buses During 2002, Valeo closed its Decatur and Grand Prairie facilities in the US and in December 2002, announced the consolidation of its lighting activities in Spain, a move that will lead to the closure of the Sant Esteve Sesrovires plant. In October 2002, Valeo announced it will consolidate its five Detroit (US)-based offices into a single campus in Auburn Hills (US) within the next two years. In December 2001, Valeo sold its plastic injection moulding and small assembly operations at its plant in Sainte-Savine (France). In November 2001, EKO, a Valeo subsidiary announced plans to close its loss-making wiring harness plant in Velenje (Slovenia). Production is to be transferred to Valeos plant in Mateur (Tunisia). Also in November 2001, Valeo announced the sale of Valeo Transmission Ltd UK in a management buyout. The business manufactures components for manual gearboxes and was regarded as non-core to Valeos operations. In October 2001, the Switches and Detection Systems Division of Valeo rationalised its production in Germany and closed its plant at Baumenheim in Bavaria. The plant produced top column modules and park assist systems. Production was transferred to the company's facility 30km away at Wemding, Bavaria. Other products produced at Wemding are now manufactured in Hungary. . In August 2001, Valeo announced plans to sell its truck vehicle signal lighting business, based in Vnissieux (France). In June 2001, Valeo sold 100% of its Filtrauto unit to Sogefi, the Italian automotive filter supplier, for around 100m. The oil, water and air filter business, acquired as part of the Labinal acquisition, was deemed as being non-core. In May 2001, Valeo announced its intention to close two wiring plants in France. Production at the Chaors and Vire facilities has been transferred to factories in Morocco, Tunisia, Spain Portugal and France. In April 2001, Valeo announced plans to close its automotive wiring harness plants in Vire and Cahors (France). Valeo acquired these operations in September 2000, as part of its purchase of Sylea. Production has been transferred to the Moroccan, Tunisian, Spanish, Portuguese and French plants of Valeo's Electronics and Connective Systems Branch. 429

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Automotive Technology Roadmap In January 2001, Valeo announced plans to close two of its UK sites: a thermal systems plant in Gorseinon (Wales), and the Labauto plant in Worksop in Nottinghamshire, which manufactured wiring harnesses for PSA.

Joint-ventures Valeo has established a number of joint-venture agreements to expand its technological capabilities, these include: In December 2003, Valeo exercised its option to acquire an additional 10% of the share capital of the existing joint venture Zexel Valeo Climate Control Corporation from Bosch Automotive Systems Corporation (Japan). Valeo's stake in the joint venture is now 50%, Bosch Automotive Systems Corporation holds the other 50% stake Also in December 2003, Valeo signed agreements to increase its shareholding in two of its Chinese joint ventures in Shanghai, one for Electrical Systems and the other for Wiper Systems. Valeo has increased its participation in Shanghai Valeo Automotive Electrical Systems from 30% to 50% and has increased its operational and executive management in this joint venture. Valeo has also increased its participation in Valeo Shanghai Automotive Electrical Motors and Wipers Systems from 50% to 55% thus strengthening its management in the venture. In October 2003, Valeo signed a Letter of Intent for joint business opportunities with Furukawa Electric of Tokyo (Japan) for future wiring systems business. The two companies will jointly develop business opportunities worldwide for automotive wiring systems, and will have access to R&D resources of both companies. Also in October Valeo signed a co-operative agreement with Iteris to exclusively manufacture and market camera-based lane departure warning systems for light vehicles worldwide. This follows a two-year joint development of the system. Under the terms of the Agreement, Valeo will take full responsibility for the manufacture and marketing of lane departure warning systems for the light vehicle market worldwide, including the aftermarket. In April 2003, Valeo increased its share in its joint-venture company with partner Hubei Auto Lighting to 75% from 51%. The joint-venture produces lighting and signalling systems in Wuhan (China). In June 2002, Valeo formed a 50/50 joint-venture with Raytheon Company (USA) to use radar technology to develop and produce obstacle detection systems for the automotive industry. In April 2002, Valeo signed a collaboration agreement with Saft (Alcatels battery activity) to develop an advanced battery management system for selected new electrical networks, including 42 Volt and hybrid systems. In March 2002, Valeo formed a partnership with Jabil Circuit, Inc., for printed circuit board manufacturing. This gives Valeo a three year supply agreement with Jabil for a range of printed circuit boards, and Valeo is to transfer ownership of four plants in France, Germany, Mexico and the USA to Jabil. In February 2002, Valeo formed a long-term strategic alliance with International Rectifier to develop advanced power electronics modules for high-growth automotive applications. In December 2001, Valeo announced plans to develop high absorption crash box technology with Cymat, a materials supplier. Aluminium foam technology is integrated into Valeos front-end modules, which will reduce crash damage to the vehicles frontend. In November 2000, Plastic Omnium and Valeo formed a 50/50 joint-venture to design and produce an integrated front-end module for Renault. The venture, Valeo Plastic Omnium, focuses on the areas of shock absorption, engine cooling and lighting. In April 2000, Valeo announced plans for full cooperation with the Japanese automotive lighting manufacturer, Ichikoh Industries Ltd. Combined lighting sales are nearly 2bn. Valeo gained Nissans 20% share in Ichikoh and Ichikoh secured an option to take a 20% share in Valeos lighting activities. In March 2000, Valeo announced a joint-venture with the South African automotive supplier Metair, initially for supplying Volkswagen with front-end modules. Valeo holds a 51% stake in Valeo Systems South Africa.

Investments The majority of Valeos recent investment has been in Europe and low-cost countries:

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Company profiles In December 2003, Valeo, in conjunction with Ichikoh Industries Ltd, announced it is to construct a lighting manufacturing plant in Guangzhou, Guangdong province (China). It is scheduled to begin operations in 2006. In October 2003, Valeo announced that it is to build a new technical centre in Wuhan (China). The technical centre will develop advanced automotive lighting systems for both Chinese and European car makers. When fully operational, the new technical centre is expected to be able to accommodate up to 120 qualified engineers and technicians who will initially focus on developing automotive lighting systems for Chinese customers. The new facility is due for completion in 2004 In August 2003, Valeo confirmed that it is to establish a new technical centre in Prague (Czech Republic). The new 1,400 square-metre facility is designed to provide engineering support to Heating Ventilation and Air Conditioning (HVAC) and control panel programs led by Valeo's existing network of R&D centres In 2002, Valeo opened five new plants as part of its redeployment of activities to lower production cost areas. Two plants were opened in Poland for wiper systems and electrical systems. One plant was opened in Brazil for front-end modules. In November 2002, Valeo started production at its first Romanian site, which produces connective equipment for the Dacia car model. A plant was also opened in Morocco for the production of wiring harnesses. In April 2002, Zexel Valeo Climate Control Corporation announced plans to build a US$53m plant in Humpolec (Czech Republic) to produce compressors for automotive air conditioning systems. In November 2001, Valeo said it was expanding its production facilities in Veszprem (Hungary). It has transferred sensors and contacts production from its plants at Baumenheim and Wending (Germany) in an effort to reduce costs. In September 2001, Valeo announced plans to open a new technical centre in Bietigheim (Germany) in order to enhance its electronics engineering capabilities. This was opened in the firs quarter of 2003. In 2001, Valeo built a new plant in San Luis Potosi (Mexico) dedicated to supplying starters and alternators to a wide range of General Motors models, including the Saturn Vue sports-utility, minivans and the Chevrolet Corvette.

Contracts Valeo has been following a strategy of expanding its technological capabilities through acquisitions and alliances. The success of this strategy is reflected in Valeos recently secured contracts. In March 2004, Valeo announced that its Lane Departure Warning System employing Iteris' technology will make its market debut in North America on Nissan's Infiniti range. The innovative system is scheduled for introduction on the 2005 model FX and 2006 M45. In December 2003, Valeo was awarded a first contract by a leading European car maker for the supply of a new generation of dual reversing front wiper systems for an unnamed model, scheduled for launch in 2006. The contract has an estimated lifetime value of over 100m (US$125.6m, 31 December 2003). In October 2003 Valeo and Ichikoh were awarded a contract to supply Toyota with the world's first LED rear lamps using mono LED technology for stop/tail function for its restyled Estima. In September 2003, Volkswagen Group awarded Valeo contracts worth 60m for power closure systems that will feature on several future new car models. In September 2003 Valeo announced that it has been awarded a contract for a compact Rain Light Tunnel (RLT) sensor system from a European luxury car manufacturer for use on a model due for production in 2005. In the same month, Valeo confirmed that it will provide PSA Peugeot Citroen with its belt-driven starter-alternator for use on a future undisclosed vehicle model, due in production in 2004. The new vehicle model is expected to be the first in the world with a 14 Volt belt-driven starter-alternator. Also in September 2003, it was revealed that Valeo is supplying innovative rear brake lights to BMW for use on its 6-Series coupe. In July 2003, it was disclosed that Valeo has secured orders from Renault's Romanian unit Dacia for a wide range of systems and components specified on the new Solenza produced in Pitesti (Romania). In the same month, it was announced that Valeo has been awarded the first contract for 431

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Automotive Technology Roadmap its new Mechanical Multi-Exchanger. The first model to be equipped with the new unit is the Renault Clio (1.2 and 1.6 litre petrol engine). The contract is valued at over 10m over the model lifetime. In December 2002, Valeo announced that its next-generation thermal systems, including both engine cooling and HVAC would be featured on a new Chrysler vehicle. In November 2002, Valeo announced that its Active Front Lighting system was to make its market debut on the new Porsche Cayenne. This contract is now underway. In October 2002, it was announced that Valeos new parking slot measurment system, which advises the driver whether the car will fit into a given parking space, has been chosen by two European car makers and is due to be installed on several future models, the first in 2004. In September 2002, Valeo announced it had won an order worth more than 1bn from the Volkswagen Group for its new generation of HVAC systems. The systems will be installed on future Volkswagen models. In May 2002, Valeo announced that it is supplying its Double-Xenon headlamp system to the new Volkswagen Phaeton luxury saloon. Valeos clear lens Bi-Xenon Projector headlamp system is to be offered as an option on the Saab 9-5 model in Europe and North America. In September 2001, Valeo announced that it had won a major order from Ford for its Ultrasonic Park Assist System. These systems are specified on two Ford Group vehicle platforms. Valeos powered trunk closure system is fitted on three DaimlerChrysler vehicles: the new Mercedes-Benz E-Class and CLK coupe, and the Maybach super-luxury sedan. Top-end versions of Peugeots 807 MPV are fitted with Valeos driver controller interface, consisting of a circular multifunction switch and integrated electronics module.

New Product Developments In 2002, Valeo invested 6.1% of sales in research and development. The company has 65 R&D centres located principally in France, Germany, Korea and the US. Valeo has been broadening its technological know-how and has developed several recent innovations. Valeo is also a modules and systems supplier, its Bending Light System won the second prize of the Automechanika 2002 Automotive Innovation Awards in the Auto Parts category in September 2002. Modules include: front-end modules; door modules; cockpit modules; fifth door module; top column module; body controller module; and an air conditioning module. Other recent innovations include the following: In June 2003 Valeos Interfaced Alternator, the first in the world to integrate a microprocessor chip onto an Application Specific Integrated Circuit (ASIC), won an EPCOS/SIA award in its powertrain category. In January 2003, Valeo announced its development of Sensor Fusion technology to create an innovative visual park assist system. The new system incorporates cameras that supply wide-angle images of the space behind the vehicle. The images are processed and presented on a dash-mounted display. The system also provides recommended trajectory when reverse parking. A radar-based warning system that tells drivers if another vehicle is in their blind spot is being developed by Valeo and its joint-venture company Raytheon Co. and will arrive on the market in 2005 or 2006. In June 2001, Valeo and Renault received an earlier EPCOS/SIA award for their jointly developed remote keyless entry system. The system uses a credit card sized "personal smart card" with a card reader slot and an engine start button integrated into the vehicle dashboard. In the same month, Valeo entered a strategic and technical partnership with Iteris Inc. to jointly develop Iteris' advanced video-based image processing system called AutoVue and integrate it into Valeo's range of automotive sensor and electronic systems. AutoVue tracks visible road lane markings ahead and warns the driver in case of unintentional lane departure. The Engine Cooling division has designed a Thermal Management Intelligent System AutoBusiness Ltd

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Company profiles (THEMIS), which regulates engine temperature in order to reduce fuel consumption and increase engine efficiency. This is achieved through a faster engine warm-up and higher engine temperatures at part load. Valeo Electrical Systems' Stop & Go function stops the engine automatically when the vehicle comes to a temporary stop. The reverse motor mode enables the engine to restart immediately in order to move on. The system reduces air pollution by up to 10% in urban traffic.

A patented Valeo radiator that can be bent into curved shapes and a new approach to rear lighting made their debut in the Renault concept car Wind at the Geneva International Motor Show in 2004.The segmented "spinal architecture" of Valeo's new radiator allows it to take on a curved shape, thereby saving space and easily adapting to all types of front-end designs. The innovation allowed Renault to develop the new front-end theme of the Wind concept car, in which a radiator is located on each side of the car fascia. Renault also designed the rear lights of the Wind with a new Valeo technology combining LED technology and the suppliers patented light guides high-tech plastic optical parts which are especially designed to create dramatic stop and turn signals that attract the attention of following drivers. Financial Overview Valeos consolidated sales fell 6% in 2003, to 9,234m, primarily due to exchange rate fluctuations. On a like-for-like basis, sales fell by 1%. Operating income was 465m, down from 487m in 2002, although the margin was unchanged at 5%. Net income amounted to 181m compared with 135m in the previous period. Outlook At the beginning of 2004, Valeo formulated its strategic ambitions with an action plan based on three development drivers. Success in meeting these ambitions will dictate the companys outlook. The three drivers are: play a significant role in the growth of the Asian market, and in particular in China, building on the 28 industrial sites already in operation; strengthen the aftermarket business; and enhance technology offerings and commercial innovation, focusing on the three new domains. The industrial branches are expected to benefit from enhanced synergies in the research, development and marketing of their innovations.

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Visteon
Automotive interiors, systems and modules
Address Visteon Corporation 17000 Rotunda Drive Dearborn MI 48121 USA Tel: +1 313 755 2800 Fax: +1 313 755 7983 Internet: http://www.visteon.com Senior Officers Peter Pestillo, Chairman and CEO Michael Johnston, President and COO Anjan Chatterjee, Acting CFO Dr. Heinz Pfannschmidt, Vice President and President, Europe and South America Products Chassis systems, (axle and driveline systems, chassis components, steering systems), climate systems (climate, powertrain cooling systems), electronics (telematics/multimedia, driver awareness systems, personal security systems), glass, interior systems (cockpit systems), exterior systems (lighting systems, bumper systems), powertrain systems (electrical conversion, energy management, fuel storage and delivery) Plants Australia, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, India, Italy, Mexico, Philippines, Poland, Portugal, South Korea, Spain, Taiwan, Thailand, UK, USA Sales Group: US$17.7bn (14.1bn, 31 December 2003) (Year to 31.12.03) Employees Group: 72,000 (2003) As of 30 June 2001, Visteon reorganised its Dynamics & Energy Conversion, Comfort, Communications & Safety and Glass reporting divisions into two segments: Automotive Operations (97% of 2003 sales) and Glass Operations (3%). Around 67% of Visteons business was generated in the US in 2003. However, the firm has a significant and growing presence in Europe (18% of sales in 2003), with several key contracts gained in recent years. Visteon has more than 135 manufacturing sites, 60 of which are in North America and 44 in Europe. In addition, there are 43 technical centres. In May 2002, Visteon announced plans to move its global headquarters from Dearborn, Michigan to Van Buren, Michigan (US), where the new Visteon Village should be completed in mid2004. Visteon counts over 50 OEMs and first tier suppliers among its customers, including: DaimlerChrysler, Fiat, Ford, General Motors, Honda, Jaguar, Nissan, PSA Peugeot Citron, Renault, Toyota, and Volkswagen. In the year to 31 December 2003, sales to non-Ford customers totalled 24% of total revenue, a record figure. Visteon is one of the worlds largest automotive suppliers, created in 1997 as Fords integral supplier and listed as an independent company since June 2000. Visteon is a world leader in supplying complete cockpits, axle, chassis and driveline components and modules, and high-end automotive telematics and multimedia, predominantly to OEMs. The company also has a glass division that sells to automotive and non-automotive customers.

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Recent Developments Corporate strategy Visteon is growing organically by opening new and expanded facilities around the world, and is broadening its technological expertise by establishing joint-venture agreements with other companies. The company's on-going aim is to reduce its dependency on Ford as a customer, lifting non-Ford revenue to over US$6bn in 2005, compared to US$4.2bn in 2003. In July 2002, Visteon announced plans to restructure its European manufacturing operations in order to improve its cost base and increase its competitiveness in the region. These restructuring plans, under the banner of the European Plan for Growth, were largely completed at the end of 2003 and are expected to result in annual pre-tax savings of around US$100m (101.7m, 31 July 2002) by 2004. In December 2003, Ford and Visteon renegotiated the terms of their 2000 separation. Under the new set of agreements between the two: Visteon is relieved of about US$1.7bn (1.35bn, 31 December 2003) of an estimated US$3bn (2.39bn, 31 December 2003) in post-retirement health care and life insurance benefit obligations to former Ford hourly UAW employees who were assigned to Visteon. Funding of the remaining obligations for Visteon employees who came from Ford will be extended over an additional 29 years, reducing Visteons cash needs. Visteon and Ford will share the cost of setting up separate computer systems. Visteons exposure to UAW profit sharing for former Ford employees will continue to be capped. Visteon has paid US$150m (119.5m, 31 December 2003) for 2003 North American price reductions for the next four years. Ford will revise payment terms over the next three years, resulting in accelerated payments to Visteon for parts supplied to the OEM. Acquisitions Visteon made several strategic acquisitions in the late 1990s, which led to new product capabilities and an increase in sales, with new customers including Renault, Fiat and Volkswagen. In December 2000, Visteon acquired LTD Parts of Tennessee (USA), a remanufacturer of starters and alternators, to expand its aftermarket operations. In April 2003, Visteon Sistemas Interiores Espana, Visteons Spanish subsidiary, acquired Grupo Antolin s instrument panels assembling unit, Antolin-IPV, based in Almusafes, near Valencia, eastern Spain, for an undisclosed sum. Divestments On 5 March 2003, Visteon announced it would exit its seating business located in Chesterfield, Michigan (USA). The Chesterfield plant currently provides seating systems to Ford. Ford will now source current model seating business at Chesterfield to Johnson Controls Inc, and operations will be transferred to Johnson Controls local facilities over a transitional period. Visteon has previously identified its seating business as non-core. Exiting that business allows Visteon to focus its product portfolio and resources on growth-oriented businesses. In support of Visteon's strategy to pursue growth in its core businesses, Ford will award additional interiors business to Visteon's Utica, Michigan (USA) facility. In February 2003, Visteon announced it is planning to sell its US steering column operations in order to focus on its better-positioned steering gears and pumps business. During the first quarter of 2002, Visteon completed the sale of its restraint electronics business to Autoliv, including the associated manufacturing operations in Markham, Ontario (Canada). As part of the sale, around 350 Visteon employees were transferred to Autoliv. Visteon and Pilkington plc of the UK announced the end of discussions regarding the sale of 80% of Visteon's glass division in November 2000. In Oct 2000, Visteon announced the end of its joint-venture with Decoma with the sale of its 49% stake in the Conix group, which manufactured moulding and finishing components. Joint-ventures In May 2003, Visteon formed a joint venture with Nissan and tier 2 supplier Lextron in the US. The venture is 51% owned by Lextron and assembles cockpits for Nissans new Quest minivan. It also assembles the cockpit and front-end modules for the Nissan Titan 436 AutoBusiness Ltd

Company profiles full-size pickup and Nissan Pathfinder Armada full-size SUV. The joint venture, which will eventually employ around 175 people, will handle an estimated US$1bn of parts a year, most of them made by Visteon. In February 2003, Visteon announced it had formed a ten-year, approximately US$2bn (1.86bn, 28 February 2003) agreement with IBM. IBM will deliver a wide range of IT services, which will allow Visteon to focus on its core business operations. In December 2002, Visteon agreed to work with technology solutions provider QinetiQ on electronic technology for the automotive industry. The priority is to develop a 'cognitive manager' for cars, which will draw on technology originally developed for military aircraft pilots. In December 2001, Visteon agreed to co-operate with PSA Peugeot Citron in developing future innovative technologies in the areas of body electronics, chassis, climate control, interior and lighting, powertrain and fuel systems. In October 2001, Visteon signed a long-term joint development agreement with Boston Acoustics, Inc., to provide premium audio systems to selected vehicle manufacturers. In August 2001, Visteon established a strategic alliance with iBiquity Corp., the result of a merger between USA Digital Radio and Lucent Digital Radio. This aims to bring about more broad and rapid use of digital radio across North America. Visteon already had close links with Lucent Technologies Inc., in the development of wireless technologies. In January 2001, Visteon agreed with XM Satellite Radio to develop satellite digital radio receivers for automotive application. In December 2000, a co-development project with Hyundai America Technical Centre was signed to develop more efficient climate control, improving fuel economy and emissions. In October 2000, Visteon established a partnership with Kayaba Industry of Japan to develop leading-edge steering systems. Also in October 2000, Visteon set up a 70/30 joint-venture with Nichirin Co Ltd, of Japan, to provide hose manufacturing expertise and support in Europe. Based at Rychvald (Czech Republic), production commenced in late 2001.

Investments In December 2003, Visteon announced the start of operations at its new European Corporate Office and Innovation Center in Kerpen, Germany. The new facility houses Visteons corporate operations for Europe and South America, including various management functions in the product development, sales and manufacturing planning and administration departments, which will coordinate the work of 23,000 employees at over 70 locations throughout Europe and South America. Visteon has relocated operations from its former offices in Cologne and Moerfelden-Walldorf to the new centre in Kerpen. The transition took place in October and November before completion in December. Approximately 800 employees from 15 different countries now work in the new office. In November 2003, Visteon moved its Asia-Pacific headquarters to Shanghai (China) from Japan. In August 2003, Visteon established a new compressor production facility in its Alba plant in Szekesfehervar (Hungary). The plant manufactures variable displacement swashplate compressors for automotive air conditioning systems. The US$30m investment allows Visteon to produce up to 600,000 compressors annually at its Hungarian facility. The new compressors are used in Fords recently launched Focus CMax. In July 2003, Visteon announced the opening of its technical centre in Chihuahua (Mexico). The Visteon Mexico Technical Center will focus on engineering products for electronics and chassis systems. The electronics products will include instrument clusters, telematics and modules for climate control and powertrain systems. The chassis products will include steering and suspension systems. The technical centre is responsible for design and engineering to support current and future models. It also assists in the development of new suppliers and helps achieve quality improvements and cost reductions in the manufacturing plants. In July 2003, Visteon revealed it will invest 49m to upgrade and expand its capabilities at its Palmela facility in Portugal. The investment will broaden the current product line and better equip the plant to meet the needs of customers, including Volkswagen, BMW and Renault. Most of the 49m investment will be used to purchase new equipment. In addition, a new product engineering centre will be built to enhance product development AutoBusiness Ltd 437

Automotive Technology Roadmap capabilities on site. The plant produces audio products, instrument clusters, climate control units and air conditioning compressors In February 2003, Visteon announced plans to open two new facilities near Volkswagen's Emden and Mosel sites in Germany. The facilities will manufacture and assemble state-of-the-art fuel tank systems for the new Volkswagen Passat. The plants will be fully operational by late 2004. In May 2002, Visteon announced plans to build new European headquarters in KerpenSindorf (Germany). Visteon also announced plans to move the companys global headquarters from Dearborn, Michigan to Van Buren, Michigan (USA). Also in May 2002, in order to meet a door panel contract from PSA Peugeot Citron, Visteon announced the construction of a new production plant in Rennes (France). In the same month, Visteon opened its new US$23m (24.6m, 31 May 2002) Aeropuerto plant in Apodaca Country, Nuevo Len (Mexico). The plant produces automotive safety electronic devices and employs 900 people. In February 2002, Visteon opened a new plant in Port Elizabeth (South Africa). Around 50 staff work at the plant and produce air fuel charge assemblies for Fords Rocam engine. In September 2001, Visteon announced the opening of a technical centre in KerpenSindorf, near Cologne (Germany) for the development of climate control and fuel systems. In February 2001, Visteon announced expansion and modernisation plans for the Rougegott plant in France, including a hydro-soluble paint line, dedicated to the production of the Peugeot 206 model. This will decrease environmental damage compared to traditional paints used in automotive interiors.

Contracts In April 2004, the company announced it will supply the hard mold-in-color instrument panel, door trim and console for an upcoming Jeep vehicle. Also in April 2004, Visteon started to deliver to PSA Peugeot Citron a complete heating and ventilation system (HVAC), an electronic control module for the climate unit, air conditioning hoses, and door panel and trim assemblies for the new Peugeot 407 model. The premium audio system in the new Chrysler 300 series of vehicles incorporates Visteons Digital Signal Processing (DSP) and sound management capability with Boston Acoustics speaker design and acoustic expertise. In November 2003, Visteon announced it would supply AM-FM radios, CD and MP3 players for all Volkswagen truck and car lines in Brazil. In October 2003, Visteon announced it had been selected to supply a family entertainment system for the new Volvo XC90. This model is available with an optional overhead entertainment system designed for rear seat passengers. Visteon is supplying the new Ford C-Max MPV with a dual-zone climate control system, instrument cluster, panel and centre console, remote rear-seat audio controls, oil and water pumps, ignition coil, throttle body, fuel filters, halfshafts and disc brakes. In February 2003, Visteon won a contract to supply its unique thermoformed fuel tanks for future General Motors vehicles. In 2002, Visteon won a contract to supply air conditioning compressors to DaimlerChrysler. In 2002, Visteon won a contract to supply in-vehicle entertainment systems on the Volkswagen Sharan van. In 2002, Visteon announced it would supply interior, electrical, climate and chassis systems on the Ford Fusion. In October 2002, it was announced that Visteon is supplying the instrument cluster, accumulator and plastic trim for the new Renault Mgane. In May 2002, Visteon announced that it had obtained the contract to supply Ford with front-end integrated assemblies, cockpit systems, fuel storage systems, and climate control systems for two 2004 high-volume models. Visteon supplies its Slip-In-Tube Propshaft to the current versions of General Motors GMC Savana and Chevrolet Express vans. This new propshaft design can reduce weight and vehicle noise, while increasing vehicle safety. In September 2001, Visteon won the contract to supply interior products and climate control components to Renault Mexico. Instrument panels for the Clio are produced in the Carplastics plant in Monterrey (Mexico) which already produces this product for the 438 AutoBusiness Ltd

Company profiles Renault Scenic. In August 2001, Visteon secured a contract to supply DVD Rear Seat Entertainment systems to MOPAR, DaimlerChryslers OE replacement parts division, to be available on all 2002 model year minivans in North America and Europe. In June 2001, Visteon announced a contract to supply Toyota Europe with almost 40 interior trim and climate control components from Gondecourt and Bellignat in France, as well as security electronics, developed in Germany and manufactured in Cadiz (Spain). These products are used in the manufacture of the new Yaris. This contract is the first time Visteon has supplied security products to Toyota Europe. In February 2001, Volkswagen awarded Visteon a contract to supply fuel tank assemblies on the new Golf platform. The tanks are manufactured in Alba (Hungary).

New Product Developments In 2003, Visteon spent US$903m (719m, 31 December 2003) on research and development, or 5% of total sales, unchanged from 2002s research & development expenditure. Visteon's focus is in driving forward its telematics division, coupled with improved design processes: With QinetiQ, Visteon is working to develop a 'cognitive manager' for cars. The system will handle all the information being delivered to the driver with the intention of minimising the load on the driver's attention. Smart Radar Cocoon system: Involves radar, adaptive cruise control, lane change aid, and side object warning systems to provide enhanced occupant safety by monitoring the near and far space around the vehicle and its predicted direction of travel. Advanced Front Lighting System: Works in conjunction with smart radar to optimise beam pattern dependent on weather and traffic conditions. Visteon Bluetooth Interface: Combines Bluetooth wireless technology with Visteons voice control systems to provide occupants with voice recognition control of entertainment and climate control along with remote mobile access to information technology. SuperIntegration: applied to cockpit and front-end modules, this process allows cost and weight saving with considerable design flexibility. Visteon is also working to develop plastic fuel tanks and fuel systems to meet tough new emissions standards, such as its twin sheet thermoformed plastic fuel tank system.

At a presentation in Detroit in March 2004, the company highlighted a number of new products: New premium audio systems developed jointly with Boston Acoustics; Voice-activated Bluetooth wireless phone systems; Integrated cockpit modules; HID projector headlamps; LED lighting technology; and HD digital radio systems

Financial Overview Visteons worldwide sales in the year to 31 December 2003 were US$17.7bn (14.1bn, 31 December 2003), down 4% from US$18.4bn (17.6bn, 31 December 2002) in 2002. Visteon reported an operating loss of US$1.13bn (900m, 31 December 2003) in 2003, compared to an operating loss of US$81m (77.3m, 31 December 2002) in 2002. For full year 2003, Visteon reported a net loss of US$1.2bn (956m, 31 December 2003), including special charges of US$947m (754m, 31 December 2003) after taxes. These special charges include US$468m (373m, 31 December 2003) for deferred tax valuation allowances and a US$260m (207m, 31 December 2003) asset impairment charge. Restructuring charges included US$139m (111m, 31 December 2003) for exiting the seating business and US$45m (36m, 31 December 2003) for the European Plan for Growth. Automotive sales for full year 2003 were US$17.1bn (13.6bn, 31 December 2003), down 4% from the previous years US$17.8bn (17.0bn, 31 December 2002). Glass sales amounted to AutoBusiness Ltd 439

Automotive Technology Roadmap US$563m (449m, 31 December 2003), a drop of 6% compared to US$598m (571m, 31 December 2002) in 2002 Outlook Visteon is making progress towards reducing its dependency on Ford although the relationship with the former parent is still strong and the supplier must ensure that new, non-Ford business carries worthwhile margins. The companys cost structure still appears too high and current measures to reduce bought-in costs are undoubtedly vital. The recent renegotiation of elements of the separation agreement with Ford should help reduce future employee-related costs. The product portfolio continues to be slimmed although this strategy still has some way to run before loss-making or low-margin businesses are exited fully. The European operations have been the subject of a restructuring programme and the full benefits of this should kick-in in 2004. Financial performance remains deeply unsatisfactory but the company clearly retains considerable strengths, including a deep understanding and experience of systems and module integration, an advantage in the consolidated market and growing modular business. Its size, technological and engineering resources should enable Visteon to overcome the weaknesses derived from its heritage as Fords components division namely: over-reliance on Ford and its affiliates, which will become more pointed as Ford comes to treat Visteon as an independent supplier; and the need to establish credibility with OEMs and suppliers across the globe.

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Wagon
Door and bumper systems
Address Wagon plc 1 Kingmaker Court Warwick Technology Park Warwick, CV34 6WG UK Tel: +44 192 647 5000 Fax: +44 192 647 5050 Internet: http://www.wagon-plc.co.uk Senior Officers David Kendall, Chairman David Sleath, Finance Director and acting CEO Products Bumper armature systems, body structures (steel, aluminium, and magnesium) door systems, glazed assemblies, sun blinds, seat rails and roof bars Plants Belgium, Czech Republic, France, Germany, Italy, UK, USA Sales Group: 408.9m (596.6m, 31 March 2003) (Ongoing activities, year to 31.03.03) Employees Group: 5,276 (31 March 2003) In the year to 31 March 2003, Wagons automotive sales amounted to 408.9m (596.6m, 31 March 2003) and this represented the value of the ongoing businesses. Of this total, the manufacturing plants contributed 327.5m (477.8m, 31 March 2003), sales of tooling and prototypes generated 59.2m (86.4m, 31 March 2003) and sales of engineering consulting services were 22.2m (32.4m, 31 March 2003). Since the disposal of its storage division, Wagon now focuses on the three key areas of: Automotive Manufacturing; Engineering Consulting; and Design and Build where the skills of both the automotive manufacturing and engineering consulting arms are combined to offer an integrated solution. Continental Europe accounted for 77.5% of automotive sales by destination in 2002/03, whilst 17.3% came from the UK market and the remainder from elsewhere, mainly the US. Wagon supplies components used on over 100 different car models. Major customers include Audi, BMW, DaimlerChrysler, Fiat, Ford, Honda, Jaguar, Land Rover, Opel, PSA Peugeot Citron, Renault, Saab, SEAT, Skoda, Toyota, Volkswagen and Volvo. The top five OEM customers are Renault (25% of 2002/03 sales); Audi (12%); PSA (12%); Ford (6%); and Ford PAG (5%). In 2001, the Group relocated its headquarters from Birmingham (UK) to Warwick (UK) and at the same time established the head office of the engineering consulting business at the same location. Wagon is an engineering group focused on the design, engineering and manufacture of vehicle body structures, door systems and special products. Following the sale of its Storage Systems division in July 2002, 97% of Wagons business is automotive. Wagon manufactures door systems (29% of continuing 2002/03 sales), body structures and pressings (32%), crash systems (3%) and special products (8%). Tooling contributed 19% of sales and engineering consultancy 6%.

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Recent Developments Corporate strategy In the past three years Wagon has undergone a comprehensive restructuring, involving the sale of non-core businesses and developing its core competencies in the automotive industry. In July 2002, Wagon completed the sale of its storage systems division to the Whittan Investment Group for 60m (96.1m, 31 July 2002) cash. Wagon has achieved leadership positions in the markets for structural door frames and door components utilising modular technology, helped by strategic acquisitions. It is also one of the market leaders in supplying bumper armature technology to European OEMs. The company has focused on enhancing its technological capabilities. Following the acquisition of Hawtal Whiting, the Group employed around 1,200 vehicle engineers in 15 offices in Europe, as well as North and South America, a presence which has now been cut back. The group has broadened its international base in order to better serve the needs of its global customers. Over recent years, acquisitions have been completed in Germany, France, Belgium, Italy, the Netherlands and the Czech Republic and the acquisition of Hawtal Whiting increased the group's exposure both in Europe as well as North and South America. In March 2003 Wagon announced a restructuring programme, which is now largely implemented. This involved the creation of a pan-European supply business encompassing all of the groups 18 manufacturing locations, together with the establishment of four product focused business groups, to lead the commercial and technical development of the core product capabilities doors, structures and pressings, crash systems and special products. A comprehensive review of the optimal configuration of the manufacturing locations has led to strategic investment being targeted in particular areas in order to support growth. For example, as noted below, the Bela facility in the Czech Republic is attracting investment, while rationalisation is underway at others the Waldaschaff, Germany facility could eventually see 170 headcount reductions and 4.4m (6.42m, 31 March 2003) of restructuring costs. Operations will progressively adopt common processes and systems in order to achieve standardisation, sharing of best practices and cost reductions. The engineering consulting services area was also the subject of a fundamental rationalisation in September 2002, triggered by the cancellation of a major vehicle programme by a customer in the UK. Wagon acknowledged that the market for independent engineering consulting has deteriorated rapidly in the last two years, with OEMs significantly reducing the volume of outsourced work. Withdrawal from the provision of stand-alone engineering consulting services in the UK was finally announced at the end of 2003. The US arm of the consulting business remains under evaluation. Acquisitions and divestments As noted above, Wagon has recently withdrawn from engineering consultancy services in the UK and a question mark remains over the remaining US business. In October 2000, Wagon acquired the design group Hawtal Whiting, which had gone into receivership, an acquisition that was intended to strengthen Wagon's presence in North America and to improve its automotive design and engineering capabilities. Crash system business prospects were enhanced in the second half of 2003 by a technology sharing agreement with Accra Teknik AB; Wagon has agreed to acquire up to 20% of the Swedish company. The key divestment in 2002 was the sale of the storage systems division for 60m (96.1m, 31 July 2002). In 2001, Wagon closed its Telford (UK) plant with a loss of 170 jobs. In November 1999, Wagon acquired Aries Structures for 77m (122m, 30 November 1999). Aries was a leading European supplier of door systems and body structures, with a workforce of 2,000 and strong customer links with Renault, PSA and Fiat. Investments In 2002, Wagon invested in its Brownhills (UK) facility and its Fleurus (Belgium) facility in support of the new Ford Fiesta programme. Door frames are assembled in Belgium and 442 AutoBusiness Ltd

Company profiles bumper armatures at Brownhills. In 2002, investment was made in Ste. Gauburge (France) to create a specialised aluminium facility. The site offers class-leading technology in aluminium door systems to French vehicle makers. Production includes the doorframes for the Renault Vel Satis and a new range of aluminium doorframes for the current Renault Espace. In 2002, investment was made in Waldaschaff (Germany) in a number of manufacturing lines, including a dedicated facility for the manufacture of door structures for Jaguar, and programmes for customers including Volkswagen, Mercedes-Benz and Audi. In 2002, a new plant was constructed at Fontaine (eastern France) in support of the first of the design and build contracts. This facility commenced the production build-up for body structures for the Peugeot 307 coup-cabriolet in the first half of 2003. All product design was PSAs responsibility but Wagon has responsibility for manufacturing process development and overall program planning and management. This represents a new and higher risk manufacturing departure for Wagon, which supplies the doors, boot lid and structural parts from the 60m Fontaine operation. PSAs Sochaux plant is a few kilometres down the road from Wagon's Greenfield site. The focus of the Fontaine operation is on project management and logistics, taking in sub-components from Peugeot itself and other suppliers and assembling large and small parts for sequenced delivery back to Sochaux. The plant utilises 220 procured components (all stamped components are supplied from other Wagon sites or third parties) and produces nine high level sub-assemblies and 22 smaller assemblies into PSA Sochaux. The main product sub-assemblies are the body side (A panel), rear unit, boot (A panel), doors (A panel) and back panel. Manufacturing processes embrace spot welding, mag welding, gluing and hemming. In 2002, Wagon invested 2.3m in the upgrade of its plant in the Orne region of northern France. Recently, Wagon has expanded its operations at Bela in the Czech Republic. This was done in order to accommodate presses transferred from the companys plant in Obertshausen (Germany). The former Skoda pressings facility at Bela has benefited from extensive investment since the 6m (8.53m, 31 March 1998) acquisition of the factory from Blaimer International in March 1998. The plant has now become the most efficient in Wagons European manufacturing network with a ppm reject rate of close to 20, down from 1,400 in 2000. The key investment has been in a new 3.5m (5.11m, 31 March 2003) press hall, which has been constructed to world class standards and uses presses ranging from 250-630 tonnes. Labour turnover is very low. The plant is extending its customer base outside of the Czech Republic, most notably to Porsche and Volkswagen in Slovakia (Cayenne/Touareg tailgate pressings) and Fiat in Poland (pressings for the new Panda).

Contracts In 2002/03 Renault was the biggest customer, accounting for 25% of manufacturing sales with PSA and Audi in joint second place with 12% each. Structures and pressings contributed 32% of turnover and doors and closures 29%. Sales of tooling are also an important business area, contributing around 19% of turnover in 2002/02. Turnover in France generated 41% of sales by destination. The most important programmes in 2002/03 were the Audi A4 (24m (35.0m, 31 March 2003) in revenues), Renault Espace (17m (24.8m, 31 March 2003)), Renault Laguna (16m (23.3m, 31 March 2003)), Renault Magane/Scenic (14m (20.4m, 31 March 2003)) and Audi A6 (14m). Wagon is supplying the roof structure for the Citroen C3 Pluriel. Supply of Ford C-Max door frames. Wagon is supplying the doorframe structures and bumper armatures for the new Ford Fiesta. Wagon will supply door frames for the next Ford Focus programme. Wagon supplies door frames for the Renault Vel Satis and Espace. Wagon makes body structures for the Peugeot 307 coup-cabriolet. Wagon currently has programmes with Jaguar, Volkswagen, Mercedes-Benz and Audi. The company is supplying tailgate pressings for the Volkswagen Touareg/ Porsche Cayenne models.

Major projects secured for launch in 2004/05 and 2005/06 include the Audi A3 Avant and A6, Land Rover Freelander and Discovery, Renault Twingo, Opel Astra, Fiat largecar, Alfa Romeo 157 and Peugeot 207. AutoBusiness Ltd 443

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New Product Developments At present, the level of development work being undertaken is at record levels. Wagon has four centres of technical excellence in Europe; each develops one of Wagons main product areas of door systems, body structures, bumpers, and windows. Wagon invests heavily in the development of lightweight structures in order to maintain its position at the leading edge of lightweight material technology. As such, Wagon has 20 years experience in providing aluminium fabricated structures and is the first company to offer serial manufacture of body structures using magnesium (30% lighter than aluminium equivalents). New growth areas include the use of closed section boron steel in the crash management activities, and development of glazed assemblies - Wagon is currently evaluating supply possibilities for panoramic roof modules. Financial Overview In the year ended 31 March 2003 the group's sales from continuing (automotive) sales grew 6.4% to 408.9m (596.6m, 31 March 2003) from 384.4m (628.9m, 31 March 2002) in the previous year. Without positive currency developments, the sales increase would have been 3%. Wagon noted that European OEM production volumes were broadly unchanged from the previous year but that sales were helped by the addition of around 52m (75.9m, 31 March 2003) from new production projects in their ramp-up phase, which was partly offset by the loss of some 36m (52.5m, 31 March 2003) from production projects either ending in the year or in their run-out phase. Operating profit on continuing operations before exceptional items and goodwill was 17.5m (25.5m, 31 March 2003), but 10.9m (15.9m, 31 March 2003) after. Reported margins were adversely effected by restructuring costs and other expenses of 5.6m (8.17m, 31 March 2003) and the fact that reported margins are low in the early months of production start-ups, of which there were a high number in 2002/02. The underlying operating margin (before exceptionals and goodwill) from continuing operations was 4.3%. This compares with 5% in the prior year and an average of around 6% for the three years to 2000/01. Results for the first half of fiscal 2003/04, ended 30 September 2003 showed that recent sales and earnings momentum has been maintained, driven by good performance from recent model launches. Sales from continuing operations rose 12% to 228.3m (328.3m, 30 September 2003), despite the fact that underlying OEM production volumes were slightly reduced. Manufacturing-related sales were 219.4m (315.5m, 30 September 2003), a figure that included 31.8m (45.7m, 30 September 2003) of sales of tools and prototypes. New model programs driving revenue growth include the Jaguar XJ8, Renault Espace, Citroen C3 Pluriel, Ford Fiesta and Peugeot 307CC. Target revenues for the 307CC for 2003/04 are at least 40m and for the Ford C-Max (ramp up began in September 2003) 8m. Operating profit from manufacturing sales was 11.4m (16.4m, 30 September 2003), a margin of 5.2%, but a 1m (1.44m, 30 September 2003) loss from engineering consulting pulled the group operating profit back to 10.4m (15.0m, 30 September 2003). Cash flow was positive in the first half of the year and net debt was reduced to 50.6m (72.8m, 30 September 2003). Outlook Wagon has experienced some difficulties in the last 18-24 months and is continuing to restructure its businesses in order to improve ongoing operating margins. The engineering consulting activities proved a particular problem and exit from these operations was sensible. Wagon has remained optimistic for the second half of the year ending 31 March 2004, based on expectations for continued sales growth from the Fontaine facility and a gradual move to a positive return there. However, this was expected to be partly offset by reduced volumes on several other programs. The focus now is on driving efficiency through the manufacturing network, extension of project management capabilities and organic growth based on new program launches. In all these areas Wagon appears to be making significant progress. Many OEMs are increasingly looking to outsource in the stampings and pressings areas and Wagon 444 AutoBusiness Ltd

Company profiles is well placed to benefit from this, especially as the supply structure for these components remains fragmented. A return to acquisition-led growth cannot be ruled out in the future but in the short and medium term the focus will remain on consolidating returns from recent investment.

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ZF
Transmission, chassis components and steering systems
Address ZF Friedrichshafen AG Allmannsweilerstrae 25 88046 Friedrichshafen Germany Tel: +49 7541 770 Fax: +49 7541 7790 8000 Internet: http://www.zf.com Senior Officers Siegfried Goll, Chairman and CEO Paul Ballmeier, Executive Vice President Finance, Information Technology Michael Paul, Executive Vice President, Car Driveline Technology division Products Car transmissions, chassis technology, commercial vehicle special transmissions, off-road driveline technology, powertrain systems, steering systems Plants ZF Group: Argentina, Austria, Belgium, Brazil, China, France, Germany, Hungary, Italy, Japan, Mexico, South Africa, Spain, Turkey, UK, USA ZF Lenksysteme: China, France, Germany, Malaysia, Spain, UK, USA Sales Group: 9.3bn (Year to 31.12.03) Employees 53,300 (2003) ZF Friedrichshafen is a leading manufacturer of chassis components, transmissions, steering systems, axles and complete modules for the automotive industry. In 2002, the automotive industry generated 84% of Group sales. The company operates through six vehiclerelated manufacturing divisions: Car Driveline Technology 20.4% of Q1 2003 sales Powertrain and Suspension Components (ZF Sachs) 20.4% Car Chassis Technology 16.4% Commercial Vehicle and Special Driveline Technology 14.0% Off-Road Driveline Technology and Axle Systems 12.4% Steering Technology operates through ZF Lenksysteme GmbH (a joint-venture between ZF and Bosch) 9.1% In addition, there are four business units Rubber-Metal Technology; Marine Propulsion Systems; Aviation Technology; and Aftermarket Trading. In May 2002, ZF created the ZF Boge Elastmetall unit, by consolidating the rubbermetal operations of ZF Sachs Boge and ZF Lemfrder Elastmetall. Also in May 2002, ZF formed a new aftermarket organisation, ZF Sachs Trading, by combining the activities of ZF Sachs Handel and ZF Lemfrder International. ZF hopes that it will be able to benefit from synergies and growth potential by combining the expertise of these groups. ZF has a 76% stake in the German chassis component supplier, Lemfrder Metallwaren AG. ZFs main automotive customers include BMW, Ford, DaimlerChrysler and Volkswagen. At the beginning of 2004, ZF operated at 119 locations in 25 countries worldwide. In 2002, Western Europe was ZFs largest market, generating 67.1% of total sales. The NAFTA region, Mercosur and Asia-Pacific contributed 22.2%, 2.2% and 5.4% respectively. 62% of 2002 sales went to car and light vehicle applications and 21% to the heavy truck sector. 61% of sales were in the driveline area and 39% in the chassis segment.

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Recent Developments Corporate strategy In January 2002, ZF Friedrichshafen said that it planned to increase its sales by 50% in the next five years, making it one of the world's top ten suppliers. The acquisition of Sachs in 2001 positions ZF as a leader in transmission and chassis technology. Other recent joint-ventures and acquisitions have broadened the company's geographical reach and have helped to strengthen its operations in its core business areas. ZF is looking to achieve growth through new product launches and it is focusing on developing complete modules and systems. At a time when the European market is slowing down, ZF is focusing more on its customers elsewhere in the world. ZF has particularly concentrated on extending its global presence in the NAFTA region and in Asia. In North America ZF has opened plants that supply complete chassis units for BMW and DaimlerChrysler. It currently employs around 6,000 people in the NAFTA region and annual sales in the area are around 2bn. ZF aims to generate 30% of its total sales in the NAFTA region by 2005. From 2002 to 2004 ZF will be investing US$700m (667.9m, 31 December 2002) to expand its engineering and production capacities in the NAFTA region. ZF is targeting annual sales growth of 20% in Asia within the next decade and has recently invested in several Asian countries. The region accounted for around 500m of sales in 2002 and employs 2,500 and the company has noted that once it has successfully expanded its business operations in the NAFTA region it plans to focus more strongly on emerging markets. Due to the declining margins seen in 2002, which were partly the result of an aggressive R&D and investment programme in the last two years (R&D expenses in 2002 accelerated 60% while group investments rose 74% between 2000 and 2002), ZF has also sharpened its focus on achieving improved productivity levels and has initiated a cost-cutting programme. A modular production structure oriented towards functional units in products, already in place at the Saarbrucken plant, is likely to be extended. Acquisitions In November 2001, ZF received the EU Commissions approval to acquire Sachs from Siemens. This purchase brought a leading shock absorbers business to complement and strengthen ZF's chassis activities, and Sachs clutch activities to round out ZF's transmission business. ZF now has a position in all the major areas of expected growth in the transmission market - automatics, CVTs and automated manuals. The unit was incorporated in the ZF group as the new Powertrain and Suspension Components division. In April 2000, ZF Passau, a ZF subsidiary, acquired tractor gearbox and axle producer, Steyr Antriebstechnik (SAT) of Austria from Magna. ZF acquired a majority stake in FKA GmbH, Aachen (Germany). FKA is active in the pre-design and development of components and systems, and complete vehicle concepts for the car and components industry Lemfrder acquired a 26% share in the renamed Sona-Somic-Lemfrder Ltd, which produces chassis components for the Indian automotive industry. Joint-ventures In November 2003, ZF signed an agreement on the foundation of a strategic joint venture with the automotive supplier FAWER. The new joint venture, ZF FAWER Chassis Technology Co. Ltd, is to produce chassis components and systems for passenger cars and commercial vehicles made in China. The planned product range includes chassis components from two of the corporate divisions of the ZF Group: the Car Chassis Technology Division and the Off-Road Driveline Technology and Axle Systems Division. ZF holds a 51% stake in the joint venture In December 2001, ZF Sachs formed a joint-venture with Horton Worldwide, an American specialist in fan clutches for heavy duty trucks. The joint operation is to be based in the Schweinfurt (Germany) area. This joint-venture further extends ZF Sachss reputation in the North American market. Since May 2001, ZF Sachs has had a joint-venture agreement with Korean 448 AutoBusiness Ltd

Company profiles manufacturer Kasco for the production of shock absorbers and pneumatic springs. Production started in August 2001. In October 2000, ZF Lenksystemes joint-venture with the Japanese firm Jidosha Kiki Co. (now called Bosch Braking Systems, Co.) began operations to produce steering systems in Japan. ZF holds an 80% stake in the venture. In March 2000, ZF, Iveco of Italy and Meritor Automotive (now ArvinMeritor) agreed to cooperate with the Indian firm, Ashok Leyland, in order to upgrade its commercial vehicle engine and transmission systems. Also in March 2000, ZF formed a joint-venture with AI Group (owned by the South African company DFI) and the Italian firm Brembo SpA. The venture, Auto Industrial Brake and Chassis Investment Holdings Ltd (AIBC), produces components for the South African automotive industry. ZF previously had a North American joint-venture with Ford to produce automatic gearboxes. ZF held a 51% stake in the joint company, known as ZF Batavia LLC. This began production of continuously variable transmissions in 2003. In early 2004, Ford assumed 100% ownership of this venture and ZF exited. ZF also has a 50/50 joint-venture with ArvinMeritor called ZF Meritor LLC. Shanghai Sachs Powertrain Components Systems Co., Ltd (China) is a 50:50 jointventure between ZF Sachs and Shanghai Automotive Industry Co., Ltd. ZF Sachs and Shanghai Huizhong Automotive Manufacturing Co. (China) have a jointventure, Shanghai Sachs Huizhong Shock Absorber Co., Ltd, to manufacture shock absorbers and suspension struts. Zua Autoparts, Inc., is a long-standing joint venture between ZF Lenksysteme GmbH and Unisia Jecs (Japan), and it manufactures steering systems.

Investments In 2003, ZF invested a total of around 729m, representing 8% of total sales. In March 2004, ZF announced it would build a new suspension components manufacturing plant in the Greater Hickory area, Newton, North Carolina. ZF Lemforder Corporation will operate the plant once it is opened during spring 2005. In 2003, ZF invested in new tooling for the production of car axle systems in Lebring, Austria and Shenyang, China. In 2002, ZF began construction of a new factory hall for passenger car suspension joints at Wagenfeld (Germany). The investment was said to total around 2.5m. In November 2002 ZF inaugurated an expansion of the Schweinfurt (Germany) development centre. The new building provides working space for over 400 employees. In September 2002, ZF announced that it was to build a new manufacturing facility for the production of car axle systems in Fords Supplier Manufacturing campus, Illinois (US). This facility is now ramping up for production and supplies of front and rear axle chassis systems for the Ford Freestyle and Ford Five Hundred will help boost sales in 2004. In September 2002, ZF Lemfrder opened a 40,000 square-foot expansion of its Duncan, South Carolina (US) facility. The expansion was completed to produce front and rear axle assemblies for the new BMW Z4 Roadster. In mid-2002, ZF expanded its Diepholz (Germany) location by 2,500 square metres, to 9,100 square metres. Around 3m was invested in the construction. In August 2002, expansion of ZFs Tusacloosa, Alabama (US) plant was reported. The investment increased manufacturing capacities by 33%. In April 2002, ZF opened its new development and planning centre in Damme (Germany). In March 2002, ZF Lemfrder Fahrwerktechnik announced plans to build a new assembly plant in Lebring (Austria). This now assembles front and rear axle systems for the BMW X3 model, production having started in autumn 2003. In February 2002, production of clutches and torque converters began at Shanghai Sachs Powertrain Components Systems Company Ltd. (China). This is a 50/50 jointventure company between ZF Sachs and the Shanghai Automotive Industry Co., Ltd. The company has also established Sachs Automotive Japan Corporation, which oversees business with Japanese vehicle manufacturers. In July 2001, ZF Southeast Asia Pte Ltd, a wholly owned subsidiary of ZF, announced the opening of a new 24,000 square feet site in Tuas (Singapore) in order to support its Asian customers with guaranteed 24-hour delivery. The operation serves as ZF's 449

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Automotive Technology Roadmap regional headquarters for South East Asia. In June 2001, Sachs' joint-venture with Shanghai Huizhong Automotive Manufacturing Co. opened a new manufacturing plant for shock absorbers in Shanghai (China). This has an annual capacity of 1.8 million units. During 2001, ZF doubled the size of its development centre at its headquarters in Friedrichshafen (Germany) and created jobs for 550 engineers. The company also constructed two plants at Passau and Gotha (Germany) in order to fulfil a VW contract to assemble drive axles for the T5 platform.

Contracts ZF supplies an electronic power steering unit for the new Volkswagen Golf and a continuous damping control (CDC) option for the new GM Astra. ZF Sachs supplies automation systems for manual transmissions to the Smart, the Ford Transit, and now the Citroen C3. ZF supplies axle drives for the Audi A8, VW Phaeton, Porsche Cayenne and Volkswagen Touareg. In August 2002, ZF Lemfrder, ZFs chassis division, announced a contract to supply front and rear axle chassis systems for the Ford Freestyle and Ford Five Hundred from the new facility in Chicago, US. Production is to begin in 2004. This is ZFs first chassis contract in North America with a non-German vehicle manufacturer. ZF supplies the electro-hydraulic power steering system, the gearshift system, stabiliser links and the suspension ball joints for the BMW Mini. It also supplies a CVT unit. ZF supplies the BMW X5 model with complete front and rear axles, automatic transmission, rack and pinion power steering system with steering pump, and chassis components. It also provides complete axle systems for the Mercedes-Benz M-Class and BMW Z3 and Z4 models. ZF supplies the Audi Allroad model with a 5-speed automatic transmission, control arms, a tiptronic gearshift system, stabiliser links, subframe bearings and tie rods. ZF's new 6-speed automatic transmission is supplied to the Audi A8, the BMW 7-series, the Jaguar S Type, XJ and XK models, VW Phaeton and the Rolls Royce Phantom. ZF has won a major contract to assemble drive axles for the Volkswagen T5 platform. Two plants in Passau and Gotha (Germany) have been constructed to handle this business. ZF started producing CVTs in Batavia, Ohio (US) at the end of 2003 for the 2004 Ford Focus C-Max. New Product Developments Total R&D expenditure for the ZF Group in 2002 amounted to 542m on sales of 9.2bn. ZF employs around 4,500 people world-wide in Technology, with 630 of these in the Groups Corporate Research and Development. The company invested around 120m in its R&D centres in 2000-02. there are four R&D centres in Germany (Friedrichshafen, Dielingen, Damme and Schweinfurt), and one in the US (Northville). In May 2003 the company commenced a 148,000 square-foot expansion of the Northville centre, which, when completed in October 2004 will total 246,000 square feet and house 500 staff. It will also combine all ZF R&D personnel under one roof. Currently, all ZF Sachs R&D is done at the Sachs Technical Centre in Troy, Michigan. ZF is the first supplier to produce a six-speed automatic gearbox for passenger cars and expects this will replace five-speed gearboxes in the coming years. The Audi A8 was one of the first models to be fitted with this unit but it is now used also by BMW, Jaguar, Volkswagen and Rolls Royce. Six-speed automatic transmission production by the Saarbrucken facility is forecast to rise to almost 800,000 units in 2006, from almost nothing in 2000. Production of five-speed units will fall to around 50,000-60,000 units, from over half a million, over the same period. ZF's CDC has recently been introduced on Volkswagen Tourareg and Porsche Cayenne models. This ZF Sachs development consists of a set of sensors, a computer unit with intelligent software and actuators. The new design of the actuator is a proportional damping valve which can be used to alter damping forces between a minimum and maximum value, working across an infinitely variable range. The CDC is also available as part of an optional 450 AutoBusiness Ltd

Company profiles suspension upgrade package on the new Opel/Vauxhall Astra. The company has also developed the SureShift and the FreedomLine automated transmissions for trucks, which help to give improved driver focus by eliminating potential distractions. A new superimposed steering system (active steering), developed by ZF Lenksysteme, features in the new BMW 5 Series and ZF has high hopes for the unit, likening its comfort and safety advantages to those of the brake ESP system. Other R&D work by ZF includes the development of the wet starting clutch; optimisation of automated transmissions; active chassis systems; simulation of load cycles; and real time vehicle models. ZF Sachs has developed innovative components that achieve significant fuel reductions in the Volkswagen one-litre car. It features DynaStart, a crankshaft starter generator, and an impulse start clutch. This is the worlds smallest automotive clutch and measures just 130mm in diameter. When compared to a standard clutch model, it reduces weight by up to 70%. ZF's technological competence, size and willingness to invest further in its systems and modules ambitions make it an attractive potential partner to OEMs who are shifting to a modular or systems approach.. ZFs module and system developments include front and rear axle modules, steering systems, shift-by-wire transmission modules Financial Overview In 2002, sales for the ZF Group rose by 3% to 9.2bn, compared with 9.1bn in 2001. During 2002 ZF's Car Driveline Technology division saw its sales rise by 3% to 1.97bn, despite a generally stagnating market. Sales in the Car Chassis Technology division, benefiting from the upturn in the systems and component business in North America and Western Europe, increased by 7% to 1.7bn. Sales for the Powertrain and Suspension Components division totalled 1.96bn. The operating result, at 180m, represented just 2% of sales, down from 2.8% in the previous year. According to preliminary data, ZFs sales in 2003 amounted to 9.3bn, a modest increase from the previous year that was put down to weak economic conditions in the companys target industries and markets coupled with the strong increase in euro exchange rates. Outlook ZF is a highly respected supplier at the forefront of technological developments in the driveline and chassis technology areas. However, it is currently paying the short-term price for an aggressive investment and R&D strategy in the last two years. This has pulled operating returns well down from the 5% return on sales level regarded by the company as desirable. The short-term outlook remains cautious, although the company appears to be expecting a more significant increase in sales in 2004, despite competitive and pricing pressures and demands from customers for better service and products. The major pluses will be advances in the Asia Pacific region, where 20% growth is forecast for China, and in North America, where output from the new facility in Chicago gets underway later in 2004. In the longer term ZFs strengths should become more visible as new projects come on stream and reflect the increasing success of the six-speed automatic transmission range, especially in high torque applications, transaxles for SUVs, electrical steering systems, CVTs and complete front and rear axle modules. The share of business in modules and systems compared with total business is expected to rise from 25-30% currently to 50% in 2010.This should invograte topline growth although the impact of this on margins remains to be seen.

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