An IMAP INDUSTRIALS Report

Automotive and Components Global Report 2010

From Detroit to Beijin

and all points in betw een

IMAP M&A advisors co

nnect the automotive

industry around the w orld

Automotive parts remanufacturer

Remaco Group, LLC

United States
Acquired the shares of

Roll former of metal parts

Modineer

United States
Acquired the assets of

MD Rebuilt Parts Detzen GmbH

Automotive parts remanufacturer

Automotive roll former

Wagon Wixom

Germany

United States

You put the vehicles on the road. Thats your business. And its our business to ensure that when your company needs to expand,invest, divest or restructure, the way is paved for you.
IMAP KNOWS HOW TO GET THE DEAL DONE.

ADVISED THE SELLER

ADVISED THE SELLER

These recent closings demonstrate our reach and expertise in the automotive industry.

Antolin Group Automotive

Automotive Tier 1 supplier

Wild Manufacturing Group, Ltd.

High-precision automotive engineering company

Automotive metal fabrication and supplier

Revstone

Spain
Acquired shares in

United States
Acquired the shares of

United Kingdom
Acquired the shares of Press parts manufacturer for the automotive industry

Automotive interior trimming components manufacturer

Gong Zhu Lin Automotive Components Co., Ltd.

Undisclosed Seller

China

Hungary

Automotive tool supplier

Talhin/T Plastics Corp

Canada

ADVISED THE BUYER

ADVISED THE SELLER

ADVISED THE SELLER

Contents
(Click to Navigate)

Automotive Global Overview ........................................................... 4 M&A Activities in the Automotive Sector .......................................... 5 Trends and Expected Growth Areas ................................................... 6
Hybrid Vehicles ............................................................................. 6

Low Cost Cars .............................................................................. 7

Remanufactured Products .............................................................. 7

Governments Role ......................................................................... 9 Overall Outlook ............................................................................... 9 Statistical Reference (Appendices)

Leading Global Players ................................................................. A-i M&A Metrics ............................................................................. B-i Growth Fundamentals ................................................................. C-i

H O T Topic: Lithium Ion Batteries ..................................................

An IMAP INDUSTRIALS Report

IMAP, Inc. is a Delaware corporation. Its regional firms are independently operating in various jurisdictions under a variety of legal forms of organization. References to IMAP transactions, offices, locations and other similar associations should not imply any form of IMAP ownership or agency over the local firms or cause any liability between the local firms and IMAP whatsoever.

Left: Peugeot is working with Mitsubishi to develop its own version of the i-MiEV electric car. The four-seater iOn will launch in Europe by the end of 2010. Fitted with lithium-ion batteries, the iOn will have a range of 130km, and total power output of 47kW (64bhp) and 180Nm of torque.1
1 Source: http://www.indiaautomotive.net/2009/09/ peugeot-ion-electric-car-to-be-launched.html

IMAPs Automotive and Components Global Report - - 2010: Page 3

Economic deceleration
slowed the auto industry
Exacerbated by the economic slowdown, the global automotive sector, including auto manufacturing and auto component manufacturing (comprising engine parts, electrical parts, drive transmission and steering parts, suspension and braking parts, equipment, and others1) has contracted significantly. The auto manufacturing industry, which has always been a major driver of economic growth with 30 percent growth and creating nearly 60 million jobs worldwide between 1995 and 2005, witnessed a severe fall in total revenues with a compound annual growth (CAGR) of 0.75 percent between 2004 and 2008. Similarly, automobile components saw a CAGR of a mere 1.52 percent during the same period. The industry shrunk as demand declined and contracted by almost 18 percent during the first half of 2009.2 The three big players in the US (GM, Ford, and Chrysler), which represented 51.8 percent of the US market and 18.3 percent globally in 2007, were punished under the pressure of the slowdown GM and Chrysler collapsed, filed for Chapter 11 bankruptcy, and are now in the process of restructuring.

Shift in dominance
With the US reeling under the economic slowdown, there has been a shift in dominance to Asia-Pacific, which is fast emerging as the next automobile production hub, with a market share of 35.8 percent in value in 2008 compared to 30.7 percent by the US. As a result, Toyota and Nissan are fast gaining market share. Toyota surpassed GM as the largest manufacturer of cars in 2008, manufacturing 8.9 million vehicles against GMs 8.3 million.

Global Market Share By Region, 2008

30.70% 35.80% 26.70% 6.80%

Asia -Pacific

Americas

Europe

Rest of the World

Source: Datamonitor, IMAP

2,100 1,900 1,700 1,500 1,300 1,100 900 700 500

In Asia, China surpassed Japan with a vehicle production of 7.9 million (9.3 million in 2008) compared Global Automotive Industry to Japans 4.1 million (11.5 mil2,203.4 110.0 lion in 2008) for the year ended 1,907.8 104.5 1,839.2 1,845.1 105.0 July 2009. As a result, Japanese 100.0 98.1 automakers have restricted 1,784.3 95.0 capital investment for 2009 fol92.1 90.0 lowing earnings deterioration on 85.9 85.0 a global scale. Toyota Motors, 80.9 625.2 616.0 which has always been a forerun597.5 80.0 577.7 560.0 ner in expansion in international 75.0 markets, has decided to reduce 2004 2005 2006 2007 2008 Auto prodn. value (USD mn) Auto components prodn. value (USD mn) capital investments to 830 bilAuto Prodn. Vol. (mn) (RHS) lion yen (9.3 billion USD), below Source: Datamonitor, IMAP 1 trillion yen for the first time in six years. Similarly, Honda 1 For detailed sub-segment breakup, please refer to Statistimotors intends to reduce investcal Reference. ments by 200 billion yen (2.2 billion 2 Source: http://designative.info/2009/08/18/china-socialismUSD) and Mazda Motors plans to keep consumer-behavior-the-worlds-biggest-automobile-makerit at 30 billion yen (337 million USD). and-market/

China has been the front runner in the auto markets recovery, recording a year-over-year growth of 48 percent in June 2009 with 7 million units, sharply above the 5.9 million unit peak reached during March 2008 prior to the global economic slowdown.3 From 2003 to 2008, China doubled its automobile production, whereas the US saw its production decline by 50 percent. This leadership shift has been mainly attributed to increased government emphasis on developing infrastructure and providing subsidies to Chinese automobile manufacturers. A cut in retail taxes and increased vehicle subsidies in rural areas in China led to a 38 percent year-over-year rise in vehicle assemblies in June 2009. In addition to Asia, East European
3 Global Auto Report Scotiabank Group dated July 31, 2009

IMAPs Automotive and Components Global Report - - 2010: Page 4

Global Market Share By Company, 2008

62.4% 7.8% 8.1% 8.9% 12.8%

Toyota Motor Corporation Daimler AG Others

General Motors Corporation Ford Motor Company

Source: Datamonitor, IMAP

countries such as Poland, Czech Republic and Hungary are becoming favored manufacturing destinations. These countries have attracted huge foreign direct investment (FDI) in the recent past due to their close proximity to Western Europe, low labor costs and skilled workforce. Some Asian companies, including Korean car makers such as Hyundai,

which sell their automobiles in Western European countries, are shifting their manufacturing base to Eastern Europe rather than importing them to avoid tariffs. Similarly, a majority of automobile component production activities are concentrated in Japan,

China, India and Thailand due to the availability of cheap raw materials and increasing demand for automotive products from the domestic market. As a result, companies like Johnson Controls are increasing their focus on emerging markets such as India and China.

M&A declines, shifts to Asia

The global slowdown also led to a decrease in M&A activities in 2009 with the focus shifting to Asia. Through the end of September 2009, year-to-date transaction value in the automotive sector was only USD 2.9 billion, comprising 44 deals, compared to USD 44.8 billion with 195 deals during all of 2008.1 Asia accounted for the highest M&A activities with 74.9 percent in terms of value while the US and Europe held only 9.8 percent and 8.7 percent, respectively. In 2008, the largest deal worth USD 31.8 billion took place in the German automobile space between Schaeffler KG and Continental; whereas 2009s largest deal, valued at USD 1.07 billion, was in Asia between Hyundai Motors and Hyundai Mobis in South Korea. This was mainly due to the better position of Asian countries than Western ones amid the current economic slowdown.
1 Only M&A deals have been considered. Private placements, public offerings, and share buybacks have been excluded. 2 YTD As of Sept. 30, 2009

M&A Activities at a Glance

2008 Transaction Value (USD millions) Top 5 deals Segment Auto components Automobile manufacturing Top 5 regions Asia Europe Latin America US/Canada Others Top 5 countries South Korea United States Russia Brazil China 44,806.5 82.7% # of deals 34 10 # of deals 15 11 3 14 1 # of deals 3 12 2 2 5 2009 YTD2 2,890.6 78.6% Value (USD million) 1,309.6 1,581.0 Value (USD mn 2,166.2 250.7 184.6 283.1 6.1 Value (USD mn) 1,799.0 236.0 200.5 183.6 123.8
Source: Capital IQ, IMAP

IMAPs Automotive and Components Global Report - - 2010: Page 5

Automotive sector expected to grow in 2010

With the economy showing signs of revival, the global auto industry in terms of value is expected to pick up driven by renewed demand automobile production is expected to expand globally at a CAGR of 2.5 percent and auto components at 0.29 percent between 2008 and 2013. The majority of growth in the global automobile industry is expected to come from Asia Pacific (mainly China and India) and the Middle East with demand remaining flat in the mature US and European markets. While demand is expected to be led by China, India, and the Middle East, manufacturing is likely to be concentrated in Eastern Europe due to its close proximity to Western European nations. Demand from India and China is expected to go up, driven by rising population, increasing per capita income, improving infrastructure, and lower impact of the global slowdown. Additionally, auto-ownership penetration in these countries is much lower than in developed countries, indicating a huge potential (the US has a large penetration of 765 vehicles per 1,000 people compared to just 40/1,000 in China and 8/1,000 in India). On the negative side, demand from developed economies such as the US and Germany is expected to remain stagnant as this market is already saturated in terms of high penetration and increasing unemploy ment. The German Association of the Automotive Industry (VDA) predicts that vehicle sales will drop to 2.6 million units in 2010 from 3.5 million estimated for 2009.

Future Outlook of Global Automotive Industry

2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 2009e 2010e 2011e 2012e 2013e
Auto prodn. value (USD mn) Auto prodn. Vol. (mn) (RHS)

1,982.4

2,002.7

2,049.8

2,135.3

2,219.9 135.6

145.0 135.0

127.6 108.9 102.0 611.9 617.4 623.2 631.2 641.5 117.5

125.0 115.0 105.0 95.0 85.0 75.0

Auto components value (USD mn)

Source: Datamonitor estimates, IMAP

Hybrid vehicles are next growth area

Hybrid vehicles are expected to witness strong growth supported by environmental legislations by various governments on the use of cleaner and fuel efficient cars. The global market for hybrid vehicles is predicted to increase to more than 11 million a year by 2020, which is around 23 times the market size in 2008.1 The number of models is expected to increase from the current base of 19 models in 2009 to 150 by 2014 and 200 by 2019.2 The European Union should be the main demand generator for these vehicles with other developed and emerging economies following suit. Due to environmental concerns, all Western European countries levy some form of CO2 tax on passenger cars. France, the UK, and Luxembourg use CO2 emissions as the only factor for car taxation, whereas other countries apply a combination of factors, including car price, engine capacity, and CO2 emissions.

1 http://www.icis.com/Articles/2009/07/13/ 9231220/lithium-producers-set-to-benefitfrom-growth-in-hybrid-autos.html 2 http://www.azom.com/news.asp?newsID=19069

IMAPs Automotive and Components Global Report - - 2010: Page 6

More remanufactured products

With flat growth in the US, Europe and Japan, automakers are targeting emerging markets by offering no-frill cars to a larger section of the population

Remanufactured products are likely to increase in popularity over the next five to seven years due to their lower price points and competitive warranties (in addition to environmental benefits). With the emphasis on higher economic contribution per unit of product manufactured, remanufacturing regulations are expected to be tightened in the future to promote sustainable manufacturing, i.e., raising productivity with lower resource and energy consumption. Moreover, among various remanufacturing methods, independent remanufacturing (these firms work without cooperation with automotive producers or original product suppliers) is expected to be the most cost effective and have more potential in the future.1 Automotive product remanufacturing accounts for two-thirds of all remanufacturing and is a USD 53 billion industry in the US and more than USD 100 billion worldwide.2 Around 50 percent of original starter mechanisms are recovered via remanufacturing methods. In the US itself, this can lead to yearly savings of 8.2 million gallons of crude oil from steel manufacturing, 51,500 tons of iron ore, and 6,000 tons of copper and other metals. Rebuilt engines require only 50 percent of the energy and 67 percent of the labor that goes into manufacturing new ones.3
1 As per a study done by Hyung-Ju Kim, Semih Severengiz, Steven J. Skerlos, and Gnther Seliger. Independent remanufacturing is better than independent OEM (these firms produce their remanufactured product by a limited cooperation with automotive producers or original product suppliers) and integrated remanufacturing (these work with a closed cooperation with original product suppliers) based on economic comparison. 2 Economic and Environmental Assessment of Remanufacturing in the Automotive Industry - Hyung-Ju Kim, Semih Severengiz, Steven J. Skerlos, Gnther Seliger 3 http://apra.org/About/Reman.asp

Similarly, in Israel, a green tax was imposed from August 2009 onwards, which would make cars that pollute more expensive. On the other hand, outsourcing of motor components is expected to see an upsurge due to the increase in demand for hybrid vehicles and continuous decrease in prices of these automobiles. Currently, due to the limited volume of hybrid vehicles and absence of standardized technology across various companies, manufacturing of motors and other hybrid components is done in-house. To optimize this opportunity, motor component manufacturers must have a deep understanding of the specific automotive requirements and be responsive to the supply-chain, operational and technical needs of the hybrid automotive industry.

with the exception of China, which experienced a 5 percent decrease in this segment over the past five years due to increasing disposable income. As a result, companies such as GM, Bajaj, Nissan, and Renault are making substantial investments in this segment. However, this segment has its share of concerns: very low margins, the need for an alternate distribution channel compared to conventional ones, and development of tailormade marketing strategies according to country as well as for exporting to other potential regions such as the Middle East, Africa and various countries in emerging markets. Hence, the chances of complete erosion of margins are high in the event the marketing strategy is not effective enough. In the auto component sector, the hybrid segment is conducive for the entry of new firms with lean manufacturing techniques that can give them an advantage over established component players. Similarly, established auto component manufacturers will have to redesign their existing product portfolio to avoid falling in the low cost trap. This entails the designing of components from scratch. For example, with the aunch of Nano, German supplier Robert Bosch had to re-engineer some motorcycle parts into Nano parts, viz., starter engine, with the help of Indian engineers rather than their European counterparts.

Low cost car (LCC) segment to receive a boost in future

With flat growth in the US, Europe, and Japan, automakers are targeting emerging markets by offering nofrill cars (LCCs priced at USD 6,000 or less) to a larger section of the population. Even though margins are razor thin (23 percent in the case of the Tata Nano), volume potential is huge. According to a study by AT Kearney in 2008,3 cars priced lower than USD 5,000 have a very high volume potential in emerging markets such as India. This sector has seen incredible growth historically and is expected to reach 17.5 million units globally by 2020. This growth has been largely driven by Asia, especially India,
3 http://wardsauto.com/ar/ultra_cars_study_080828/

IMAPs Automotive and Components Global Report - - 2010: Page 7

Lithium ion-battery business expected to grow

Lithium ion (Li-ion) batteries are expected to be the next disruptive1 technology in the automotive industry. The global Li-ion battery market for automotive application in electric vehicles (EVs) and hybrid electric vehicles (HEVs) is expected to grow to USD 21.8 billion by 2015 and USD 74.1 billion by 2020 from USD 31.9 million in 2009. The main reason behind this growth is the government emphasis on hybrid vehicles to tackle environmental concerns. Governments in Japan, China, and South Korea have been providing subsidies to support their domestic Li-ion battery manufacturers. Li-ion batteries have a long driving range (at least 125 miles on a single charge) and increased lifetime (minimum of 10 years). On similar lines, the US government announced a USD 2 billion stimulus package in 2009 to promote the manufacture of advanced batteries in the US as an indirect response to the growing dominance of Asian countries in this segment. The National Alliance for Advanced Transportation Battery Cell Manufacture, comprising 14 US battery manufacturers, was formed in December 2008. The US Department of Energy has set a target price of USD 1,700 to 3,400 for an all-electric car battery that will go 40 miles on a full charge. Similarly, the introduction of high fuel taxes in European countries,
1 This term was coined by Dr. Joseph Bower and Dr. Clayton Christensen of Harvard University in 1995 for an innovation that fulfils the requirements of some but not most consumers better than the incumbent does. That gives it a toehold, which allows room for improvement and, eventually, dominance. Source: The electric-fueltrade acid test Economist dated Sep 03, 2009

T O Topic H

linking of vehicle and sales taxes to carbon emissions, and stricter environmental legislations to curb CO2 emissions in the future should spur demand in the hybrid segment. Furthermore, the European Union is coming out with legislation whereby new vehicles must limit emissions to an average of 120 g/km by 2012 compared with the current average of approximately 160 g/km for diesel- and gasoline-powered cars. The expected rapid decline in current cheaper technologies such as nickelcadmium and lead-acid batteries by 2013 due to stricter environmental controls over the use of cadmium and lead is also a positive factor for growth in Li-ion technology. Currently, leadacid batteries account for majority of the market. However, Li-ion technology still has many challenges. The high cost of Liion batteries acts as a deterrent to its easy adaptability. According to a report released by the Department of Energy in January 2009, the current cost of Li-ion based batteries is approximately three to five times higher when compared to currently used technology of lead acid batteries

and NiMH. Lightweight, high energy density Li-ion batteries that can enable a car to travel up to 300 miles on a single charge can cost as much as USD 35,000, which is the replacement cost of a Tesla Motors Roadster.2 Durability of Li-ion batteries is still untested as it is a new technology: The ability to attain a 15-year life (or 300,000 HEV cycles or 5,000 EV cycles) is still not proved and could be difficult to achieve. Competition from nickel-metal hydrid (NiMH) batteries in the near term will also act as a hurdle. NiMH batteries are much cheaper than Li-ion ones and are being used by many manufacturers to produce cheaper EVs. Additionally, to protect NiMH and lead acid battery manufacturers, the Chinese government has imposed certain restrictions on the usage of Li-ion battery vehicles.3 Companies such as A123, Advanced Battery Technologies (ABAT), Altair Nanotechnologies, GS Yuasa (worlds third largest Li-ion battery manufacturer), China Sun Group (CSCG), Ener1 (HEV), Hong Kong High Power Technology (HPJ), and Valence Technologies (VLNC) that are currently focusing in the Li-ion sector in addition to NiMH and lead acid batteries are expected to reap the benefits of the exponential growth in this sector.
Left: Volvo is preparing a plug-in hybrid for release in 2012, but has begun work on a full electric solution known as the BEV (Battery Electric Vehicle), shown. The base for this is the compact C30, which has been left virtually unchanged from its petrol and diesel siblings. The main difference is under the hood an electric motor replaces the fossil-fuel engine. Engineers are still deciding where to put the 24 kWh lithium-ion battery. The two most likely places are the prop shaft tunnel and the area normally reserved for a petrol/ diesel tank.4

2 Source: http://www.azom.com/news.asp?newsID=19069 3 Source: http://autonews.gasgoo.com/auto-news/1011097/ China-to-restrict-lithium-battery-vehicles-to-certain-cityroads.html 4 Source: http://www.worldcarfans.com/109091721845/ volvo-c30-electric-vehicle-project-announced

IMAPs Automotive and Components Global Report - - 2010: Page 8

Overall outlook
The years 2008 and 2009 were tumultuous, with all economies taking a major hit and demand contracting at alarming levels. As a result, the automotive sector bore the brunt of this collapse in the global economy. However, this scenario is expected to improve from 2010 onwards albeit at a sluggish rate. According to IMF estimates in July and September 2009, economic growth was expected to contract by 1.4 percent in 2009 and expand by 3.0 percent in 2010. Similarly, growth in the automotive sector is expected to improve from 2010 onwards with emerging markets fuelling the growth story. Rising demand for small and fuel efficient cars coupled with government support in the form of tax incentives and subsidies at various levels should also give an impetus to the auto segment.

Government support to play important role

Even though the automobile sector is expected to see an upswing from 2009 and 2010 onwards, government support will remain crucial. The governments role should not only be limited to reviving automobile demand but also making sure that demand is sustained. In response to the economic downturn, governments of most nations have been implementing a wide range of emergency economic measures, including tax incentives, subsidies, low carbon measures, and initiatives aimed at local revitalization. These measures will need to be continued in the future so that companies can sustain their business activities even amidst declining demand. Governments have been providing support through various ways to rejuvenate the sector. For example, the Japanese government introduced tax incentives and announced a stimulus package. On April 1, 2009, the government reduced the tax on the purchase of new vehicles that met pre-defined fuel efficiency and emissions criteria. In addition, EVs and HEVs are exempt from taxes, providing a tax reduction of 150,000 yen (USD 1,685). The government also announced a stimulus package of 56.8 trillion yen (USD 626.6 billion) to promote old vehicle replacement and subsidies for new vehicle purchases.1 The Russian government is offering subsidized auto loans, which translates into subsidies on interest payments. This amounts to two-thirds of the Central Bank of Russia (CBR)s refinancing rate, which currently is 11 percent on car loans. The government has also decided earlier to subsidize interest payments on cars worth up to 600,000 rubles (USD 20,293) instead of 350,000 rubles (USD 11,837) and lowered the minimum down payment on a car to 15 percent from 30 percent.2 Similarly, the US government has also announced a stimulus package of USD 2.4 billion for electric vehicles, which is in line with the governments goal of putting 1 million plug-in hybrid vehicles on the road by 2015. However, government support has not been entirely effective in all countries. Some countries have seen an artificial demand for cars, which has now dried up. For example, the German government provided a USD 7.13
1 http://www.jama-english.jp/europe/news/2009/no_2/art3. html 2 http://www.free-press-release.com/ news/200907/1248950228.html

billion stimulus package in January 2009 where customers received USD 3,250 for scrapping their old cars and purchasing new ones. As a result, 2009 sales picked up in a big way and are estimated to be 3.5 million cars for the year. With the stimulus fund drying up in September 2009, sales are expected to take a hit in 2010 with the number of cars sold falling to 1 million.3 Similarly, in the US, which had set aside USD 1 billion for the Cash for Clunkers Program (USD 4,500 discount for a new car) and then had to forcibly add another USD 2 billion to the discount kitty. With the funds for discounts dried up and fan fare diminished, car makers such as Toyota have cut their production by 10 percent and have even shut down some plants.4 These kinds of stimulus packages were more of a temporary upsurge in demand. The role that governments are likely to continue to play in shaping this industry into the future is hard to assess, but there is sure to be substantial and active governmental involvement.
3 http://www.spiegel.de/international/business/0,1518,646716,00.html 4 http://seekingalpha.com/article/159347-why-americancar-manufacturers-fail

IMAPs Automotive and Components Global Report - - 2010: Page 9

IMAPs Automotive and Components Global Report - - 2010: Page 10

Appendix A: Global overview of automotive industry

Business value chain
The global automotive industry can be classified into Auto manufacturing Auto component manufacturing

Auto manufacturing includes the production of passenger cars, light commercial vehicles, heavy trucks, buses, and coaches. Auto component manufacturing includes the production of all components required for the manufacturing of automobiles. Auto components can be sub-divided into the following categories:
Sub-division Engine Parts Electrical Parts Drive Transmission and Steering Parts Suspension and Braking Parts Equipment Others Components Pistons, piston rings, fuel delivery systems, engine valves, carburetors (largest component) Starter motors, spark plugs, electric ignition systems (EIS), generators, distributors, voltage regulators, ignition coils, flywheel magnetos Steering systems, gears, axles, wheels, clutches Leaf springs, shock absorbers, brakes, brake assemblies, brake lining Switches, electric horns, headlights, halogen bulbs, wiper motors, dashboard instruments, other panel instruments Sheet metal parts, pressure die castings, plastic moulded components, fan belts, hydraulic pneumatic equipment
Source: http://www.automotive-online.com/auto-industry.html

Snapshot of auto manufacturing sector

The global auto industry was battered by the economic slowdown as worldwide demand shrunk by almost 18% during the first half of 20091. Even though the auto manufacturing industry has been a major driver of economic growth (30% growth rate between 1995 and 2005 globally and generating 60 million jobs), the industry has been facing a severe downturn. The global auto industry generated total revenues of USD 1.784 trillion in 2008, representing a CAGR of 0.75% between 2004 and 2008.2 The top four automobile manufacturers constitute 37.6% of the global market with Toyota as the leader with 12.8% market share. (Market shares of the top four companies are available in the excel file). With regard to automobile production by geography, Asia Pacific commanded 35.8% in value in 2008 compared to 30.7% by the US. China beat Japan (largest in 2008) in 2009 (till July 09) as the largest automobile manufacturer in Asia Pacific with auto production totaling 9.3 million in 2008 and 7.9 million in 2009 (till July 09) while auto production in Japan decreased from 11.5 million to 4.1 million over the same period. Chinas growth in automobile production has been driven by the increased government emphasis on developing infrastructure and providing subsidies to Chinese automobile manufacturers. Among western countries, Germany is the only developed country which saw an increase in sales (20.9% on a YOY basis) driven by the German governments subsidy policy.3 The auto manufacturing industry was earlier dominated by the three big players in the US (General Motors, Ford and Chrysler), which represented 51.8% of the US market and 18.3% globally in 2007. However, with the US economy crumbling under the recession and auto companies facing the pressure of the slowdown, two of the biggest players (GM and Chrysler) collapsed, filed for Chapter 11 bankruptcy, and are now in the process of restructuring. As a result, Toyota and Nissan are fast gaining market share. Toyota surpassed GM as the largest manufacturer of cars in 2008, manufacturing 8.9 million vehicles against GMs 8.3 million vehicles.

1 Source: http://designative.info/2009/08/18/china-socialism-consumer-behavior-the-worlds-biggest-automobile-maker-and-market/ 2 Source: Data Monitor - Global Automobile Report - March 2009 3 http://designative.info/2009/08/18/china-socialism-consumer-behavior-the-worlds-biggest-automobile-maker-and-market/

IMAPs Automotive Industry Global Report -- 2010: Appendix A-i

Future outlook of auto manufacturing sector

With developing countries in the East gaining expertise in automobile and component manufacturing and demand for automobiles increasing in these countries, most companies are now shifting their automobile manufacturing from the West to the East. China now specializes in components, India in two wheelers and small cars, Indonesia in utility vehicles, and Thailand in pickup trucks and passenger cars. Consequently, most big automobile companies are setting up operations in these countries to leverage on the growing demand and low cost production capabilities. Manufacturing is also shifting towards East European countries due to their lowers costs and better transport facilities. Some Asian companies (including Korean car makers such as Hyundai), which sell their automobiles in Western European countries, are shifting their manufacturing base to Eastern Europe rather than importing them to avoid tariffs. Demand from India and China is expected to increase driven by rising population, increasing per capita income, improving infrastructure, and lower impact of the global slowdown. Additionally, auto penetration rates in these countries are much lower than those of developed countries, indicating huge potential (US: 765 vehicles/1000 people, China: 40 vehicles/1000 people, India: 8 vehicles/1000 people). With the economy reviving from the global economic slowdown, the global auto industry is expected to pick up due to renewed demand and expand globally at a CAGR of 2.5% between 2008 and 2013. Majority of the demand for automobile is expected to be driven from the Asia Pacific (mainly China and India) and Middle East regions with demand stagnating in the mature US and European markets. The contribution of hybrid cars in auto manufacturing is expected to increase in the future. Worldwide demand for light hybrid electric vehicles (HEVs) is estimated to reach 4 million units by 20154. Hybrid cars currently form only 2.5% of total car sales with 15 models being sold in late 2008. Driven by burgeoning energy costs and rising emission restrictions, demand for hybrid cars is expected to increase going forward. As automotive markets in developed countries have matured, emerging economies such as India and China are expected to be the new hub of automotive manufacturing. China has already overtaken the US as the largest consumer of automobiles. Moreover, the recession-hit Big Three are now being overtaken by Japanese car makers such as Toyota and Nissan, which are emerging as the new leading players.

Snapshot of auto component manufacturing

Like the automobile manufacturing sector, the auto components segment has also seen declining growth rates between 2006 (3.4% YOY) and 2008 (1.5% YOY). The global auto component sector increased from USD 560 billion in 2004 to USD 625.2 billion in 2008, representing a CAGR of 2.8%. The market for auto parts and equipment is highly fragmented with the top four players (Affinia, Valeo, Delphi and Federal Morgul) accounting for less than 2% of aggregate global revenues. On the other hand, the top four players in the tire and rubber market, namely, Bridgestone, Michelin, Goodyear and Continental, hold more than 64% of global revenues5. Majority of automobile production activities are concentrated in Japan, China, India and Thailand due to the availability of cheap raw materials and increasing demand for automotive products from the domestic market.

Future outlook of auto component manufacturing

The auto component sector is expected to increase at a CAGR of 0.3% between 2008 and 2013 with Asia being a major contributor to the growth story on account of increased manufacturing activity in India, China, and Thailand. This sector is expected to fall in terms of value by 2.1% YOY in 2009 on account of the decline in automobile demand particularly from the US and Europe caused by the global economic slowdown. However, driven by demand for fuel efficient cars, auto component manufacturers in emerging economies are likely to flourish.

4 Source: Factiva, Toyota presentation 5 Source: Factiva, Datamonitor

IMAPs Automotive Industry Global Report -- 2010: Appendix A-ii

Thumbnail summaries of top 10 vehicle manufacturers

1. Toyota (Japan) Product portfolio Passenger cars, recreational and sports utility vehicles (SUVs), minivans, and trucks. Toyota is the market leader in hybrid cars, and its Prius model is the worlds best selling hybrid car. Toyota sells 13 hybrid vehicle models in 50 countries. The company has 50 manufacturing facilities in 27 countries and is the leader in hybrid cars. Japan (36.3%); North America (29.7%); Europe (14%); Asia (12%); and Central and South America, Oceania, Africa, and the Middle East (8%). Emphasis on hybrid sales as the company plans to sell 1 million cars a year from 2010 onwards. Total sales of hybrid cars till August 2009 were 2.01 million (cumulative total from 1999). Launched an iQ ultra-efficient package vehicle in Japan and Europe in 2008. The iQ was specifically designed to reduce CO2 emissions and realize higher fuel efficiency. The company also plans to launch lithium-ion battery equipped plug-in hybrid vehicles for fleet customers in the US and elsewhere by 2010. 8.09 million (-4.0% YOY) Revenue: USD 229.9 billion (12.3% YOY); Operating Profit: USD 19.9 billion (3.7% YOY); Net Income: USD 15 billion (6.9% YOY) Low consumption small cars to luxury class vehicles. Company has nine brands from seven European countries. In the commercial vehicles sector, the company makes pickups, buses, and heavy trucks. Leading brands include Volkswagen, Audi, Bentley, Bugatti, Lamborghini, Scania, SEAT and Skoda. Target market is 150 countries. Germany (24.3%); North America (11.2%); South America (8.6%); Asia/Oceania (7.4%); Africa (1.5%); Rest of Europe (47%) The company has no eco-friendly car in its portfolio and plans to introduce E-UPp in 2013. This car is planned to be an electric small car for the masses. The car will have a 500-lb lithium-ion battery pack stored in the floor. Supplementing that is a 15-foot roof mounted solar array as well as another 3 sq ft of solar cells mounted on the back of the vehicles sun visors. The car can function for 63 miles between five hour charges. The company opened a plant in Pune in March 2009 to build the Skoda Fabia compact car later in 2009. The hatchback version of Volkswagen Polo specially developed for the Indian market will be added from 2010 onwards. 6.3 million cars produced in 2008 (2.1% YOY) Revenue: USD166.5 billion (11.8% YOY); Operating Profit: USD 9.77 billion (2.9% YOY); Net Income: USD 6.96 billion (23.4% YOY) Cars, trucks, vans, and utility vehicles America (59.3%); Europe (21.8%); Latin America (9.6%); Asia Pacific (8.4%); Others (1%) 8.1 million (-12.3% YOY) Revenue: USD 148.98 billion (17.7% YOY); Operating Profit: USD 21.28 million (4.39 million in 2007); Net Income: USD 30.86 billion (38.73 billion in 2007) Company filed for Chapter 11 bankruptcy in June 2009. The company received USD 20 billion from the US government before the filing and will get another USD 30 billion post filing to see it through its restructuring and exit from bankruptcy protection. After providing aid, the Canadian and Ontario governments will have a 12.5% stake in the company Cars in small, medium, large, and premium segments; trucks; buses/vans; full size pick ups; SUVs; and vehicles for the medium and heavy segments North America (48.5%), Europe (38.8%), other regions (12.7%) In 2009, Ford plans to introduce upgraded gas and new hybrid versions of the Ford Fusion midsize sedan; a high-performance Taurus SHO with an EcoBoost engine; an upgraded Mercury Milan and new Milan Hybrid; an upgraded Lincoln MKZ; a Ford Flex and Lincoln MKS with a fuel-efficient EcoBoost engine; and an all-new Lincoln MKT premium crossover with EcoBoost. In 2010, Ford plans to deliver a commercial battery powered vehicle for fleet customers and a battery-powered passenger vehicle in 2011. In 2012, Ford intends to deliver its third generation of hybrid vehicles, including a plug-in version.1 5.5 million (-15.6% YOY) Revenue: USD 146.28 billion (-15.2% YOY); Operating Profit: USD 11.87 billion (USD 644 million in 2007 ); Net Income: USD 14.67 billion (USD 2.72 billion in 2007)
Premium passenger cars (Mercedes Benz is the largest contributor to revenue with 48.5% in 20082); cars, Daimler trucks, Mercedes-Benz vans, and Daimler buses Germany (22.8%); Western Europe (25.1%); US (18.7%); Asia (14.4%); Other American Countries (8%); and Other Countries (11.1%) Moving towards hybrid vehicles. To reduce CO2 emissions, the company is working on lightweight components, alternative propulsion systems such as hybrid drive and fuel cells, and electronic systems. The company also makes hybrid buses. In June 2008, the company launched a new-generation van, Sprinter Plug-In-Hybrid, a diesel HEV. 2.1 million (-0.8% YOY) Revenue: USD 140.29 billion (3.2% YOY); Operating Profit: USD 7.99 billion (25.0% YOY); Net Income: USD 1.97 billion (63.8% YOY) Pioneer in luxury cars. The company has also developed eco-friendly electric cars in which the electric motor of the purely battery-powered BlueZERO E-CELL is combined with an additional three-cylinder, turbocharged petrol engine. These cars use fuel cell technology.

Geographic coverage (2008) Future plans

Cars manufactured (2008) Financials (2008) 2. Volkswagen (Germany) Product Portfolio

Geographic coverage (2008) Future plans

Cars manufactured (2008) Financials (2008) 3. General Motors (US) Product portfolio Geographic coverage (2008) Cars manufactured (2008) Financials (2008) Additional points

4. Ford Motor Company (US) Product Portfolio Geographic coverage (2008) Future plans

Cars manufactured (2008) Financials (2008)

5. Daimler (Germany) Product Portfolio Geographic coverage (2008) Future plans

Cars manufactured (2008) Financials (2008) Additional points

IMAPs Automotive Industry Global Report -- 2010: Appendix A-iii

6. Honda (Japan) Product portfolio Passenger cars, SUVs, commercial vehicles, special need vehicles, utility vehicles, and motorcycles. The company has two plants in Japan and other plants at the US (Ohio, Alabama), Canada (Alliston), UK (Swindon) and Thailand (Ayutthaya). North America (50.8%), Japan (17.1%), Europe (12.5%), Asia (10.9%), and Rest of the World (8.7%) The company is moving towards developing hybrid cars. Launched Civic Hybrid, first hybrid car in India, in 2008 3.9 million (1.5% YOY) Revenue: USD 104.97 billion (10.7% YOY); Operating Profit: USD 8.37 billion (14.4% YOY); Net Income: USD 5.25 billion (3.6% YOY) Passenger cars, trucks, SUVs, light utility vehicles and mini vans. Company is in a partnership with Renault for automobile manufacturing. Renault holds a 44.3% stake in Nissan, while Nissan owns 15% of Renault shares. North America (40.8%); Japan (23.2%); Europe (19.9%); and Rest of the World (16.1%) Alliance with Indian auto manufacturer Bajaj to introduce ultra low cost cars from 2011 3.5 million Nissan (2.3% YOY) Revenue: USD 94.67 billion (5.8% YOY); Operating Profit: USD 6.93 billion (4.1% YOY); Net Income: USD 4.22 billion (7.0% YOY) Automobiles, trucks, wheel loaders, excavators, tele-handlers, tractors. The company has 10 plants, of which 6 are in Italy and 1 each in Poland, India, Argentina, and Brazil. Italy (24.1%) Europe excluding Italy (40.1%), North America (9.5%), Mercosur (16.8%), Others (9.6%) NA 2.1 million (-3.6% YOY) Revenue: USD 86.89 billion (8.5%); Operating Profit: USD 4.92 billion (11.2% YOY); Net Income: USD 2.36 billion (11.7% YOY) Automobiles and motorcycles. The company owns three brands: BMW, MINI, and Rolls Royce. US (21.3%); Germany (20.2%); Africa/Asia/Oceania (15.9%); UK (9.2%); Rest of Europe (29.7%); Rest of America (3.7%) 1.4 million (-6.6% YOY) Revenue: USD 77.84 billion (1.6%) Operating Profit: USD 1.16 billion (78.9% YOY ); Net Income: USD 474 million (88.9% YOY) Passenger vehicles, recreational vehicles, and commercial vehicles South Korea (54.7%), North America (21.5%), Europe (15%), and Asia (8.8%) Electric version of i10, a small car which has already been launched in India. The company also plans to introduce a hybrid version that runs on LPG and lithium ion polymer batteries for Elantra. 1.6 million (-1.9% YOY) Revenue: USD 29.25 billion (11.2% YOY); Operating Profit: USD 1.71 billion (18.5% YOY); Net Income: USD 1.32 billion (27.3% YOY)
Source: Factiva, Capital IQ, Datamonitor, Bloomberg

Geographic coverage (2008) Future plans Cars manufactured (2008) Financials (2008) 7. Nissan Motors (Japan) Product portfolio Geographic coverage (2008) Future plans Cars manufactured (2008) Financials (2008) 8. Fiat (Italy) Product Portfolio Geographic coverage (2007) Future plans Cars manufactured (2008) Financials (2008) 9. BMW (Germany)

Product portfolio Geographic coverage (2008) Future plans Cars manufactured (2008) Financials (2008) 10. Hyundai (South Korea) Product portfolio Geographic coverage (2007) Future plans Cars manufactured (2007) Financials (2008)

IMAPs Automotive Industry Global Report -- 2010: Appendix A-iv

Thumbnail summaries of top 20 auto component manufacturers6

1. Denso Corp (Japan) Japanese company engaged in the manufacture and sale of automobile parts Thermal systems, powertrain control systems, electric systems Toyota accounted for 30% of sales Japan (56.9%), Americas (17.4%), Europe (12.9%), Asia and Oceania (12.8%) Focus on parts for hybrid vehicles Revenue: USD 35.2 billion (14.1% YOY); Operating Profit: USD 3.05 billion (17.7% YOY); Net Income: USD 2.14 billion (21.8% YOY) Manufacturer of automotive interior systems and power solutions that optimize energy usage in batteries for automobiles and hybrid cars Automotive interiors, products that optimize energy usage in batteries for automobiles and HEVs Ford, GM, Chrysler, Toyota, Nissan US (35.1%), Germany (10.5%), Other European Countries (28.8%), Other Foreign Countries (25.6%) Increasing focus on emerging markets such as India and China Revenue: USD 38.06 billion (9.9% YOY); Operating Profit: USD 1.96 billion ( 9.2 YOY); Net Income: USD 979 million (-21.8 YOY) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 2. Johnson Controls (US)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008)

3.

Bridgestone Corp (Japan) Japan based manufacturing company in the tire segment Tires Acushnet Company, American Tire Distributors Holdings, Toyota Americas (44.2%), Japan (27.8%), Europe (13%), Other (13%) NA Revenue: USD 31.28 billion (8.7% YOY); Operating Profit: USD 1.27 billion (-40.1% YOY); Net Income: USD 100.6 million (-91% YOY) Germany based automotive industry supplier. It is the fourth largest player in the tire market and market leader in Europe in passenger and light truck tires, winter tires, and industrial tires. Chassis, hydraulic and electronic brake systems, sensor systems, telematics GM, Ford, AB Volvo, DaimlerChrysler, Maserati, Cayman, Audi AG, Mercedes-Benz, BMW, Volkswagen, Paccar, Porsche, Toyota, Kia, Fiat, and Suzuki NA NA Revenue: USD 35.47 billion (56.0% YOY); Operating Profit: USD -36.5 million (-101.5 YOY); Net Income: USD -1.65 billion (-217.7% YOY) Japanese company manufacturing auto components and housing related equipment Drivetrain components, automatic transmissions, manual transmissions, car navigation systems, brake and chassis-related products, and automobile body related products Toyota Japan (69%) NA Revenue: USD 23.62 billion (16.1% YOY); Operating Profit: USD 1.58 billion (40.9%YOY); Net Income: USD 801.5 million (40.1% YOY) Diversified global automotive supplier Automotive systems, assemblies, modules, and components Aston Martin, BMW, Chery Automobile, Daimler, Ferrari, Fiat, Honda, Hyundai, Mercedes Benz North America (49.9%), Europe (47.7%), Rest of the World (2.4%) NA Revenue: USD 23.7 billion (-9.1% YOY); Operating Profit: USD 530 million (-53.3%YOY); Net Income: USD 71 million (-89.3% YOY)

Brief description Parts manufactured Customers Geographic coverage (2007) Future plans Financials (2008) 4. Continental AG (Germany)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 5. Aisin Seiki Co (Japan)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 6.

Magna International Inc (Canada)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008)

6 Includes only listed companies and hence Robert Bosch (private company) which is one of the major players in this sector has been excluded.

IMAPs Automotive Industry Global Report -- 2010: Appendix A-v

7.

Michelin (France) French based company which manufactures tires for passenger cars, two-wheelers, trucks, agricultural equipment, and aircraft. Largest tire manufacturer in the world with a 17.1% market share in 2008 Tires NA Europe (49.7%), North America (31.4%), Others (18.9%) NA Revenue: USD 24.01 billion (4.0% YOY); Operating Profit: USD 1.36 billion (-25.4% YOY); Net Income: USD 527 million (-50.3% YOY) Japanese based company engaged in the manufacture and sale of automobiles, automobile bodies, components, and accessories Automobile parts NA NA NA Revenue: USD 13.74 billion (12.2% YOY); Operating Profit: USD 195 million (17.6% YOY); Net Income: USD 114 million (0.9% YOY) Leading tire maker in North America and Latin America and second largest tire maker in Europe; owns the two strongest brands in the tire industry: Goodyear and Dunlop Tires NA US (37.7%), Germany (12%), and Other Countries (50.3%) NA Revenue: USD 19.49 billion (-0.8% YOY); Operating Profit: USD 749 million (-22.1% YOY); Net Income: USD -77 million (-12.8% YOY) Leading supplier of auto components Vehicle electronics, transportation components, integrated systems, modules, other electronic equipment Ford, Chrysler, Renault Nissan, Hyundai, and Volkswagen North America (42.5%); Europe, the Middle East, and Africa (40%); Asia Pacific (11.2%), South America (6.3%) NA Revenue: USD 18.06 billion (-19% YOY); Operating Profit: USD -1.295 billion (0.2% YOY); Net Income: USD 3,04 billion (-199.1% YOY) Germany based automotive supplier Driveline and chassis products Audi, BMW, Daimler Trucks, Nissan NA NA Revenue: USD 17.31 billion Largest automotive seat maker in Europe Seats PSA Peugeot Citroen S.A (24% of sales), Volkswagen (21%), Renault-Nissan (12%), Ford (11%), BMW (8%), GM (6%), Daimler (6%), Chrysler (4%), Hyundai (3%), Toyota (2%) and Other Vehicle Manufacturers (3%) NA NA Revenue: USD 17.575 billion (1.5% YOY); Operating Profit: USD 133 million (-19.5% YOY); Net Income: USD -841 million (USD-324 million 2007)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 8. Toyota Auto Body Co (Japan)

Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 9.

Goodyear Tire and Rubber Co (US)

Brief description Parts manufactured Customers Geographic coverage (2007) Future plans Financials (2008) 10. Delphi Corp (US) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008)

11. ZF Friedrichshafen AG (Germany) Brief Description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2007) 12. Faurecia (France) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008)

IMAPs Automotive Industry Global Report -- 2010: Appendix A-vi

13. TRW Automotive (US) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) Diversified supplier of automotive systems, modules, and components Chassis systems, engine valves, body controls, and engineered fasteners and components Volkswagen (17.8% of sales), GM (13.5%), Ford (12.1%), Chrysler (9.6%) US (24%), Germany (19.1%), UK (4%), Rest of the World (52.9%)

NA
Revenue: USD 14.995 billion (2.9% YOY); Operating Profit: USD 464 million (-31.3%YOY); Net Income: USD -779 million (-965.6% YOY)

14. Lear Corporation (US) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) Additional points Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 16. Valeo SA (France) Brief description Parts manufactured Customers Geographic coverage (2007) Future plans Financials (2008) 17. Hyundai Mobis (Korea) Brief Description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) 18. Visteon Corporation (US) Brief Description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) Diversified company manufacturing electronic products Chassis, powertrain, and drive train products NA North America (35.2%), Europe (25.3%), South America (0.2%)
NA

Manufacturer of seating systems Seat systems GM (28.8% of sales), Ford (20.6%), BMW (19.2%); Other customers: Daimler Chrysler, PSA, Volkswagen, Fiat, Renault Nissan, Hyundai, Mazda, Subaru, and Toyota NA
NA NA

The company has filed for Chapter 11 bankruptcy in 2009. Japanese manufacturer of automobile parts and textile products Automobile interior components such as floor carpets and seats, floor silencers, door trims, fender lines, bumpers, engine undercovers, automotive filters, and power train components Aisin Seiki, Honda, Toyota NA
NA

15. Toyota Boshoku Corporation (Japan)

Revenue: USD 10.79 billion (16.5% YOY); Operating Profit: USD 574 million (38.7 YOY); Net Income: USD 356 million (38.3% YOY) French industrial company focusing on auto components and modules for cars and trucks Lighting systems, wiper systems, interior controls, electrical systems, security systems, engine management systems, compressors, climate control, engine cooling, and transmission Ford, GM, PSA Peugeot Citroen, Renault-Nissan, Volkswagen (61.5% of revenues in 2007) Europe (67.6%), North America (13.5%), Asia (13%), South America (5.9%)
NA

Revenue: USD 12.68 billion (-3.0% YOY); Operating Profit: USD -76 million (-117.4%YOY); Net Income: USD -302 million (-373.3% YOY) Korea based auto component manufacturer. It has merged with Hyundai Autonet Co. Chassis, cockpit, front-ends, safety parts, braking components, combination parts, injection parts, and wheel and deck modules Daimler, Mercedes Benz, Old Carco, Volkswagen NA
NA

Revenue: USD 8.52 billion (-6.8% YOY); Operating Profit: USD 1.08 billion (22.4%YOY); Net Income: USD 990 million (19.4% YOY)

Revenue: USD 9.54 billion (-15.3% YOY); Operating Profit: USD -94 million (USD -63 million 2007); Net Income: USD -681 million (USD -372 million)

IMAPs Automotive Industry Global Report -- 2010: Appendix A-vii

19. Calsonic Kansei Corporation (Japan) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008) Japan-based comprehensive automotive parts manufacturer Module parts, system products BMW, Honda, Jaguar, Land Rover, Nissan, Toyota NA NA Revenue: USD 7.23 billion (21.7% YOY); Operating Profit: USD 124 million (18.5% YOY); Net Income: USD 24 million (1741.7% YOY) Japanese manufacturing company Wire harnesses, rubber cushions, hoses for automobiles, automobile electrical parts, and others Toyota Japan (61.9%), Asia (14.7%), Americas (13%), Europe (10.4%) NA Revenue: USD 22.22 billion (108.9% YOY); Operating Profit: USD 1.3 billion (118.4% YOY); Net Income: USD 767.9 million (118.1% YOY)
Source: Factiva, Capital IQ, Datamonitor, Company websites, Bloomberg

20. Sumitomo Electric Industries Ltd (Japan) Brief description Parts manufactured Customers Geographic coverage (2008) Future plans Financials (2008)

Country Profiles
1. China 8.8 million (2007), 9.3 million (2008), 8.2 million (till Aug 09) 0.6 million (2007), 0.68 million (2008), 0.2 million (till Aug 09) 8.9% 40/1000 people SAIC, FAW Car Co, Beiqi Foton Mortors, Dongfeng and BYD. High population, emphasis on infrastructure by Government, lower manufacturing costs due to cheap raw material and labour costs, lower vehicle penetration rates. 6.2 million (2007), 6.04 million (2008) NA 5.8% 550/1000 people Volkswagen, Audi, BMW, Daimler, Porsche and Opel Leader in European auto industry and state of the art technology but the negative factor is the already higher penetration rate which has made the market a bit saturated. 2.23 million (2007), 2.3 million (2008) NA 2.2% 7/1000 people Maruti, Hyundai motors, GM, Ford, Tata, Bajaj, Mahindra High population, lower manufacturing costs due to cheap raw material and labour costs, lower vehicle penetration rates, increase in per capita income
1.3 million (2007), 1.02 million (2008)

Automobile production Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 2. Germany

Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 3. India

Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)
4. Italy

Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

NA
1.0% 598/1000 people Fiat (70% domestic market share), Ferrari, Lamborghini and Maserati Dominant luxury car maker in Europe. However, most consumers are unable to get the desired financing for purchasing new automobiles and this is impacting the industry. Italy like most other European countries enjoys a relatively high car penetration rate of 598 cars/ 1000 people.

IMAPs Automotive Industry Global Report -- 2010: Appendix A-viii

5.

Japan 11.6 million (2007), 11.5 million (2008), 4.1 million (till Jul 09) 6.5 million (2007), 6.7 million (2008), 1.7 million (Till July 2009) 10.6%
NA

Automobile production Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 6. Korea

Toyota, Honda, Nissan, Suzuki, Mitsubishi and Kawakasi. Recession has led to a huge decline in production in Japan and auto production has fallen. Also exports have seen a drastic decline in 2009. 4.08 million (2007), 3.8 million (2008), 2.07 (till Aug 09) 2.8 million (2007), 2.6 million (2008) 1.2 million (Till August 2009) 3.6%
NA

Automobile production Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

Hyundai Motors (25% market share) and Kia Motors Low cost of production, expertise in auto component manufacturing. However, recession has hit the industry which has resulted in drastic reduction in exports (-29.3% in 2009 year to date). 7.3 million (2007), 8.7 million (2008)
NA

7.

USA

Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

8.3% 750/1000 people GM, Ford, Chrysler Market is saturated. No future growth expected. Two of the three major companies GM and Chrysler (who were global leaders in the past years) have filed for bankruptcy. Financial aid has been given by the Government to help restructure these companies. 1.6 million (2007), 1.7 million (2008)
NA

8.

Russia

Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 9. Canada Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 10. Brazil Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

7.5% 188/1000 people AvtoVAZ, Sollers, GAZ Auto Plant Low penetration rate of 188 cars per 1000 people. 2.6 million (2007), 2.07 million(2008)
NA

2%
NA

General Motors, Chrysler, Zenn Motor Company Hit by recession due to which there has been slowdown in production. 2.9 million (2007), 3.2 million (2008)
NA

3.1%
NA

General Motors, Volkswagen , Fiat, Renault and Troller Cheap availability of raw material and labour , support by Brazilian Government, proximity to USA

IMAPs Automotive Industry Global Report -- 2010: Appendix A-ix

11. Slovenia Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 1.9 million (2007), 1.9 million (2008)

NA
1.8% 615/1000 people Renault through an agreement with local manufacturer Revoz Highly technologically developed auto industry. Export oriented automotive component industry

12. Czech Republic Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative) 13. Hungary Automobile production 2008 0.33 million (2007), 0.35 million (2008)
NA

0.94 million (2007), 0.95 million (2008)

NA

0.9%
NA

Hyundai Motors, Skoda Auto, and TPCA( JV between Toyota and PSA Peugeot Citroen) Very strong auto component sector, has attracted a lot of FDI, proximity to Western Europe makes it a good destination for manufacturing due to low cost of inputs.

Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

0.3% 300/1000 people Audi, Opel and Suzuki Hungarian automotive industry is expected to become a major automotive hub in Europe due to its central position in EU. This has resulted in high FDI investments. Major auto companies such as Daimler, Renault and others are investing in Hungary. 0.79 million (2007), 0.95 million (2008)
NA

14. Poland Automobile production 2008 Automobile exports Share in global auto manufacturing in 2008 (in volume) Vehicle penetration rate Major automobile companies Major factors driving auto industry (Positive/negative)

0.9% 383/1000 people Honda, BMW Peugeot, Opel,Mercedes, Volkswagen,Porsche, Lamborghini, Nissan, Volvo,Toyota, Isuzu, Fiat, Citroen, Rolls-Royce, and Ferrari Low labour costs, skilled workforce and close proximity to the western European market.
Source: OICA, Bloomberg, ACEA, Datamonitor, SIAM

IMAPs Automotive Industry Global Report -- 2010: Appendix A-x

Appendix B: Automotive Sector M&A Deals Summary

Automobile sector saw a total transaction value of USD 2.89 billion comprising of 44 deals in 2009 YTD compared to USD 44.81 billion with 195 deals during 2008, witnessing a decline of 93.5%. Total number of deals1 in 2009 is 149 compared to 424 during the full year of 2008, but transaction details are not available for all the deals. There has also been a major decline in the largest deal and shift from Europe to Asia (effect of global economic slowdown). In 2008, the largest deal of USD 31.8 billion was in German automobile space between Schaeffler KG and Continental whereas 2009s largest deal was in Asia between Hyundai Motors and Hyundai Mobis in South Korea valued at USD 1.07 billion.

Particulars Total Number of deals (includes only M&A) Deals with available transaction value Total Transaction Value (USD million) Largest Deal Top 5 deals as a % of total deal value

2008 424 195 44,806.5 Deal between Schaeffler KG and Continental worth USD 31.8 billion. 82.7%

2009 YTD 151 44 2,890.6 Deal between Hyundai Motors and Hyundai Mobis worth USD 1.07 billion 78.6%
Source: Capital IQ

In terms of distribution of deals by business segments in 2009, auto components saw the majority of the deals both in terms of volume (77.3%) and value (59.0%).
Segment Auto Parts and Equipment Automobile Manufacturers # of deals 34 10 Value (USD million) 1,309.7 1,581.0 Largest Deal in terms of Value Hyundai Mobis buying Hyundai Autonet Co Ltd for USD 700.7 million Hyundai Mobis acquired additional 5.84% stake in Hyundai Motor Co for USD 1,075.8 million
Source: Capital IQ

In 2009, South Korea saw the highest transaction value of USD 1,799 million with a total of 3 deals while US with 12 deals (maximum in volume) was at second position with USD 236 million in transaction value. Asia was the leader among the regions with USD 2,166.2 million.

Top 5 Countries South Korea United States Russia Brazil China Region Asia
2

# of deals 3 12 2 2 5 # of deals 15 11 3 14 1

Value (USD million) 1,799.0 236.0 200.5 183.6 123.8 Value (USD million) 2,166.2 250.7 184.6 283.1 6.1
Source: Capital IQ

Europe3 Latin America US/Canada Others

4

1 Only M&A deals have been considered. Private placements, public offerings and share buybacks have been excluded 2 Includes China, India, Hong Kong, Indonesia, Malaysia, Russia 3 Includes France, Netherlands, Poland, Romania, Slovakia, UK 4 Includes Australia

IMAPs Automotive Industry Global Report -- 2010: Appendix B-i

Summary of Deals in the Automotive Sector in 2009 by Country

Country South Korea United States Russia Brazil China Netherlands Slovakia UK Canada Thailand Vietnam France Australia Indonesia Hong Kong Poland Argentina India Malaysia Romania Total # of Transactions in 2009 3 12 2 2 5 1 1 3 2 1 1 2 1 1 1 1 1 2 1 1 44 Total Transaction Value (USD million) 1,799.0 236.0 200.5 183.6 123.8 111.2 67.0 58.7 47.1 18.1 14.7 10.4 6.1 4.7 4.5 3.1 1.0 0.5 0.5 0.4 2,890.6 Average EV/ Revenue (x) 0.8 0.6 0.9 0.2 0.3 1.3 0.4 0.5 2.0 0.1 0.2 0.0 3.3 2.1 Average EV/EBITDA (x) 11.6 7.0 -

Summary of Deals in the Automotive Sector in 2009 by Business Segments

Segments Automobile Manufacturers Auto Parts and Equipment Total # of Transactions in 2009 10 34 44 Total Transaction Value in USD million 1,581 1,310 2,890.6 Average EV/ Revenue (x) 1.4 0.4 Average EV/ EBITDA (x) 11.6 4.1

Summary of Deals in the Automotive Sector in 2009 by Region

Continents Asia Europe Latin America US/Canada Others Total # of Transactions in 2009 15 11 3 14 1 44 Total Transaction Value in USD million 2,166.2 250.7 184.6 283.1 6.1 2,890.6
Source: Capital I

Average EV/ Revenue (x) 0.8 0.4 0.6 0.4

Average EV/ EBITDA (x) 6.0 -

Note: Only the deals where transaction value is available have been considered.

IMAPs Automotive Industry Global Report -- 2010: Appendix Bii

Appendix C: Growth Drivers

Drivers for the automobile sector
Environmental legislations on the use of cleaner and fuel efficient cars
o Due to environmental concerns, all Western European countries levy some form of CO2 tax on passenger cars. France, UK, and Luxembourg use CO2 emissions as the only factor for car taxation, whereas other countries apply a combination of factors including car price, engine capacity, and CO2 emissions. Similarly, in Israel, a green tax has been imposed from August 2009 onwards which would make polluting cars expensive These environmental regulations in turn have spurred growth in hybrid vehicles. Annual production of electric vehicles is expected to increase from the current base of 19 models in 2009 to 150 by 2014 and 200 by 2019.1 The global market for hybrid vehicles is predicted to increase to over 11 million vehicles a year by 2020, which is around 23 times the market size in 2008.2 Currently, due to the limited volume of hybrid vehicles and absence of standardized technology across various companies, manufacturing of motors and other hybrid components is done in-house. However, with the expected upsurge in demand for hybrid vehicles and continuous decrease in prices of these automobiles, outsourcing of motor requirements is round the corner. To actualize this opportunity, motor component manufactures must have a profound understanding of the specific automotive requirements and be aware of the operational, supply chain, and technical needs of the hybrid automotive industry. Majority of growth in the global automobile industry is expected to come from India, China, and Eastern Europe. While demand is expected from China and India, manufacturing is likely to be concentrated in Eastern Europe due to its close proximity to Western European nations. China has been the front runner in the auto markets recovery, recording a YOY growth of 48% in June 2009 with 7 million units, much above the 5.9 million unit peak reached during March 2008 prior to the sharp global economic slowdown.3 From 2003 to 2008, China doubled its automobile production whereas US saw its production decline by 50%. Government stimulus and tax incentives coupled with rising disposable income are major catalysts behind the revival in China and other emerging markets. A cut in retail taxes and increased vehicle subsidies in rural areas in China led to a 38% YOY rise in vehicle assemblies in June 2009. Similarly, tax breaks in Brazil saw sales climb to 3.1 million units in June 09, a YOY rise of 21%. With stagnant growth in the US, Europe, and Japan, automakers are targeting emerging markets by offering nofrill cars (LCCs priced at USD 6,000 or less) to a larger section of the population. Even though margins are razor thin (23% in the case of Tata Nano), volume potential is huge. As a result, companies like GM, Bajaj, Nissan, and Renault are quickly venturing into this segment. According to a study by AT Kearney in 20084, cars priced lower than USD 5,000 have a very high volume potential in emerging markets such as India. This sector has seen incredible growth historically and is expected to reach 17.5 million units globally by 2020 largely driven by Asia, especially India, with the exception of China, which has experienced a 5% decrease in this segment over the past five years due to increasing disposable income. While there are immense opportunities in terms of volume considering the lower number of existing players, there are also numerous hurdles, the foremost being very low margins and development of an alternate distribution channel compared to conventional ones. The market development strategy needs to be tailored for the particular country as well as for exporting to other potential regions such as the Middle East, Africa, and various countries in emerging markets. So any wrong calculation during the launch of the product can erase margins completely. The scope for established auto component manufacturers is the redesigning of their existing product portfolio so as to avoid falling in the low cost trap. This would entail designing of components from scratch. For example,

o o

Growth in emerging market

o

Low cost car (LCC) segment

o

1 http://www.azom.com/news.asp?newsID=19069 2 http://www.icis.com/Articles/2009/07/13/9231220/lithium-producers-set-to-benefit-from-growth-in-hybrid-autos.html 3 Global Auto Report Scotiabank Group dated July 31, 2009 4 http://wardsauto.com/ar/ultra_cars_study_080828/

IMAPs Automotive Industry Global Report -- 2010: Appendix C-i

for the launch of Nano, German supplier Robert Bosch had to re-engineer some of the motorcycle parts into Nano parts, viz., the starter engine, with the help of Indian engineers rather than their European counterparts. Similarly, the scope for startup component suppliers to enter this segment is to learn new and lean manufacturing techniques that can give them an advantage over other established component players.

Trend towards remanufactured products

o With the emphasis on higher economic contribution per unit of product manufactured, remanufacturing regulations are expected to be tightened in future to promote sustainable manufacturing, i.e., creating more productivity with lower resource and energy consumption. Remanufacturing helps in conserving energy, raw material, and landfill space and reducing air pollution. Automotive product remanufacturing accounts for two-thirds of all remanufacturing and is a USD 53 billion industry in the US and more than USD 100 billion worldwide.5 Around 50% of the original starter is recovered via remanufacturing methods. In the US itself, this can lead to yearly savings of 8.2 million gallons of crude oil from steel manufacturing, 51,500 tons of iron ore, and 6,000 tons of copper and other metals. Rebuilt engines require only 50% of the energy and 67% of the labor that goes into manufacturing new engines. Remanufactured products are likely to increase in popularity over the next 57 years due to their lower price points and competitive warranties in addition to environmental benefits. Moreover, the growing demand for remanufactured engine control units, higher priced technologically advanced products such as electric power steering, rack and pinion steering gears, and higher priced diesel engines would also drive the remanufacturing trend upward. Moreover among various remanufacturing methods applied, independent remanufacturing is expected to be the most cost effective and would have more potential in the future6.

o o

o o

Government support for this sector

As a response to the economic downturn, governments of all the nations have been implementing a wide range of emergency economic measures including tax incentives, subsidies, low carbon measures and measures aimed at local revitalization. These measures will have to be continued even in the future so that these companies are able to sustain their business activities amidst declining demand in sales. Governments of each of the countries have been providing support in its own ways with the sole aim of rejuvenating the lost growth in the sector. Japanese government has gone for tax incentive measures and stimulus package. On April 1, 2009 tax reductions were provided for the purchase of new vehicles meeting defined fuel efficiency and emissions criteria. Also Electric vehicles (EVs) and Hybrid Electric vehicles (HEVs) are exempt from taxes which provide a tax reduction of 150,000 yen, or about 1,125 Euros. The government has also gone for a stimulus package of 56.8 trillion yen (427 billion Euros) for initiatives on old vehicle replacement and subsidies for new vehicle purchases7. Russian government has provided subsidized auto loans translating into subsidies on interest payments. This amounts to two-thirds of the Central Bank of Russia's (CBR) refinancing rate, which currently is 11% on car loans. It has also decided to subsidize interest payments on cars worth up to 600,000 rubles instead of 350,000 rubles earlier and lowered the minimum size of the down payment on a car to 15% from 30%8.

However, government backing has not seen positive synergy effects in all the countries. Some of the countries have seen only artificial demand for cars and which have now dried up. For example, German government provided a USD 7.13billion stimulus package in January 2009 where customers received USD 3,250 for scraping out their old cars for purchase of new cars. Due to this, sales for 2009 picked up big time and are estimated to be around 3.5 million cars. But with the stimulus fund drying up by September 2009, sales are expected to take a hit in 2010 with number of cars falling to 1 million units9. Similarly, US adopting the same strategy like Germany, car makers like Toyota have cut their production by 10% and have closed a plant down10. The governments role should not only be limited to reviving the demand for automobile, but making sure that demand is permanent. Else the after effects are more damaging than beneficial with huge job losses.
5 Economic and Environmental Assessment of Remanufacturing in the Automotive Industry - Hyung-Ju Kim, Semih Severengiz, Steven J. Skerlos, Gnther Seliger 6 As per the study done by Hyung-Ju Kim, Semih Severengiz, Steven J. Skerlos and Gnther Seliger, Independent remanufacturing is better than Independent OEM and Integrated remanufacturing based on economic comparison. 7 http://www.jama-english.jp/europe/news/2009/no_2/art3.html http://www.free-press-release.com/news/200907/1248950228.html 9 http://www.spiegel.de/international/business/0,1518,646716,00.html 10 http://seekingalpha.com/article/159347-why-american-car-manufacturers-fail

IMAPs Automotive Industry Global Report -- 2010: Appendix C-ii

somewhere in the world

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Every business day

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IMAPs Automotive and Components Global Report - - 2010: Page 25

IMAPs Industrials Team

Argentina
Mario Hugo Azulay mario.azulay@imap.com Armando Fejler armando.fejler@imap.com Diego Galiana diego.galiana@imap.com Eduardo Rodrguez eduardo.rodriguez@imap.com

Finland
Terhi Alanko terhi.alanko@imap.com

France
Michel Champsaur michel.champsaur@imap.com

Christoph Kloberdanz christoph.kloberdanz@imap.com Peter Mueller peter.mueller@imap.com Jan Steinbaecher jan.steinbaecher@imap.com Wolfgang Wagner wolfgang.wagner@imap.com

Spain
Francisco Ass Gomez Ruiz francisco.gomez@imap.com

United States
Brad Harse brad.harse@imap.com Scott Isherwood s.isherwood@imap.com Ted Johnston ted.johnston@imap.com

United Kingdom
Constantine Biller constantine.biller@imap.com Robert Britton robert.britton@imap.com Jon Hustler jon.hustler@imap.com Paul Jones paul.jones@imap.com

Germany
Alexander Bolz alexander.bolz@imap.com Johannes Eckhard johannes.eckhard@imap.com

Italy
Filippo Avidano filippo.avidano@imap.com Toni Ferrante toni.ferrante@imap.com

Brazil
Andre Pereira andre.pereira@imap.com

For a comprehensive list of IMAP advisors and to discover how IMAP can help you with your M&A transaction, go to www.imap.com.

IMAPs Automotive and Components Global Report - - 2010: Page 26

Cross-border M&A requires local knowledge and experience. IMAP advisors located around the world have successfully completed thousands of M&A transactions. Let IMAP help you with your M&A project in 2010.
Other industry reports available from IMAP: Alternative Energy Industry Global Report, 2010 Computing & Internet Software Global Report, 2010 Food & Beverage Industry Global Report, 2010 For copies, visit the Industries page of www.imap.com.

IMAPs Automotive and Components Global Report - - 2010: Page 27

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