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Auto Parts Industry Liquidity Analysis COVID-19 - Supply Base Update #3 March 2021 Limiting Conditions These documents and schedules were created by B. Riley Advisory Services (“B. Riley”) from publicly available information. B. Riley has relied on information provided by public information sources as so noted and accepts no responsibility for the accuracy and completeness of information and other reports and documents not prepared by B. Riley or for reports prepared by B. Riley based in whole or in part on inaccurate, incomplete, or out-of-date information. Any statement or opinion expressed or implied in these documents and schedules is provided in good faith but only on the basis that no investment decision(s) will be made based on any of the contents herein by you or others. Changes may have occurred or will occur with respect to the information in this report. B. 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The information contained in this report has been made available on the basis that the recipient is a person into whose possession such information may be lawfully delivered in accordance with the laws of the jurisdiction in which the recipient is located. B. Riley expressly disclaims any responsibility or liability for any loss howsoever arising from any use of or reliance on these documents and schedules or its contents as a whole or in part by any person, or otherwise howsoever arising in connection with these documents and schedules. January 12, 2020 2 Table of Contents I. Executive Summary and Key Take Aways Overview Overview of Analysis Estimated COVID Impact to Auto Parts Suppliers to Date Estimated COVID Impact as a % of Pre-COVID Sales II. COVID Impact on Profitability by Region Asia Sales and Profit Margins Europe Sales and Profit Margin Americas Sales and Profit Margin Suppliers in Focus Americas Suppliers III. European Suppliers Asian Suppliers IV. Appendix 3 Executive Summary and Key Takeaways This is our third review of the economic impacts on Tier 1 suppliers since Covid-19 struck in March 2020. In all our reviews, we have focused on data from publicly traded suppliers that have as major customers, U.S., European and Japanese OEM’s. As Background: Our first review focused on pre-COVID liquidity and estimated economic impacts of a two-month 100% shutdown of the auto industry across the globe. For individual suppliers as well as the industry data set, historical profitability and fixed/variable cost metrics were used to estimate changes in debt/net debt levels and liquidity during the shutdown and included a slow production ramp up through December 2020 to estimate the expected financial distress and potential costs to OEM customers. Our findings showed that while distress was likely for some suppliers, it was limited to those suppliers who exhibited distress prior to COVID and the industry impact to be far below the $25 -$50 billion cost discussed by some industry groups. Our second review focused on same group of suppliers and examined the actual impact in debt/net debt levels and liquidity for both individual suppliers and the industry data set in total through the second quarter ended June 30, 2020. We determined that our first analysis was directionally correct, however, all performed better than expected because of a strong ramp up of production levels. Suppliers in all regions increased net debt by approximately 3% of pre COVID Sales and cash balances grew as credit lines were drawn down. Consistent with our findings in the first review, we did not find systemic wide-spread distress caused by COVID rather those companies exhibiting distress pre-COVID were negatively impacted by COVID. This third review focuses on performance through September 30, 2020. Sales volumes have largely recovered to pre COVID levels. It is clear from the data that suppliers in the Americas had the largest original drop in revenues, but also recovered the most. The European suppliers showed a smaller reduction in revenues than the Americas but recovered slightly less as well. The Asian Suppliers (primarily Japanese and Korean) had the smallest drop in sales, but the smallest recovery as well. The impact on profit metrics largely followed the same relative pattern. It is worth noting that although sales in the third quarter 2020 were lower than the fourth quarter 2019 in all regions, profit metrics in the Americas were better, Europe were about the same and Asia were only moderately reduced. This suggests that cost cutting in early/mid 2020 was impactful and that any costs associated with physical distancing efforts, labor shortages and logistical challenges were not particularly significant. The aforementioned earnings metrics played out directly on the balance sheets of the companies within the data set during Q3 with net debt being reduced approximately 1.7% of pre-COVID sales in the Americas and European data sets. In Asia net debt was approximately flat, presumably reflecting the weaker revenue and profit recovery. In all regions. cash + reported available credit improved. When looking at individual suppliers, the same suppliers that were distressed in our last report remain so with Shiloh and Garrett having filed for insolvency during the third quarter. Key Takeaways COVID has caused disruptions to the automotive supply chain manifested in continued labor shortages and material shortages as OEM’s work to recapture the volumes lost during the 2020 shutdown period. The virus is still circulating and requires continued vigilance on the part of the entire manufacturing chain. Through December 2020, the OEM’s and suppliers have operated strongly. Recent shortages in materials in January 2021 such as chips and aluminum, to name a couple, will keep the industry keenly focused on managing material inputs and OEM’s will meter their production accordingly. The industry has proven itself resilient again and the kudos go to the teams who work 24/7 to ensure the supply chain can meet production needs. Its worth mentioning that financial support through the government funding programs such as the Paycheck Protection Program in the US and lender accommodations provided much needed assistance to the middle market supply base. Continued attention to financial and operational efficiencies are key to long-term viability in the new normal of continuous change. 4 Overview 5 Overview of Analysis Commentary Europe Data Set – Post COVID Revenue and Profitability Margins B. Riley reviewed the changes in specific DATASET DATASET REMOVAL OF balance sheet accounts between December 31, SUBDIVIDED BY SUPPLIERS NOT 2019, June 30, 2020 and September 30, 2020 as 169 Publicly Traded REGION REPORTING well as various revenue / profitability metrics Companies Classified as SEPTEMBER Auto Parts Manufacturing & Divided the dataset into for 169 publicly traded automotive suppliers Reported significant OEM RESULTS Asia, Europe and North sales as a % of their total America based on ● As part of the analysis, we reviewed cash, total • Asia had 121 suppliers headquarters location debt, net debt and reported available credit with $418B in pre COVID annual sales Actual results are generally consistent with • Europe had 18 our previous forecasts suppliers with $145B in pre COVID annual ● In each of Asia, Europe and the Americas, Net sales Debt increased approximately 3% of annual • Americas had 30 pre COVID Sales or 36% (3% x 12 months) of suppliers with $175B in pre COVID annual monthly pre COVID Sales from December to sales June and then improved or flatlined from June to September ● We previously forecasted Cash / EBITDA Impact on Liquidity within the Supply Base losses consistent with 2 months of shutdown at Suppliers 121 18 30 15% per month of pre COVID monthly sales, Asia - Dec. Asia - June Asia - Sep Europe - Dec. Europe - June Europe - Sep Americas - Americas - Americas - $ Billions added interest costs and then additional 2019 2020 2020 2019 2020 2020 Dec. 2019 June 2020 Sep 2020 Available Credit 3 1 1 11 9 10 18 12 14 marginal losses as volume ramped back up... Cash 66 73 75 13 17 18 11 14 15 (Debt) (86) (107) (109) (41) (48) (47) (43) (51) (48) or approximately 36% Net Cash/ (Debt) (20) (34) (34) (27) (31) (29) (32) (37) (34) Pre Covid Annual Sales 418 146 176 ● Its worth noting that in all regions, that by June, suppliers had drawn down on available credit and cash balances actually increased, as a % of Pre Covid Annual Asia - Dec.