9/20/10

Debbie Maranger Menk Project Manager Center for Automove Research Ann Arbor, Michigan

The Center for Automove Research • An independent non-profit research organizaon • Don’t pick winners or losers • A corporate, public sector, and academic interface • Funded by: • Private companies and organizaons (contract research) • Public enes (federal, state & local governments), and • Foundaons

2 • Focused on future trends

1 9/20/10

What Affects Corporate Revenues Affects Jobs • Annual U.S. sales • Segment shis • Increased compeon for segment market share • Products built at a plant • Restructuring • Miscellaneous

Over $100 Billion in Losses Since 2000 But we have profits now! U.S. Automove Capacity Ulizaon and Profits 1978 – Q2 2010

Source: Federal Reserve, U.S. DOC/BEA

2 9/20/10

Motor Vehicle & Parts Manufacturing Employment 1999 –May* 2010

50% change

61% change

51% change

46% change

*U.S. Total through Apr. 2010 Source: BLS, U.S. DOL, March 2010

Signs of Auto Sales Recovery in 1st Half 2010 • Posive Signs – Full Time Employment Increasing – UI Inial Claims Decreasing – Retail Sales Rebounding – Wholesale Trade and Inventories Gradually Increasing – Consumer Confidence Index Improved to Summer ‘08 Level – New Vehicle Prices Stabilized and Used Vehicle Prices Jumped To the Highest Since ’03 • Monthly payment of a new car loan might be the same as a good quality used car. – Fleet Sales Returned to Pre-Recession Level

3 9/20/10

Signs of Auto Sales Recovery in 1st Half 2010 • Negave Signs – Unemployment Rate Remains High – Private Sector Employment Increasing But Slowly – Lower Than Expected Apr/May Auto Sales Retail Sales Lagging – Weakening Euro and PIGS Debt Crisis – Sluggish Q2 GDP Growth – Stock Market Struggling/Housing Sales Slow

Light Vehicle Sales and Producon

4 9/20/10

The Glory Years - a Plateau! Total U.S. Sales of Light Vehicles: 1992 - 2007

17.0 17.4 17.2 16.8 16.6 16.9 16.9 16.5 16.4 15.6 15.0 14.7 15.1 15.0 13.3 13.9 Millions

Year

Source: Auto News 9

Off A Cliff! Total U.S. Sales of Light Vehicles: 1992 - 2009

17.4 17.2 17.0 16.9 16.8 16.6 16.9 16.5 16.1 15.6 15.0 14.7 15.1 15.0 13.3 13.9 13.2

10.4 Millions

Year Source: Ward’s Automove Reports

5 9/20/10

Back to Trend? CAR Long-Term US LV Sales Forecast

+ 17 M + 3.2 M

- 6.2 M - 13.5 M

Combined CSM & IHS N.A. Light Vehicle Production History & Forecast: 2007 - 2013

16.0

15.0 15.0 14.8 13.8 14.0 13.0 12.6 12.5 12.0 11.6 11.0 10.0 9.0 8.6 8.0 7.0 Light Vehicle Producon in Millions 6.0 2007 2008 2009 2010 2011 2012 2013

Source: IHS Global Insight, CSM Worldwide

6 9/20/10

But It Will Recover U.S. Vehicle Producon & Automove Employment Forecasts

12,000,000 900,000

10,000,000 800,000 8,000,000

6,000,000 700,000 Producon

4,000,000 Employment 600,000 2,000,000

0 500,000 2007 2008 2009 2010 2011 2012 Vehicle Producon 10,485,161 8,455,959 5,574,026 6,957,931 8,039,721 9,129,232 Automove Employment 827,900 735,100 561,200 565,700 653,600 742,200

Source: IHS Global Insight; CAR Research

6,665,180 857,322

2,140,628 441,118 (32,1%)

2,987,254 444,864 (44.8%)

630,314 59,372 (9.5%)

1,107,543 202,018 (16.6%)

1,249,397 183,474 (18.8%) Updated 8/04/2010

Source: CAR calculaons on Data From Automove News Percentage Change 14

7 9/20/10

Source: Ward’s Automove Reports

A Monthly Sales Version

GM Employees Post-9/11 Get America Moving Hired Laid Off Nominal $ per Gallon Gasoline Light Truck Sales SAAR (Millions)

Source: EIA, Ward’s Automove, BEA

8 9/20/10

Automove Industry Investment

Detroit Three Manufacturing Plants St. Tomas Assembly (Ford)

Total U.S. Detroit Three Ingersoll Assembly (GM) Employment (12.31.09): Oakville Assembly (Ford) 177,417 Assembly Windsor Engine Oshawa Assembly 1 & 2 (GM) Windsor Transmission (GM) Oshawa Metal Center (GM) Cambridge Engine (Toyota) Buffalo Stamping Lockport and Rochester Delphi Tonawanda Engine Twin Cies Assembly Toledo North Assembly Ohio Assembly (Avon Lake) Kenosha Engine Lordstown Assembly Toledo Transmission And Metal Center Cleveland Engine & Casng Belvidere Assembly Twinsburg Stamping and Parma Components & Metal Chicago Stamping and Assembly Balmore Transmission Walton Hills Stamping Marion Metal Center Toledo Supplier Park & Defiance GMPT Foundry Lima Engine Moraine Engine Plant 2 Fairfax Assembly & Stamping Sharonville Transmission Indianapolis Metal Center Bedford Foundry Kansas City Assembly 1 & 2 Fort Wayne Louisville Assembly Assembly Kentucky Truck Assembly Plant 1 & 2 Arlington Assembly & Bowling Green Assembly Casngs/Kokomo Delphi GM Spring Hill Assembly & Stamping Wentzville Assembly & Stamping Shreveport Stamping & Assembly Spring Hill Engine

9 9/20/10

Internaonal Automove Manufacturing Plants

Cambridge North & South Woodstock Assembly (Toyota) Assembly (Toyota) Total U.S. Internaonal Muncie Transmission East Liberty Assembly Buffalo Transmission OEMs Employment: Anna Engine (12.31.08) 107,488 Russell’s Point Marysville Assembly Cambridge Engine (Toyota) Transmission Georgetown 1 & 2 Assembly Georgetown Engine Buffalo Transmission Greensburg Assembly Lafayee Engine Buffalo Transmission Buffalo Engine Lafayee Assembly Normal Assembly Columbus Engine Volvo Powertrain Princeton East & West Assembly Chaanooga Assembly St. Louis Stamping Troy Casng Raleigh Transmission Smyrna Engine Jackson Foundry Mt. Holly Assembly Smyrna & Smyrna Truck Assembly Spartanburg Assembly Greenville Transmission Decherd Engine Long Beach Engine Gainesville Transmission Huntsville Engine Ladson Assembly

Tallapoosa Transmission Tupelo Assembly West Point Assembly West Point Transmission San Antonio Assembly Lincoln Engine Montgomery Assembly Canton Assembly Lincoln Assembly Montgomery Engine Tuscaloosa Assembly 1 & 2

Vehicle Assembly is Huge Driver of Economy

Typical Assembly Plant 2,000 Jobs

.56 Powertrain Plants or .56 Stamping Plants or 450 Jobs 650 Jobs 2,900 Parts & Component Jobs or a Total of 6,000 Manufacturing Jobs!

And another 7,000 Non-manufacturing jobs For a total of 13,000 jobs

10 9/20/10

Source: ELM Database

Parts suppliers are top employer in 7 states, top 5 employer in 12 other states Top Employer

Top 5 Employer

(Ranked by Size Compared to Other Industries in State)

11 9/20/10

Market Share

Source: CAR Research

12 9/20/10

About 25% since 2008, or 2.9 mil. units Millions

Source: Company Restructuring Plans and CAR Research

Too Much Competition? New Market Structure? U.S. Market Share of N.A. Light Vehicle Sales: 2009-2014

2009 2014 2009 2014

19.2 17.0 2.2 2.7

15.7 17.3 2.9 2.6

15.5 16.8 2.5 3.2

9.5 6.4 1.8 1.8

10.9 11.0 1.9 1.3

8.0 8.4 0.5 0.7

4.5 4.3 0.7 0.7

3.6 3.6 0.2 0.3

Source: Ward’s Automotive YTD U.S./CAN/MEX sales through August; CSM Worldwide

13 9/20/10

“Ford made more money in the first six months of this year than in the previous five years combined. G.M. is profitable and preparing for one of the biggest public stock offerings in American history. Even , the automaker thought least likely to survive the recession, is hiring new workers.”

“Many of the excesses of the past — overproducon, bloated vehicle lineups, expensive rebates — are gone. All three carmakers have shed workers, plants and brands.”

“Since 2000, the number of Big Three assembly plants in North America has dropped to 40, from 66, according to the consulng firm Oliver Wyman. In turn, overall capacity has shrunk to about eight million vehicles a year, from 13.7 million.”

“The bankruptcies at G.M. and Chrysler slashed debt, jobs and labor costs, and revised union contracts have brought manufacturing expenses more in line with factories in this country operated by Toyota and other foreign automakers.

!

14 9/20/10

Parity: Esmated GM-UAW/Toyota All In per Hour Labor Costs 2010 2. 1st Tier Skilled 3. Toyota- TMMK 4. Toyota TMMK 1. 1st Tier Production Trades Production** Skilled Trades** Wages $29 $33 $28 $30 Premiums 1 2 3 4 PTO 6 6 5 5 Total Wages $36 $41 $32 $39 Active Benefits* 15 15 11 11 FICA etc. 4 4 4 5 Legacy 2 2 0 0 Total $57 $62 $47 $55

Other Bonus 0 0 4 4

Average Hourly Labor $57 $62 $51 $59 Costs Employment Fraction x .77 x .23 x .87 x .13 Wage Components $43.89 $14.26 $44.37 $7.67

Sum of Labor Cost X 1.08 $58.15 Components *Pension, Insurance, Acve Health $56.16 **Toyota costs are for 4/07, recommend that total be increased by 8%.

CAR's Comments- February 25, 2009

Recessions and U.S. Automove Producvity

1.2

1.0

0.8

0.6

0.4

Producvity Index (2000 = 1) 0.2

0.0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

Automove Producvity Index consists of SIC 3711/3714 and NAICS 3361/3363. 2000 is the base year. Source: BLS, USDOL

15 9/20/10

No Significant Difference? Harbour’s Overall Producvity Esmates: (Strategic Operaons) 1995-2008

50.0

45.0

40.0

35.0

30.0

25.0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 GM 46.0 44.6 46.5 45.6 43.0 40.5 39.3 36.7 35.2 34.3 33.2 32.4 32.3 31.6 Chrysler 43.0 40.5 45.5 44.3 43.6 44.8 44.3 40.6 37.4 35.9 33.7 32.9 30.4 30.2 Ford 37.9 37.6 34.7 34.8 36.2 39.9 40.9 40.0 38.6 37.0 35.8 35.1 33.9 32.4 Toyota 29.4 29.5 31.8 30.4 31.0 31.1 31.6 32.0 30.0 32.0 29.4 29.9 30.4 32.6

Source: Harbour Reports, 1996-2009

31

Reinvesng in the Industry

16 9/20/10

Announced U.S. & Canadian Investments: 2010 Almost $6.2 Billion

Program Amount States Products

Malibu, New V8 Engine, 4-Cylinder Ecotec, Tesng of baeries, Develop Lean IN, KS, MI, NY, OH, Combuson Engines, V8 Components, General Motors $1.9 billion ONT Precision Blocks for Ecotec, Malibu, Connecng rods for Ecotec, Fuel Efficient 6- speed Transmissions Develop flexible combuson system for Chrysler $378 million IN, MI minivan plaorm, Transmission, Medium Sized Cars, New 8 speed Transmission Ford Explorer, N.A. Center Advanced Powertrain Technology, Engine Efficiency Ford $1.6 billion IL, MI, OH, ONT Research, HEV and Plug in Hybrid/Lithium ion baery, Lithium ion baery Packs, 6R140 Transmission for Ford Super Duty Ownership Stake in NUMMI, Camry, Legacy, CA, IN, MS Toyota $281 million and Outback, Corolla

Nissan $1.7 billion TN Leaf Electric Car, Lithium ion baery Model S EV, Think City Electric Car, CA, IN, OR Other $316 million Powertrain, Engine R&D

CA, IL, IN, KS, MI, MS, TOTAL $6.2 billion NY, OH, ONT, OR, TN

The US/CAN/ONT Government’s Auto Investment GM DIP: $50 billion DOE Loans: $25 billion GMAC: $20 billion Chrysler DIP: $12 billion TALF: $4.9 billion+ Supplier Assistance: $3.5 billion Cash for Clunkers: $2.9 billion Baery Iniave (Recovery Act): $2.4 billion Chrysler Finance: $2.0 billion Warranty Coverage: $0.64 billion Training (DOL): $0.01 billion TOTAL: $123.4 billion

17 9/20/10

CAR esmates that the government intervenon resulng in successful bankruptcies at Chrysler and General Motors avoided $113.8 billion in addional personal income loss, government transfer payments and forgone social security and personal income tax receipts in the first two years, and more in succeeding years.

Department of Energy Advanced Technology Vehicles Manufacturing Loan Program ATVM / Secon 136 Loans: $8.4 Billion of $25 Billion Awarded

Company Award Project Ford $5.9 Billion Transform factories across Illinois, Kentucky, Michigan, Missouri, and Ohio to produce more fuel efficient models Nissan $1.44 Billion Retool Tennessee factory to (reduced from $1.6 build advanced electric automobiles and build an Billion award) advanced baery manufacturing facility Fisker $528 Million Development of two lines of plug-in hybrids

Tesla $465 Million Manufacture electric drive trains and electric vehicles in California

Tenneco $24 Million Development of fuel efficient emission control components

18 9/20/10

Recovery Act Awards for Electric Drive Vehicle Baery and Component Manufacturing Iniave

Amount States Program Companies Awarded Benefing Cell, Baery and Materials $1.2 billion MI, IN, OR, FL , TN, GA, A123, Dow Kokam, Compact Power, GM, JCI, Manufacturing Facilies PA Enerdel, Sa, Exide/Axion Electric Drive Component $465 million MI, IN, MD, ND, CO GM, Delphi, Allison Trans., Ford, Remy, UQM Manufacturing Facilies Technologies, Magna E-Car Advanced Vehicle Electrificaon $254 million AZ, CA, OR, WA, TN, Nissan/ETEC, Chrysler, SCAQMD, Navistar MI, KY, IN, IL Advanced Baery Supplier $235 million NC, SC, NV, NY, IL, OH, Celgard, Toda, Chemetall Foote, Honeywell, Manufacturing Facilies OR, LA, AR, CT BASF, EnerG2, Novolyte, FutureFuel, Pyrotek, H&T Waterbury Advanced Vehicle Electrificaon and $71 million MI, MO GM, Ford, Smith Electric Vehicles Transportaon Sector Electrificaon Advanced Electric Drive Vehicle $39 million MI, WV, SC, IN, CO, WVU, Purdue, Colorado State, MUST, WSU, Educaon Program GA, MO, MA, VA, CA MTU, UM, Naonal Fire Protecon Associaon, Reynolds CC, City College of San Francisco Electric Drive Subcomponent $32 million SC, VT, PA KEMET, SBE, Powerex Manufacturing Facilies Transportaon Sector Electrificaon $22 million OR Cascade Sierra

Advanced Lithium-Ion Baery $9.5 million OH TOXCO Recycling Facilies

Sun Valley, Idaho September 20, 2010

Debbie Maranger Menk Project Manager Center for Automotive Research Ann Arbor, Michigan [email protected]

19