THE HANSEN REPORT ON AUTOMOTIVE ELECTRONICS. A Business and Technology Newsletter

VOL. 19, NO. 5◆◆ PORTSMOUTH, NH USA JUNE 2006 Roundup of Japanese Big-Three Top EEs Speak Auto Electronics I had the opportunity last month to Chrysler sees vehicle architecture de- Suppliers, FY 2005 visit individually with top electrical engi- sign and validation as something that neers from the North American Big Three must be handled 100% inside. “However, carmakers: Ronn Jamieson, formerly the we are making a move at the other end of In this article, FY 2005 is the fiscal year ending controls and software engineering director the spectrum—where wiring design and March 31, 2006. for GM North America, recently put in release will be 100% done by the supplier, Alpine Electronics charge of HVAC/supplier integration; Bill with Chrysler supervision.” FY 2005 Consolidated Net Sales: ¥254 Mattingly, vice president of electrical/ When it comes to wiring, Ford also billion ($2.3 billion) electronics engineering at Chrysler defers to the supplier community, having Change from FY 2004: up 14% Group; and Graydon Reitz, director of agreed to a long-term partnership with FY 2005 Net Income: ¥6.2 billion ($55.1 electrical systems engineering at Ford. Yazaki. Ford will pursue other technology million), or 2.4% of sales. Net income fell Generous with their time and insights, partnerships with infotainment suppliers. 22.2% compared with the prior year. these experts shared their views on a Ford has had a habit of changing suppliers FY 2006 Estimated Net Sales: ¥250 bil- number of topics including the role sup- frequently in search of the lowest cost lion ($2.2 billion), down 1.5% from FY pliers play and the development of active possible, but that will change says 2005 safety features. Graydon Reitz: “The fly-by-night, two or FY 2006 Estimated Net Income: ¥6 bil- In an attempt to off-load overhead, three years in, and then out doesn’t work. lion ($54.4 million) some carmakers have been relying heavily Now when we talk to suppliers, we are The Audio Products segment contrib- on suppliers for engineering support. I looking at long-term partnership relation- uted 51% of Alpine’s sales in FY 2005. asked the electrical engineers which way ships—for 10 or 15 years out.” Ford North Audio Products sales grew just 5% during their companies were heading these days, America recently concluded an agreement the period, but Alpine shifted a portion toward or away from reliance on suppliers. with Hitachi subsidiary, Xanavi, to supply of the segment’s sales to the Information For all of them the degree of reliance Ford with navigation equipment, but not and Communication Equipment segment. on in-house competencies versus suppli- yet including infotainment. According to the company, this adjust- ers’ expertise depends on which part of All three carmakers are keen on the ment better reflects the growing trend to- the vehicle you are talking about. Accord- development of safety systems, particu- ward more integrated audio, navigation ing to GM’s Mr. Jamieson, “Powertrain is larly active safety systems. Mr. Jamieson and video systems. clearly core, and we view software and believes active safety is “one of the hottest Information and Communication controls as a core area of competency that things going right now.” Of particular in- Equipment sales were up 25.1% over the we want to continue to develop.” terest to GM is finding active safety sen- prior year, aided by the introduction of Since it helps define the vehicle’s char- sors that can serve multiple functions, new aftermarket in-dash navigation and acter, body control is also core. “For years which would help reduce the cost of add- audio/video products as well as increased GM defined the functions and modeled ing new features. penetration of integrated systems. Alpine those functions; we now are taking the The cost of some of those sensors must also benefited from increased vehicle next step—we’ll have full control of the also come down, according to Mr. sales in the U.S. and Europe by Honda, application software of those body func- Jamieson. “Radar sensors are still too ex- Alpine’s major OEM customer. OEM cus- tions.” GM works closely with its chassis pensive. A promising alternative is laser tomers accounted for 77% of sales. systems suppliers, but it will take charge of radar, which is improving in performance chassis systems when they “cut across mul- and has inherently lower costs,” he noted. Denso tiple [vehicle control] domains.” According to Hella, laser radar, or lidar, FY 2005 Consolidated Net Sales: Chrysler’s Bill Mattingly agrees that can reduce the cost of an ACC system by ¥3,188.3 billion ($28.4 billion) combining chassis systems with the 50%. Chrysler’s Mr. Mattingly also sees Change from FY 2004: 13.9% growth powertrain can only be done at the ve- promise in laser radar, despite the fact that FY 2005 Net Income: ¥169.6 billion hicle level. “The next one, collision miti- unlike radar, laser sensors can’t see ($1.5 billion), or 5.3% of sales. Net mar- gation, is a combination of the safety through driving rain, snow or heavy fog. gin in FY 2004 was 4.7%. system, the brake system and the engine “These are situations where you shouldn’t management system. That also will be be driving with adaptive cruise control. Turn to Roundup, page 3 done inside.” Turn to EEs, page 3 Drowsy Driver Monitoring Slow to Wake Up According to the NHTSA-sponsored yet been issued. Once announced, 90 to far shipped prototypes to two carmakers, 100 Car Naturalistic Driving Study, pub- 120 days would elapse to allow for public one in Europe and the other in the U.S. lished in April 2006, drowsiness affects comment. From that point it would take crashes and collisions at a much higher another 12 to 18 months to issue a man- Distracted Driving rate than expected: Drowsiness was a con- date, which wouldn’t take effect for an- A much bigger problem than drowsy tributing factor in 12% of all crashes and other three years. If “fast-track” ESC is driving is distracted driving. Indeed, ac- 10% of near crashes. Most current data- going to take almost five years to reach cording to the 100 Car Study, “Almost base estimates place drowsiness-related implementation, any drowsy driver warn- 80% of all crashes and 65% of all near crashes at approximately 2% to 4%. ing mandate would take at least that long crashes involved the driver looking away Adding weight to the striking findings to be implemented, if at all. from the forward roadway just prior to the is the realistic nature of the study, which With or without mandates, Volvo will onset of the conflict.” was the first of its kind done for NHTSA probably introduce its Driver Alert system Toyota has one answer to that problem (National Highway Traffic Safety Admin- before the end of 2007, assuming that already on the road in the Japanese mar- istration). The study tracked real drivers verification tests continue to be success- ket. This past March, Toyota introduced a in northern Virginia and metropolitan ful. Volvo is conducting tests that require driver monitoring system on the Lexus GS Washington, D.C., going about their busi- drivers to drive until they risk falling 450 hybrid that keeps track of the driver’s ness with no special instructions and no asleep at the wheel, in real vehicles, on face position from a digital camera experimenter present. The data, including closed tracks in Sweden, Belgium and the mounted on the steering wheel. If the 5 channels of video, was collected from United States. (Co-drivers with control of vehicle’s radar sensor detects a possible 100 instrumented vehicles driven a total the brakes ride along in the test vehicles.) collision while the driver is looking away of approximately 2 million miles, by 242 According to Daniel Levin, the Volvo from the road, a warning light and buzzer drivers, over a 12- or 13-month period. engineer responsible for developing the is activated earlier than if the driver was Before this study’s surprising results, Driver Alert system, thus far Volvo has looking straight ahead. If the driver takes NHTSA had quantified the deadly nature seen no significant differences in the be- no action in response to the warning, the of the drowsiness problem this way: havior of drowsy drivers from different system automatically applies the brakes “Approximately 100,000 crashes per year, locations of the world. Volvo is also per- slightly to alert the driver to danger. The including 1,357 fatal crashes and approxi- forming so-called “alert tests” in different driver monitoring system will be available mately 71,000 injury crashes, involved parts of the world, where subjects drive on on the new Lexus LS coming to both Eu- drowsiness.” Given the 100 Car Study public roads under normal conditions, rope and the U.S. next September. findings, NHTSA’s numbers now severely when they are not sleepy, to make sure the The results of the 100 Car Naturalistic understate the problem. system doesn’t produce false alarms. Driving Study are available at the NHTSA We talked to NHTSA press spokesman With a camera mounted in front of the website, www-nrd.nhtsa.dot.gov. ◆ Rae Tyson to see if a groundswell has de- rearview mirror, Volvo’s Driver Alert sys- veloped for mandated drowsy driver moni- tem keeps video tabs on the road mark- THE HANSEN REPORT ON tors, which carmakers have experimented ings ahead of the vehicle and alerts the with for years and have even used in pro- driver if it detects signs of fatigue or dis- AUTOMOTIVE ELECTRONICS duction vehicles. (Nissan deployed a traction, which can be ascertained in a © 2006 Paul Hansen Associates, 150 drowsy driver monitor in the 1980s on matter of seconds. Pinehurst Rd., Portsmouth, NH 03801, Bluebird sedans sold in Japan. The system The video analysis and lane position USA. Telephone: 603-431-5859. Fax: 603- analyzed driving time and steering angle technology is Volvo’s. The video camera 431-5791. Email: [email protected]. fluctuations and warned the driver when and lane tracker will come from a Volvo All rights reserved. Materials may not be drowsiness was determined. It was with- supplier. reproduced in any form without written per- drawn from the market.) Separately, Delphi has developed a mission. The Hansen Report on Automotive According to Mr. Tyson, “NHTSA has drowsy driver alert system that monitors Electronics is published 10 times a year, been concerned about drowsy driving for a the driver’s eye movements and keeps monthly; July/August and December/Janu- long time, has done an extensive amount track of eye closures, a method that de- ary are combined issues. The annual sub- of research and has launched education tects drowsiness sooner than the lane scription rate is $717 (North America), $747 campaigns targeting drivers who are prone monitoring approach, according to the (elsewhere). Back issues are available for to drowsy driving. ... [But] NHTSA company. “As time proceeds and you con- $50 each; see our online index at doesn’t know whether or not it is some- tinue to become more and more fatigued, www.hansenreport.com. Paul Hansen Asso- thing that’s worthy of federal regulation, you start to lose control of the vehicle,” ciates is a strategy and market research or even if the solution lies in technology.” noted Jerry Witt, manager of advanced firm consulting to the electronics industry. In contrast with drowsy driving moni- driver systems for Delphi. An infrared Publisher/Editor Paul Hansen tors, electronics stability control is on a camera with illumination helps the cam- Managing Editor/ Brianne Wolfe “fast track” at NHTSA. But no notice of era see the driver’s eyes through eye Circulation Manager proposed rulemaking concerning ESC has glasses and most sun glasses. Delphi has so ISSN 1040-1105

Page 2, June 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com Roundup... Continued from page 1 FY 2006 Estimated Sales: ¥3,380.0 bil- Hitachi Group continues to strength- America. Full scale production at a lion ($30.1 billion) en and expand its Automotive Systems manufacturing subsidiary in China began Change from FY 2005: 6% growth business. In February 2006 Hitachi made in January 2006. Domestic AEC sales are FY 2006 Estimated Net Income: ¥173 the public company Hitachi Mobile a projected to decline by about 1%. billion ($1.5 billion) or 5.1% of sales wholly-owned subsidiary. Hitachi Mobile Sales to customers in Japan contrib- operates an aftermarket sales and service Pioneer Car Electronics Business uted 53% of Denso sales in FY 2005, network in Japan for automotive parts, FY 2005 Consolidated Sales: ¥330.5 bil- compared with 55.5% in the prior year. including electrical components and mo- lion ($2.9 billion) Sales to customers in the Americas grew bile communication equipment. Hitachi Change from FY 2004: 8.9% growth 19% and accounted for 21.7% of FY 2005 plans to leverage this network of more FY 2005 Operating Income: ¥17.5 bil- sales. Denso noted the increase was due than 500 facilities to increase sales of au- lion ($156 million), down nearly 6% to strong production by Japanese carmak- tomotive electrical and electronic com- from fiscal 2004 ers in North America. Operating profits ponents and car information systems. As it was last year, Car Electronics was in North America, however, declined the most profitable business segment; Pio- 7.5% due to production costs, new prod- Omron Automotive Electronic Compo- neer Corporation posted a net loss of ¥85 uct additions and an increase in fixed nents (AEC) Business Segment billion ($758 million) for fiscal 2005. Re- costs. In Europe, sales grew 13.1%, driven FY 2005 Net Sales: ¥77.6 billion ($692 gionally, Car Electronics’ total sales in- by navigation, A/C and diesel common million), 12.4% of Omron’s total sales creased 16.3% overseas, but domestic rail systems. Change from FY 2004: 20.1% growth sales dropped 2.2%. OEM sales accounted In December 2005, Denso added a Estimated FY 2006 Sales: ¥91.0 billion for 35% of the Car Electronics segment fifth business group to its organization. ($811 million), 17.3% growth sales in FY 2005, down from 36% the Joining the four existing groups, Power- Most of AEC’s growth came from over- prior year. train Control Systems, Electric Systems, seas sales, which increased 30.6% from According to the company, sales of car Electronic Systems and Thermal Systems, the prior year. Part of that growth outside audio products grew in both the OEM is the new Information & Safety Systems Japan is a result of Omron’s acquisition and consumer markets. OEM sales growth business group, under the leadership of last year of a relay business in Italy; part came primarily from North America and senior managing officer Mitsuharu Kato. was due to new product launches in the Japan. Aftermarket sales grew in Central The new group is focused on driver assis- U.S. and strong sales in Asia. The com- and South America as well as in North tance systems and incorporates ITS, pany cited steadily increasing sales of la- America and Russia. safety systems and body electronics. ser radar, electric power steering OEM navigation sales grew in North controllers and wireless control devices. America, but declined in Japan; aftermar- Hitachi Automotive Systems Omron AEC expects overseas sales ket navigation grew in both regions. Pio- FY 2005 Net Sales: ¥582.2 billion ($5.2 growth of 27% in the current fiscal year, neer sees opportunity in the emerging billion) driven by expanded vehicle production in navigation aftermarket in North America Change from FY 2004: up 23.2% China, Eastern Europe and South and Europe. ◆

EEs... Continued from page 1 When lidar-based ACC realizes it’s blind, tronic stability control, the calibration of numerous luxury features including Mag- it turns itself off,” he noted. ERM was done within Chrysler for use on netic (electrorheological fluid) Ride Ford North America wants to replicate Chrysler Group vehicles. ERM monitors Control, all-wheel drive, a Bose 5.1 sur- what Volvo and Jaguar have done in ac- the vehicle’s roll attitude and lateral force round-sound system with 15 speakers, tive safety in Europe. But the number of and estimates the potential for a rollover adaptive cruise control and head-up dis- active safety system suppliers is limited, in situation. It then applies full braking play. The Escalade stands out, says Mr. Mr. Reitz’ view. “In active safety I’d like to power to the appropriate wheels to stabi- Jamieson, for its standardized infotain- have a larger choice of supply partners,” lize the vehicle. Of special note, on both ment architecture, which is shared he said. LX platform vehicles and the Jeep Com- throughout GM’s truck line. Those high I asked each of the electrical engineers mander, according to Mr. Mattingly, is the volumes led to significantly lower costs. to name the vehicle which exemplifies “very reliable” Alpine navigation radio, Graydon Reitz, who has been in his job the best automotive electronics at his with its AM/FM, 6-disc player and satel- for just nine months, asked us to come company. Bill Mattingly’s choice was the lite radio. The platform also offers a back to him during the next Detroit auto Jeep Commander SUV, which has all of UConnect hands-free Bluetooth interface show, in January 2007, when he’ll be able the features of Chrysler’s LX platform and rear seat entertainment system. to talk about a new Ford vehicle that (which includes the Chrysler 300 and Ronn Jamieson named two exemplary showcases automotive electronics. Stay Dodge Magnum), plus Electronic Roll vehicles from Cadillac: the STS and the tuned. ◆ Mitigation (ERM). An extension of elec- Escalade. The STS can be ordered with

The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com June 2006, Page 3 The Company Profile... Tele Atlas

Thumbnail Sketch Tele Atlas Sales Tele Atlas Sales by Market Segment Headquarters: Reitscheweg, 7F, NL-5232 in € millions 250 2005 Total Sales: €200.1 million BX ’s-Hertogenbosch, The Netherlands; Other, 6.5% Telephone: 31 73 640 21 21; Fax: 31 73 2001 to 2005 CAGR 200.1 In-car naviga- tion, 26.4% 640 21 22; www.teleatlas.com of Sales: 29.6% Enterprise & 2005 Sales: €200.1 million government, 127.7 22.4% 2005 Net Profit: (€21.6 million) Data products 86.5 Product: Digital map data/geographic 70.9 78.3 navigation, 13.6% content Personal navigation, 31.1% Shareholders’ Equity: €469 million as of March 31, 2006 2001 2002 2003 2004 2005 2006 Tele Atlas Sales by Region Market Capitalization: €1,818 million as est. € of May 9, 2006 2005 Total Sales: 200.1 million Net Profit Net Cash from Major Shareholders as of December 31, North € Operating Activities* 2005: International Asset Management, in millions America, 18%; Oak Investment Partners, 10%; New 2001 (18.9) 14.7 27.4% Enterprise Associates, 9%; Bosch 7% 2002 (18.6) 17.7 € 2003 (87.3) 9.3 2005 Net Cash Flow: 18.1 million Europe, 72.6% Current Ratio: 4.2 as of March 31, 2006 2004 (5.8) 29.7 Employees: 1,391 full-time as of Decem- 2005 (21.6) 50.9 ber 31, 2005 *Excluding capitalization of databases and tools those markets will underpin double-digit Sales per Employee: €143,853 sales growth probably for the next five Top Customers: TomTom, 17% of sales; Distinctions Claimed by Tele Atlas years. Bosch subsidiary Blaupunkt, 12% of sales Tele Atlas’ sales to the personal navi- ◆ First digital map provider with ISO gation segment grew 87% in 2005 to Background certification over its entire global data €62.3 million, from €33.4 million in 2004. Tele Atlas was founded in 1984 in The production process Sales to the in-car navigation segment Netherlands. In 2000, following an initial ◆ Tele Atlas has been mapping Europe grew 43% in 2005 to €52.9 million, from public offering on the Frankfurt Stock Ex- since 1984 €37 million in 2004. change, Tele Atlas acquired the U.S. digi- ◆ Tele Atlas map data is used by the Seventy-three percent of Tele Atlas’ tal mapping company Etak from Sony. majority of e911 systems in the U.S., 2005 sales come from Europe; North Etak, founded in 1983, pioneered impor- covering more than 200 million people America accounts for the rest. While Tele tant navigation technology, which it li- ◆ Share leader in the personal navigation Atlas sees growth opportunities in Asia, censed to General Motors in 1985 and to market, with 55% of the market its revenues from that region will be insig- Bosch in 1986. In 1989 Etak was acquired nificant for at least the next several years. by Rupert Murdoch’s News Corporation, roadway including 20 million points of In the first quarter of 2006 Tele Atlas ad- which sold it to Sony in 1996. interest, almost all of which are in Europe vanced €3.5 million in funds to its Chi- Tele Atlas expanded further with the and North America. Its maps cover 360 nese joint venture, NaviAtlas. It also acquisition of another U.S. company fo- million addresses in Europe and more staffed a new position in the region, that cused on North American map data, Geo- than 300 million addresses in North of chief operating officer, Asia Pacific. graphic Data Technology (GDT) of America. The company engages more Tele Atlas employs two other COOs: Lebanon, New Hampshire, in July 2004. than 2,300 full-time staff and contract Mike Gerling is in charge of the Americas When it was acquired, GDT had annual cartographers in nearly 30 countries. and Jack Reinelt is in charge of operations revenues of more than $40 million. GDT Since its founding, Tele Atlas has in- in Europe, Middle East and Africa. Mr. was founded in 1980 and was spun off vested more than $1 billion in the com- Gerling was president and CEO of GDT from map publisher R.L. Polk in 2000. In pany. when it was acquired by Tele Atlas in November 2005 Tele Atlas completed a Between 2001 and 2005 Tele Atlas’ 2004. He holds a bachelor’s degree in second stock offering, this one on the sales have grown annually at the rate of business and finance from Cornell Uni- Euronext Amsterdam Exchange. 30%. Over the next several years Tele At- versity. Tele Atlas shipped more than 6 million las expects sales will grow at least 20% per The company in 1998 founded Tele maps in 2005, more than double the 2.6 year. Tele Atlas’ two most important mar- Atlas India, which it sold in March 2005 million it shipped in 2004. Tele Atlas kets—portable navigation and in-car to Infotech for €1.2 million, to cut over- maps cover 19.4 million kilometers of navigation—are growing quickly, and head. Infotech still provides cartographic Page 4, June 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued

North American Navigation Market, 2005 – 2011 2006 Portable Navigation Market Unit Sales by Type N. America: Unit Sales (000) 2005 2006 2007 2008 2009 2010 2011 12 10.8 million In-Vehicle: OEM & Aftermarket 1,430 1,870 2,350 2,900 3,500 4,130 4,780 10 Portable Navigation Devices (PND): 33% 8 Dedicated PND 835 1,600 2,175 2,645 3,030 3,400 3,750 PDA/Smartphones with Navigation 485 835 1,400 2,210 3,270 4,610 6,230 6 67% Million of units Cell Phones with GPS & Navigation 205 500 1,180 2,420 4,600 7,390 10,620 4 2.4 million Total PND 1,525 2,935 4,755 7,275 10,900 15,400 20,600 34% Total Navigation Devices 2,955 4,805 7,105 10,175 14,400 19,530 25,380 2 66% 0 Data: Telematics Research Group, telephone 847-758-3687; www.telematicsresearch.com Europe North America Tele Atlas Stock Price Atlas has been making in North America Smart phones/PDAs to catch up with its competitor, it would Dedicated systems June 30, 2000 to June 1, 2006 Euros be profitable. In addition to the cost of Data for Europe: Tele Atlas and Canalys 35 the North American acquisitions, Tele Data for No. America: Telematics Research Group 30 Atlas has devoted resources to integrating November 2005 the company successfully 25 the GDT and Tele Atlas databases. “In completed its second offering, this one of 20 North America, NAVTEQ had a better about 29 million shares on Euronext 15 position in the in-vehicle navigation mar- Amsterdam in addition to its existing list- 10 ketplace, which they are enjoying right ing on the Frankfurt Stock Exchange. 5 now,” Mr. Gerling noted. “Up until 2001, The offering comprised the sale of roughly they really had no competition in North 0 7 million new shares as well as 21 million 2001 2002 2003 2004 2005 2006 America. Tele Atlas wasn’t there; Etak existing shares; Stanford University and Data: Tele Atlas was in and out of the business, and GDT Robert Bosch were among those selling deliberately decided not to play in that significant holdings. Bosch still owns 7% services on behalf of Tele Atlas. Eight business.” In 2005 NAVTEQ maps were of the company. As a result of the offer- hundred to 1,000 cartographers work at used in 57% of the 1.27 million in-car ing, the free float increased from 21% to the facility in Noida, India. At year end navigation units sold in North America; 51% of shares outstanding, and Tele Atlas 2005 all but nine of Tele Atlas’ 1,391 full- Tele Atlas maps were used in 21% of raised about €134 million (gross) from the time employees worked in the West. them. The remaining 22%, made for issuance of new shares. The company is Toyota by Denso, used maps made by using the proceeds for general corporate North America Key to Profitability merging map data from both companies. expenses and to acquire new map data. Tele Atlas claims numerous firsts: first In 2005 North America accounted for On May 9, 2006, the markets valued Tele to introduce map-matching navigation, 35% of NAVTEQ’s revenue. Atlas stock at €1.8 billion, or nine times first to have digital road map coverage of Mr. Gerling observed: “This is a high sales. (For comparison, Continental re- the U.S., first to launch navigation CDs fixed cost business—building and main- cently purchased Motorola’s Automotive in Europe and first to realize open applica- taining the data set—with relatively low Unit for $1 billion, or 0.63 times sales of tion program interface standards for data variable costs. In the last few years, $1.6 billion.) Tele Atlas has no plans to access to navigation map data. NAVTEQ has broken through the fixed pay a stock dividend. Yet despite these firsts, Tele Atlas has cost barrier and started becoming very grown more slowly since its founding than profitable.” He believes that as sales pick Company Strengths NAVTEQ, the company’s major digital up, aided by the burgeoning portable Tele Atlas does not compete with its mapping competitor in its two key mar- navigation market in North America and customers, a point it makes by consis- kets, Europe and the United States. Tele Europe, Tele Atlas, too, will break tently referring to its customers as Atlas is 40% the size of NAVTEQ and through that fix-cost barrier and then “partners.” This more than anything dis- isn’t yet profitable. NAVTEQ was founded start becoming profitable. tinguishes the company from its main in 1985, one year after Tele Atlas, and in Tele Atlas is also investing in expand- rival. “Unlike NAVTEQ, we aren’t neces- 2005 produced $497 million in sales along ing its geographic coverage in Mexico, sarily into having our brand and logo all with a very healthy net margin of 34%. Eastern Europe and Asia in anticipation over the place where navigation equip- Why is NAVTEQ profitable and Tele of future growth in those markets. ment is retailed,” pointed out Jon Husby, Atlas is not? According to Mike Gerling, Despite Tele Atlas’ lack of profitability, director of automotive and in-vehicle ap- Tele Atlas COO for the Americas, with- the capital markets have behaved very plications for North America. “When you out the considerable investments Tele favorably toward Tele Atlas stock. In continued on following page The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com June 2006, Page 5 Tele Atlas

Tele Atlas Content Features Tele Atlas Employees Tele Atlas Customers For Personal Navigation Devices ◆ Average Number of Full-Time Employees Geometric Accuracy – Comprehen- #1 TomTom sive network of accurately positioned 2001 to 2005 CAGR: -6.0% (listed alphabetically) streets to support map matching Cobra ◆ Geo-coding Accuracy – Industry best, Destinator according to Tele Atlas, guarantees Gate5 drivers find the address they’re Mitac looking for Navman ◆ Turn-by-Turn Content – Complete 1,700 1,819 1,865 1,904 1,329 Pharos turn restrictions and one-ways ensure TeleType the recommended route actually 2001 2002 2003 2004 2005 ViaMichelin works Wayfinder ◆ Extended Attribution – Information on By Department surface type and access restrictions Full-time employees at year-end 2005: 1,391 For Automotive Navigation Devices allows users to customize routes (listed alphabetically) Support, 183 ◆ Dynamic Content – Support for real- Blaupunkt time traffic feeds Marketing, 106 Clarion ◆ Phonemes – Integrated phonetics for Customer delivery, 956 Denso voice guidance Sales, 146 Harman/Becker ◆ Points of Interest – Restaurants, iPC/Pioneer hotels and airports, for example Kenwood Siemens VDO Tele Atlas Map Offerings By Region Europe 741 developed a faster approach to collecting Number of Countries: 50+ North America 641 map data using mobile vans. “We went Worldwide points of interest: 20+ million Rest of World 9 after them to get exclusive rights to that North America proprietary technology,” noted Mr. Husby. Road Coverage: 11.7 million km which provide data updates, confirmed by Presently, Tele Atlas employs 20 to 25 (7.3 million miles) multiple sources, faster and more fre- mobile mapping vans in Europe and 10 in Address coverage: 300+ million quently than can be done by actually driv- North America. “Each van is outfitted Europe ing. With 200 vehicles operating around with four cameras: two looking at slight Road coverage: 7.5 million km the world, Tele Atlas collectively is able angles to either side in the front and two (4.6 million miles) to drive just 3.2 million kilometers per looking slightly to either side in the Address coverage: 360 million year, not nearly enough to keep the data back,” explained Mr. Gerling. “At high- fresh without other input. In Europe and way speeds they do image collection while think of navigation you should be think- the United States alone, Tele Atlas maps laying down a GPS trail. They collect ing TomTom, Pioneer or Denso. We want cover nearly 20 million km of road. Ac- data about the surface of the road, sign- to enable them to be successful. If they are cording to Tele Atlas, the road network age, lane counts, turn restrictions and successful, we’re successful.” changes about 20% annually. bridge heights.” Tele Atlas says its map database is su- The acquisition of GDT also gave Tele Tele Atlas’ 12 million points-of-inter- perior to the competition because of the Atlas a unique opportunity to create an est U.S. database, including hotels, restau- way Tele Atlas develops and updates the especially accurate map of North rants, gas stations and ATMs, comes from data. Prior to 2004, Tele Atlas collected America, since before the merger both InfoUSA, based in Omaha, Nebraska. map data the traditional way, by actually companies maintained separate maps of According to InfoUSA, the company’s driving the roads. But with the acquisition North America. The melding of those two database changes about 65% per year. in 2004 of GDT, Tele Atlas gained access databases will be completed sometime this Mr. Husby noted that Tele Atlas is to GDT’s “compile and drive” approach to year. Tele Atlas reports that its maps cor- well-positioned to take its map-making map data collection, which compiles data rectly geo-locate residences and businesses capabilities to the next generation. “Au- from a variety of secondary sources includ- 95% of the time. The company owns five tomotive companies want to improve map ing aerial photos, government entities, mapping, four retrieval and eight path- accuracy from where it is today, at five to business partners and end users. finding patents. seven meters, down to sub-one-meter ac- Tele Atlas says it now utilizes 50,000 In October 2005 Tele Atlas acquired curacy in order to precisely locate indi- separate sources of map data globally, Warsaw-based PPWK GeoInvent, which vidual lanes and use the navigation

Page 6, June 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued

European Navigation Market, 2003 – 2008 Tele Atlas’ Served Automotive Market 2003–08 European Unit Sales in Millions 2003 2004 2005 2006 2007 2008 CAGR Aftermarket and OEM In-Car Navigation In-Vehicle: OEM & Aftermarket 1.58 1.91 2.05 2.23 2.52 2.89 12.8% Unit Sales by Region in 2006 Portable Navigation Devices* 0.8 2.3 7.0 10.8 16.9 21.2 92.6% in millions of units *Dedicated PNDs, Smartphones and PDAs Europe 2.23 Data: Tele Atlas and Canalys North America 1.87 equipment as an input to lane departure Inrix – Tele Atlas Total Served Market 4.10 warning systems.” Such map-data preci- Traffic Data Partnership sion could also be used to warn the driver In September 2005 Tele Atlas an- Data: Telematics Research Group, Canalys when the vehicle’s speed is too great for nounced a partnership with traffic data and private sources for key metropolitan an oncoming curve. aggregator Inrix of Kirkland, Washington, areas throughout the United States. The In the past, navigation device makers to jointly deliver traffic services to Tele metadata includes existing speed and inci- tended to work with just one map sup- Atlas customers in the United States dent data, historical data, weather condi- plier, but that is changing as they make through a reseller agreement. Furthering tions and forecasts, school calendars, the engineering investment necessary to that agreement, in May 2006 the two major events, construction, holidays and accommodate maps from more than one companies announced they would form other local variables unique to each mar- supplier. This trend will work in Tele At- joint operations to collect, integrate and ket. The company then detects and cor- las’ favor in North America, where deliver Tele Atlas traffic solutions and rects erroneous sensor data and uniquely NAVTEQ maps have been used in the related map information through wireless utilizes Bayesian analysis, initially devel- majority of applications. connections to personal navigation de- oped by Microsoft Research and exclu- Tele Atlas gets most of TomTom’s map vices and in-car navigation devices. Tele sively licensed to Inrix, to calculate future business. Fast-growing TomTom is the Atlas’ objective is to provide dynamic traffic conditions with a high degree of leading portable navigation device sup- route guidance that comprehends traffic accuracy.” ◆ plier in Europe, where it has 30% of the conditions, a feature that would stimulate market. Unfortunately, the trend away the demand for navigation devices. from the use of exclusive map suppliers Inrix currently provides real-time traf- 2005 Portable Navigation Device Market will drive down map prices. According to fic incident information covering 138 by Supplier, North America and Europe industry estimates, in-vehicle maps cur- metropolitan markets and real-time traffic North America rently sell for approximately $50 each and speed and dynamic predictive information 2005 Total Sales: 1.1 million units personal navigation device maps sell at covering 20 markets. Not only does Inrix prices in the $20 range. collect traffic data from the usual sources, Navman, 1% Pharos, 2% Others, 4% including occupancy and speed measure- Cobra, 3% Tele Atlas Automotive End-Use ments from Department of Transportation TomTom, 12% Customers sensor networks, it also collects real-time Garmin, 47% All of these carmakers use Tele Atlas maps, GPS probe data from more than 500,000 but not exclusively. commercial fleet, delivery and taxi ve- Lowrance, 14% hicles. Probe data—which are based on (listed alphabetically) wireless transmissions from moving ve- Magellan, 17% Alfa Romeo Nissan hicles—could ultimately replace traffic data developed from stationary roadside Audi Opel Europe detectors, which require a huge invest- BMW Peugeot 2005 Total Sales: 7.0 million units Cadillac Pontiac ment in infrastructure. Chevrolet Porsche Inrix competes directly with digital ViaMichelin, 4% Citroën Renault mapmaker NAVTEQ, which has been PTV/Map & Others, 9% Guide, 5% Fiat Rover providing U.S. traffic data to Honda cus- TomTom, 30% Ford Saab tomers since the fall of 2004 via XM Sat- Route 66, 5% ellite Radio. Inrix’s traffic information is Honda Seat Garmin, 7% Lancia Skoda compatible with both Tele Atlas’ and Navigon, 20% Lexus Subaru NAVTEQ’s map databases. Navman, 8% Maserati Toyota According to an Inrix press release: Destinator, 12% Mazda Volkswagen “Inrix aggregates and enhances traffic- related content from hundreds of public Mercedes Data: Tele Atlas and Canalys

The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com June 2006, Page 7 dSPACE User Conference Panel on Software Development Tools Last month at the dSPACE user con- mas, director of E/E systems for Detroit They wanted to get ownership of func- ference held in Plymouth, Michigan, I Diesel. tions that differentiate the OEMs, and so moderated a panel discussion on automo- Among the most promising tools are a good way out of that problem was to use tive controls software and found agree- those that generate production-ready soft- design tools.” ment among the panelists that the ware code automatically from tested mod- “Model-based design is a way to facili- demand for software development tools is els. According to dSPACE CEO, Herbert tate the clarification of requirements. In- very, very strong and likely to continue Hanselmann, the Japanese and the Euro- stead of trying to write a text specification that way for a decade or longer. peans have adopted automatic code gen- and toss it over the wall to the design What’s driving demand? To stay com- eration faster than the Americans. team, I take the next step and say, this is petitive, carmakers must strive mightily to Automatic code generation (ACG) what I want to do. I model it, I simulate quickly develop cars with more and more may be lagging in the United States be- it, I validate it,” explained Salim Momin, features, at prices people can afford. These cause it is an outcome of model-based de- director of Freescale Semiconductor’s days more features means more electronics sign, which is not yet as widely adopted in Virtual Garage. Then, he added, “Imple- and more software, and that leads to the U.S. as it is elsewhere. But not for mentation becomes easy.” mind-boggling complexity. Particularly lack of interest, says GM’s Jim Kolhoff. What’s next? Mr. Kolhoff would like problematic are features that require the GM Powertrain has already developed to see more validation tools. And there interaction of powertrain, steering, brak- systems that work, using older heuristic was broad agreement that tools from the ing, suspension and even infotainment methods. “Since we’ve been developing various suppliers need to work more systems. “You can’t design, validate or electronics controls for so long, we have seamlessly with each other, as well as with manage that complexity without the help many legacy control algorithms and sys- configuration management tools and com- that tools and automation provide,” de- tems. So we have been a little slower to pilers. Mr. Kolhoff elaborated: “dSPACE clared Jim Kolhoff, director of software transition to the mathematical design ap- is the de facto standard for hardware-in- engineering for GM Powertrain. “They proaches than, say, chassis systems.” the-loop and rapid prototyping. In the are mandatory in order to achieve confi- While 25% to 30% of its existing sys- design environment, The MathWorks’ dence that the product you put out there tems are based on models, GM Powertrain Simulink is the de facto standard. In cali- will deliver the features you intend, not to develops models for all new systems and bration, INCA from ETAS is the de facto mention the potential for efficiency and when it needs to redesign existing sys- standard. There is a long way to go to im- quality improvement.” tems, for example, to meet new diagnos- prove the integration of these tools.” While many engineering organizations tics or emissions regulations. Indeed, Headquartered in Paderborn, Germany, around the world have made significant according to Mr. Kolhoff, “Probably 80% and serving carmakers and suppliers investments in software development of the code in GM hybrid propulsion sys- worldwide, dSPACE has developed a tools, the panelists agreed that there is tems is automatically generated.” number of tools that support the software still a long way to go before the industry Other carmakers could start from development V-cycle including proto- has its fill. “We already have a large in- clean-slate designs. Dr. Hanselmann ob- typing with RapidPro, production code vestment in these tools, but tools are served that “In Europe, the structure was generation with TargetLink, calibration evolving, and if we see something that different. The OEMs relied on suppliers with CalDesk and hardware-in-the-loop can make us more effective and efficient, for a long time and suddenly they discov- testing with dSPACE Simulator. ◆ more will be invested,” noted Mark Tho- ered they were relying on them too much. Get Ready for Convergence 2006 If you attend only one automotive electronics Electrical and Controls Integration Lab, for their ◆ A banquet speech by Rick Wagoner, conference every two years, this should be the hard work guiding this year’s promising event. CEO, General Motors one. Hosted by General Motors, with the theme Among the highlights of Convergence 2006: ◆ More than 90 presentations covering all “Convergence Reinvents the Automobile,” Conver- ◆ A keynote speech by conference chairman the right subjects: international standards, gence 2006 is the perfect venue to network with Larry Burns, vice president R&D and strategic emerging markets in China and India, the movers and shakers, and to learn about the planning for General Motors infotainment architecture, digital connectivity, the companies and technologies that will shape our ◆ The Blue Ribbon Panel, moderated by user experience, alternative drivetrains and industry’s future. Gerhard Schmidt, vice president R&D and ad- safety systems What I especially like about Convergence is vanced engineering for Ford, will tackle the chal- ◆ Already 130 companies have signed on that it is run and planned by our industry’s leading lenges and opportunities of software development. as exhibitors including these major players: GM, lights from around the world. It is truly an interna- ◆ I am honored to again be moderating the Continental Teves, Delphi, Hitachi, IBM, Rob- tional event that balances the interests of “Car Makers Speak” panel, this time joined by top ert Bosch, Siemens VDO, Valeo and Yazaki. carmakers and suppliers from North America, electrical engineers from Nissan, General Motors, Convergence 2006 will convene at Cobo Cen- Europe and Asia. Hats off to conference vice- DaimlerChrysler, Honda, Ford and Hyundai, who ter in Detroit on Sunday evening, October 15 and chair Ronn Jamieson, director HVAC/supplier will discuss a wide range of topics including inter- run through Wednesday, October 18. For more integration for General Motors, and to technical national standards, the major challenges they face information, please visit www.sae.org/conver- program chair Patrick Popp, director of GM’s and how suppliers can help. gence. See you there. ◆

Page 8, June 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com