Contents Corporate Profile 2 Corporate Information 4 Company Overview 6 CEO Statement 7 Our Products & Technologies 9 Business Overview 15 Financial Highlights 36 Management Discussion and Analysis 37 Directors and Senior Management 49 Directors’ Report 59 Corporate Governance Report 78 Independent Auditor’s Report 90 Consolidated Balance Sheet 96 Consolidated Income Statement 98 Consolidated Statement of Comprehensive Income 99 Consolidated Statement of Changes in Equity 100 Consolidated Statement of Cash Flows 101 Notes to the Consolidated Financial Statements 102 Five Years’ Financial Summary 170 02 NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 Corporate Profile Nexteer Automotive Group Limited (the Company) together with its subsidiaries are collectively referred to as we, us, our, Nexteer, Nexteer Automotive or the Group. Nexteer Automotive is a global leader in advanced steering and driveline systems, as well as advanced driver assistance systems (ADAS) and automated driving (AD) enabling technologies. In-house development and full systems integration of hardware, software and electronics provides Nexteer a competitive advantage as a full-service supplier to automotive original equipment manufacturers (OEM) around the world. As a leader in intuitive motion control, our continued focus and drive is to leverage our design, development and manufacturing strengths in advanced steering and driveline systems that provide differentiated and value-added solutions to our customers. We develop innovative solutions that enable a new era of safety and performance for all levels of ADAS/AD, as well as supporting all modes of vehicle propulsion, be it traditional internal combustion, hybrid or pure electric systems. Overall, we are making driving safer, more fuel-efficient and fun for today’s world and an increasingly electrified and automated future. Our ability to seamlessly integrate our systems into OEM vehicles is a testament to our more than 110-year heritage of vehicle integration expertise and product craftsmanship. Our “One Nexteer” culture inspires employees to achieve personal and corporate growth by focusing on our core values across all aspects of the Company: people first, operational excellence and enterprise growth. We strive to be the partner of choice for our customers and suppliers by delivering dependable, safety-critical products and building enduring relationships. Nexteer provides real-world, vehicle-level solutions by being: • Customer Focused: Respected and trusted for delivering on commitments • Proactive: We listen carefully to understand customer needs, requirements and aspirations • Innovative: A market leader in steering and driveline system innovation and value-added service • Agile: Able to respond quickly with high-quality, cost-effective solutions • Global: Committed to exceeding customer and vehicle needs every time, in every customer-targeted market NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 03 Corporate Profile GLOBAL FOOTPRINT & CUSTOMERS • World Headquarters: Auburn Hills, Michigan, United States of America (USA or US) • Manufacturing Plants: 27, including 2 non-consolidated joint ventures (JV) • Technical & Software Centres: 4 • Customer Service Centres: 13 • Global Customers: 60+, including BMW Group (BMW), Changan Automotive (Group) Co., Ltd. (Changan), Dongfeng Peugeot Citroën Automobile Co., Ltd. (DPCA), Ford Motor Company (Ford), General Motors Company and Subsidiaries (GM), Maruti Suzuki India Limited, Renault-Nissan Mitsubishi Alliance (RNM), SAIC General Motors Co., Ltd., SAIC-GM-Wuling Automobile Co., Ltd. (SGMW), Stellantis N.V. (formerly Fiat Chrysler Automobiles (FCA) and Groupe PSA), Toyota Motor Corporation (Toyota) and Volkswagen Group (VW) as well as domestic automakers in India, China and South America 04 NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 Corporate Information BOARD OF DIRECTORS LEGAL ADVISERS Executive Directors As to Hong Kong Law ZHAO, Guibin (趙桂斌) DLA Piper Hong Kong (Chief Executive Officer and Vice Chairman) RICHARDSON, Michael Paul As to Cayman Islands Law (retired with effect from January 1, 2020) Maples and Calder MILAVEC, Robin Zane (appointed with effect from June 30, 2020) AUDITOR FAN, Yi (樊毅) PricewaterhouseCoopers Certified Public Accountants and Registered PIE Auditor Non-Executive Directors WANG, Jian (王堅) (Chairman) AUDIT AND COMPLIANCE COMMITTEE ZHANG, Jianxun (張建勛) WEI, Kevin Cheng (蔚成) (Chairman) (resigned with effect from November 13, 2020) YICK, Wing Fat Simon (易永發) LIU, Ping (劉平) LIU, Ping (劉平) ZHANG, Wendong (張文冬) (appointed with effect from November 13, 2020) REMUNERATION AND NOMINATION COMMITTEE Independent Non-Executive Directors LIU, Jianjun (劉健君) YICK, Wing Fat Simon (易永發) (Chairman) WEI, Kevin Cheng (蔚成) LIU, Jianjun (劉健君) YICK, Wing Fat Simon (易永發) ZHANG, Jianxun (張建勛) (resigned with effect from November 13, 2020) COMPANY SECRETARY ZHANG, Wendong (張文冬) (appointed with effect from November 13, 2020) FAN, Yi (樊毅) HEADQUARTERS AUTHORISED REPRESENTATIVES 1272 Doris Road ZHAO, Guibin (趙桂斌) Auburn Hills, Michigan 48326, USA FAN, Yi (樊毅) NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 05 Corporate Information REGISTERED OFFICE PRINCIPAL BANKERS P.O. Box 309, Ugland House Bank of America Merrill Lynch Grand Cayman, KY1-1104 Bank of China Cayman Islands Bank Pekao SA China CITIC Bank PRINCIPAL PLACE OF BUSINESS IN China Construction Bank HONG KONG Comerica Bank 31/F, Tower Two JPMorgan Chase & Co. Times Square PKO Bank Polski 1 Matheson Street Shanghai Pudong Development Bank Causeway Bay The Export-Import Bank of China Hong Kong Wells Fargo Capital Finance PRINCIPAL SHARE REGISTRAR AND STOCK CODES TRANSFER OFFICE Share Listing Maples Fund Services (Cayman) Limited Ordinary Shares P.O. Box 1093, Boundary Hall The Stock Exchange of Hong Kong Limited Cricket Square (Stock code: 1316) Grand Cayman, KY1-1102 Cayman Islands Senior Notes Listing US$250,000,000 5.875% HONG KONG BRANCH SHARE REGISTRAR Senior Notes due November 2021 AND TRANSFER OFFICE The Stock Exchange of Hong Kong Limited (Stock code: 5826) Computershare Hong Kong Investor Services Limited Shops 1712-1716 COMPANY WEBSITE 17th Floor Hopewell Centre 183 Queen’s Road East http://www.nexteer.com/ Wanchai Hong Kong COMPANY OVERVIEW US US ELECTRIC POWER STEERING COLUMNS & INTERMEDIATE SHAFTS DRIVELINE SYSTEMS HYDRAULIC POWER STEERING * In 2020, 55% of Nexteer’s total salaried workforce was committed to Engineering activities. NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 07 CEO Statement Nexteer’s financial performance in the second half of 2020 reflects our financial resilience and our global team’s ongoing discipline and focus in successfully navigating an unprecedented year of uncertainty and volatility. Going forward, Nexteer remains focused on where the industry is heading through strategic alignment on industry megatrends – such as Electrification, Software, Autonomy and more. ZHAO, Guibin Chief Executive Officer Dear Shareholders: On behalf of Nexteer, I am honoured to share with you • Implemented cost, capital investment and other our 2020 Annual Report and highlight a few of the year’s cash actions and controls – ensuring the on-going successes in driving shareholder value. support of the business SUCCESSES IN A CHALLENGING YEAR • Maximised opportunities during the second half of 2020 industry upturn – with revenue In 2020, the COVID-19 pandemic was an unexpected, outperforming the OEM production by 6% global challenge to us all, but our organization quickly (revenue growth compared with market) in the adapted and navigated through – with the health and second half of 2020 compared with the first half safety of our global team our top priority while quickly of 2020, and outperforming the market by 1% for adopting new ways to operate and move the business the full year 2020 when compared with 2019 forward despite this adversity. As we moved through the extreme and quickly shifting landscape that 2020 • Capitalised on revenue upturn delivering strong brought to bear on the industry, our Nexteer Team earnings, margin expansion and cash flow succeeded on many fronts. generation in the second half of 2020 when compared with the first half of 2020 2020 HIGHLIGHTS – NAVIGATING THE ENVIRONMENT; ALIGNING OUR PORTFOLIO • Successfully launched 47 new customer programmes globally – across all product lines AND MEGATRENDS; AND CAPITALIZING ON and regions ELECTRIFICATION • Continued to leverage our deep technical • Managed industry downturn as a result of competencies in developing innovative products the global health crisis without any significant and value propositions – driving future growth impact to our customers’ operations – including and customer diversification shutdown and restart of our operations globally and responding to adjustments to customer • Committed investment and demonstrated demand requirements leadership in technology for future growth in alignment with intersecting global industry megatrends – including Electrification, Software and more 08 NEXTEER AUTOMOTIVE GROUP LIMITED ANNUAL REPORT 2020 CEO Statement • Leveraged our foundational technologies like REVIEW OF RESULTS EPS to support shifting OEM needs – helping to expand Nexteer’s future via increased content For the year ended December 31, 2020, the Company’s per vehicle revenue was US$3,032.2 million, operating profit was US$118.7 million and net profit attributable to equity • Strongly ramped-up customer programme holders of the Company was US$116.8 million. awards in the second