DupontDupont RefinishRefinish BusinessBusiness ReviewReview SeriesSeries EricEric G.G. MelinMelin JuneJune 18,18, 20032003 Forward Looking Statement Before we begin, I would like to point out that we may make forward-looking statements during this meeting. All statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as "expects," "anticipates," "plans," "intends," "projects," and "indicates." Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks, uncertainties, and assumptions. We urge you to review DuPont's SEC filings, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, for a discussion of some of the factors which could cause actual results to differ materially. 2 Agenda ● DuPont Coatings & Color Technologies ● Refinish Market Space ● Collision Value Chain ● Industry Trends and Drivers ● Business Mission ● Competitive Advantage ● Business Thrust ● Summary 3 DuPont Coatings & Color Technologies 4 Driving Top Line Growth !Large Opportunities !Leadership Focus !Strong Capabilities DuPont DuPont Electronic DuPont Safety & & Communication Coatings Protection Technologies & Color $3.5 B $2.5 B Technologies $5.0 B DuPont DuPont Performance Agriculture & Materials Nutrition $4.9 B $4.5 B 5 DuPont Coatings & Color Technologies 2002 Sales $5.0B 2002 Earnings – Underlying $530MM Major Customers •Ampacet Net Assets $3.2B •Collision repair shops 16,000 People •Daimler Chrysler ADV. •Ford COATINGS •Freightliner SYSTEMS INK/COLOR ROW •General Motors A/P DTT HP US • •ICI •MeadWestvaco REFINISH •PPG Europe AUTO •Sherwin Williams SYSTEMS •Toyota Sales by Region Sales by Business •Volkswagen Major Competitors Annual Major Markets Served Size $B Growth •Akzo •BASF Coatings 60-70 3% •Huntsman •Kerr McGee TiO 2 8 3 •Millenium Digital inks 1-3 12 •PPG 6 6 DCCT Mission DuPont To develop and market coatings, Coatings ingredients, systems and & Color Technologies technologies that address industrial and consumer needs for aesthetics, $5.0 B functionality and durability. Component Businesses Refinish •RefinishRefinish •LargestLargest business segment in DCCT •AutomotiveAutomotive Systems •LeadingLeading supplier to collision body •InkInk shops, Heavy Duty Truck, Bus •IndustrialIndustrial manufacturers and misc. OEM’s •PowderPowder •3600+3600+ employees worldwide •ManufactureManufacture in 8 countries 7 Refinish Market Space 8 Refinish Market Space World Car Population Basis : ± 650 MM Cars Collision Repair Rate (CRR)- Global Average 18%/yr. CRR: 12%/yr. CRR: 19%/yr. 248 CRR: 18%/yr. North Europe America Japan Asia 238 8 72 Africa 30 Central & South America 14 27 Australia CRR: 39%/yr. 13 9 Refinish Market Size (volume and $) 2001: ± $ 5.8 Bn Source: Chem Research N. Am. (vol.) W. EU (vol.) Asia (vol.) - 1 % Growth - 2-3% Growth 5% +3-4% growth 28% 5 % North Europe America Asia 40% Africa 19% Central & South America 3% 5% Australia $ 0.1 Bn 10 Refinish Market Space Worldwide Automotive Refinishes Technology Major shifts in Technology requirements across the world 1997 Trend s007 others NC HS, H2 O AE 10% 1% 2K 10% 51% 2K KH 13% TPA TPA 15% AE NC KH 2K=2K Systems incl. Base Coats; HS=2K High Solids; H2O=Waterborne Systems; KH=Synthetic Enamels; TPA=Thermoplastic Acrylic Lacquers; AE=Acrylic Enamels; NC=Nitrocellulose Paints 11 Refinish Market Space Uncharted Frontier- Reducing Waste from the Collision Repair Process Opportunities to reduce excess costs and scale inefficiencies $ B Billions of US dollars $30 $1.8 $8.0 Current total cost $6.2 $20 $2.5 $8.9 Estimated profit improvement Total potential opportunity $26.4 pretax profit $6.4 improvement $7.1 $10 $1.8 $8.5 Optimal cost $5.3 $6.1 $0 $2.4 Total revenues Labor costs Parts and Fixed costs Pretax profits materials Source: McKinsey & Co., “The Impact of Body Shop Consolidation on Insurers”, 1999., (CRI Insight, Body Shop Business) 12 In Summary- The Drivers for the Refinish Market are… Market Drivers Current State ● Fleet size and growth rates " Growing faster in developing countries ● Application technology - Paint Usage " Reducing paint consumption in all regions due to technology changes. " Negative impact on small local producer’s competitiveness. " Improved safety laws like drunk driving, ABS ● Number of collisions - Miles driven, brakes, reducing the market size - Weather conditions " Varies year to year, region to region ● Collisions repaired - Used car values " Varies year to year, region to region - Insurance Deductibles - Totals ● Consumer confidence " Uncertainty in economic growth across regions ● Reducing excess cost from collision " Large new untapped opportunity industry 13 Collision Value Chain The Collision Industry Supply Chain 5 Global Paint MfgrsMfgrs,, multiple regional, and locals Warehouse Distributors Warehouse Distributors Becoming common Independent Chain Company-Owned Jobbers Distributor Outlets s Jobbers 400,000 Independent Car Dealer Chain Chain Fleet Fleet OE Body Shops Body Shops Body Shops Production Shops Refinishers Factories Shops US Postal Service worldwideworldwide! US Postal US Postal US Postal Service 14 Refinish Market - Importance of Paint Factors Most Influential in REFINISH SPENDING PROFILE Choosing a New Paint Brand (Collision) Ins. Paint Supplier Companies Materials 9.7% Sublet Incentives 3.2% 4% 5% 9.7% Paint Parts 6% 35% Price 24.2% Prod.Perfor Labor Support mance 50% 19.3% 33.9% Paint is a small piece of the repair process, but has significant VISIBILITY with the end customer 15 Collision Industry Value Chain - Managing the Dynamics Dynamics Repair Shops Insurance Suppliers Consumer Distributors Companies Fulfillment Value Chain Driver Trends Focus is on convenience. Consolidated- 5 global Fragmented Various new segments Decreasing profitability. emerging to respond to Increasing concern about OEM connection increasing Relationship cost pressures. Difficulty in managing cost to insure. in importance oriented claims process. Technology difficult Consolidation System varies in all for local players to keep taking place markets. up. New routes to Utilize after market parts. market emerging Expeditious repair process. Efficiently access a fragmented Ability to reduce Bring me cars to repair. Lower loss adjustment Critical market costs to serve expense. Teach me how to improve No compromise on quality Success Reduced severity. of work. Factor Influence the paint purchasing Ability to my profitability decision at the body shop.. differentiate Reduce cycle time. On-going communication offering to Train my people. during the repair process. Influence the end customer to customers Reduce indemnity. go to a body shop with our Leverage costs for Real-time access to finish. Help me to technology systems Reduce rental expense. information about the survive across shops. Provide shop solutions. Satisfied customer repair. experience. Relationship Help me improve relationships with Clear, meaningful Insurance Companies. warranties. 16 DuPont Refinish Business Mission Extend our Global Leadership position in the the Collision Repair Industry by being recognized as a leader in innovation in products, services and solutions for the body shops, while consistently bringing forward new offerings that improve the efficiency of the collision repair industry. Extend into new business models where we can have revenue streams beyond share gain in paint sales. Expand our Leadership Position in Heavy Duty Truck, Trailers and Buses by moving into new non-collision market segments, utilizing our technology and global scale. Measures of our Success • Outperforming our competitions growth • 6% + Revenue Growth • 10% + Earnings Growth 17 Market Shares Worldwide Market Shares Worldwide (Volume Basis) (Revenue Basis) Local Regionals Japanese Producers Local Regionals 5% Full Line 5% Producers 10% 8% Suppliers 16% Japanese Full Line Multi- Suppliers Nationals 20% 62% Multi- Nationals 74% DuPont is the Global Market Share Leader Source: Chem Research 18 Competitive Advantage DuPont Production, People, & Training Facilities Worldwide 2000 People USA Japan Canada China Taiwan Mexico S. Korea Puerto Rico Thailand Indonesia India Argentina Brazil Austria Belgium Denmark Chile Finland France Germany Columbia Greece Italy Netherlands Venezuela Norway Portugal Spain Australia - Production Sweden Switzerland UK New Zealand - Research Bulgaria Croatia Czech. Rep. Training Centers Hungary Poland Russia South Africa - Spies Hecker Slovenia Saudi Arabia Turkey - Standox 19 - DuPont UAE Competitive Advantage Sources of Competitive Breadth of Offering and Advantage Brands ● Strong global brands ● Market access - distribution network Premium - strong, global sales force ● Breadth of offering to Mainstream cover all segments ● Private Labels ● Technology Leadership ● Strong global brands Economy ● Strong position in OEM approvals ● Private Labels Generic ● Knowledge of collision repair industry 20 Refinish - Business Thrusts . Growth through: ● Increased market penetration in existing markets & customers ● Geographic expansion & extensions ● Product leadership and innovation ● Stretching the boundaries of our business definition for solutions to collision repair ● Growing our leadership position in transportation industry Productivity and Efficiency of Delivery to a fragmented market People and organization effectiveness 21 Growth: Increased market penetration in existing markets & customers " Effective