PEOPLE PEOPLE OPERATIONAL OPERATIONAL EXCELLENCE EXCELLENCE SUSTAINABLE 2017 INTERIM REPORT SUSTAINABLE GROWTH GROWTH 中期報告 INTERIM REPORT 2017 中期報告 2017 Contents Corporate Profile 2 Corporate Information 3 Business Overview 4 Financial Highlights 11 Management Discussion and Analysis 13 Corporate Governance/Other Information 21 Report on Review of Interim Financial Information 28 Interim Condensed Consolidated Balance Sheet 30 Interim Condensed Consolidated Income Statement 32 Interim Condensed Consolidated Statement of Comprehensive Income 33 Interim Condensed Consolidated Statement of Changes in Equity 34 Interim Condensed Consolidated Statement of Cash Flows 35 Notes to the Condensed Consolidated Interim Financial Information 36 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, advanced driver assist systems (ADAS) and autonomous vehicle technologies. In-house development and full integration of hardware, software and electronics give Nexteer a competitive advantage as a full service supplier. Our vision is to remain a leader in intuitive motion control – leveraging our strengths in advanced steering and driveline systems. We maintain product focus on electric power steering (EPS), a socially responsible technology that offers automakers increased fuel economy and reduced emissions. Nexteer Automotive has put more than 40 million units on the road since 1999, saving more than 4 billion gallons of fuel. Our ability to integrate our systems seamlessly into automotive original equipment manufacturer’s (OEM) vehicles is a testament to our 110-year heritage of vehicle integration expertise and product craftsmanship. Our corporate culture inspires employees to achieve personal and corporate growth by focusing on the Company’s core values across all aspects of the enterprise: people, operational excellence and sustainable growth. We seek 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: • Customer Focused: Respected and trusted for delivering on commitments • Proactive: We listen carefully to understand customer requirements • Innovative: A market leader in steering and driveline innovation • Agile: Able to respond quickly with high-quality, cost-effective solutions • Global: Committed to exceeding customer and vehicle needs every time, everywhere GLOBAL FOOTPRINT World Headquarters: Auburn Hills, Michigan, United States of America (USA or US) Manufacturing Plants: 24, including 1 non-consolidated joint venture Technical Centres: 3 Customer Service Centres: 12 Full-Time Equivalent Global Workforce: 13,600+ Global Customers: 50+, including BMW Group (BMW), Fiat Chrysler Automobiles N.V. (FCA), Ford Motor Company (Ford), General Motors Company and Subsidiaries (GM), PSA Groupe (PSA), SAIC General Motors Co., Ltd. (SGM or Shanghai GM), SAIC-GM-Wuling Automobile Co. Ltd. (SGMW), Toyota Motor Corporation (Toyota) and Volkswagen Group (Volkswagen) as well as domestic automakers in India, China and South America Products: EPS, Hydraulic Power Steering (HPS), Steering Columns and Intermediate Shafts (CIS), Driveline Systems (DL), ADAS and Automated Driving (AD) 02 NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 2017 Corporate Information BOARD OF DIRECTORS HEADQUARTERS Executive Directors 1272 Doris Road ZHAO, Guibin (趙桂斌) Auburn Hills, Michigan 48326, USA (Chairman and Chief Executive Officer) RICHARDSON, Michael Paul REGISTERED OFFICE FAN, Yi (樊毅) P.O. Box 309, Ugland House Grand Cayman, KY1-1104, Cayman Islands Non-Executive Directors WANG, Xiaobo (王曉波) PRINCIPAL PLACE OF BUSINESS IN YANG, Shengqun (楊勝群) HONG KONG (appointed with effect from March 14, 2017) 36/F, Tower Two Lu, Daen (錄大恩) Times Square (resigned with effect from and upon the conclusion of 1 Matheson Street the board meeting held on March 14, 2017) Causeway Bay Hong Kong Independent Non-Executive Directors TSANG, Hing Lun (曾慶麟) PRINCIPAL SHARE REGISTRAR AND (passed away on June 4, 2017) LIU, Jianjun (劉健君) TRANSFER OFFICE Maples Fund Services (Cayman) Limited WEI, Kevin Cheng (蔚成) P.O. Box 1093, Boundary Hall YICK, Wing Fat Simon (易永發) Cricket Square (appointed with effect from August 15, 2017) Grand Cayman, KY1-1102 JOINT COMPANY SECRETARIES Cayman Islands FAN, Yi (樊毅) MOK, Ming Wai (莫明慧) (FCIS, FCS) HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE AUTHORISED REPRESENTATIVES Computershare Hong Kong Investor Services Limited FAN, Yi (樊毅) Shops 1712–1716 MOK, Ming Wai (莫明慧) (FCIS, FCS) 17th Floor Hopewell Centre LEGAL ADVISERS 183 Queen’s Road East As to Hong Kong Law Wanchai DLA Piper Hong Kong Hong Kong As to Cayman Islands Law PRINCIPAL BANKERS Maples and Calder Wells Fargo Capital Finance Bank of China AUDITOR Shanghai Pudong Development Bank PricewaterhouseCoopers China CITIC Bank The Export-Import Bank of China AUDIT AND COMPLIANCE COMMITTEE PKO Bank Polski WEI, Kevin Cheng (蔚成) (Chairman) Bank Pekao SA TSANG, Hing Lun (曾慶麟) China Construction Bank (passed away on June 4, 2017) YANG, Shengqun (楊勝群) (appointed with effect from March 14, 2017) STOCK CODES Share Listing Lu, Daen (錄大恩) (resigned with effect from and upon the conclusion of Ordinary Shares the board meeting held on March 14, 2017) The Stock Exchange of Hong Kong Limited (Stock code: 1316) YICK, Wing Fat Simon (易永發) (appointed with effect from August 15, 2017) Senior Notes Listing REMUNERATION AND NOMINATION US$250,000,000 5.875% COMMITTEE Senior Notes due 2021 TSANG, Hing Lun (曾慶麟) (Chairman) The Stock Exchange of Hong Kong Limited (passed away on June 4, 2017) (Stock code: 5826) LIU, Jianjun (劉健君) WANG, Xiaobo (王曉波) COMPANY WEBSITE YICK, Wing Fat Simon (易永發) (Chairman) http://www.nexteer.com/ (appointed with effect from August 15, 2017) NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 2017 03 Business Overview STRATEGY FOR PROFITABLE GROWTH • Strengthen technology leadership • Expand and diversify revenue base • Capitalise on EPS as enabler for ADAS • Target China and emerging market growth • Optimise cost structure • Pursue select acquisitions and alliances FIRST HALF OF 2017 BUSINESS HIGHLIGHTS The following are business highlights for the first half of 2017 which demonstrate Nexteer’s focus on delivering profitable growth: • Successfully launched 15 new EPS and DL programmes across multiple regions and customers • Strong backlog of US$24.0 billion reflected by all business awarded but not yet delivered to customers • Continued engagement with key global customers to jointly develop ADAS functionality • Received industry recognition for multiple accomplishments NEW PRODUCTION LAUNCHES With the launch of 15 customer programmes during the first six months of 2017, inclusive of 1 programme from our non-consolidated joint venture, we introduced new or improved product applications in DL and EPS. These programmes included incumbent and conquest business. Customer programmes that began production during the six months ended June 30, 2017 included: OEMs Vehicle Nameplate Our Products North America GM Chevrolet Equinox DL Buick Terrain DL Chevrolet Traverse Rack-assist EPS, DL Europe & South America FCA Fiat Argo Column-assist EPS (CEPS) GM Opel Crossland Single pinion-assist EPS (SPEPS) Asia Pacific BMW 1-Series SPEPS X1 SPEPS *Changan Changan CS55 CEPS Dongfeng Liuzhou Jingyi S50 EV CEPS Jingyi SX3 CEPS GM Buick Velite DL Chevrolet Equinox DL Renault Nissan Renault Lodgy DL Tata Motors Ace, Iris, Majic, Zip DL * Related to a non-consolidated joint venture 04 NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 2017 Business Overview BACKLOG OF BOOKED BUSINESS We begin to realise revenue under a new business contract at the start of production as steering systems and driveline products are first shipped to vehicle manufacturers at the time of product launch. Product launches have historically lagged the date of contract award by an average period of 24 to 30 months. We have calculated a booked business backlog value which includes the value of awarded business for as yet, undelivered product generating revenue between the time of launch through the end of the life of the respective award (the “order to delivery” backlog valuation model). We estimate the value of all booked business under contracts that have been awarded, but for which we have undelivered products, which amounts to approximately US$24.0 billion (the Booked Business Amount or Booked Business) as at June 30, 2017, compared to US$25.6 billion as at December 31, 2016. The backlog decreased due to the partial cancellation of a programme, as well as other platform adjustments, as a result of GM’s plan to sell its Opel-Vauxhall subsidiary to PSA during the six months ended June 30, 2017. The value of Booked Business is not a measure defined by International Financial Reporting Standards (IFRS), and our methodology for determining the Booked Business Amount may not be comparable to the methodology used by other companies in determining the value of their booked business. Assumptions relative to estimated lifetime programme volumes and contract performance remain unchanged from our disclosures in prior periods. Any modification or suspension of the contracts related to the Booked Business by the Group’s customers may have a substantial and immediate effect on the value of the Booked Business.