1. Booz & Company Detroit, Michigan
May 2012
2012 U.S.
Automotive
Survey
Advanced
Look

2. Our team today
 Brian is a Chicago-based partner in the firm’s global automotive team
 He specializes in working with automotive Tier One suppliers on business
unit strategy and transformation, with extensive experience in cost
Brian Collie transformation, accelerating the growth agenda, portfolio
management, and manufacturing strategy
Chicago
 Recent Tier One Supplier engagements include: NA manufacturing
network restructuring, global turnaround strategy, sourcing
transformation, and inorganic growth assessment
 Scott is a New York-based partner in the firm’s global automotive team
 Over the past twenty years, Scott has worked extensively with automotive
companies to successfully develop and implement strategy based
transformations – gaining deep expertise across many areas of the
Scott Corwin automotive value chain
New York  Client engagements have involved: corporate strategy, operational
restructuring, portfolio strategy, product development, advanced R&D and
innovation, supply chain management, manufacturing optimization, sales
marketing and distribution, information technology, and new business
models
Booz & Company
29 May 2012
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3. Introduction
 Booz & Company recently conducted its U.S. Automotive Industry Survey and Confidence
Index – an annual study examining current state of the U.S. automotive industry, key challenges
facing it, attitudes of its executives, and what companies are doing in response
 Over 200 automotive executives from more than 75 automotive vehicle manufacturers and
suppliers participated in an online survey conducted during February and March
 During today’s webinar we would like to:
– Share what industry executives had to say on the future of the automotive industry
– Discuss key implications for OEMs and suppliers, and
– Answer any questions you may have about the results
Booz & Company
29 May 2012
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4. Relative to last year, industry executives are significantly more
bullish on the current state of the automotive industry
Perceived State of the Industry Compared to One Year Ago
66%
63%
In 2011, 53% of OEMs and 37%
of Suppliers described the
current state of the industry has
“About the Same” or
“Somewhat Worse” relative to
same time prior year
31%
OEM 26%
Supplier
7%
6%
0% 0% 0% 1%
Much Worse Somewhat Worse About the Same Somewhat Better Much Better
Booz & Company
29 May 2012
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5. The improvement in the industry’s performance was driven in
large part by the industry restructuring and pent-up demand
Key Drivers of Strong 2011 Industry Performance
Percentage of respondents that ranked a driver in their top 3
72%
68%
OEMs 62% Suppliers
58%
58%
48%
46%
34%
34%
30% 30%
22% 22%
16%
Availability Pricing Better Improved Production Pent-Up Industry Pricing Availability Production Better Improved Pent-Up Industry
of Credit Discipline Product Customer Discipline/ Demand Restructuring Discipline of Credit Discipline / Product Customer Demand Restructuring
Confidence Tight Tight Confidence
Inventory Inventory
Booz & Company
29 May 2012
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6. OEMs credit their current product portfolio and pipeline as the
reason for their positive outlook in 2012
Important Internal Factors Contributing to Positive 2012 Outlook – OEMs
Percentage of respondents that ranked a factor in their top 3 69%
60%
“Other” includes internal
process
execution, leadership, and
strategic vision 29%
25% 25%
18% 18% 20%
16%
10% 10%
Engineering/ Other Sales Ability to Customer Financial Cost Position Marketing Retail Product Current
R&D Innovate Experience/ Position Network/ Pipeline Product
Relationship Footprint Portfolio
Booz & Company
29 May 2012
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7. For Suppliers, though product is important, customer mix, and to a
lesser extent cost position, play a key role in shaping outlook
Important Internal Factors Contributing to Positive 2012 Outlook – Suppliers
Percentage of suppliers that ranked a factor in their top 3 58%
55%
43%
“Other” includes internal
38%
process
execution, leadership, and
strategic vision 27% 28%
19% 20%
7%
5%
Other Marketing Sales Financial Engineering/ Ability to Cost Position Product Current Product Customer
Position R&D Innovate Pipeline Portfolio Base and
Relationships
Booz & Company
29 May 2012
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8. Respondents forecast U.S. sales in 2012 to approach 14M, with
growth then settling to levels more consistent with GDP
Average U.S. Light Vehicle Sales Forecasts Five Year Outlook for the US. Auto Industry
2012–2016
Units (Millions) 86% 86%
16.0
OEM
15.5 15.4 Supplier
15.0 14.6
14.5
14.0 13.7
13.5
13.0 12.8
12.5
10%
12.0 6% 8%
4%
11.6
0.0
2010 2011 2012 2013 2014 2015 2016 Little to no growth Steady growth Strong growth
consistent and prosperity
with GDP
Booz & Company
29 May 2012
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9. Over the next five years, executives believe Hyundai/Kia and
Volkswagen/Audi are the OEMs most likely to gain market share
Expected U.S. Market Share Changes in Next 5 Years
2% 100%
10% 4%
10% 10%
27% 26%
31% 34% 32% 24%
40%
52%
59%
46%
40%
53% 46% 88%
66%
47% 72%
38%
28% 28% 31%
16% 20%
13%
7%
Mercedes Nissan/Infiniti Honda/ GM Chrysler/ Toyota/ BMW/Mini Ford VW/Audi Hyundai/Kia
Acura Dodge/Fiat Lexus
Lose Share Maintain Share Gain Share
Booz & Company
29 May 2012
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10. Executives see a bright future for Chinese OEMs -- forecasting a
rate of U.S. market penetration more rapid than historical precedent
Chinese OEMs with Greatest Potential to
Forecasted Chinese OEM U.S. Share in 2020
Capture U.S. Share through 2020
50% Geely 24%
47% U.S. Market Share
45% of Korean OEMs SAIC 22%
was 5% as recently
40% Chery 19%
as 2008
35% 32% BYD 11%
30% FAW 9%
25% Dongfeng 6%
20% Greatwall 4%
15%
11% JAC 3%
10%
10%
ChangAn 2%
5%
GAC 1%
0%
0%-4% 4-8% 8%-12% 12%+
Booz & Company
29 May 2012
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11. Alternative powertrains will gain share -- however, adoption rates
are seen as being extremely sensitive to government support
Expected U.S. Market Share of Alternative Powertrains by 2020
Continued Government Support No Government Support
% of Responses % of Responses
29% 50%
30% 50%
45%
25%
40%
35%
20% 18%
30%
15% 13% 14% 14% 25%
20%
20%
10%
7% 15% 13%
12%
5% 10%
5%
5% 4%
1% 0%
0%% 0%%
10%-15%
15%-20%
20%-25%
25%-30%
10%-15%
15%-20%
20%-25%
25%-30%
5%-10%
5%-10%
0%-5%
0%-5%
30% +
30% +
Booz & Company
29 May 2012
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12. Of the various powertrain choices, respondents are most confident
about the long-term prospects of full hybrid & mild hybrid
Current Confidence in Long-Term
Expected Leading Alterative Powertrain in 2020
Prospects of Alternative Powertrains vs. 2011
42%
39% 40%
Full Hybrid 30% 70% OEM
Supplier
Mild Hybrid 35% 65%
25%
Plug-In Hybrid 55% 45%
14%
12% 12%
Battery Electric 71% 29% 10%
4%
2%
Fuel Cell Electric 75% 25%
Less Confident More Confident Fuel Cell Battery Plug-In Mild Full Hybrid
Electric Electric Hybrid Hybrid
Booz & Company
29 May 2012
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13. Specific to their own companies, both OEMs and suppliers alike
are forecasting strong revenue growth for 2012, however, capacity
may be an issue
Planned Growth in 2012 U.S. Revenue Current Capacity Situation
40%
OEM 55%
Supplier 51%
29%
27%
24% 36%
23% 34%
21%
18%
14%
15%
9%
2% 2%
0% 0%
Negative No 1%-5% 6%-10% 11%- Greater Still have more Comfortable with Capacity
Growth Growth 15% than capacity than current capacity constrained
15% market demands
Booz & Company
29 May 2012
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14. In light of more advantageous supply-demand dynamics, OEMs &
Suppliers describe themselves as being disciplined about pricing
Current Pricing Approach – OEMs Current Pricing Approach – Suppliers
53% 58%
Will OEMs maintain
this discipline if
market dynamics and
39%
supply greatly These results suggest
exceeds demand? a dramatic departure
from recent behavior
24% where filling the
factory was the norm
19% for many suppliers
4% 3%
Significantly Holding Opportunistically Significantly Aggressively Opportunistically Maintaining
reducing use the line on increasing increasing use using price to using pricing as strong pricing
of incentives incentives incentives of incentives win business a lever to win discipline
program
Booz & Company
29 May 2012
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15. Compared to competitors, OEMs view cost position, customer
experience, and financial position as their most significant areas of
weakness
Perceived Performance Relative to Key Competitors – OEMs
4% 2% 2% 2% 2% 2% 2% 100%
9% 9% 9% 9% 9%
17% 15%
24%
30% 29%
31% 28% 26% 30%
21% 43%
37%
41%
32%
29% 52%
44% 48% 50%
50%
39% 42%
23% 24%
31%
11% 17% 15% 11% 17%
9% 9% 8% 6%
Cost Customer Financial Retail Ability to Current Product Sales Marketing Engineering/
Position Experience/ Position Network/ Innovate Product Pipeline R&D
Relationship Footprint Portfolio
Very Poor Performance Performance Matches Competitors Strong Performance
Poor Performance Good Performance
Booz & Company
29 May 2012
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16. Suppliers meanwhile cite their sales / marketing capabilities and
cost position as their most significant areas of weakness
Perceived Performance Relative to Key Competitors – Suppliers
2% 2% 2% 100%
5% 10% 6% 6%
12% 10% 10%
13%
21%
26%
31% 33%
30% 28% 30%
41%
48%
44%
54% 33%
35% 47%
49% 55%
38%
27% 35%
23% 27%
11% 14%
6% 11% 11% 8%
4% 2%
Marketing Cost Position Sales Ability to Financial Product Engineering/ Current Customer
Innovate Position Pipeline R&D Product Base and
Portfolio Relationship
Very Poor Performance Performance Matches Competitors Strong Performance
Weak Performance Good Performance
Booz & Company
29 May 2012
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17. Respondents cite In-Vehicle Connectivity & Entertainment as the
technology most likely to see widespread adoption over the next
five years
Technologies Most Likely to See Widespread Adoption in the Next Five Years
Percentage of respondents that ranked a technology in their top 3
85%
52% 52%
48%
42%
20%
1%
Other "Green" Active Safety Composite/Light LED Lighting Passive Safety In-Vehicle
Material Usage Systems (er)-weight Systems Connectivity and
materials Entertainment
Booz & Company
29 May 2012
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18. 38% of OEM respondents say they intend to create their
own platform for integrating digitization and connectivity
Plans for Integrating
Consumer Digitization / Connectivity
38%
This may be a potentially
risky strategy, given that personal technology
devices have far shorter product cycles than
automobiles -- witness the ubiquity of
GPS systems on mobile phones -- and that a 24%
single family may have multiple drivers who
share multiple cars
17%
14%
7%
Outsure to consumer Establish a Allow consumers/ Allow suppliers to Create own platform
electronics players flexible platform external system develop platform
in a consortium to plug into car
Booz & Company
29 May 2012
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19. 2011 will sadly be remembered for the devastating earthquake &
tsunami in Japan, an event which impacted ~55% of OEMs
Production Impact of the Japanese Earthquake and Tsunami
OEM
Supplier
35% “Other” includes higher
34% margins as a result of
shortages and needing to
retrofit vehicles after sale
26% 26%
21% 21%
13%
8%
7%
4%
2% 3%
No impact- supply No impact- had No Impact- avoided Some impact Significant Impact Other
chain not affected safety stock interruptions through
redundancies
Booz & Company
29 May 2012
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20. Contingency planning is viewed as the most important action for
preparing for such “Black Swan” events, but to date, action has
lagged
Important Preparatory Steps for “Black Swan” Events
and Steps Actually Taken by Respondents
68%
In Top 3 Important Measures 59%
Action Taken
52% 51%
45%
42%
32% 31%
29%
26%
19% 19%
15%
12%
3% 4%
Other No action Created new Built Moved to Moved to Identified risks Worked with
taken org. structure redundancy increase the localize and developed suppliers on
for risk into sourcing use of dual supply base contingency contingency
management sourcing plants planning
Booz & Company
29 May 2012
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21. In summary, these results suggest a few forces coming together to
help shape the industry in the coming years …
 The US auto recovery demonstrates that with stronger balance sheets, legacy liabilities
shed, debt reduction, product/capital investment, this industry can return to consistent
levels of profitability at lower annual sales volumes
 The industry clearly has expressed a very sober, collective understanding that it needs
Re-Emergence to grow smartly -- namely not let capacity grow faster than natural market demand
of Fundamentals  This has been a product led renaissance and there is strong confidence in the portfolio
 Similarly suppliers are unwilling to cede leverage in their relationship with OEMs and are
working to stretch existing production capacity further, postponing new capacity
 A new normal is emerging with an emphasis on building brand equity with
consumers, improving the experience, continuing to improve the cost position, and
competing globally
 US remains the most profitable automotive market in the world, but growth is
occurring more rapidly in emerging markets
 Requires automakers to preserve their competitive position in developed markets while
Shifting Demand also funding the investments necessary for longer term growth
Centers  Increases the importance of gaining a much greater understanding of the unique
requirements, dynamics, and needs of emerging markets and positioning your company to
be able to compete with fundamentally different economics and possibly against different
competitors
Booz & Company
29 May 2012
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22. … forces continued
 There is also a strong view that improvements in internal combustion engines are still
possible and can generate meaningful increases in fuel efficiency
 The adoption rate of alternative powertrains is highly dependent upon government
Powertrain and support, fuel prices and availability, and OEM/supplier willingness to make investments
Technology – Led by full and mild hybrids
Uncertainty – Still skeptical about the potential of full electric and fuel cell vehicles
 The industry is on the cusp of very significant technological changes, especially in vehicle
connectivity that could result in creating real innovation in personal mobility
 These will require significant incremental investments and making “bets”
 The unfortunate events of the Japanese tsunami and floods in Thailand brought home
the limitations of a lean global supply chain to Black Swan events
 Actions taken in response seem highly appropriate given what happened – assess the
Inter-Connected damage, weigh future events and probabilities, work with suppliers to be better
Supply Chain prepared, build new organizational capabilities, etc.
 We wonder though if the industry is really prepared for the next Black Swan event or were
these actions “once and done” and will this be less prominent of an issue as time goes by?
Booz & Company
29 May 2012
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23. Q&A
Booz & Company
29 May 2012
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24. SCOTT L. CORWIN Booz & Company (N.A.) Inc. BRIAN E. COLLIE Booz & Company (N.A.) Inc.
Vice President 101 Park Avenue Vice President 225 West Wacker Drive
New York, NY 10178 Suite 2270
Tel +1 212 551 6578 Chicago, IL 60606-1228
Fax +1 212 551 6732 Tel +1 312 578 4637
Mobile +1 917 853 3735 Fax +1 312 578 4668
scott.corwin@booz.com Mobile +1 312 498 2704
www.booz.com brian.collie@booz.com
www.booz.com
Booz & Company
29 May 2012
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