NAFTA Powertrain Outlook Efficiency Driving New Engine and Transmission Production Opportunities

David Petrovski Principal Analyst, North America Powertrain Forecasting April 17, 2013

Agenda • Drivers for Change • Efficiency Opportunities

• Production Opportunities • Summary

Copyright © 2012 IHS Inc. All Rights Reserved.

2

Evolutionary Change • Automotive technology development is an evolutionary process,

influenced by:

ENERGY ECONOMICS

LEGISLATION/FISCAL POLICY

CONSUMER DESIRE/RESPONSE

An integrated approach is key – all stakeholder need to act together to reduce CO2 emissions (infrastructure, public authorities, consumers, OEMs( as this is the most costefficient way of achieving improvement –Ford Copyright © 2012 IHS Inc. All Rights Reserved.

INDUSTRY CAPABILITY

LEGISLATION/FISCAL POLICY

Global Convergence Drives Scale

35.5 MPG

54.5 MPG

Source:

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4

ENERGY ECONOMICS

Relatively “Cheap” fuel in comparison…

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5

ENERGY ECONOMICS

Forecasted Prices Remain Relatively Low

~$4/gal

Source: IHS CERA – Feb 2013 Copyright © 2012 IHS Inc. All Rights Reserved.

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CONSUMER RESPONSE

Will Consumers Accept higher Cost for Efficiency? % of Disposable Income Spend on Fuel vs. High Fuel Efficient Vehicles 7.0%

4.5%

6.0%

4.0% 5.0%

3.5% 3.0%

4.0%

2.5% 3.0%

2.0% 1.5%

2.0%

1.0%

1.0%

0.5% 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

0.0% 1975

0.0%

Market Share of Diesels and Hybrids

% Disposable Income Spend on Fuel

5.0%

• As spending levels increased in recent years, consumers elect to purchase high fuel efficient options

such as hybrids and diesels) • Technology penetration of diesels and hybrids begins to drop as gasoline prices drop Sources: Copyright © 2012 IHS Inc. All Rights Reserved.

Bureau of Economic Analysis www.bea.gov EPA: Fuel Economy Trends

CONSUMER RESPONSE

Consumer demands continued… “Because future fuel savings are inherently uncertain, consumers will discount them heavily relative to certain initial costs.” (How Consumers Value Fuel Economy: A Literature Review, Oakridge National Lab for EPA, March 24, 2010)

“Consumers want fuel efficiency … if it is free. 95% of customers are pragmatic, 5% are green” (Mike Jackson, CEO, Auto Nation, October 7, 2012)

“There are large differences, even among comprehensive, high quality studies, in estimates of the incremental retail price equivalent of technology that achieves major reductions in vehicle fuel consumption.” (National Petroleum Council, Advancing Technology for America’s Transportation Future, August 1, 2012) Copyright © 2012 IHS Inc. All Rights Reserved.

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INDUSTRY CAPABILITIES

Competing Priorities? Industry must weight different risks while trying to comply with new standards Midterm review uncertainty

Technology performance

Unemployment rate Warranty cost and recall liability

Technology cost

Technology development

Consumer finance Fuel price uncertainty California ZEV Mandate

Safety Consumer demand

Competitive risk Net Upstream CO2 Emissions 9

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Agenda • Drivers for Change • Efficiency Opportunities

• Production Opportunities • Summary

Copyright © 2012 IHS Inc. All Rights Reserved.

10

Vehicle Energy Loss Review…

Copyright © 2012 IHS Inc. All Rights Reserved.

Tremendous Opportunities Exist for Efficiency Improvements…

68%

9%

23%

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Transmission Only Improvement… 6%

Standby Idle

Pump/Hydraulics 3%

Accessories

Vehicle Energy Loss

Torque Converter 68%

6%

ICE

Transmission & D/L

Drag losses Seals, bearings, gears Differential

8%

Aero

5%

Rolling Resistance

4%

Braking

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Variable displ pumps Low Leak Solenoids Viscous churning losses New Fluids Active Warm-up Cooling

NOTE: Not mean to be an exhaustive list

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Future Fuel Economy Improvement Devices US Fuel Economy Improving Device and Cost-1 (MY2017) Fuel Economy Improve Ratio (%)

60 P2 Hybrid

50

Engine 2-mode Hybrid

40 30

IMA Hybrid V6→L4 Downsizing

Diesel With SCR

Transmission Power-split Hybrid

20

Electrification

10

Note) NHTSA AppendixFDraft_Joint_Technical_Support_Document (2011Nov) and created by IHS

0

Total Cost for MY2017 (Direct Manufacturing cost + Indirect cost) Copyright © 2012 IHS Inc. All Rights Reserved.

Fuel Economy Improve Ratio and its cost are basically based on Large Car. When no data for Large Car, using other vehicle data. Engine devices are based on the effect for L4 engine.

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Technology Cost vs. Benefit US Fuel Economy Improving Technology and Cost--2 (MY2017) Fuel Economy Improve Ratio (%)

8 7

24bar With Cooled EGR Aggressive Shift Logic

20

6

DEAC 6AT→8AT

4AT→ 6DCT(Dry)

5

High Efficiency Gearbox

DCP

4 3

27bar With Cooled EGR

25

FR1

DVVL

SGDI

Transmission

10 Electrification

5 1

Early Torque Converter Lockup

0

Stop/Start (Belt) Stop/Start

0

Total Cost for MY2017 (Direct Manufacturing cost + Indirect cost) Copyright © 2012 IHS Inc. All Rights Reserved.

Engine

18bar

5MT →6MT

2

V6→L4 Downsizing

CVVL

FR2

ICP

15

24bar

Agenda • Drivers for Change • Efficiency Opportunities

• Production Opportunities • Summary

Copyright © 2012 IHS Inc. All Rights Reserved.

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18 16 14 12 10 8 6 4 2 0

Engine Output by Country

25% 20% United States

5%

Mexico

0% 2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Transmission Output by Country

25%

14

20%

12 10

15%

United States

8

10%

6 4

5%

2

Mexico

0

0% 2000

2002

2004

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2006

2008

2010

2012

2014

2016

2018

2020

% Share Mexico

Millions

15% 10%

2000

16

30%

% Share Mexico

Millions

Powertrain Production Outlook

Engine Production Outlook

Millions

Output Variance by OEM Δ2020–2012 18 16 0.7

0.8

14 0.5

12

0.1

0.3

0.4

0.1

0.2

Others

-0.05

0.5

10

Contribution to Growth ‘12-’20 8 6

15.3

11.7

4

Mazda GM Hyundai 6% 14% 12% R/N 9%

2 0 2012 Copyright © 2012 IHS Inc. All Rights Reserved.

Toyota 19%

Fiat 12%

Honda 23%

2020

Transmission Production Outlook Millions

Output Variance by OEM Δ2020–2012 18 16 14

0.4

12

0.6

0.3

0.2

0.9

0.2

0.6

Others

-0.4

0.4

10

Contribution to Growth ‘12-’20 8 6

15.0 11.8

4

ZF 17%

Ford 18%

Hyundai 7%

2 0 2012 Copyright © 2012 IHS Inc. All Rights Reserved.

GM 12%

Jatco 25%

Fiat 11% 2020

North American Engine Opportunities… MFG

PEAK COMMENTS VOLUME

PLATFORM

SOP

Fiat SGE Hurricane Pentastar Duratec HE

TBD 2015-16 2015 2015

TBD ~500k ~800k ~400k

Dragon

2016

TBD

Nano

2014

~300k

SGE

2014

~700k

HFV6

2016

~800k

New-L (AP2)

2014

~350k

Mazda-Small

2014

~150k

Localized prod. of 1.5L/2.0L in Salamanca,MEX

New 4-cyl

2016

~250k

New 2.0L engine for Mexico, likely turbo + DI

2015-16 2015

~200k ~500k

New Turbo + DI version of AR platform, 2.0L 3.5L V6 Upgrade program adds DI

2012

~500k+

1.8L & 2.0L Turbo, Launched in Silao, expect vol inc.

AR GR EA888 Copyright © 2012 IHS Inc. All Rights Reserved.

Fire replacement? New 2.0L 4-cylinder turbo engine Upgrade program for 3.2L/3.6L Localize from Valencia,Spain to Cleveland,Ohio Potential 2.4M global, no N.A. production, but could affect SIGMA and DURATEC HE All new small V6 turbo DI, 2.7L/2.9L Global engine program, 2.7M global, 1.0L L3-1.5L L4 Upgrade program for 3.0L/3.6L Honda AP3 program cancelled, 1.5L AP2 could benefit

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Detroit 3 Transmission Opportunities… MFG

TYPE

PROGRAM

FWD RWD

FWD

RWD

FWD

RWD

Copyright © 2012 IHS Inc. All Rights Reserved.

DESIGN

SOP

PEAK VOLUME

9HP28/48

A9

2013

~1,6M

8HP 45

A8

now

~450k

6F15

A6

TBD

~150k

9F-MID

A9

2017

~1.0M

9F50/55

A9

TBD

~300k

HF35

EVT

now

~150k

10R60/80

A10

2016

~900k

GF9

A9

2016

~1.2M

9T70/75

A9

TBD

~500k

X39F

EVT

2015

~125k

X44F

DCT7

2015

~250k

8L45/90

A8

2014

~550k

10L45/90

A10

~2016/7

~800k

Localization potential if volumes rise

Transmission Opportunities… MFG

TYPE FWD

FWD RWD FWD RWD FWD RWD

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PROGRAM

DESIGN

SOP

PEAK VOLUME

XZXA LL-CVT TC-DCT SM-CVT 2nd A6GF1 A8LF2 A8MF1/2 10AT JF015E JF016E/17E

A10 CVT DCT8 CVT A6 A8 A8 A10 CVT CVT

2016 now ~2016 ~2014 ~2015 ~2016 ~2016 TBD ~2015 ~2017

~400k ~500k ~150k ~500k ~300k ~350k ~400k TBD ~350k ~1.0M

W9A400/700

A9

2016

~200k

New K311

CVT

TBD

~375k

G001

A8

~2015

~1.0M

TL-80SN

A8

TBD

Localization potential if volumes rise

~100K

Transmission Opportunities… MFG

TYPE

PROGRAM

FWD

FW6A

FWD

DQ200? DQ250?

FWD

RWD

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DESIGN

SOP

PEAK

A6

TBD

~200k

DCT7

TBD

TBD

9HP48 (EP2)

A9

~2013/14

~800k

8HP 70

A8

now

~400k

Localization potential if volumes rise

Agenda • Drivers for Change • Efficiency Opportunities

• Production Opportunities • Summary

Copyright © 2012 IHS Inc. All Rights Reserved.

24

Summary • Energy security (fuel efficiency) and environmental (clean air) legislation

provide unprecedented drivers for change • Entire vehicle system optimization needs to be the focus to meet

increasing stringent fuel economy and emissions standards • Light weighting has a compounding effect • The “sweet spot:” Optimal powertrains will balance engine and transmission flexibility

• Various degrees of hybridization from start-stop through battery electric vehicles • Modularity; Parts integration and system cost reductions

• Consistent growth in North America vehicle production predicated on

strong utilization, co-location of output to offset risk and exports • Overall engine and transmission production volumes to return to robust levels driven

by localization • Numerous new opportunities exist as technology proliferates the engine and

transmission portfolio Copyright © 2012 IHS Inc. All Rights Reserved.

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Thank You for Your Participation!

David Petrovski Principal Analyst, North America Powertrain Forecasting IHS Automotive [email protected] 248-465-2828