Global Trends in the Automotive Industry

1
Clepa

• Approx. 80 Corporate members
• Associated members
• MAJOSZ
• TAYSAD
• Partners
• EUROBAT
• EUWA
• INA
• SINDIPECAS

• National associations
• AFIA
• AGORIA
• ANFIA
• AOEM/ASA
• AUTIG
• FIEV
• RAI
• SAS
• SERNAUTO
• SMMT
• VDA

www.clepa.be
www.fordonskomponentgruppen.se
2
Global Trends in the Automotive Industry

• Level of profitability too low
• Continued consolidation
• Pressure to lower prices continues
• Shared platforms and modules increasingly
  important
• Product development ability important to Tier 1,
  but not only road to success
• Emerging markets are the fastest growing markets
  for vehicle manufacturers and suppliers

www.fordonskomponentgruppen.se
3
Level of profitability too low

• Some of the big vehicle manufacturers have
  financial problems
• The supplier industry has unsatisfying margins
  
• The Big 3 lost market shares in 2003
• The 600 biggest suppliers in Sweden had an
  overall negative profit margin in 2002

GM, Ford, Chrysler
2 profit margin
GM -0,5, Ford -0,6, Chrysler -0,4
www.fordonskomponentgruppen.se
4
Continued consolidation

• The consolidation among SMEs continues - from 148
  to 206 acquisitions over the past three years
• There are many reasons
• - To reach critical size
• - To cover particular geographical areas
• - To supply a platform
• - To acquire technology and capacity for product
  development
• Big become bigger

www.fordonskomponentgruppen.se
5
Pressure to lower prices continues

• The vehicle manufacturers demand continued
  lowering of prices
• Advanced tools for choice of supplier
• Insistence on suppliers to invest in
  development, tools and equipment
• Outsourcing is also a way to put pressure on
  costs
• Production and development moved to competitive
  countries
• Payment terms are also an important part of
  negotiations
• New purchasing terms and conditions worsen the
  business climate

3,5 - 7
30 days
www.fordonskomponentgruppen.se
6
Shared platforms and modules increasingly
important

• Standardisation is a way of lowering costs and
  securing quality
• Standardisation includes factories, trade marks
  and platforms
• Quality is not a means of competing, it is a
  basic requirement.
• The is an increasing incorporation of
  electronics and software in vehicles, which
  renders quality steering more difficult.

www.fordonskomponentgruppen.se
7
Product development is important to Tier 1, but
not the only road to success

• Product development capacity is very important
  to Tier 1 suppliers
• Project management and ordering ability are
  important skills
• The number of products increase
• Time to market Faster, faster and faster
• Insourcing also occurs and vehicle manufacturers
  also have a need for good manufacturing
  companies

www.fordonskomponentgruppen.se
8
Emerging markets are the fastest growing markets
for vehicle manufacturers and suppliers

• Political changes have also changed the premises
  on which the industry operates
• The Baltics, Eastern and Central Europe, China,
  India etc offer low costs in terms of production
  as well as development
• The new EU countries
• The new Group Exemption

www.fordonskomponentgruppen.se
9
Where are we heading?

• What long-term effects will outsourcing have on
  the build-up of skills and competence, product
  development and quality?
• Where is Swedish research heading?
• Have we only caught a glimpse of the competition
  to come from the competitive countries?
• Why do other EU countries find it easier to
  shape extensive projects which support
  internationalisation, projects aimed at
  increasing productivity etc?
• Is the continuously unforgiving business climate
  in the industry really optimal?
• What is happening to Volvo Cars? Saab? Scania?

www.fordonskomponentgruppen.se