State of the

1

• State of the
• Automotive Aftermarket
• Steve Handschuh
• Executive Director, AASA

2
Industry Outlook

• We have our share of challenges
• But we also have our share of opportunities.
• Technology advancements will drive the future of
  this industry
• Global strategy is a must today

3
Importance of the Automotive Supplier

• Suppliers
• Spend 20 billion annually on RD
• Provide 2/3 of vehicle content (30,000 parts per
  car)
• 1.3 million employees
• Taking on more responsibilities from customers

4
Current Issues Impacting Suppliers

• Margin erosion
• Consolidation fewer suppliers fighting for
  fewer customers (who now have greater power)
• Raw material cost increases (steel, resins, etc.)
• Energy costs more expensive to make the products

5
Current Issues Impacting Suppliers

• Wages and benefits (health care and pensions)
• Imports and overseas sourcing
• Exports trade imbalance continues to escalate
• IPR and counterfeiting issues
• Gas prices impact remains uncertain

6
U.S. Motor Vehicle Parts Market
7
Number of WDs (in U.S.)
8
U.S. Aftermarket TrendParts, Excluding Labor
(Billions)
MEMA forecast
9
Total Vehicles in Service (U.S.) (000)
Source RL Polk Co.
MEMA Est.
10
Key U.S. Aftermarket Indicators
Age Structure ( of Vehicles in Use)
Source RL Polk Co.
11
Producer Price Index Motor Vehicle Parts and
Accessories
The average price of an aftermarket component has
not increased over the past 12 years
12
DIY Share of Service Job
13
U.S. Aftermarket Channel Summary By Share of
Service Jobs
Sources MEMA and Industrial Marketing Research
Inc.
14
Dealer Share of U.S. Aftermarket Parts
15
Unperformed Maintenance (Billions)
Forecast
16
Other U.S. Aftermarket Trends

• Proliferation of part numbers
• Inventory growth at all levels
• Importance of data management more significant
  than ever before
• Prices are flat
• Margins squeezed at all levels
• Consolidation of suppliers and distributors

17
Opportunities for Suppliers

• Increased collaboration with channel partners
• Use technology to reduce cost and for competitive
  edge
• Developing low-cost manufacturing strategies
  identifying inefficiencies and developing
  solutions

18
Opportunities for Suppliers

• Strategic alliances/partnerships
• Customer diversification -- Dont have all your
  eggs in one basket
• Leading market position (product, technology and
  process)
• No to unprofitable deals -- Know when to say No

19
The Importance of AASA
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Formation of AASA

• Created in 2002
• Aftermarket suppliers have unique issues and
  needed a focused organization representing their
  interests
• Created a Board of Governors consisting of
  industry leaders
• More than 85 of the top 100 aftermarket
  suppliers are AASA members

22
Our Mission

• AASA will aggressively represent its members on
  critical business issues by generating dialogue,
  education and action, which will help provide a
  stronger unified voice for aftermarket suppliers.

23
Our Core Services

• Influence and intelligence on the global
  aftermarket supplier industry
• Authoritative representation on critical business
  issues
• Strategic market research
• International business support
• Government affairs representation
• Industry networking and trade events
• Providing increased knowledge through peer and
  product councils
• Commercial services through MFSG and MISG

24
Our Members

• We represent ONLY manufacturers
• Must be a NORTH AMERICAN supplier to the
  aftermarket industry
• We do NOT represent importers or foreign
  suppliers!

25
Some Recent Initiatives

• AASA Brand Protection Council
• Provide a forum for manufacturers to discuss
  counterfeiting, protection of intellectual
  property rights, gray market or diversion.
• Share best practices, recommend solutions,
  formulate future seminars and promote networking.
• Helps prioritize AASA and the industry's
  collective actions on various intellectual
  property issues.

26
Some Recent Initiatives

• European Aftermarket Forum
• A peer group for discussion of aftermarket
  commercial business issues and actions.
• Its quarterly meetings are open to aftermarket
  executives heading their businesses' European
  operations.

27
Some Recent Initiatives

• China Aftermarket Forum
• Provide a forum for members senior executives
  who head-up their China aftermarket operations to
  meet and discuss industry issues and solutions,
  share best practices and network among peers. 
• Share information among other Forums or Councils
  in Europe and North America where appropriate.

28
Some Recent Initiatives

• Fuel Pump Manufacturers Council
• Mission is to reduce warranty returns through
  greater education and communication regarding the
  proper diagnosis and service procedures for
  todays fuel pumps

29

• Thank You!

Questions?