DELPHI Driving Tomorrows Technology University of Michigan-Flint & Delphi Automotive Strategic Report: Motorcycle EMS North American and Western European

DELPHIDriving Tomorrow’s

Technology

University of Michigan-Flint & Delphi Automotive

Strategic Report: Motorcycle EMS

North American and Western European Markets

Nancy Fike, James Redumski,

Frank Steiert, Carrie Warning

12/17/03

12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 2


Technology

Presentation AgendaProject Purpose & Scope

Motorcycle Technology

EMS Technology

Regulation Implications

Motorcycle Market Analysis

Top Motorcycle OEM’s

Proposed Entry Strategy


Technology

Purpose & Scope

Carrie Warning



Technology

North America Western Europe


Technology

Motorcycle Technology

2-Cycle vs. 4-Cycle

Motorcycle Engine Lifespan

Jim Redumski



Technology Manufacturing 2-Cycle vs. 4-Cycle

Engines• United States

• Europe

• Indonesia

• Japan

• China



Technology

FOUR-CYCLE

• Emission Standards

• Carbon Monoxide

• Hydrocarbon

• U.S.

• Europe

TWO-CYCLE

• Smaller

• Lighter

• More Powerful

• Less Expensive

• Less Motion



Technology

Honda

• New Technology

• The EXP-2

• Completely burns fuel

• Valve Positioning

• Pressurized Auto Ignite



Technology Motorcycle Engine Lifespan

• Factors in Engine Wear

• Two Research Studies

• Cycle Trend

• California Government

• Hours of Usage per Year


Technology

EMS TechnologyEMS Function

Open Loop vs. Closed Loop

Control System Needs

Regulations

EMS Advantages & Disadvantages

Frank Steiert



Technology

EMS Function• Controls the engine and defines the performance

and uniqueness of each motorcycle brand

• Comprised of an ECU, software, calibrations, input sensors, and output devices.

• Required to meet current and future emission regulations

• May be either Open-Loop or Closed-Loop



TechnologyOpen Loop vs. Closed Loop

• Open-Loop systems do not have any feedback mechanism (static)

• Closed-Loop systems have feedback that allow the EMS to react (dynamic) to changes in the exhaust gas

• Closed-Loop systems incorporate an Oxygen sensor as its feedback mechanism

• The ECU modifies the amount of fuel injected based on the O2 sensor feedback



Technology

Control System NeedsEC1

(Open-Loop Control) EC2

(Closed-Loop Control) EC3

(Closed-Loop Control) - Engine Control Module

- Throttle Position sensor

- Manifold Absolute Pressure (MAP) sensor

- Intake Air Temperature (IAT)

- Electronic fuel injectors (sequential)

- Electronic Ignition Timing (engine position sensing)

- Options: Engine Coolant Temperature (ECT) sensor (liquid cooled), Exhaust Gas Recirculation (EGR), 2-way or 3-way Catalytic Converter, Pulsed Air Injection Reaction (PAIR)

- Emission Control I

- EGR

- Non-heated Oxygen sensor (O2)

- Options: Engine Coolant Temperature (ECT) sensor (liquid cooled), 3-way Catalytic Converter, Pulsed Air Injection Reaction (PAIR), Heated O2 sensor

- Emission Control II

- PAIR and/or Heated O2 sensor

- 3-Way Catalytic Converter

- Options: Mass Air Flow sensor (MAF)


Technology

Regulations

European Emissions

California Emissions (ARB)

Federal Emissions (EPA)

Noise - North America & Europe



Technology

European Emissions

EU (< 150cc) HC (g/km) CO (g/km) NOx (g/km) EVAP (g/test)

Emission Type

Tier 1 (2003) 1.2 5.5 0.3 N/A EC1 Tier 2 (2006) 0.8 2.0 0.15 N/A EC2/EC3

EU (> 150cc) HC (g/km) CO (g/km) NOx (g/km)

EVAP (g/test)

Emission Type

Tier 1 (2003) 1.0 5.5 0.3 N/A EC1/EC2 Tier 2 (2006) 0.3 2.0 0.15 N/A EC3



TechnologyCalifornia Emissions (ARB)

ARB HC (g/km) CO (g/km) NOx (g/km) EVAP (g/test)

Emission Type

Current 1.0 (50 – 699 cc)

1.4 (> 700 cc) 12.0 N/A 2.0 EC1

Future (< 280 cc)

1.0 12.0 N/A 2.0 EC1

ARB HC + NOx (g/km) CO (g/km) NOx (g/km)

EVAP (g/test)

Emission Type

Tier 1 (2004) (> 280 cc) 1.4 12.0 N/A 2.0 EC1

Tier 2 (2008) (> 280 cc)

0.8 12.0 N/A 2.0 EC2



Technology Federal Emissions (EPA)

EPA HC (g/km) CO

(g/km) NOx

(g/km) EVAP (g/test)

Emission Type

Current 5.0 12.0 N/A N/A EC1 Future (2006)

< 280 cc 1.0 12.0 N/A N/A EC1

EPA

HC + NOx (g/km)

CO (g/km)

NOx (g/km)

EVAP (g/test)

Emission Type

Tier 1 (2006) (> 280 cc)

1.4 12.0 N/A N/A EC1

Tier 2 (2010) (> 280 cc)

0.8 12.0 N/A N/A EC2



TechnologyNoise - North America & Europe

EU Engine Displacement

< 80 cc > 80 cc & < 175 cc > 175 cc

Tier 1

(Effective Date)

77 dBA(01Oct88)

79 dBA

(01Oct89)

82 dBA(01Oct88)

Tier 2

(Effective Date)

75 dBA(01Oct93)

77 dBA

(31Dec94)

80 dBA(01Oct93)

North America (EPA):•Current EPA regulation is 80 dBA, established 1982

Europe:



Technology EMS Advantages & Disadvantages

Advantages:– Increased performance & improved drivability

– Reduced emissions

– On-board diagnostics (improved serviceability)

– Improved relationship with Environmentalists

Disadvantages:– Cost (development, purchase, warranty)

– Less owner customization & maintenance

– Opportunity for more governmental regulations

– Increased motorcycle complexity


Technology Motorcycle Industry

Demographic Market Trends

Motorcycle Market Analysis

Carrie Warning



TechnologyDemographic Market Trends

• Male

• 45 years old

• Married

• No children

• Educated

• $78,000 per year



Technology

Motorcycle Market Analysis (NA)

• Class III

– 90% of sales

– 75% are 700 cc or greater

– 1% annual growth (2010)

• Top 6 OEMs

– 95.3% market share



Technology

Motorcycle Market Analysis (EU)

• 2002

– Registration 3.3%

– Volume 1.325M units

• 2004 - 2007 forecast

– 2.5%

– 1.416M units (2007)

• Top 5 OEMs

– 77.1% market share

• Italy

– 29.5% of EU sales


Technology

Motorcycle OEMsMajor OEMs

Motorcycle Segment

OEM Highlights

Market Share

Nancy Fike



Technology

Major OEMs

• Harley-Davidson

• Honda Motor Co., Ltd.

• Suzuki Motor Corporation

• Yamaha Motor Co., Ltd.

• Kawasaki Heavy Industries

• BMW



Technology

Harley-Davidson, Inc.• Known as the “Motor Company”

• Only major U.S. motorcycle manufacturer

• #1 U.S. seller of heavyweight motorcycles

• Invested $1.5 billion over last 7 years to

ensure market leader position

• Moved into new European headquarters

during 2002



Technology

Honda Motor Co., Ltd.• World’s largest motorcycle producer

• Japan’s #3 automaker

• World leader manufacturer of internal combustion engines

• Operates 110 factories in 31 countries

• CY2005-plans to reduce total hydrocarbon emissions to 1/3 of ’95 levels

• CY2005-plans to improve average fuel efficiency by 30% relative to ’95 levels



Technology Suzuki Motor Corporation

• Japan’s #1 minicar producer

• Japan’s #3 motorcycle manufacturer

• Operates in 190 countries

• Partnership w/ Kawasaki to develop

motorcycles and ATV’s

• Developing technology to reduce emission

gases, improve fuel economy, and reduce

noise



Technology

Yamaha Motor Co., Ltd.

• Best known for extensive line of

motorcycles

• Operates 60 plants in 35 countries

• Made efforts to meet strict CO2

emission regulations, but failed



Technology Kawasaki Heavy Industries, Ltd.

• Multitude of products

• Difficult to find motorcycle specific

information



Technology

BMW

• One of Europe’s top automakers

• Currently expanding R&D facilities

and staff

• Engineering & Emissions Control

Test Center

• Represented in 130 countries

Summary of Major OEMs

Major FY/CY '02/'03 Motorcycle % of Total LargestOEM Products Total Sales Units Sales Sales Market

Harley-Davidson Motorcycles $4,091 million 263,700 $3,161 million 77% U.S. (84%)

HondaAutomobiles, Motorcycles $67,479 million 8,080 thous. $8,280 million 12% North America (34%)

SuzukiAutomobiles, Motorcycles $16,816 million 1,661 thous. $2,902 million 17% Japan (27%)

Yamaha

Motorcycles, Marine Products, Power Products $8,502 million 2,335 thous. $4,447 million 52% Asia (57%)

Kawasaki

Consumer products & machinery; Plant & Infrastructure Engineering; Gas Turbines & Machinery; Rolling stock, Construction machinery & crushing plant $10,345 million NA NA NA NA

BMWAutomobiles, Motorcycles $44,315.8 million 103,020 $1,074 million 9% NA

FY/CY 2002/2003

OEM Research & Development Costs

OEM Total Motorcycle Related Area of Research

Harley-Davidson $140 million NA Emissions

Honda $3,635 million $611 million Hydrocarbon emissions

Suzuki $502,855 thous. NAEmissions, fuel efficiency, noise reduction

Yamaha $465,907 thous. NA Emissions

Kawasaki $128,902 thous. NA NA

BMW $2,108 million NA Emissions

Research & Development Costs

Harley-Davidson

Honda

Suzuki

Yamaha

Kawasaki

BMW

Other

46.4%

20.2%

9.8%

9.3%

7.1%

2.5%

4.6%

2002 U.S. Motorcycle MarketOEMs

Top 6 OEMs hold 95.3% of Motorcycle Market 7

Honda

Yamaha

BMW

Suzuki

Kawasaki

Harley-Davidson

Ducati

Triumph

21.0%

14.8%

8.5%

6.6%

5.7%

3.5%7.0%

2002 Europe Motorcycle Market

17.7%

15.1%

OEMs

Top 5 OEMs hold 77.1% of Motorcycle Market 8


Technology Proposed Entry Strategy

Competitive Market

SWOT Analysis

Strategic Options

Strategic Recommendations

Frank Steiert



Technology

Competitive Market• Many established EMS Suppliers

• OEMs and EMS Suppliers build strong relationships (due to length and complexity of EMS projects)

• EMS is considered by many OEMs to be a core competency (internal expertise)

• A new EMS Supplier must have technically superior systems and competitive prices

SWOT Analysis - Delphi

Strengths Weaknesses

Delphi has a rich tradition of automotive engine management experience (designing hardware, software, and calibrating systems).

Delphi's strong partnerships with North American automotive and motorcycle OEMs; potential resistance from European and Japanese OEMs (loss of trade secrets, technology, privacy)

Delphi possesses a global network of technology centers to support OEMs.

Limited exposure to Western Europe and Japanese motorcycle markets.

Delphi's reputation as the #1 global automotive tier-1 supplier.

Lack of sales and engineering resources in Japan and Europe.

Delphi's existing product portfolio.

Lack of resources may result in entering a new market without fully understanding impact on Delphi.

Delphi's strong purchasing power.

Threats OpportunitiesDecreasing motorcycle demand. Increasing motorcycle demand.Strengthening of U.S. dollar / weakening of foreign currency.

Weakening of U.S. dollar / strengthening of foreign currency.

Foreign motorcycle EMS suppliers enter U.S. market. Increasingly more stringent EMS regulations.Negative impact of U.S. foreign policy on U.S. businesses . Consolidation of EMS suppliers.Motorcycle OEMs decide to integrate EMS design (I.e., algorithm, calibration, and possibly ECU) in-house.

SWOT Analysis



Technology

Strategic Options• Offer EMS to high-volume OEMs with non-

automotive divisions

• Offer EMS to high-volume OEMs with automotive divisions

• Offer generic EMS with tools to low-volume custom motorcycle manufacturers

• Offer EMS components to OEMs



Technology Strategic Recommendations

Offer EMS to high-volume OEMs with non-automotive divisions

– Offer EMS to high-volume OEMs with automotive divisions

X Offer generic EMS with tools to low-volume custom motorcycle manufacturers

Offer EMS components to OEMs


Technology

Questions & Answers

TEAM

Documents

DELPHI Driving Tomorrows Technology University of Michigan-Flint & Delphi Automotive Strategic Report: Motorcycle EMS North American and Western European