This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Ducker Worldwide LLC.

Ducker Worldwide | 1250 Maplelawn Drive | Troy , MI 48084 | www.ducker.com | info@ducker.com Confidential © Ducker Worldwide

DUCKER WORLDWIDECRITICAL THINKING FOR CRITICAL DECISIONS.

AUTOMOTIVE LIGHTWEIGHTING INSIGHTSPrepared for SAA Lightweighting Summit | September 25 2017The Federal Reserve Bank of Chicago, Detroit Branch

CRITICAL THINKING FOR CRITICAL DECISIONS

TRANSACTION ADVISORY GROWTH CONSULTINGMARKET RESEARCH

Ducker gathers unique market, customer and competitive insights

when others cannot. Leveraging industry expertise and research

capabilities, Ducker develops sound strategies to win in existing and new

markets

Ducker’s transaction advisors assist clients with searching and

researching acquisition targets, and provide best-in-class diligence to de-risk M&A transactions. It's a

natural extension of our consulting and research services

With a dynamic fact-based and advanced business analytics, Ducker works with management to develop

actionable strategies and detailed go-to-market plans that represent best-

fit solutions

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GLOBAL INSIGHTS THAT OUTSMART THE COMPETITION

AmericasTroy, Michigan (Global Headquarters)

EuropeParis, FranceBerlin, GermanyLondon, United Kingdom

Asia-PacificBangalore, IndiaShanghai, China

Ducker Worldwide employs a seasoned team of 150 full-time consultants, located throughout North America, Europe, and Asia- Pacific.

Our team covers all major languages required to do business in Europe, Asia, India, Africa, and the Middle East. This ensures the best cultural fit and most accurate exchange of information needed to turn insights into effective decisions.

In addition to Ducker’s general markets served, Ducker Europe brings their considerable expertise to the emerging energy and environmental industries.

Ducker also offers operational consulting in India and critical data analytics for complex markets across the region.

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AUTOMOTIVE & TRANSPORTATIONManufacturers, tier suppliers and associations in the global transportation sector count on Ducker to deliver trusted insight

BUILDING & CONSTRUCTIONFrom basic materials to advanced building performance systems, Ducker understands every aspect of the construction industry

HEAVY EQUIPMENTFrom mining, road construction and work at height applications, Ducker’s global access into the equipment industry provides seamless methods to identify and capture opportunity

INDUSTRIALAs reshoring of manufacturing continues and growth of automation reaches a new level, Ducker is there to help clients optimize their product/market strategies around the world

MATERIALS & CHEMICALSDucker partners with clients in the materials and chemicals industry to build sustainable strategies and drive success, even as commodities and prices remain in constant motion

HEALTHCAREOur team helps companies navigate the changing face of healthcare, with solutions that support innovation and foster the growth of manufacturers and providers of medical equipment and provider business models

SOLUTIONS FOR GROWTH IN COMPLEX MARKETS,IN TECHNICAL ENVIRONMENTS

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Confidential © Ducker Worldwide

1996 2006 2015 2016

ALTG Aluminum

Content

Castings/Alloys

Development

Casting & Forging Research

Steel Stamping

Tool & Die

Rod & Bar

Analysis

RIM for Auto

Application

SMDI Steel Content

ALTG Aluminum Content

SMDI Steel Content

SMDI Steel

Content

Aluminum Sheet Recycling

SMDI Steel

Content

Steel Roll-Forming

Auto Extrusions Research

Auto Castings Research

AEC Research

Program

AEC Research Program

Composite & Plastics Analysis

360 Degrees of Auto

Lightweighting

Materials

2014

EU Aluminum Content Study

100+ Bespoke Supplier Studies

2016 EU Aluminum Content Study

European Aluminum Association

2017

2017 NA Aluminum

Content Study

NA Aluminum Association

2016 18 + Bespoke Supplier Studies

NA, EU, APAC

S. Africa

SINCE 1996 A TRUSTED SOURCE FOR UNBIASED LIGHTWEIGHT MATERIAL MARKET INTELLIGENCE

2015 30+ Bespoke Supplier Studies

NA, EU, APAC, S. Africa

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Confidential © Ducker Worldwide

LIGHT WEIGHTING MATERIALS

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GLOBAL REGULATIONS DRIVE DEMAND FOR LIGHTWEIGHTING

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Midterm Evaluation (MTE)Three Step Process

REGULATORY BACKGROUND

On January 12, 2017, Administrator Gina McCarthy signed her determination to maintain the current GHG emissions standards for model year (MY) 2022-2025 vehicles.

Could be Revised!

On March 15, 2017 Administrator Scott Pruitt and Department of Transportation Secretary Elaine Chao announced that EPA intends to reconsider the final determination, issued on January 12, 2017

September 6, 2017: Oral Arguments

October 5, 2017: Written Comments Due

April 1, 2018: FINAL DETERMINATION

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THE ROAD TO COMPLIANCE IS A BALANCING ACT

7%I s N e e d e d

Compliance - Gap

Global Goals

Customer Needs

Performance

Cost Targets

Plant Issues/Union

Powertrain

Materials (Body structures/chassis)

Design/Aerodynamic

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REGULATORY WEIGHT SAVINGS GOALS:

REDUCE 270 POUNDS!

Over 70% of the passenger cars will require mass reduction between 263 pounds per vehicle and 350 pounds per vehicle

Nearly 30% of the light trucks will require mass savings of approximately 840 pounds

Source: Ducker Analysis, Draft TAR Chapter 13

Annual weight reduction targets goes from ~20 lb’s per year for 2015 to 2020 to ~34 lb’s per year for 2021 to 2025 or 7% reduction from 2015

175

263

350

700

0

100

200

300

400

500

600

700

800

20% 60% 12% 8%

PASSENGER CAR WEIGHT SAVINGS BY 2030 IN POUND PER VEHICLE

210

315

420

629

839

0

100

200

300

400

500

600

700

800

900

16% 23% 19% 13% 29%

LIGHT TRUCK WEIGHT SAVINGS BY 2030 IN POUND PER VEHICLE

3779

3835

3735

3565

3400

3450

3500

3550

3600

3650

3700

3750

3800

3850

3900

2012 2015 2020 2025/28

TAR IMPLIED MASS REDUCTION

-100 lbs.

-170 lbs.

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CLOSING THE COMPLIANCE GAP IS A

MULTISTEP PROCESS

Source: Ducker Analysis

Level 1 - Material Substitution

One to One Part/Material Substitution: Closures, Bumpers, Knuckles, Control Arms etc.

Level 2 - Holistic Weight Saving Designs

Parts Consolidation, Multi-Form & Multi Material: sub-frames, front end modules, shock towers, door

rings etc.

Level 3 –

Glazing/glass, coatings, interiors, etc.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Bumpers

HVAC

Braking

Electronical & Electronics

All Others

Wheels & Tires

Glass, Paint, Trim

Interior

Fuel & Exhaust

Transmission & Driveline

Engine

Chassis Suspension & Steering

Body & Closure 25%

13%

15%

12%

6%

5%

5%

5%

4%

4%

4%

1%

1%

Body parts, closures, bumpers, chassis and

suspension parts are the prime candidates for

further weight reduction

Where is the Weight: Light Vehicle Mass Distribution

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THERE ARE OPTIONS!

12V

DC

A

lum

inu

mC

arb

on

Fi

be

r

• New applications of body and structural aluminum for a growing number of applications: replacing stamped & welded mild steel

• Mg castings for seat frames as well as closure inners performs well when paired with aluminum outers

• Carbon fiber as structural patch-work to enable further light-weighting is beneficial

Mag

ne

siu

m

It is unlikely there are breakthrough lightweight materials awaiting discovery – refinement of what is available today

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COMPETING MATERIALS HAVE A PLACE IN THE MIXED MATERIAL FUTURE

Materials cost comparison 2015 ($/Kg) Weight saving comparison

2015 (weight for equal stiffness as steel)

Source: Ducker Analysis

13

The right material mix has to be evaluated for the right application and goals for the right budget!

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MULTI-MATERIAL VEHICLES DEMONSTRATE THAT ONE SIZE DOES NOT FIT ALL

2018 A8 Body is 58% Aluminum

Audi Q7 SUV

BMW 7 SeriesCadillac CT6

Aluminum VDC>170 lbs.

in Color

Multimaterial/Multiproduct body structures are the key to significant weight savings going forward

Aluminum, High Strength Steels, CFRP & Mg

High Strength Steels, Aluminum and CFRP

Aluminum, Conventional Steels & High Strength Steels

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EVOLUTIONS IN JOINING TECHNOLGOY ENABLES MATERIAL REVOLUTIONS

15

The 2018 Audi A8 utilizes 13 joining methods

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COMPLEXITIES IN THE MATERIAL MIX

FOR THE FUTURE

Source: 1Q2017Ducker Analysis

40% 38%32%

15% 15%

15%

10% 13%16%

8% 8%8%

27% 26% 27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2020 2025/28

AUTOMOTIVE MATERIAL MIX PER VEHICLE

All Others

CFRP

Magnesium

Iron Casting

Aluminum

All Other Steel

Steel Sheet

Mg 0%CFRP 0%

Mg 0%CFRP 0%

Mg 1%CFRP 1%

3835 LBS 3735 LBS 3565 LBS

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To achieve a reduction of 270 PPV from 2015, significant content increases required in AHSS, Aluminum, Magnesium and CFRP

Confidential © Ducker Worldwide

55 Years of Uninterrupted Growth

84120 139

165

212

258

306340

397

466

520

565

0

100

200

300

400

500

600

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2028

Net

Po

un

ds

per

Veh

icle

North American Light Vehicle Aluminum ContentNet Pounds per Vehicle @ 7% MR Scenario by 2028

Source: Ducker Analysis 1Q2017

ALUMINUM MARCHES INTO THE NEXT DECADE WITH UNPRECEDENTED GROWTH

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Aluminum penetration set to grow dramatically within closures, bumpers and structural castings: Aluminum remains the fastest growing automotive material…

Sheet(Hood)

Extrusion(CMS)

Casting(Subframe)

Confidential © Ducker Worldwide

MORE AHSS WILL BE NEEDED

& GEN 3 STEELS ARE ON THE WAY

164 188 203 220 233 248 259 274 293 298 312 330 347 3674147

5155 58

6273

7783 94

99104

109116

205235

254275

291310

332351

375392

411434

456483

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Po

un

ds

pe

r V

eh

icle

AHSS UHSS

Source: AISI/SMDI, Ducker Analysis

Under Review

18

AHSS penetration surpassed Ducker’s prior estimates. Steel remains the single largest share of automotive materials

(UHSS) Press Hardened Steels

• High Tensile Strengths

• Deformation Resistance

• Med to High Part Complexity (improving however)

Generation 3 Steels

• High Tensile Strengths

• Engineered Deformation Resistance

• High Parts Complexity (advanced geometries)

Replace Conventional

HSS for Weight Savings & Ductility

Replace Select PH Steels for Strength &

Ductility

Lower Finished Parts Pricing

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SUPPLIER IMPACT CASE STUDY

Confidential © Ducker Worldwide20

AHSS

SMC >1.2 SG

Continuous Cast Al Sheet

Al Extruded Body Parts

Al Low Pressure PM

Al Extruded Bumper Beams

SMC <1.2 SG

CFR Epoxy <1.6

Aluminum Vacuum Die Casting

UHSS/Gen 3 Sheet

Aluminum Sheet

Millions Of Dollars

Revenue Growth over 2020 levels for Premium Auto Materials

2025 10% E

2025 15% E

2025 20% E

2020

High

Low

SELECTING THE RIGHT MATERIALS TO FULFILL GROWTH MANDATE

2025 Scenario 2

2025 Scenario 1

2025 Base

2020

Attractiven

essAluminum Sheet

UHSS Sheet

Material A

Material B

Material D

Material E

Material F

Material G

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Confidential © Ducker Worldwide21

Steel Aluminum Composite

Alloy/Grade HSS, AHSS, UHSS (PH) 6060, 6061, 6063, 6082, 7003 GMT, LFT-D, PC-PBT

Tensile Strength 550MPa (up to 1700 MPa)6xxx 300MPa7xxx 350MPa (up to 550 MPa)

275MPa

Energy Absorption Normal Best Good

Weight 1X (base) 0.5X to 0.7X 0.7X

Cost (finished CMS)

Adoption

ProsLower costRepairable (non PH Steel)

LightweightingAnti-corrosionHigh energy absorption

LightweightingAnti-corrosionHigh design flexibility (molding)

ConsCorrosionWeight

Higher costNot repairable

Not repairableLow availability (Hanwha JV with AZDEL)

CASE STUDY – CRASH MANAGEMENT SYSTEMS

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Regulation/Test Standard Description

FMVSS Test Procedure for Regulation Part 581 Bumper Standard (NHTSA)

• Prohibit damage to the vehicle surfaces and limit damage to passenger vehicle bumpers on vehicles under low speed (2.4 MPH)

o Lamp and reflective deviceo Hood, trunk, doorso Fuel and cooling systemo Exhaust systemo Propulsion, suspension, steering, and

braking system• Limit the impact force levels for pendulum

impacts to reduce the frequency of override and under ride

Low-Speed Crash Test Protocol (IIHS)

• Assess how well the bumper system can protect the vehicle from damage in an impact at 5 MPH speed

• Appraise bumper damage and estimate repair cost after impact

• Major components including reinforcement bars, energy absorbers for the front and rear bumper assemblies

• Minor cosmetic damages are permitted

UNDERSTANDING THE MATERIALS ROLE IN THE APPLICATION

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Cold Stamped

Hot Stamped

Roll Formed

Mild/HSS

AHSS

UHSS

Aluminum, 34%

Steel, 66%

6xxx

7xxx

Extruded

0%

25%

50%

75%

100%

Primary Process Grade LV Bumper Material Grade Primary Process

2016

2020

CMS Market Structure in NA(% of total market volume)

23.8 23.8 35.8 12.0 12.0

Cold Stamped

Hot Stamped

Roll Formed

Mild/HSS

AHSS

UHSS

Aluminum, 51%

Steel, 49%

6xxx

7xxx

Extruded

0%

25%

50%

75%

100%

Primary Process Grade LV Bumper Material Grade Primary Process

CAGR (6.2%) (6.2%) 1.3% 12.6% 12.6%

37.7

AluminumSteel

Units in million

Units in million

MATERIAL STRATEGY EVOLUTION IS PART AND APPLICATION SPECIFIC

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Confidential © Ducker Worldwide

Vertical Integration Complimentary

Processes

CMS Cast Billet Extrusion FabricationSub-

Assembly Tier I

IntegratorSteel

StampingSteel Roll Forming

Alloys

Supplier A 6xxx

Supplier B 6xxx, 7xxx

Supplier C 6xxx, 7xxx

Supplier D 6xxx

Supplier E 6xxx

Supplier F 6xxx

Supplier G 6xxx, 7xxx

Supplier H 6xxx, 7xxx

Supplier I 6xxx

Supplier J 6xxx

VERTICAL INTEGRATION BRINGS OPPORTUNITIES

Example of supplier capability vertical integration (CMS)

Tier 1

Tier 1

Tier 1

Tier 1&2

Tier 1&2

Tier 2

Tier 2

Tier 2

Mar

gin

Customer Intimacy

CMS Supplier Positioning

Low High

High

Low

Size: CMS Revenue

Tier 1&2: Tier 1 with extrusion capability 24

Confidential © Ducker Worldwide

VALUE-ADD STEPS PROVIDE MARGINE EXPANSION AND CUSTOMER INTIMACY

Xx%

Xx%

XX%

100%

Material Conversion Costs Value-Added Services Total Price

Value Chain Positioning

Tier 2

Tier 1

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THANK YOU.This concludes our presentation. Today’s presentation was prepared by Ducker Worldwide LLC. Opinions and estimates constitute judgment as of the date of this material and are subject to change without notice. Any interpretations derived from this document are the sole responsibility of the client. Reproduction without the explicit consent of Ducker Worldwide LLC is strictly prohibited.

For more information regarding our Market Research, Transaction Advisory, or Growth Consulting expertise or to learn how Ducker Worldwide can help you, please contact one of our team members at 248-644-0086 or visit our website at www.ducker.com.

DETROIT | PARIS | BERLIN | SHANGHAI | BANGALORE | LONDONwww.ducker.com | info@ducker.com

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