GKN Powder Metallurgy

Andrew Reynolds Smith - Chief ExecutiveGKN Powder Metallurgy,

OffHighway & Industrial Services

Agenda

GKN Powder Metal Overview

What is Powder Metallurgy?

Why is PM an outstanding value creation opportunity?

Why is GKN uniquely positioned in the business?• What have we done to get where we are?• What are we doing to drive value creating growth going

forward?

Summary

GKN Powder Metallurgy – The world’s No1

INDIA CHINA KOREAJAPAN

INDIA CHINA KOREAJAPAN

SWEDENUKFRANCEGERMANYITALYSOUTH AFRICA

SWEDENUKFRANCEGERMANYITALYSOUTH AFRICA

CANADAUSABRAZILARGENTINA

CANADAUSABRAZILARGENTINA

USAUSA GERMANYROMANIAGERMANYROMANIA

35 Global locations15 Countries

7000 employees

6bn parts/annum - $1.1bn Sales

Global Technical Centres

GKN Sinter Metals The Global Leader in Powder Metallurgy

15% market share15% market share

400 Engineers 265 active patentsDesign, Simulation, Development and Validation CapabilitiesDedicated PM Machining Service CenterStand alone R+D CenterAdvanced materials laboratory

Unmatched Global Engineering Capability…..

Radevormwald, Germany

Unmatched Breadth of Products and Processes……opening new markets and

applications

Increasing DensityPM Aluminum

I ncr

easi

ng M

e cha

nica

lPe

rfor

man

ce

Filter

Conventional Powder Metallurgy

Green Machined PM

Metal Injection Moulding

Powder Forging

Gears

What is the basic value proposition for powder metallurgy?

The production of components for a wide range of Industrial and Automotive applications via a process allowing clear cost advantages BUT importantly if a “design for PM” approach is adopted the achievement of dimensional and geometric design properties which would be very difficult to deliver through alternative processes

Powder Metallurgy ProcessPowder metallurgy is a highly cost effective method of producing complex, high performance parts

Powder Manufacture

Component Manufacture

Material Wastage and Energy Consumption of Metal Processes

Sintering Casting Cold orWarm

Extrusion

Hot DropForging

MachiningProcesses

Source: EPMA

Sintering Casting Cold orWarm

Extrusion

Hot DropForging

MachiningProcesses

95%

29MJ40-50%

66-82MJ

Raw material utilisation (%) Energy requirement per kg of finished part

Why is PM a good value creation opportunity?

Global powder metal market growth from $7.5 to $9.8BN in 2012

Fragmented competitive environment with only one globally positioned player

Served market diversity allowing a balanced customer portfolio

Technology development is allowing increasing technically driven differentiation including “Design for PM”

Significant opportunity to leverage global manufacturing, commercial and engineering to gain economies of scale

Global Powder Metal Market Growth

Total =$7.5BTotal =$7.5B Total =$9.8BTotal =$9.8B

2007 PM market CAGR 5.6%CAGR 5.6% 2012

PM market

EU

NASA

Japan

OtherKorea

IndiaAsean

ChinaEU

NA

SA

Japan

Other

China

AseanIndia

Korea

Global Powder Metal Market Growth2007

PM market CAGR 5.6%

incl MIM and Filters

CAGR 5.6%2012

PM market

Total =$7.5BTotal =$7.5B Total =$9.8BTotal =$9.8B

Industrial IndustrialAuto Auto

APSA Eu

North America

APSA Eu

North America

Industrial growing faster than Auto

APSA growing faster than North

America and Europe

Global Powder Metal Market Growth

CAGR 5.3%CAGR 5.3%

CAGR 9.8%CAGR 9.8%

2007 PM market

CAGR 5.6%CAGR 5.6%

2012 PM market

MIM

MIM

MIM

PM

Conventional PM

PM

Total =$7.5BTotal =$7.5B Total =$9.8BTotal =$9.8B

Technology Trends Driving PM

Macro trends Technical solutions PM impact

Cost

Performance

Health

Refrigerator

Compressors

Air Conditioning

5%+ CAGRPM marketPotential

Industrial Powder Metal Applications

PowerTools

DomesticApplications

White Goods

Bearings

Transmission

Sport & Hobby

Engine

Medical

Furniture

Transportation

General Machinery

Lawn & Garden2000 2003 2006

CAGR 5-8%CAGR 5-8%

Automotive Powder Metal Applications

SteeringColumns & Systems

BrakingSystems

Body & Chassis

SeatingSystems

ManualTransmission

AutomaticTransmission

Engine

ExhaustSystems

ShockAbsorbers

Bearings

2000 2003 2006

AsiaEUNA

CAGR 5-8%CAGR 5-8%

PM content [kg/vehicle]

“What have we done to get where we are today and what are we doing to drive value creating growth?.....”

Its been about the basics……

1. Understand the fundamental economics of the business and value creation potential

2. Establish and continuously communicate the strategy and associated objectives to realise the potential

3. Rigorous and relentless execution

“This analysis is used to drive investment decisions to develop our business to provide sustainable value creating growth with clearly prioritised actions”

Technology efforts re focussed and intensified in alignment with growth plan

300 programmes

95 programmes

60 programmes

Eliminated Double Work

Consolidated Technologies and Deliverables

Customer Focused & Differentiators

Advanced EngineeringSmall & MIMMedium & ForgeLarge

Project Spread

0

10

20

30

40

50

60

70

80

0 10 20 30 40 60 70 80

Unfavourable Cost, Risk and Resource Favourable

Unf

avou

rabl

eVa

lue

Favo

urab

le

2005 Technology Plan Project Assessment

2005 = 300 Programmes

Project Spread

0

10

20

30

40

50

60

70

80

0 10 20 30 40 60 70 80

Unfavourable Cost, Risk and Ressource Favourable

Unf

avou

rabl

eVa

lue

Favo

urab

le

2007 Technology Plan Project Assessment

50

2007 = 67 Programmes

MIM Turbo Vanes

-

Technology differentiator• High precision requirement• Complex net shape geometry versus

fine cast solution which requires machining

• Annual volume: 2.500.000

Cost$

DurabilityPerformance

Weight

kg

Environment

Ancorsteel 4300 – Powder/Part synergy in action

Application• High Strength Components

- Gears and Synchronizer Hubs

Technology differentiator• Strength @ levels of wrought

materials• Cost competitive, no Cu• Advanced high temperature

sintering compatible

A/C Compressor “Scroll”

Differentiators • Net shape technology• Reduced machining cost @ customer• High precision capability

Strategic Rationale• Significant market size• Customer diversification

Cost$

Environment Productivity

Variable valve timing rotors

Differentiators • High precision • Significant cost advantage over

machined alternatives• Designed in lubrication features

which would be unviable to

Cost$

Environment Productivity

Performance

Global Process Standardisation and Know How Transfer are key facilitators

Standard / Robust Processes

Integrated Tool ShopStrategy

90% (30%)

Integrated Tool ShopIntegrated Tool ShopStrategyStrategy

90%90% (30%)(30%)

Press / Adaptor Strategy45%(20%)

Press / Adaptor StrategyPress / Adaptor Strategy45%(45%(20%)20%)

StandardisationUnderway linked

to PowderConversion

StandardisationStandardisationUnderway linked Underway linked

to Powderto PowderConversionConversion Sintering

Standard Atmosphaere85% (45%)

Standard Furnaces45 (35%)

SinteringSinteringStandard Standard

AtmosphaereAtmosphaere85%85% (45%)(45%)

Standard FurnacesStandard Furnaces4545 (35%)(35%)

Green Machining20% (<10%)Green MachiningGreen Machining20%20% (<10%)(<10%)

Palletising Systems65% (40%)

Furnace Loaders35% (15%)

Palletising SystemsPalletising Systems65%65% (40%)(40%)

FurnaceFurnace LoadersLoaders35%35% (15%)(15%)

Design65% (50%)

DesignDesign65%65% (50%)(50%)60%

(15%)60%60%(15%)(15%)

Global Powder StandardizsationStandardisation History

• 1998: 6 Suppliers of Base PowderSeveral Suppliers of Alloying AdditivesSeveral Suppliers of LubricantsAbout 3,000 different Mixes

• 2005: 4 Suppliers of Base PowderDesignated Suppliers of Cu / Ni / GraphiteAbout 800 different Mixes

• 2006: 1 core supplier of Base Powder 32 Alloy Systems

World Class Sustainable Operations

Lean Enterprise

Manufacturing footprint rationalisation

Manufacturing footprint transition

A powerful global operational footprint has been established…

LeanEnterprise

GKNVision

GKN Lean Enterprise deployed in all locations

2005 – 2007 Restructuring and Rationalisation

RomulusRomulusOwossoOwossoZeelandZeelandWorcesterWorcesterLichfieldLichfieldOberhausenOberhausen

20% of global production relocated in the last 2 years with every plant affected

North American Plant Alignment to Segments and Scale/Focus

Hig

h C

ompl

exity

Low

C

ompl

exity

MediumSmall Large X Large

EMP1

EMP3

DUBSTH

KER

Forge

MF STMWOR

ROMZEE

OWO

SAL

MANGER

EMPF

North American Plant Alignment to Segments and Scale/Focus

SAL

MF MANGER

EMP1

EMP3

DUB STHKER

STM

MediumSmall Large X Large Forge

Hig

h C

ompl

exity

Low

C

ompl

exity

EMPF

2005-2008 New Plants and Expansion

Danyang, ChinaDanyang, ChinaPimpri, IndiaPimpri, India

Eastern EuropeEastern EuropeMexicoMexico

BrazilBrazilArgentinaArgentina

New PlantsNew Plants

2008 Plans2008 Plans

ExpansionExpansion Operations aligned to high growth emerging economies

New Operations in high growth economiesChina and India Powder Metal

market to double by 2012

Danyang, China

Plant 3 Pimpri, India

Current GKN Market share in India – 52%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Americas Europe APO

2006 Actual Strategic Plan

Future Order Book

2007 2008 2009 2010 2011

Ann

ual S

ales

Sales growth on track to deliver strategic growth in all regions

Booked programmes

Hit rates

$235m of sales wins in 2006

CAGR 6-8%CAGR 6-8%

GKN PM Strategy Summary

Global growth in target markets validated at 5%+

World No 1 sintered component producer allowing significant asset and capability leverage

• No other player has powder and parts allowing technology synergy which is unmatched

Unique global operational footprint aligned with high growth economies with restructuring largely complete

GKN PM Strategy Summary

Market leading product and process technology capability with significant global leverage potential

Positioned in high growth PM technologies such as MIM

Strong position with industrial and automotive customers

Summary

“GKN Powder Metallurgy is well positioned globally to grow at 6 to 8% globally with margins in the 8 – 10% range………now lets take a tour round our Bonn plant and see what can be achieved in the Powder Metal business through outstanding strategy execution”