Lars Holmqvist, CEO

CLEPA

European Association of Automotive Suppliers

Relocation in the Automotive Industry, EESC

29 June 2006

Facts about CLEPA

• 3000 member companies in total, representing 2500 SMEs

• 3 Million employees

• 300 billion Euro sales

CLEPA, the European umbrella membership organisation for the global automotive supply

industry

20 National Trade Associations

69 Corporate members

Facts about the automotive suppliers

75% of the value of the car comes from the suppliers

50% of the R and D spending from the suppliers

A majority of patents are from suppliers

Some examples:

ABS

Airbags

Electronic stablility programmes

High pressure injection systems

Diesel particulate filters

Navigation systems

Vehicle Production

2003 2008 2013 p.a.

Europe 16.8 18.0 18.9 1.2%

Nafta 16.3 17.5 18.5 1.3%

Asia 21.1 26.1 30.2 3.3%

World 60.1 69.4 76.4 2.4%

Automotive Key Figures

Supplier Potential

2.4% per annum growth in world production

1.3% per annum growth through outsourcing

0.4% per annum growth through new technologies

= 4.1% per annum total potential growth

The European Automotive Manufacturing Industry

Official number of employees 2.1 million

Industry estimates 6.5 million

Whereof Suppliers 5.2 million

Manufacturing output €700 billion

R and D spending €24 billion

Whereof Suppliers €12 billion

New potential markets:

China, India, Russia, Poland

Low cost production:

Baltic States, other Eastern European countries

Move to New Countries

RELOCATION – The Automotive way

Most components are unique to a specific model of a car i.e.

“VW Golf 1.8 TDI 2002-2007”

For each new model (5-7 years) a new purchasing contract is

negoitiated

This lead-time is 2-3 years

Re-location is a way to meet the price pressure from the VMs

Re-location is gradual and progressive

“Made in Germany” could mean that 75% of the car is made

outside of Germany

Automotive Manufacturing in Western Europe under threat?

• Currently, 33% of Western European Supplier (WES) has operations in

Eastern Europe and 15% in China

• Soon, 50% of WES will be operating in Eastern Europe and/or China

• 39% of all WES intend to transfer parts of production process to Eastern

Europe in the next 5 years

• 23% of all WES planning similar investments in China

Source: Ernst & Young

VMs moving eastwards

Hyundai – informal agreement to invest approx $1.2 billion in a new

300,000-a-year Czech assembly plant, adding 10,000 jobs

Toyota and Peugeot – new plant in Czech Republic, having capacity

to make 300,000 cars a year, investment of approx €1.5 billion

Slovakia set to be the world’s biggest car producer per capita

Slovakia – home of PSA Peugeot-Citroën’s newest European plant,

forecast to make 1million cars a year by 2008

Kia will invest €835m in Slovakia, production should reach 300,000

cars a year from 2008

Peugeot will invest €1.1bn in Slovakia, production should reach

450,000 cars a year by 2009

VMs moving eastwards

Hyundai, Toyota have set up car assemblies in Turkey

General Motors rapidly expanding its manufacturing operations in

Russia, also expanding in Kalingrad – GM’s 2006 target in Russia is

100,000 sales, up from 76,578 last year

Ford has an assembly plant in St. Petersburg

Toyota will open its assembly plant in St. Petersburg this year

Renault has a joint venture in Moscow that began building the Logan

last year

Sales of foreign automakers in Russia more than doubled to 600,000

units last year

in 2005, total unit-sales volume in Russia was 1.6 million – expected

to reach 2 million before 2010

Key location factors

low production costs

low wage costs

sound employee qualifications

good engineering skills

flexible and motivated labour markets

good working attitudes

proximity to attractive sales markets

demand for cars set to grow swiftly

political and economic stability

Source: Ernst & Young, FT

Parts market: growth and manufacturing attractiveness 2003-2010 (100 = best in peer group)

Source: Roland Berger Strategy Consultants

1 Combined OEM and aftermarket for automotive parts2 Based on manufacturing opportunity weighted with political/financial stability and investment flexibility

Cumulativeautomotiveparts marketgrowth2003-2010e1

Manufacturing attractiveness rating2

Japan

Italy

United States

China

GermanySouth Korea

France Russia

Brazil

Latvia

Mexico

LithuaniaVietnam

Slovakia

India

Portugal Estonia

HungaryPhilippines

United Kingdom

ArgentinaMalaysia

Poland

Canada

Indonesia

Average12.8

Czech Republic

Turkey

Spain RomaniaUkraine

Bulgaria

Slovenia

Average 47.1

15 30 45 60 75 9000

10

20

30

40

50

55

100

12

34

Colombia

Conclusions

The automotive industry is a growth market

The outsourcing continues

The growth comes from new markets and new technology

Investment and employment moves to Eastern Europe and Asia

The Competition is truly global both for carmakers and suppliers