OESA Automotive Supplier Barometer · OESA Automotive Supplier Barometer- May 2015 Published with the support of Deloitte LLP. The May OESA Automotive Supplier Barometer focused on

OESAAutomotive Supplier BarometerFocus on Globalization

Detroit – Washington D. C.

May 4-6, 201588 Survey Responses

The OESA Automotive Supplier Barometer is published with the support of Deloitte LLP.

OESA Automotive Supplier Barometer Executive Summary

OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.

The May OESA Automotive Supplier Barometer focused on industry globalization. OESA received 88 responses to this Barometer survey.

The Supplier Sentiment Index (SSI) continues to remain positive, though down slightly to 53 from the March index of 55. This decline was not necessarily due to an increase in pessimism, but more an increase in the ‘unchanged’ outlook, from optimistic.

Absolute growth continues in all global regions with the exception of South America. Mexico continues to remain strong, followed closely by the U.S. and China. Overall, economics, labor costs and transportation are the most significant hurdles in achieving growth. In the U.S. hurdles are more related to talent availability, government regulations and customer cost pressures.

For products produced in North America, the United States is the major hub of operations with 70 percent of manufacturing occurring here.

Seventy-one respondent companies export N.A. production outside of the U.S. The median exported is 15 percent, based on dollar value. Seventy-three respondent companies purchase material for N.A. production outside of the U.S. with the median purchased value of 20 percent based on dollar value.

Where companies need production capacity to increase, the key strategies being implemented continue to be adding new facilities and using existing facilities with additional floor space or additional shifts. Where additional engineering capabilities are needed, hiring permanent staff is the most likely choices to support growth strategies in all regions. Overall, where production component/systems sourcing capacity needs to increase, companies are expanding business with existing suppliers.

2

OESA Automotive Supplier Barometer Summary Details The May OESA Automotive Supplier Barometer focused on industry globalization. OESA received

88 responses to this Barometer survey.

The Supplier Sentiment Index (SSI) continues to remain positive, though down slightly to 53 from the March index of 55. This decline was not necessarily due to an increase in pessimism, but more an increase in the ‘unchanged’ outlook, from optimistic; with the notable exception of companies with annual revenue less than $50 million trending to a more positive sentiment. New business opportunities and strong sales/production volumes are the drivers of supplier optimism but indications are that companies are seeing the market begin to level off. Competition plays a role in an unsure outlook. Suppliers are concerned about the regions of South America and Europe, particularly Russia and Greece. (See pages 5-9)

Absolute growth continues in all global regions with the exception of South America. However, when considering rate of growth, all regions are slowing with the exception of Japan/Korea, where a slight increase in the growth rate is shown. Mexico continues to remain strong, followed closely by the U.S. and China. Overall, economics, labor costs and transportation are the most significant hurdles in achieving growth. Though in China, labor costs seem to be improving. Managerial direction and oversight are improving factors in regional growth. In the U.S. hurdles are more related to talent availability, government regulations and customer cost pressures. (See pages 10-11)

For products produced in North America, the United States is the major hub of operations with 70 percent of manufacturing occurring here. Mexico and Canada average 24 percent and 6 percent of manufacturing respectively. Based on the comments received from respondents, there are differing strategies related to Mexican operations; some are clearly focused on growth in that region, while others are continuing to focus on existing operations in the United States. (See pages 12-14)

OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.3

OESA Automotive Supplier Barometer Summary Details (continued)

Seventy-one respondent companies export N.A. production outside of the U.S. The median exported is 15 percent, based on dollar value (lower quartile of 9 percent and upper quartile of 26 percent). The destination regions with the highest concentration of export value are Mexico, Canada and Europe with 40 percent, 25 percent and 20 percent respectively. Seventy-three respondent companies purchasematerial for N.A. production outside of the U.S. with the median purchased value of 20 percent based on dollar value (lower quartile of 7 percent and upper quartile of 40 percent). The purchase regions with the highest concentration of dollar value are China, Japan/Korea, and Mexico with 30 percent, 29 percent and 27 percent respectively. (See pages 15-16)

Where companies need production capacity to increase, the key strategies being implemented continue to be adding new facilities and using existing facilities with additional floor space or additional shifts. In Mexico, new facilities are the predominant chosen strategy. In Europe, adding new facilities along with additional shifts in existing facilities is most common. In Japan/Korea, adding shifts and developing partnerships and JVs is a growing trend. In China, suppliers are moving more toward adding facilities while moving away from adding floor space to existing facilities. (See page 17)

Where additional engineering capabilities are needed, hiring permanent staff is the most likely choices to support growth strategies in all regions. In Japan/Korea and China, development of partnerships and JVs is growing. New to the Barometer this year, is the use of temporary/contract staffing. This strategy is played out most often in Europe. (See page 18)

Overall, where production component/systems sourcing capacity needs to increase, companies are expanding business with existing suppliers. However, in Mexico, companies are adding to their supply base. Companies expanding in China are moving away from adding to their supplier deck in favor of expanding business with current suppliers. In South Asia, companies are implementing expanding current supplier business and adding suppliers. (See page 19)


Describe the general twelve month outlook for your business. Over the past two months, has your opinion become:

5%15%

67%

14%

0%6%

24%

56%

11% 3%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Significantlymore optimistic

Somewhat moreoptimistic

Unchanged Somewhat morepessimistic

Significantlymore

pessimisticMay-15 Mar-15

No. of Responses = 88 OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.5

Barometer Results By Company Revenue

17%

14%

7% 8% 8% 9%

33%

14%

7% 8%

10% 14

%

8%

33%

19%

35%

25%

50%

71%

69%

81%

64% 67

%

47%

74%

57%

25%

14%

14%

15% 10

%

21% 17

%

13%

7%7% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Significantly more pessimistic

Somewhat more pessimistic

Unchanged

Somewhat more optimistic

Significantly more optimistic

<$50 million

$50-$150 million

$151-$500 million

$501 million –$1 billion

>$1 billion

Global AutomotiveRevenue

# of responses

in May

# of responses

in March

<$50 million 12 14

$50-$150 million 14 13

$151-$500 million 21 14

$501 million -$1 billion 12 15

>$1 billion 27 23

MarMay

No. of Responses = 86 OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.

MarMay MarMay MarMay MarMay

6

Significantly More Optimistic New program launches in North America and Asia-Pacific. Multiple new programs starting. My position is more about our unique business and would be slightly less optimistic in regard to the

overall market.Somewhat More Optimistic 2014 was a strong year and we expect similar vehicle production in 2015. New launches occurring on-time and with no issues. Year-end sales are further above original forecast; strong sales in all major regions with all customers. Up-tick in auto industry, specifically lower volume niche vehicles and rapid model changes. We are seeing volumes increase over 2014, but at a slower pace. Margins have been flat. New business opportunities trending upward.

Unchanged I still think 2015 will be a solid year. Remain optimistic on the outlook based on what we have in the pipeline over the next seven years. Stable strong customer demand. We have been an international company for many years. The current conditions have not affected our

5 year plan in any real measurable way. We continue to see strong opportunities in the automotive sector, in particular focusing on new product

development and innovation. Actuals are in line with forecast. Various market factors have not changed significantly over the past 2 months to change my opinion. South America and Russia remain significant concerns. Europe to a lessor degree, depends upon

what happens in Greece. This could have a significant impact.

Describe the general twelve month outlook for your business. Over the past two months, has your opinion become…comments:


Somewhat More Pessimistic Incremental shutdown periods added by OEMs later in the year. Appears economy may be slowing, so we expect flat growth. Seeing some softness in orders compared to budgeted levels. Could be budget miss or could be some

slowing of actual sales. Short-term orders have fallen off. Changes to GM Oshawa's production. Fierce competitive pressures are becoming more evident. Demand appears to be softening. Customer purchasing practices are becoming increasingly predatory. Every day forward is one step closer to the next cycle. The volume of mold business being sourced to LCC is increasing.

Describe the general twelve month outlook for your business. Over the past two months, has your opinion become…comments: (continued)


OESA Automotive Supplier Sentiment IndexCompared to two months ago,

how has your 12 month outlook changed?P

ositi

veN

egat

ive

5852

61

7166

50 51

37

52

66 6460

55

4651

55 5562 60

6660 60

56 59 6156 56

6155 53

0

10

20

30

40

50

60

70

80

90

100

No. of Responses = 88 OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.9

Related to your regional revenue, identify your incremental growth/contraction in each of the following locations through 2020.

17%27%

3%3%

26%42%

8%7%

2%3%

22%41%

2%3%

3%7%

44%41%

11%14%

39%37%

15%24%

6%6%

31%26%

8%16%

10%15%

26%25%

10%16%

21%10%

44%32%

23%17%

15%10%

22%29%

10%4%

22%23%

8%6%

45%43%

8%6%

13%18%

40%34%

13%7%

22%29%

40%46%

33%20%

5%

14%3%

3%

4%4%

5%6%

14%2%

5%

2%2%

5% 8%

12%20%

4%4%

15%13%

23%30%

16%14%

22%20%

48%47%

32%33%

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

2015

2015

2015

2015

2015

2015

2015

2015

2015

Significant Growth Moderate Growth Slight GrowthNo Change Slight Contraction Moderate ContractionSignificant Contraction Not Applicable

2014Average Growth Rating*

* +3 = Significant Growth, 0=No Change, -3=Significant ContractionNot Applicable is not considered in the average growth rating value

2015 No. of Responses = 60-872014 No. of Responses = 91-104

1.9

0.5

2.1

1.0

0.3

1.8

0.7

0.1

0.7

2015Average Growth Rating*

1.6

0.3

1.7

1.0

0.4

1.4

-0.4

0.1

0.5

201520142015201420152014201520142015201420152014201520142015201420152014

United States

Canada

Mexico

Europe

Japan/Korea

China

S. America

Mid-East/Africa

S. Asia


Select the most critical hurdle in meeting your 2020 growth strategies within each region.

30%28%

19%18%

13%10%

38%33%

22%20%

26%16%

33%28%

12%6%

20%13%

33%37%

5%4%

35%38%

14%7%

2%5%

22%21%

4%4%

6%4%

6%8%

5%8%

11%10%

6%4%

10%10%

12%2%

3%10%

2%5%

4%

2%3%

2%4%

6%4%

2%3%

4%5%

3%4%

2%

2%6%

13%8%

3%

15%10%

5%5%

2%2%

5%9%

6%

2%

4%

5%4%

3%

7%17%

7%10%

8%7%

9%13%

4%9%

4%

8%16%

2%2%

3%

3%5%

3%2%

7%8%

10%9%

4%4%

7%8%

3%6%

7%4%

5%2%

4%4%

9%2%

6%4%

4%

2%4%

50%54%

7%8%

19%26%

44%55%

19%17%

38%36%

72%86%

52%49%

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

201520142015201420152014201520142015201420152014201520142015201420152014

Macro-economic Growth Labor/Talent Availability Labor CostInbound/Outbound Transportation Capital Availability Managerial Direction/OversightMaterial/Sourcing Constraints Other Not Applicable


United States

Canada

Mexico

Europe

Japan/Korea

China

S. America

Mid-East/Africa

S. Asia

201520142015201420152014201520142015201420152014201520142015201420152014


For your products produced in North America, identify the percent manufactured in each of the following countries.

No. of Responses = 86

United States70%

Canada6%

Mexico24%

Regional percent of manufacturing

Number ofrespondent companies with mfg in each region

Range ofmfg volume

for these companies

United States 81 3-100%

Canada 23 5-100%

Mexico 54 2-100%


Average values

12

Do you expect these percentages to change significantly over the next 2 years? Please elaborate on regional directional changes and reasons for the changes.

Growth in Mexico: Mexico to increase. (9 similar comments) Not for the next two years but in the next 3 we will have

manufacturing in Mexico. Mexico has 14 free trade agreements with 45 countries.

This continues to affect growth of business in North America.

Stronger support from Mexico. Yes. Mexico will grow more quickly. Only one plant in N.A. (Mexico). Some movement towards Mexico about 10 percent. Increasing percent in Mexico. Mexico will grow to somewhere between 10 and 20 percent. Increase shift towards production in Mexico. I expect no more than a 5 percent swing toward Mexico, but

that is based on plant size and ability to handle more business within 2 years.

Yes, we are just opening a plant in Mexico. Yes, could increase capacities in Mexico. Yes. We plan to establish manufacturing in Mexico. Mexico slightly higher. Not in the next 2 years but by 2020, 10 percent would be

produced in Mexico. Expecting slight increase in Mexico.


Growth in the United States: We see more manufacturing moving to the

U.S. as our customers are looking for suppliers to align their manufacturing footprint with the customers assembly plants.

Potential plant addition in the U.S.

Growth in China: Yes, we will be looking at manufacturing in

China.

13

Do you expect these percentages to change significantly over the next 2 years? Please elaborate on regional directional changes and reasons for the changes.

‘Moving’ comments: Canada will reduce. Mexico will grow. With increase in OEM Mexico production we

will have a shift from U.S. to Mexico and Canada is reducing OEM production.

Yes, there is a potential shift to Mexico. Mexico increase and Canada decrease,

because of OEM's direction. Overall strategy is to grow more in Mexico

than in the U.S. so overall percentage will grow in Mexico and reduce in U.S.

Mexico will increase and Canada will decrease. Moderate growth in the U.S.

Yes in U.S. Some manufacturing is likely to be shifted to our Mexican site.

Yes Canada is down but growth in U.S. and Mexico.

Yes, moving some manufacturing close to customers.

Anticipate that Mexico will grow and Canada will shrink.

Less Canada, a lot more Mexico.


‘No change’ comments: No change (24 similar responses) No anticipated change in coming 2 years. No - for North America: our capital

investment is in the U.S. and ours is a capital intensive product. Moving to Mexico does not cut costs significantly.

No. Canada and Mexico are distribution points only for us.

No. All of our work is done in the U.S, and is just freighted to the end location.

If we are able to find the correct business opportunity in the U.S. and/or Mexico.

14

North American production that is exported outside of the United States

9.0%

15.0%

26.0%

0% 10% 20% 30%

LowerQuartile

Median

TopQuartile

No. of Responses = 82OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.

Estimate the percent of your current North American

production that is exportedoutside of the United States

(percent of dollar value).

Regional export value from the United States

Lower Quartile Median Upper

Quartile

Number of respondentcompanies exportingto each region

Canada 15% 25% 39% 43

Mexico 20% 40% 67% 55

Europe 10% 20% 34% 54

Japan/ Korea 6% 11% 24% 28

China 7% 10% 25% 43

S. America 5% 10% 21% 28

Mid-East/ Africa 2% 2% 3% 4

S. Asia 5% 6% 17% 15

15

Material costs for North American production that is purchasedoutside of the United States.

No. of Responses = 82OESA Automotive Supplier Barometer- May 2015Published with the support of Deloitte LLP.

7.0%

20.0%

40.0%

0% 10% 20% 30% 40% 50%

LowerQuartile

Median

TopQuartile

Estimate the percent of your current material costs for

North American production that is purchased outside of the United States (percent of

dollar value).

Regional purchase value outside of the United States

Lower Quartile Median Upper

Quartile

Number of respondent companies purchasing from each

regionCanada 10% 18% 31% 24

Mexico 13% 27% 55% 26

Europe 11% 22% 60% 43

Japan/ Korea 11% 29% 67% 35

China 16% 30% 55% 51

S. America 5% 10% 20% 9

Mid-East/ Africa 8% 10% 10% 5

S. Asia 10% 25% 43% 20

16

Where production capacity needs to increase, identify your most significant strategy to increase production within each region.

32%32%

3%10%9%10%

22%13%

18%6%8%7%

16%15%

5%6%6%

3%

24%25%

10%7%

26%22%

16%16%8%

7%12%

22%8%

15%

17%14%

25%27%

3%6%

49%44%

18%11%

3%4%

40%31%

11%11%

14%13%

6%5%

8%3%

9%12%

20%24%

15%7%

19%17%

5%11%

3%6%

17%17%

3%3%

3%3%

2%2%

3%

4%2%

4%

3%

3%2%

3%

3%

7%7%

75%72%

4%8%

20%34%

58%69%

17%22%

61%46%

89%84%

44%53%

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

2015

2015

2015

2015

2015

2015

2015

2015

2015

Existing Facilities with Additional Shifts Existing Facilities with Additional Floor SpaceNew Facilities Partnerships or JVsOutsource to Sub-tier Suppliers OtherNot Applicable


United States

Canada

Mexico

Europe

Japan/Korea

China

S. America

Mid-East/Africa

S. Asia

201520142015201420152014201520142015201420152014201520142015201420152014


Where engineering capabilities need to increase, identify your most significant strategy to increase engineering support within each region.

76%93%

15%10%

74%73%

37%47%

30%29%

64%68%

23%33%

5%28%28%

11%

3%

5%

25%

7%

4%

8%

8%

4%2%

3%4%

7%16%

17%19%

16%8%

17%12%

8%13%

3%10%

13%

3%3%

3%

2%5%

2%3%

3%

5%

9%2%

78%83%

14%11%

19%28%

44%60%

15%19%

60%53%

97%92%

49%58%

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

201520142015201420152014201520142015201420152014201520142015201420152014

Additional Permanent Staff on Ground * Use of Temporary/Contract staffPartnerships or JVs OtherNot Applicable


United States

Canada

Mexico

Europe

Japan/Korea

China

S. America

Mid-East/Africa

S. Asia

201520142015201420152014201520142015201420152014201520142015201420152014

Note: * Use of temporary staff was added in 2015


Where production component/systems sourcing capacity needs to increase, identify your most significant strategy to increase your supply chain within each region.

61%62%

19%26%

32%28%

41%40%

43%18%

36%21%

12%10%8%6%

23%11%

26%26%

5%4%

48%56%

20%29%

5%5%

41%54%

22%33%

3%6%

30%24%

4%2%

5%

3%2%

4%

5%

2%

2%2%

9%9%

71%69%

17%14%

35%30%

52%77%

18%24%

63%55%

90%88%

44%64%

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

201520142015201420152014201520142015201420152014201520142015201420152014

Expand Business with Current Suppliers Add Supplier Count Other Not Applicable


United States

Canada

Mexico

Europe

Japan/Korea

China

S. America

Mid-East/Africa

S. Asia

201520142015201420152014201520142015201420152014201520142015201420152014


Thank you for your participation

The OESA Automotive Supplier Barometer survey is published every other month. The next survey will be launched on Monday, July 6, 2015 and will be released Friday, July 10, 2015.

For media questions For content questionsand comments, contact: and comments, contact:Dave Andrea Kathy ReissSenior Vice President DirectorIndustry Analysis and Economics Research and Industry Analysis248.952.6401 ext 228 248.952.6401 ext [email protected] [email protected]

OESA1301 W. Long Lake RoadSuite 225Troy, MI 48098www.oesa.org

Please note: The information and opinions contained in this report are for general information purposes. Comments are edited only for spelling and may contain grammatical errors due to their verbatim nature. Responses to this survey are confidential. Therefore, only aggregated results will be reported and individual responses will not be released or shared. These results that have been reviewed and approved by outside counsel.

Antitrust Statement: This survey content is exclusively about historical data, and respondents/participants should not contact each other to discuss responses, or to discuss the issues dealt with in the survey. It is an absolute imperative to consult legal counsel about any contacts with competitors. All pricing decisions and negotiating strategies should be handled on an individual company basis.


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Documents

OESA Automotive Supplier Barometer · OESA Automotive Supplier Barometer- May 2015 Published with the support of Deloitte LLP. The May OESA Automotive Supplier Barometer focused on