1

OPPORTUNITIES FOR ADVANCED TECHNOLOGY NONWOVENS IN AUTO INTERIORS AND EXTERIORS

PRESENTED AT:TECHTEXTIL SYMPOSIUM NORTH AMERICA 2006 Atlanta, GAMarch 31, 2006B/mydocs/papers/techtex06

PRESENTED BY:BOB ELLERROBERT ELLER ASSOCIATES, INC. Akron, OH (USA)330.670.9566info@robertellerassoc.com

2

PRESENTATION HIGHLIGHTS

• AUTO INDUSTRY OVERVIEW• AUTO SUPPLY CHAIN IMPLOSION/

IMPLICATIONS FOR NONWOVENS• NONWOVEN PATHS-TO-MARKET• GLOBAL NONWOVENS DIFFERENCES• COMPETITIVE MATERIALS/PROCESS

COUPLES• VALUE ADD STRATEGIES• TARGET MODULES

3

SOURCES/REFERENCES

• ADVANCED TECHNOLOGY NONWOVENS MULTICLIENT: ROBERT ELLER ASSOCIATES, INC./JOHN R. STARR INC.

• AUTOMOTIVE INTERIOR SOFT TRIM MULTICLIENT: ROBERT ELLER ASSOCIATES INC.

4

AUTO INTERIORFIBERS

AND TEXTILESMARKETS

COATED FABRICS

BATTING(SHODDY, FELT)

NONWOVENFACINGS

FOAMS (COMPETITION/COMPLEMENT)

NEW LIGHTWEIGHTACOUSTIC FIBERS

WOVEN/KNITTEXTILES

ARTIFICIALLEATHER

LEATHER

Opportunities for Advanced TechnologyNonwoven Fabrics for Automotive Interior

Surface and Construction Applicationsin NAFTA and Europe

March 2004

ROBERT ELLER ASSOCIATES, INC.

Technical, Economic, Market Analysis inSupport of Management Decisionmaking4000 Embassy ParkwaySuite 230Akron, Ohio 44333-8328 (USA)

Telephone: 330-670-9566Facsimile: 330-670-9844E-mail: bobeller@prodigy.net

JOHN R. STARR, INC.

Management Consultants

5150 North Tamiami TrailNewgate Tower, Suite 504Naples, Florida 34103 (USA)

Telephone: 239-430-1983Facsimile: 239-430-1989E-mail: jstarr@johnrstarr.com

5

ManagementDECISIONSANALYSIS

MARKET

ECONOMIC

TECHNICAL

Robert Eller Associates, Inc.

Automotive Interior Soft Trim:Skins, Foams, Coated Fabrics, Textiles, and Acoustic Barriers

Prospectus for a Global M ulticlient Industry Analysis

M ODULEFABRICATION

ANDINTEGRATION

TECHNOLOGIES

REQUIREM ENTS

OCCUPANT SAFETYACOUSTIC REQUIREM ENTSW EIGHTELV LEGISLATIONESTHETICSTELEM ATICS INTEGRATIONSENSORYSM ELL

INTERIOR M ODULES- COCKPIT- HEADLINER- DOOR- FLOOR/ACOUSTICS- TRUNK LINER- SEATING- PILLAR COVERS

CONSTRAINTS

M ANUFACTURING ECONOM ICS

SKINS

FOAM S

SUBSTRATES

COATED FABRICS

TEXTILES (W OVEN, NON-W OVEN)

CARPET

ACOUSTIC BARRIERS

QUALITY

CRAFTSM ANSHIP

PRODUCT POSITIONING

SUPPLY CHAIN M ANAGEM ENT

slide-covautointsofttrim701 02.vsd

6

OPERATING HYPOTHESES• VEHICLE PRICES CONTINUE DOWNWARD• THE SUPPLY CHAIN WILL BE RESHAPED • GLOBAL AUTOPLASTICS/TEXTILES TECHNOLOGY

CONVERGENCE (U.S. 3-5 YEAR LAG BEING REDUCED)• SEVERE MATERIALS PRICE PRESSURE CONTINUES• SEVERE PROFITABILITY PRESSURES DRIVE NW SUPPLIERS

TO SEEK VALUE ADD STRATEGIES• ACOUSTICS PERFORMANCE AND LIGHT-WEIGHTING

CONTINUE AS DRIVING FORCES• THE NONWOVENS MATERIALS/PROCESS COUPLE CAN OFFER

SYSTEMS COST SAVINGS AND VALUE ADD OPPORTUNITIES• MONOMATERIALS CONSTRUCTIONS PREFERRED• POLYOLEFIN-BASED MODULE CONSTRUCTION CONTINUES

SHARE GAIN• PLASTOMER-BASED ELASTIC NONWOVENS ENTERING

MARKET• MAJOR CONSTRUCTION SHIFTS (TRUNK, FLOOR,

HEADLINERS, DOOR TRIM)

7

GLOBAL AUTO INDUSTRY CHARACTERISTICS

• PRODUCTION GROWTH 3%/YR. THROUGH 2012• DEMAND HISTORY +/- 5% OFF TREND SINCE 1970• GLOBAL OVERCAPACITY• STAGNANT U.S./EUROPE DEMAND• DEMAND GROWTH SHIFT TO ASIA PACIFIC• MINI/SMALL CAR (B SEGMENT) SHARE GAIN• GROWTH OF DOMESTIC ASIA PACIFIC OEMs• SHARE LOSS BY U.S./EUROPEAN DOMESTIC OEMs• “HIGH” U.S. FUEL PRICES CONTINUE• NO MAJOR U.S. ENERGY POLICY SHIFT THRU 2010

8

GLOBAL LIGHT VEHICLE PRODUCTION TREND LINE

• 2011 GLOBAL SALES COULD REACH 75MM UNITS

• GLOBAL AAG = 3%/YR.• ASIA PACIFIC GROWTH

7.5-8.5%/YR.?• WESTERN GROWTH

STAGNANT OR DECLINE• GLOBAL FLEET SHIFT

TOWARD SMALLER CARS• VARIATIONS HAVE BEEN

IN +/- 5% BAND SINCE 19700

10

20

30

40

50

60

70

80

90

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

SOURCE: GM, WARDS, ROBERT ELLER ASSOCIATES, INC., 2006

SALE

S, M

M V

EHI

CLE

S

ACTUAL

TREND

PLUS 5%MINUS 5%

1973 OIL CRISIS

1979 OIL CRISIS

- GULF WAR- EUROPE RECESSION

'06 GLOBAL SALES,

65MM UNITS

IRAQ INVASION

9

LIGHT VEHICLE PRODUCTION SHIFT, 1997-2011

0

2

4

6

8

10

12

14

1997 2005 2011

SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006

VEH

ICLE

PR

OD

UC

TIO

N, (

MM

UN

ITS) USA

JAPANRUSSIACHINAINDIA

10SOURCE: CLEAR VIEW ECONOMICS L.L.C., 2006

11

0.0

0.0

0.0

0.4

4.6

1.0

1.4

0.9

0.2

0.1

0.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0

VIETNAM

PHILLIPPINES

AUSTRALIA

TAIWAN

MALAYSIA

INDONESIA

THAILAND

INDIA

KOREA

CHINA

JAPAN

VEHICLE PRODUCTION, ASIA (MM UNITS)

2005

2012

7 MM NEW VEHICLES ARE EXPECTED TO COME FROM CHINA, INDIA, AND THAILAND BY 2012.

SOURCE: CSM, ROBERT ELLER ASSOCIATES,INC., 2006

PROJECTED AUTOMOBILE PRODUCTION IN ASIA: 2005-2012

12

PETROCHEM PRICEINCREASES

GLOBALCOMPETITION

OFFSHORECOMPETITION

IMPORTEDCOMPETITORS

HARDBALL PURCHASINGPRESSURES

RAW MATERIALPRICE INCREASES

VEHICLE PRICEDECREASES

FUEL COSTS(PROD. LINE FIT)

LEGACY COSTS,LABOR PRESSURES

PRICECOMMODITIZATION

SHIFT TO MOREATTRACTIVE MARKETS

MATERIALSTECHNOLOGY

LAG

ELIMINATION OFEXTRA STEPS

PROCESSTECHNOLOGY

LAG

LEGACYCOSTS

RAW MATERIALS COMPOUNDER TIER 1 FABRICATOR ASSEMBLY

TIER 2, 3SUPPLIERS

MARKETSHARELOSS

OVERCAPACITY

STOCKHOLDERPRESSURES

PRESSURES PASSED DOWNTHE SUPPLY CHAIN:

PRICING PRESSURES

SUPPLY CHAIN "MANAGEMENT"

DEMAND SLOWDOWN

REVISED SPECIFICATIONS

GLOBALIZATION PRESSURES

ELIMINATE/REDUCE THE INEFFICIENCIES:-MULTIPLE STEPS-EXCESSIVE LOGISTICS-SCRAP GENERATION-INEFFICIENT PROCESS TECHNOLOGIES-SALES/MARKETING COSTS-EXCESS LABOR COSTS-OVER-GLOBALIZATION?

SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006re/mydox/tpemcII/SPETPO05-implosion.vsdlg/myfiles/visio/SPETPO05-implosion.vsd

AUTOPLASTIC SUPPLY CHAIN IMPLOSION

13SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006

HOOD ACOUSTIC INSULATOR PACKAGETRAY

HEADLINER SUBSTRATE/FACE FABRIC?*

DOORMEDALLION*

SEAT BACK

SEATSIDES*

PILLAR TRIM

re/mydox/papers/AdvTechNWTgts06.vsdlg/myfiles/visio/AdvTechNWTgts06.vsd

ADVANCED TECHNOLOGY NONWOVEN TARGETS

TRUNK FLOOR/LOAD FLOOR/WHEEL ARCH

DASHINSULATOR*

FLOOR/ACOUSTICSYSTEMS*

FILTER SYSTEMS

FENDER LINER

*INDICATES FOAM/FIBER INTERFACE

14

EUROPE/NAFTA NONWOVEN DIFFERENCES

-SIMILAR (SLIGHTLY MORE ADVANCED IN EUROPE)USE OF LIGHTWEIGHT FIBER CONSTRUCTIONS

-DIFFERENT FREQUENCIES, SIMILAR PERFORMANCE REQUIREMENTS

ACOUSTIC PERFORMANCE. REQUIREMENTS

-HIGHER (65%) IN EUROPE(STARTING IN U.S.)NW CARPET SURFACE

-HIGHLY PENETRATED BY NWs IN EUROPEHEADLINER FACE FABRIC

-HIGHER IN EUROPE-INCREASE IN NAFTA DUE TO:

-“HIGH”FUEL PRICES-SLOWLY CHANGING FLEET MIX

WEIGHT REDUCTION PRESSURES

-SIGNIF. IN EUROPE/VERY MODERATE IN NAFTA-FAVORS PO MONO-MATERIAL CONSTRUCTIONS

RECYCLING PRESSURES

-DEVELOPMENT TARGET IN BOTH REGIONS-EUROPEAN “BEER CRATE” LEGISLATION -“TALL CARS” INCREASING FASTER IN NAFTA-EUROPEAN SPARE TIRE COVER DESIGNS MORE ADVANCED

TRUNK/FLOOR MODULECONSTRUCTION SHIFTS

NONWOVEN POSITIONTARGET MODULE/ KEY PARAMETER

15

AUTO INDUSTRY SHIFT IMPLICATIONS

U.S. NEARS EUROPE/JAPAN TECH.

TECHNOLOGY CONVERGENCE

-REDUCE SQ M/VEHICLE-INCREASE NW USAGE

B-VEHICLE SHARE GROWTH

MICRODENIER NW PENETRATION

ACOUSTIC IMPROVEMENT REQ’D

-TECHNOLOGY CONVERGENCE-“GLOBAL” SUPPLIERS

GLOBAL VEHICLE SHARE GAINFAVORS PP NONWOVENSMONOMATLS CONSTRUCTIONSFAVORS PP NONWOVENSINCREASE PP IN INTERIORS

POLYOLEFIN NW INCREASEPOLYOLEFINS FOAM INCREASE

-GROWTH OF ACOUSTICS NWs-HEADLINER TARGET

WEIGHT SAVINGS VALUE GAINROLL GOODS SUPPLY SHIFTPROFIT PRESSURESREDUCE TIER 2, 3 SUPPLIERSSUPPLY CHAIN IMPLOSION

NONWOVEN EFFECTAUTO INDUSTRY FACTOR

16

ADVANCED TECHNOLOGY NW OPPORTUNITIES/CHALLENGES

U.S. NEARS EUROPE/JAPAN TECH.

TECHNOLOGY CONVERGENCE

ELASTIC NWs?/IN MOLD QUALITY

QUALITY IMPROVEMENT-FOLLOWED BY PP?PET BICO MARKET SHARE GAIN

-IN MOLD FORMING/BACKMOLDING

PROCESS COST REDUCTION

-GROWTH OF PP NWsWEIGHT/MAT’LS COST SAVE

SUPPLIERS MUST ADD VALUE TO ROLL GOODS

VALUE CHAIN POSITION SHIFT

MIRODENIER SHARE GAINELASTIC NONWOVENSIMPROVED UV RESISTANCE

NONWOVEN PERFORMANCE CAPABILITIES

IMPLICATIONPARAMETER

17

SUPPLY CHAIN STRATEGIES FOR NW SUPPLIERS

• FORWARD/BACKWARD INTEGRATION-LAMINATION-PRE-FORMED ROLL GOODS-HIGH VOLUME TAILORED ROLL GOODS

• ADAPT NEW NW MATERIALS/PROCESS TECHNOLOGIES-ELASTIC NWs-ALTERNATIVES TO FLAME LAMINATION-IMPROVED BACKMOLDING

• SANDWICH LAYER CONSOLIDATION-ALL-FIBER CONSTRUCTIONS

• REDUCE SECONDARY OPERATIONS-LASER SCORING-IN MOLD TRIM

18

MATS TEXTILES/SKINS CARPET SEMI-STRUCTURAL(c)

INCUMBENT-SHODDY-PU FOAM

CHALLENGER-MD NW-N-PUNCHED-SPUNBOND-MELT SPUN-LIGHTWEIGHT FIBER MAT(b)

INCUMBENT-KNITS-WOVEN-SKINS-COATED FABRIC-LEATHER

CHALLENGER-NWs-NON-SKIN TECH-LUXURY COATED FABRIC-2-SHOT MOLDING

INCUMBENT-TUFTED-NONWOVEN

CHALLENGER-NW

INCUMBENT-FOAM LAM.-BLOW MOLD-INJECTION

CHALLENGER-LFTPs(a)-PU/HONEYCOMB-PO FOAMS

NOTES:(a) AZDEL SUPERLITE®, SYMALITE(b) FROM RIETER, C+A, LEAR, PELZER, FAURECIA INCORPORATING MICRO-DENIER NONWOVENS(c) E.G., EXTERIOR WHEEL ARCH LINER, LOAD FLOORS/TRUNK MODULE, HEADLINER

SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006b/mydox/papers/IncumbChalNW06.vsdlg/myfiles/visio/IncumbChalNW06.vsd

INCUMBENTS AND CHALLENGERS IN NONWOVENS CONSTRUCTIONS

19

ADDING VALUE VIA IMPROVED FUNCTIONAL CHARACTERISTICS

-VIA NEW PO RESINSELASTIC NONWOVENSPENETRATING SEATING, DOOR TRIM, INSTRUMENT PANEL

LUXURY FABRICS

-JCI CRAFTECH® PROCESS-OTHER IN-MOLD PROCESSES

CRAFTSMANSHIP/QUALITY

MICRO-DENIER NONWOVENS-BETTER ACOUSTICS-IMPROVED DRAPE-REDUCED WRINKLING

-MICRO-DENIER NONWOVENS-NEGATIVE FORMING

SURFACE ESTHETICS-FLOOR/ACOUSTICS, HEADLINERWEIGHT SAVE-PILLAR TRIMIN-MOLD DECORATION

NONWOVEN EXAMPLE/TARGET MODULE

VALUE-ADDED STRATEGY

20

IN-MOLD FORMING AND SANDWICH CONSOLIDATION

• NUMEROUS METHODS AVAILABLE• PROCESS COST SAVE POTENTIAL• PO FOAM/TEXTILE LAMINATES

EVOLVING IN EUROPEAN FLEET• BASED ON PET AND PO TEXTILES• INCREASED POLYOLEFIN SUBSTRATE

MOLDING RESINS ACCELERATES PO NWs• ROLE IN ENERGY MANAGEMENT

COMPONENTS (e.g., B-PILLAR)

21SOURCE: TARACELL

EPP SEMI-STRUCTURE/TEXTILE COVERING CONCEPT

22

NONWOVEN/PO FOAM LAMINATES• NONWOVEN/PO FOAM LAMINATES SHOW

POTENTIAL FOR PENETRATION INTO INTERIOR SOFT TRIM MODULES BASED ON:– IMPROVED THERMOFORMABILITY VS. TEXTILE/PO

FOAM LAMINATES– IMPROVED RECYCLABILITY WITH DOMINANT PO

SUBSTRATES– MATERIAL AND PROCESS COST SAVINGS

• TEXTILE/PO FOAM LAMINATESPENETRATION OF PO NWs

• UV RESISTANCE, ABRASION RESISTANCE ELASTIC PROPERTIES AND MICRODENIER WEIGHTS WILL FACILITATE PO NONWOVENS PENETRATION

23

FLOOR/TRUNK TARGETS• DASH MAT/PASSENGER COMPARTMENT

– ELIMINATE/REDUCE HEAVY LAYER– MICRODENIER NW PENETRATION HAS STARTED

• TRUNK MODULE– GROWTH OF CONSOLIDATED TRUNK MODULE– NEED FOR SEMI-STRUCTURAL PROPERTIES– ROLE FOR HONEYCOMB CONSTRUCTION

• BOTH– FOAM/FIBER COMPETITION– NEED FOR FORMING PROCESS TECHNOLOGY

SHIFTS– ROLE IN THRU-THE-FLOOR CONSTRUCTION

24

EXAMPLE OF DASH MAT LAYER CONSTRUCTION

SOURCE: COLLINS & AIKMAN

HEAVY LAYER

ACOUSTIC BATTING

CARPET

25

NOTES:- OVERHEAD MODULE DESIGN CHANGES COULD SHIFT HEADLINER CONSTRUCTION REQUIREMENTS- ROLE OF HEADLINER IN THRU-THE-ROOF OVERHEAD MODULE

SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006

HEADLINER CONSTRUCTION SHIFTS/ROLE OF NONWOVENS

GR-PU FOAMS/PA KNITS

FOAM CORE

PO FOAM/PO NONWOVENS

PO FOAM/KNITS

FIBER CORE

LIGHTWEIGHT COMPOSITES/KNITS OR NONWOVENS

PET BICO/KNITS

LIGHTWEIGHT PET BICO/NONWOVENS

PP BICO?/PP NONWOVENS?

b/mydox/papers/HdlnrNW06.vsdlg/myfiles/visio/HdlnrNW06.vsd

26

PATHS TO MARKET FOR AUTOMOTIVE NONWOVENS

RESIN PRODUCER

RESINS (E.G., PO, PET)

SPUNBOND NONWOVENSPRODUCER

(E.G., FREUDENBERG)

NEEDLEPUNCHNONWOVENPRODUCER

NONWOVEN NEEDLEPUNCHED FABRIC

TO SEAT, HEADLINER,DOOR TRIM TUFTING

FOAMING ORLAMINATION WITH

FIBER MAT

PU FOAMFORMULATION

LT. WT. FIBERS(B)

NEEDLEPUNCHMAT(SHODDY)

NEEDLE-PUNCH

RECYCLEDCOTTONFIBERS

TRIM, DIE CUT,WATERJET(A),

OR LASER

DASHMAT

FLOORACOUSTICMODULE

TRUNKFLOORMAT(C)

TRIM

LAMINATE ORBACK-INJECT

(HINTER-SPRITZEN)

TRIM

LAMINATE ORBACK-INJECT

(HINTER-SPRITZEN) (D)

TRIM

TRUNKFLOOR

MAT

PACKAGETRAY

DOORTRIM

PANELNOTES:OMITS HYDROENTANGLED (ABOUT 6% MKT. SHARE)(A) DOMINANT METHOD(B) E.G., AcTTM (C+A), ULTRALIGHTTM (RIETER), SonoTec AT (LEAR), DUAL IMPEDANCE FIBER (PELZER)(C) HIGH END VEHICLES ONLY(D) EPP FOAMS MAY BE USED FOR HINTERSPRITZEN

SOURCE: ROBERT ELLER ASSOCIATES, INC./JOHN R. STARR, INC. AUTOMOTIVE NONWOVENS MULTICLIENT STUDY

nonwoven ptm 03.vsd

27

NONWOVEN PATH-TO-MARKET OPPORTUNITY FORADDING VALUE RESIN

NONWOVENPRODUCTION

NONWOVEN

FOAMLAMINATION

NW/FOAMLAMINATE

MODULEASSEMBLY

ASSEMBLEDMODULE

OEM

PREFORM

MODULEASSEMBLY

PUFOAMRESIN

PREFORMEDSUBSTRATE SUBSTRATE

RESIN

MODULEASSEMBLY

PU RESIN?SKIVED PU SHEETPO FOAM SHEET?

NOTE: = VALUE ADD OPPORTUNITIES FOR NONWOVENS

nw op val ad 03.vsdSOURCE: ROBERT ELLER ASSOCIATES, INC./JOHN R. STARR, INC.AUTOMOTIVE NONWOVENS MULTICLIENT STUDY

28

65MM UNITS / 3%/YR. GROWTH

RADICAL OEM RESTRUCTURING

AGGRESSIVE COST SAVE SEARCH

FLEET COMPOSITION SHIFT

REGIONAL VEHICLE PROD'N. SHIFT

CHINA/ASIA VEHICLE SHARE GAIN

SUPPLIER REDUCTION

ADVANCEDTECHNOLOGYNONWOVENS

AUTO DEMAND/OPPORTUNITIES ENABLERS

NEW PROCESSTECHNOLOGY

PROPERTYADVANTAGES

SYSTEMS COSTSAVINGSPOTENTIAL

MONO-MATERIALCONSTRUCTION

SOURCE: ROBERT ELLER ASSOCIATES, INC., 2006re/mydox/papers/autodemand-oppys06.vsdlg/myfiles/visio/autodemand-oppys06.vsd

29

SUMMARY• PROFITABILITY PRESSURES WILL INTENSIFY• VEHICLE GROWTH WILL BE IN ASIA PACIFIC• SUPPLY CHAIN SHIFTS OFFER OPPY’S/CHALLENGES

FOR NWs • POLYOLEFIN FOAM/NW LAMINATES WILL GAIN

SHARE• ADVANCED TECHNOLOGY NWs OFFER VALUE ADD

POTENTIAL AND SYSTEMS COST SAVINGS VIA:- MONOMATERIAL CONSTRUCTIONS- ELASTIC NONWOVENS- IMPROVED ACOUSTIC PROPERTIES (ELIMINATION OF HEAVY LAYER (PARTIAL IN FLOOR SYSTEMS)

30

SUMMARY (CONT’D.)• KEY TARGETS ARE

- HEADLINERS (SUBSTRATE/FACE FABRIC, NW vs. KNIT COMPETITION)-FLOOR/ACOUSTIC SYSTEMS (MICRODENIER NWs)-DOOR MODULES (PO NW/PO FOAM LAMINATE

• PO NONWOVENS PENETRATION WILL BE FACILITATED BY:- UV RESISTANCE- ABRASION RESISTANCE - ELASTIC PROPERTIES - MICRODENIER WEIGHTS/ACOUSTIC PROPERTIES - BICOMPONENT FIBERS

31

THANK YOU