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SKF Automotive

SKF Capital Markets Day ● 10 September 2014

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SKF Automotive speakers

• Tryggve SthenPresident

• Ulrich SeligDirector, Automotive Asia

• Luc GrauxDirector, Manufacturing & Demand Chain

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Agenda SKF Automotive

• Market update

• Way ahead • SKF Automotive strategy

• Growth• Cost reductions

• Summary• Key business message

• Q&A

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Market update

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Customer segments

Cars Trucks Two wheelersVehicle

aftermarket Other

CMD 2014

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W.Europe N.America Asia0

8000

16000

24000

32000

40000

48000

2009

2010

2011

2012

2013

2014 fcast

Source: IHS August 2014

+4.5 %

+5.2 %

+4.6 %

Values in K units

Light vehicle production2014 full year forecast

Total growth 2014/2013: +4.6%

CMD 2014

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W.Europe N.America Asia0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2009

2010

2011

2012

2013

2014 Fcast

Truck production (GVW>6t)2014 full year forecast

Source: LMC Report Q2 2014

-10.2%

+11.5%

+2.6% Values in K units

Total growth 2014/2013: +2.1%

CMD 2014

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W.Europe L.America India Indonesia0

5,000

10,000

15,000

20,000

25,000

30,000

2009

2010

2011

2012

2013

2014

Two wheeler production2014 full year forecast

Source: Frost & Sullivan and others, July 2014

0%

0%

Values in K units

+9%

+4%

Total growth2014/2013: +5%

CMD 2014

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Business result

Sales development Operating margin

9,0 8,8 9,2

8,1 8,7

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

2012 2013 2014 H1

SE

K b

illio

n

Excl. one time costs

2012 2013 2014 H1

2.2% 4.0% 4.8%

YoY: 2%

YoY: 5%

CMD 2014

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The way ahead

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SKF Automotive strategy

Growth

After-market

Fast growing markets

Winning customers

Engin-eering partner

Cost and capital

efficiencyProduct-

ivityRobust supplier

base

Cost reductions

Strategic account mgmt

CMD 2014

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Growth areas

Growth

After-market

Fast growing markets

Engin-eering partnerWinning

customersStrategic account mgmt

CMD 2014

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Successes

• Continued strong order intake• Deliveries started from strong order intake 2011/2012• Strategic and engineering partnerships• Customer quality award recognitions

CMD 2014

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GM quality awards for several consecutive years

Solution examples • Wheel hub bearing units

• Transmission bearings

• Transmission seals

• Engine seals

Supplier of the Year award• 4 consecutive years

Supplier Quality Excellence award• Busan, Korea - 2013

• Leverkusen, Germany - 2013

• Cajamar, Brazil – 2013, 2014

• Tortuguitas, Argentina – 2014

• Seneca, USA - 2014

Supplier of the Year award 2013

CMD 2014

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Successful business with Volvo Cars

Solution for XC90 - 2015• Wheel hub bearing unit gen. 3

Solutions for V40, S60L - 2014• MacPherson suspension bearing unit

• Wheel hub bearing unit gen. 3

SKF benefits• Strong reliable engineering partnership

leading to long-term business on new platform

• Growing volumes

• Quality award recognition Volvo Cars Quality Excellence AwardSKF Airasca, Italy

CMD 2014

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Volvo CarsMr. Sven-Ole Svensson, Director Global Purchasing

● Low friction solution – reduced fuel consumption● State of the art technology● Global footprint● Competitive value for money● Best supplier - good match

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Successful business with Fiat/Chrysler

Solution for SUV models• Wheel hub bearing unit gen 3

SKF benefits• Strong reliable co-operation leading

to more than one billion SEK agreement for long-term business on new platform

• Potential for further large businesses

• Growing volumes

• Quality award recognition

Fiat Group Qualitas awardSKF Airasca, Italy

CMD 2014

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Fiat Group

The Fiat Group’s Quality Supplier of the Year Award recognizes a supplier with high quality products and support leading to improved vehicle value. SKF is being recognized for providing an outstanding quality performance, taken into account high product complexity and significant production volumes. SKF has also shown an intense commitment to new developments within Fiat and FPT platforms.

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Successful business with Hino

Solution• Tapered roller bearing for

wheel end

SKF benefits• First TRB for series production to

Japanese truck OEM in 2012

• VSM business increased potential in Japan and other Asian countries where Japanese truck OEs have high market share

• Quality award recognition

Hino Quality awardSKF Lutsk, Ukraine

CMD 2014

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SKF Automotive strategy

Growth

Engin-eering partner

After-market

Fast growing markets

Winning customers

Strategic account mgmt

CMD 2014

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Launched Automotive NMOs 2010-2014

Wheel end

Engine

Electrifi-cation

Transmis-sion and clutch

Steering

Body

Suspen-sion

CMD 2014

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SKF BeyondZero Automotive portfolio

Energy efficient solutions to reduce CO2 emissions and fuel/energy consumption.

SKF Bus Door Actuator

Low friction grease for hub bearing units

SKF Low Friction Hub Bearing Unit

Low friction X-Tracker

SKF Sealed Energy Efficient deep groove ball bearing

SKF Low Weight Hub Bearing Unit

High performance seal for HBU

Wheel end friction & weight reduction

Mecha- tronics

SKF Low Friction Engine Seal

High pressure valve stem seal

High pressure valve stem seals with lower friction

SKF Turbocharger Ball Bearing Unit

Enginedownsizing& frictionreduction

SKF StopGo

SKF Rotor Positioning Sensor-Bearing Unit for traction motors

SKF eDrive Ball Bearing

SKF Rotor Positioning Bearing

Electrifica- tion

E2 TRB for truck final drive

Sealed DGBB for driveline

Driveline angular contact ball bearing Ball pinion unit

SKF Hybrid Pinion Unit

Transmission friction reduction

CMD 2014

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SKF BeyondZero Automotive portfolio development

0

200

400

600

2012 2013SEKm

Outlook

• Mega trends supporting efficient use of earth resources

• CO2 legislations sharpened

• The market for hybrid electric vehicles (HEV) and electric vehicles (EV) expected to expand significantly

Sales development

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Hybrid and Electric powertrain

SKF Rotor Positioning Bearing for stop-start

Peugeot 308 Citroen DS3

SKF eDrive Ball Bearing for e-motor

VW e-up! Mercedes-Benz SLS AMG

CMD 2014

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Successful sealing solution with reduced friction

Efficient transmission sealing solution • Enables lower weight design of the transmission• Enhances smoothness in gear shifting• Reduces friction by up to 80%• Unique patented solution

Low friction bonded piston seal …and several other

major global vehicle manufacturers…..

CMD 2014

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Innovations in Engine

Energy recovery bearings• Leading the way in Formula one improving

fuel efficiency with up to 30%• Enables high performance in downsized

engines with patented design

Valve stem seals with lower friction• Enables higher valve train efficiency under

extreme pressure in downsized engines• Improved and patented design

CMD 2014

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Meeting CO2 targets and improving mileage C

o2 r

educt

ion (

g/k

m)

Conventional

Hybrid

Full electric

CMD 2014

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SKF Automotive strategy

Growth

After- market

Fast growing markets

Winning customers

Engin- eering partner

Strategic account mgmt

CMD 2014

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A world of SKF vehicle aftermarket products

CMD 2014

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Focus • Increase SKF content in the box• SKF branded products

Kit development

Growing assortment

2014 FC

2012 20132009 2010 2011

More than 7% CAGR

Other (TW, chassis)

Wheel end

Engine

Driveline

No. of

kits

CMD 2014

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Focus• Distribution network white spots • E-commerce

Development• Growth in Brazil and Mexico• High speed growing the Asia distributor network

Expanding distribution network

Asian distribution network development

India (2014/2012)*

China(2014/2012)*

SKF distributors +12% +42%

SKF retailers +18% +43%

*) 2014 June

CMD 2014

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Bosch Service - Brazil

Solutions• Full aftermarket assortment

Bosch Service• 1,800 service repair centres

• Largest in Brazil

• SKF / Bosch Service co-marketing

“We are truly happy to have SKF’s aftermarket products in our Service Centers.

Not only do the products fit with our profile, the support SKF and SKF Distributors

offer our garages is what we appreciate highly, as part of our professional service

concept”, says Daniel Angelo, Workshop Concept Manager, Bosch Service

CMD 2014

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Strengthening support to mechanics

Focus • Establish SKF brand preference• Utilize Social Media, apps, etc

Activities and objectives• Closer to garages with training and support• Mounting instruction videos on YouTube • Easy access to parts information in app

CMD 2014

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SKF Automotive strategy

GrowthFast

growing markets

After-market

Winning customers

Engin- eering partner

Strategic account mgmt

CMD 2014