S&P Light Vehicles Report

Permission to reprint or distribute any content from this presentation

requires the prior written approval of Standard & Poor’s. Copyright © 2013

by Standard & Poor’s Financial Services LLC. All rights reserved.

Auto Industry

Hot Topics Conference

Corporate Ratings

October 10, 2013

www.standardandpoors.com/autos

Permission to reprint or distribute any content from this presentation requires the prior written approval of

Standard & Poor’s. Copyright © 2013 by Standard & Poor’s Financial Services LLC. All rights reserved.

Introduction

Ron Barone

Managing Director

Corporate Ratings

2

Global Vehicle Outlook: Full Speed Ahead?

Jeff Schuster Senior Vice President October 10th 2013

10 October 2013 © LMC Automotive 4

Outline

• Global Automotive Trends

• Regional Focus: North America

• Global Risks – What to Watch

2013 Global LV Sales – Stable but with Risks Global: 83.4M

4%

India: 2.9M -12%

USA: 15.6M 8%

Brazil: 3.7M 1%

N. America: 18.4M 7%

Europe: 17.4M -3%

S. America: 5.6M 2%

Asia: 35.7M

5%

Russia: 2.8M -4%

China: 21.3M 11%

Japan: 5.2M -2%

Germany: 3.2M -3%

Source: LMC Automotive


Enormous Potential from Low Density and Economic Growth

-

100

200

300

400

500

600

700

800

900

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

PV

Den

sity

per

00

0 p

op

GDP Per Capita PPP (2005 USD)

GDP PER CAPITA & PASSENGER VEHICLE DENSITY

Source: Oxford Economics; LMC Automotive

USA

Australia

Canada

Taiwan

Germany

UK Japan

France

Italy

Spain

South Korea

Russia

Malaysia

Argentina Mexico Brazil

Thailand

India Philippines

Indonesia

China



Emerging Markets Now Dominate Global Light Vehicle Demand

20

00

20

03

20

06

20

09

20

12

20

13

20

14

20

15

20

16

20

17

Mature Emerging

57 59 67 65

81 83

23% 28% 36% 48%

54% 55%

Mn

58% 60%

61% 62%

88 93

99 104



• Closing in on 100 million units by 2016

• Double 2000 sales by 2020

• BRICs, C&E Europe continue to drive long-term growth

• Western Europe still in recovery

• US recovery evident but growth will slow

But They Remain Highly Diverse …

Share of LV Sales by Size Segment (2012)



Global Light Vehicle Production Summary

• Emerging growth and Mature recovery in demand drive increases in regional production

• At odds or in concert - globalization and localization both are shaping the future

• Asia dominance continues 48% of global production in ’11 to 53% by ‘17 - China expansion continues as most rapid


36.7 40.7 42.1 45.2 48.9 53.3 56.1

20.519.4 19.0

19.420.3

21.413.115.4 16.0

16.517.3

17.918.4

4.34.3 4.7

4.95.2

5.55.8

23.0

0

20

40

60

80

100

120

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Other

S. America

N. America

Europe

Asia

Million


Locations of Production Expansion

Net New LV Plants, by Country, 2012 vs 2015

0

5

10

15

20

25

China

India

Brazil

Indonesia

Mexic

o

Russia

Thailand

Taiwan

Mala

ysia

Turkey

*

* Number of new plants, minus plants closed


¾ non-Chinese brand



-6%

-4%

-2%

0%

2%

4%

6%

8%

Toyo

ta

VW

GM

Ren

-Nis

Hyu

nd

a/K

ia

Ford

Fiat

-

Ch

rysl

er

Ho

nd

a

PSA

Suzu

ki

Global OEMs - Short- and Mid-term Outlook

2013 Global LV Production Growth (YoY from 2012)

(In Millions)

Chase for Top Global OEM

• Exposure in Europe and India has negative impact on short-term growth.

• Battle for Largest producer continues – Volkswagen looks to recapture in 2017, but could be 4 way race

• (GM with JVs would be 9.9M in ‘13 and 11.9 in ’17) Source: LMC Automotive

India: Clear And Present Danger

3.23.6

4.13.5

3.84.5

9.0

2010 2011 2012 2013 2014 2015 2020

India Light Vehicle Production (mn)

-14% +9%



Long-term Outlook Remains Good

• Car purchasing limits pose as a risk to growth, amid worsening air quality and traffic jams

• CAAM: 8 cities likely to implement car purchasing limits with affected volume estimated at 400k units/year, or 2% to total vehicle market

• ~1.8 million passenger vehicles registered in 2012 in these tier-2/1 cities

Car purchasing limits in place Car purchasing limits under discussion

Tianjin

Shijiazhuang Qingdao

Hangzhou

Shenzhen

Wuhan Chongqing

Chengdu

China Market Risks



• China Still Outpaces Emerging Markets but…

• 6 million production by 2018 - Indonesia and Thailand are the engines of growth

• And forecasts for Indonesia and Thailand are conservative

Mn

Light Vehicle production

ASEAN: Larger Production than Brazil or Russia




Source: Oxford Economics

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Mill

ion

sWest European Car sales – Recovery Pace

2013: 11.4mn (-3.0%)

2014: 11.5mn (+1.0%)


-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

20

06

Q1

20

07

Q1

20

08

Q1

20

09

Q1

20

10

Q1

20

11

Q1

20

12

Q1

20

13

Q1

20

14

Q1

European LV Inventory Analysis

European Inventory Change, Cumulative

Days supply averaged 73 days in 2008 and now at 65 days…Well

managed considering



European LV Production Outlook – Up from Here?

17.5

18.0

18.5

19.0

19.5

20.0

20.5

21.0

21.5

22.02

01

0

20

11

20

12

20

13

20

14

20

15

20

16

mn

s

+7.3%

-5.3%

-2.3%

+2.3%

+4.4%

+5.6%

Output only reaches 2007 ‘pre-crash’ level

in 2017

+15%



Outline




11.7M

10.3M

2011 2012 1.

Disposable

Income

2.

Unemp. Stock

Market

4. 3.

Housing

Market

5.

Fuel

Prices

6.

Credit

Avail.

10.

Product

Activity

7.

Vehicle

Equity

2013F

Vo

lum

e

Vehicle

Price

8. 9.

Incentive

Actions

Total Sales 14.5M 12.9M

12.7M

Risk 10%

YoY

15.6M Total Sales

Macro Factors Consumer Internals & OEM Drivers

Source: LMC Automotive, Oxford Economics, JDP PIN

U.S. Retail Sales Trend – Outpacing Expectations!


North American Demand – Growth Slows, but Remains Solid

2013: 1.72M

North American Light Vehicle Sales

13.915.2

17.118.4 18.9 19.4

20.9

2010 2011 2012 2013 2014 2015 2020

(Mill

ion

s)

+3%

2013: 15.60M

+8%

2013: 1.08M

+10%



US Segment Share Battleground in 2013

16.0% Share

Pickups gain on housing recovery, product

D Segment cars stable, but giving back some gains from 2012

12.0% Share

-0.3%

11.5% Share Premium staled for much of

2013,improvement started in September

+0.7%

Non-premium CUVs in high demand


+1.2% No Change

21.0% Share


-0.6%

15.0 16.0

3.7 1.7

2007 2013NA Production Underutilized Capacity

16.1m 15.6m US sales

• Recovery, Localization and exports bolstering regional output

• Inventory Holding in 50-60 day Range with Some Pockets of Trouble

NA Production - Then and Now

91% 80%



Volkswagen

Renault-Nissan

Hyundai

Honda

GM

Fuji Heavy

Ford

Fiat-Chrysler

BMW

Other

Daimler

Toyota

-20% -15% -10% -5% 0% 5% 10% 15% 20% 25%

North America Near-term Production by OEM Group

2012 to 2013 Year-over-Year Change


15.4

16.0

2012 2013

+4%

• R-N adds Rogue and Versa Note

• Current Success of Elantra Driving Hyundai Growth

• YoY NA Sales Up Across GM - Excess Inventory and Ramp-ups Limit Production Growth


• Increasing NA sourcing and exports drive production expansion – Global platforms

• Demand driven growth supports level, leaner build environment continues

15.7 15.2 15.012.6

8.511.8 13.1

15.4 16.0 16.5 17.4 18.0 18.4 18.7 18.7 18.8

3.6 3.8 3.76.0

9.25.3 4.2

2.1 1.7 1.71.7

2.1 1.8 1.7 1.6 1.5

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015 2017 2019

Mill

ion

s

0%

20%

40%

60%

80%

100%

NA Production Underutilized Capacity % Utilization

NA Production and Capacity Long-term Trend



3.75.5

7.8

6.86.5

7.25.3 3.4

3.7

0

4

8

12

16

20

2005 2010 2015 2020

Mill

ion

s

Compact Midsize Large

• Underlying shift in segment mix; greater production diversity

• Fundamental shift in cost structures translates to margins on small cars

• Shift in consumer preference, economic and regulatory derived

NA Production Segment Shift



NA Production and US Sales Decouple


Import substitution & increased exports are key drivers


• Fuji Heavy – Lafayette (SIA)

• Honda – Alliston, Greensburg, Lincoln

• Hyundai – West Point (Kia)

• Toyota – Cambridge, Georgetown 3, Princeton,

Tupelo

• GM – Spring Hill

• Audi – San Jose Chiapa

• BMW – Queretaro?

• Daimler – Aguascalientes II?

• Honda – Celaya

• Mazda – Salamanca

• Nissan – Aguascalientes II

• Toyota – Salamanca w/Mazda

• Fiat-Chrysler – Saltillo Van +3.4M

Investment Pours into Region (2012-2020)

• BMW – Spartanburg

• Daimler – Vance

• VW – Chattanooga

New Capacity

Capacity Expansion



• 90% of new capacity to MEX

• USA/MEX as low cost producers

• CAN: position weakens with little new investment

• MEX: primarily B- and C-segment

NAFT

A

Sourcing Trends Impact on NA Production

Country Share




Outline




Risks: macroeconomic/geopolitical

Eurozone split

Rebalancing, banking, slower

growth?

Currency & infrastructure

Slower external boost in growth?

Cheap oil/slower

growth

Currency?

Conflict

Shale Gas Abenomics?

End QE)/Washington self-destructing


Risks: Macroeconomic/Geopolitical

Source: LMC Automotive Global Automotive Scenario Service

Risks: automotive

Gen Y/ Replacement

demand

Curbs on ownership

Currency/ Infrastructure

Affordability/ Gov’t Support

Oil Prices

Inland growth


Risks: Automotive


Downside Risks Emerge in Demand Scenarios

N. America LV Sales (mn)

S. America LV Sales (mn)

Europe LV Sales (mn)

Asia LV Sales (mn)



Highest scenario Baseline

Lowest scenario

World LV Production Scenarios

Light Vehicle Production (mn)



Concluding Remarks

• US recovery close to completion and the outlook remains positive – North American industry is on a sound footing but capacity constraints could hold back growth

• European demand is now stable, though low – but when will recovery come and what kind of recovery will it be?

• Emerging market growth still key for global expansion, but giving mixed signals in near-term

• An unusually broad range of (mostly) negative of risks characterize the automotive outlook


Accurate Real-Time Automotive

Forecasting

and Market Intelligence

Oxford ● Detroit ● Frankfurt ● Paris ● Bangkok ● Shanghai ● Tokyo ● São Paulo

www.lmc-auto.com

[email protected]


http://www.lmc-auto.com/





Credit Outlook for European and U.S. Automakers,

Suppliers and Retailers

Moderator: Jesse Juliano, Director, Analytical Manager

Nishit Madlani, Associate Director

Nancy Messer, CFA, Director

Larry Orlowski, CFA, Director

Dan Picciotto, CFA, Senior Director

Eric Tanguy, Senior Director

36

Market Conditions: a Flat European Market in 2014

• H2‘13 expected to be slightly better than H1

• Western Europe expected to be down 4-5% year-on year

• Countries most affected: Italy (-20% in 2012 /-8% in 2013), France (-11%/-9%) and

Spain (-13%/-1%). Germany (-1%/-3%) turning negative; only the UK (+4%/+5%) is

proving resilient.

FY 2013


• Western Europe expected to be flat, up 1% year-on year

• No State interventions; austerity packages not supportive of any rebound next year

• Need to focus on Asia-Pacific, North America and others (Russia, Turkey, South

America & Mercosur, ANZ) to capture growth and sustain earnings

FY 2014

2012 and 1H 2013 – European Auto

• North-South divide in terms of revenues and profitability: IG German car markers

still reporting broadly flat margins while southern European OEMs are struggling to

achieve break-even in Autos (Fiat boosted by Chrysler and resilient contribution

from Latin America).

• In Europe, important to cling to one’s

market share

• Changes reflect company-specific

country mix but also more fundamental

factors (brand positioning, recent model

launches and marketing efforts, perceived

quality, RV expectations, etc…)

• Some have been doing better than

others.

• Sales outside Europe is key

• Not all OEMs are equal in terms

of geographic diversification

Geographic Mix – European Auto

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Other EM Asia-Pacific North America South America

Unit sold outside Europe - FY’2012

Manufacturing Footprint

• Some companies have moved capacity outside of Western Europe faster than

others (eg Romania, Turkey and Morocco for Renault, Eastern Europe for VW)

• Impact of industrial footprint needs to be assessed in conjunction with a

company’s ability to command a price premium

Downside Risk

Several events may affect European OEMs in 2014:

• Further tensions within the Eurozone, adverse currency movements

• Another dip into recession

• Slide of the European car market continuing in 2014

• Slower growth in China

• Erosion in premium pricing power globally

• Tariffs and local content rules in various regions European Automakers' Downside case

Guidance Threshold where guidance likely to be tested

Aston Martin

FFO to debt 12%

Debt to EBITDA < 5.0x

Dependance on launch of new models

EBITDA Margin not restored to 18-19% (e)

BMW

EBIT Margin in the 8-10% range through the cycle

FFO to debt 50%-60%

Significant positive FOCF

EBIT Margin < 8-10% range

Negative FOCF from Auto

More aggressive financial policy

Daimler

FFO to debt 50%-60%


3-4% revenue decline

Sustained negative FOCF from Auto

JLR FFO to debt >30%

Evoque a firebrand and not a sustained phenomenon

Failure to reposition Jaguar

EBITDA margin < 12%

Fiat

FFO to debt 12-20% range


Further deterioration in European performance

Liquidity situation no longer 'adequate' (excl. Chrysler)

Major outflow related to VEBA's stake in Chrysler

Peugeot

FFO to debt 12-20% range

Negative FOCF to be halved in 2013

Execution issues wrt restructuring plans (agreed; 2nd one being negotiated)

No marked reduction in negative FOCF in auto for 2013 (max €-1.4 bn)

FOCF at break-even by YE'14 no longer in sight

Renault

FFO to debt ~25%


FFO to debt < 25%

Inability to maintain positive FOCF in auto for more than a year

Scania

FFO to Debt > 60%

Debt to EBITDA < 1.5x Related to Volskswagen

Volkswagen

FFO to Debt > 60%


Group EBIT margin > 6%

Lower dependance on European market

EBIT margin 100 bps below recent level

More aggressive financial policy (eg future acquisitions in particular wrt trucks)

FFO to debt < 45%

Volvo

FFO to debt > 35%


FFO to debt < 30%

Inability to restore EBIT margins at 6%

Inability to maintain positive FOCF through the cycle

U.S. SAAR Trend

42

Pick-Up Truck Sales Estimates

43

Company Focus: Ford Motor Co. BBB- / Stable

Business Risk

Satisfactory

Financial Risk

Intermediate

Key Strengths Key Weaknesses

Reduced cost base in N.A. = overall

profits and positive cash flow

NA segment margin better than

other domestics (>10% in H1 2013)

Improved product diversity (cars)

and consumer perception

Pension funding improving (cash

contributions and discount rate)

Mgmt continuity and strategy

Losses in Europe

Profit mix still weighted to light

trucks

Still high debt + pension

Limited, but improving, exposure

to certain attractive developing

markets

Liquidity: Strong Stable Outlook

Auto cash June 2013, $25 billion

Gradual reduction of debt and

voluntary pension funding

Automotive free cash flow ~$4+ bil

expected

FMCC funding channels appear

stable

Current rating: Adjusted Debt to

EBITDA of 2.5x, FOCF/ Debt ~15%

Higher rating: < 2.5x and 20%+,

among other factors

Higher rating: More diverse

profitability and good NA, definitive

Europe profit prospects

44

Company Focus: General Motors Co. BB+ / Positive

Business Risk

Fair

Financial Risk

Intermediate


Reduced cost base and debt

burden in NA supporting profits (>7%

H1 2013 segment margin) and

positive cash flow

Geographic diversity: strong

positions China & Brazil

IPO completed. UST stake being

eliminated

Losses in Europe


trucks

High unfunded pensions

Ownership mix temporary

Somewhat elevated level of mgt

turnover


Auto cash at June 2013, $24 billion


voluntary pension funding/derisking

Automotive cash flow >$3 bil

expected

Evolving captive finance ops

Outlook incorporates assumption

of continued profitability in NA and

Auto FOCF

For a higher rating: Adjusted Debt

to EBITDA of 2.5x, FOCF / Debt

~15%, among other factors such as

pathway to European profit

45

Company Focus: Chrysler Group LLC B+ / Positive

Business Risk

Weak

Financial Risk

Aggressive



burden leading to profits and positive

cash flow

Fiat (BB-/Stable/B) ownership a

positive for business risk

Solid positions in certain segments

(e.g. Jeep, pickups and minivan)

Good NA market conditions

Profit mix very weighted to light

trucks

2013 expect op profit margin

around 5% despite heavy NA

exposure

Limited geographic diversity

Still needs to improve consumer

perception in U.S. after 2009

Liquidity: Adequate Positive Outlook

Cash at Dec. 31, $11.6 billion

Cash flow positive >$1 bil expected

No captive finance ops

Assumes profits in N.A.

Fiat - Chrysler rating difference

will not increase

For higher rating: Fiat rating and

degree of alignment is major factor;

also FOCF >$1 bil and margin

improvement

46

S&P 2013 & 2014 Assumption Summary Key Factors S&P Base-Case Assumptions

Light Vehicles (millions) 2013 2014

U.S. Light Vehicle Sales * 15.6 ( 8% YoY) 16.0 ( 3% )

North American Production 16.0 ( 4% ) 16.5 ( 3% )

Europe Production 18.9 ( 3% ) 19.3 ( 2% )

China Production 20.2 ( 11% ) 23.1 ( 14% )

Commercial Vehicles - Class 8 (‘000s)

North American Production 252 ( 10% ) 281 ( 11% )

W. Europe Production 299 ( 1% ) 291 ( 3% )

China Production 638 ( 8%) 707 ( 11% )

S&P Projections

Revenue Growth (midspread) 2.0% to 5.0% 3.0% to 6.5%

Adjusted EBITDA margins (midspread) 8.5% - 13.5% 9.0% - 14.0%

Adj. FOCF/Debt (median) ~ 5.0% ~ 6.5%

Adj. Debt to EBITDA (median) ~ 3.8x ~ 3.4x

source: LMC Automotive September 2013 (previously, a forecasting division of J.D. Power);

* Standard & Poor’s estimates

47

Supplier Margins Flattening Out

48

11.6%

10.4%

9.6%

10.4%

8.5% 8.6%

11.7% 11.6%

11.0%

8.7%

8.0%

9.9%

10.8%

7.7%

7.3%

9.3% 9.1%

8.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012

Suppliers

OEMs

Global Auto Sector: Selected Threats

S&P Perspectives Probability Time Frame EffectAffected

Parties

Double dip recession in near

term or hard landing in China.

U.S. 10% - 15%

(near low end);

Europe bottoming?

China slower but

ok?

Near to

medium term

Moderate if

brief

Automakers

and Suppliers

Adverse product mix shifts ($5

gas driven)Moderate - High Medium term

Less

severe

than 2008

bc of

improved

efficiency?

Automakers

and some

Suppliers

Rising emissions, fuel economy

and safety standards High

Medium to

long termModerate

Automakers

and some

Suppliers

Raw material price impact Moderate - High Near term Moderate

Automakers

and many

Suppliers

Unsettled capital markets High Anytime?

Positive for

now, but

this can

swing

quickly.

Automakers

and Suppliers

49

Auto Suppliers/Retailers Business & Financial Risk Profile

Business Risk Profile

Minimal Modest Intermediate Significant Aggressive Highly Leveraged

Excellent -- -- -- -- -- --

Strong Bosch,

Denso

Aisin Seiki Toyota

Industries

-- -- --

Satisfactory -- Knorr-

Bremse,

Hyundai

Mobis,

Magna,

Autoliv

JCI, Michelin,

BorgWarner,

Valeo, Harman,

TRW

Autonation,

GKN,

Gestamp

Continental Schaeffler AG

Fair -- -- Delphi, LKQ Group 1,

Asbury, Sonic

Piaggio, Goodyear Tire, KAR,

Pinafore, Penske, Allison,

Falcon

Europcar, Servus

Weak -- -- Lear, Metalsa Tenneco,

Dana, Shiloh,

Stoneridge,

Cooper-

Standard,

Cooper Tire,

Tenedora

Axle, Visteon, ASP HHI, Mark IV,

Metaldyne, PGW, Remy,

Tower, Grede, Waupaca,

Wabash, China Zhengtong,

Baoxin, ARCAS, PT Gajah,

KSS, Pendragon, SANLUIS

Meritor, Affinia, August

Cayman, A.T.U Auto-Teile

Unger Handels, Transtar,

Fed-Mog, American Tire,

Fastlane, Hyva, UCI,

Autoparts Holdings

Vulnerable -- -- -- -- International Automotive

Components, Neenah

UC Holdings, Accuride,

Commercial Vehicle

Business And Financial Risk Profile Matrix

Financial Risk Profile

As of September 16, 2013

50



Credit Outlook for European and U.S. Automakers,

Suppliers and Retailers

Moderator: Jesse Juliano, Director, Analytical Manager

Nishit Madlani, Associate Director

Nancy Messer, CFA, Director

Larry Orlowski, CFA, Director

Dan Picciotto, CFA, Senior Director

Eric Tanguy, Senior Director



Asset-Backed Securities: Auto ABS Update and Outlook

Amy Martin, Senior Director

Mark Risi, Senior Director

James Traynor, Director

0

2

4

6

8

10

12

14

16

18

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 P

Auto Loan ($ Bil) Auto Lease ($ Bil) DFP ($ Bil) Auto Sales (Million Units)

$ B

illio

n

Au

to S

ale

s (

Mill

ion

Un

its)

$117.3

$95.2

$58.8 $57.4 $62.3

$66.7

$91.5

$83.0

Auto ABS Issuance Tracks Auto Sales

Source: Standard & Poor’s Ratings Services

U.S. Retail Auto Loan ABS Volume (Public and Private)

YTD 9/30/2013

57 Transactions - $46.3 Billion

2012

75 Transactions - $66.8 Billion

Domestic Captives20%

Foreign Captives33%

Prime - Banks7%

Prime - Other8%

Nonprime2%

Subprime30%

Note: Domestic Captives include Ally Bank. Source: Standard & Poor’s Ratings Services.

Domestic Captives

28%

Foreign Captives29%

Banks7%

Prime - Other8%

Nonprime2%

Subprime27%

U.S. Retail Auto Loan Issuance by Issuer


Ford

14%

Santander

13%

Ally

14%

AmeriCredit

8%

Honda

8%

Hyundai

7%

Nissan

4% Toyota

4% CarMax

4% Volkswagen

4%

B of A

4%

Huntington

3%

World Omni

2%

Mercedes

2%

Other (< 2.0%)

9%

2012 75 Transactions - $66.76 bn

Santander

12%

Ford

11%

Ally

9%

Hyundai

9%

Honda

9%

AmeriCredit

9%

CarMax

6%

Nissan

6%Toyota

4%Fifth Third

4%

M&T

3%Volkswagen

3%

Mercedes

2%

Other (< 2.0%)

13%

YTD 9/30/2013 57 Transactions - $46.3 bn

• Potentially lowers funding costs

• Improves funding diversification and liquidity

• Provides match funding

Benefits of Securitization

56

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 9months9/2012

9months9/2013


Subprime Auto Loan ABS Industry Volume (In $Billions)

Special and Unique Considerations

• Financial condition, funding flexibility and liquidity

• Company background, management, and infrastructure

• Amount and quality of performance data

• Collections (decentralized or centralized collections, back-up servicer arrangements)

• Weakness in the above areas may preclude us from issuing a rating or may result in us limiting the rating we’ll assign to a transaction. For more information, please see “Standard & Poor’s Explains Its Approach To Rating Subprime Auto Loan ABS Transactions,” August 29, 2011.

58

Standard & Poor’s Rating Process for Subprime Auto ABS Issuers

• Underwriting remains strong, however, there has been some weakening in 2013

• Weighted Average FICO down to 738, from 745 in 2012

• Percent of loans with terms greater than 60 months is up to 47.69%, from 44.90% in 2012

• Weighted average loan-to-value ratio up to 96.81%, from 94.48% in 2012

• However, underwriting remains stronger than what we saw in 2008-2009

• Collateral performance remains very strong, with near record low losses

• Defaults and net losses remain well below historical averages

• Recoveries remain high, bolstered by continued strength in the used vehicle market

• Some slight deterioration in 2013 from 2012 as performance starts to normalize from

unsustainable levels

• Ratings performance remains predominantly positive • From 2001 through August 2013, we’ve upgraded 1011 ratings and downgraded only 39 for credit

reasons. This includes prime and subprime. 26 upgrades for every 1 downgrade.

• Since the start of 2012, we have upgraded 118 prime auto loan ratings and have not downgraded

any.

59

Prime Auto Loan ABS:

700

710

720

730

740

750

2010 2011 2012 2013

FICO

90

92

94

96

98

100

2010 2011 2012 2013

Loan-To-Value (%)

40

42

44

46

48

50

2010 2011 2012 2013

WAOM >60 months

0

2

4

6

8

2010 2011 2012 2013

WAAPR (%)

60

Prime Collateral Trends


0.00

0.50

1.00

1.50

2.00

2.50

3.00

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

2005 2006 2007 2008 2009 2010 2011 2012

61

Prime Cumulative Net Losses (By Vintage)


0.00

0.20

0.40

0.60

0.80

1.00

1.20

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

2005 2006 2007 2008 2009 2010 2011 2012

62

Prime Delinquencies – 60+ (By Vintage)


63

Captive Issuer Performance – CNL% by Issuance Year

.

2006 2007 2008 2009 2010 2011 2012

Month 36 Month 36 Month 36 Month 36 Month 33 Month 21 Month 8

Prime Index 1.56% 2.60% 2.01% 0.92% 0.53% 0.43% 0.12%

Ally N/A N/A N/A 0.42% 0.24% 0.22% 0.07%

Ford 1.51% 2.01% 1.76% 1.03% 0.67% 0.39% 0.10%

Honda 1.03% 0.83% 0.91% 0.68% 0.39% 0.27% 0.07%

Hyundai 2.63% 3.43% 2.35% 1.29% 0.77% 0.50% 0.26%

Mitsubishi N/A 2.82% 1.93% 1.89% 1.84% 1.26% 0.38%

Toyota N/A N/A N/A N/A 0.25% 0.16% 0.08%

Volkswagen N/A 1.42% 1.98% N/A 0.86% 0.43% 0.12%

World Omni 1.66% 2.59% 3.43% 1.24% 0.49% 0.66% 0.30%

• Ally, Ford, Honda and Toyota have historically performed better than the

average

• Hyundai and Mitsubishi have historically performed worse than the average


0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

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Net Losses Delinquencies (60+)

64

Prime Monthly Net Losses & Delinquencies


90

95

100

105

110

115

120

125

130

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

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Recoveries Manheim

65

Prime Recoveries & Manheim Used Vehicle Value Index


Manheim

• Increased competition has led to some softening in underwriting as loan-to-value ratios and loan tenors continue to rise

• Weighted average loan-to-value ratio up to 113.87%, from 113.15% in 2012

• Percent of loans with terms greater than 60 months is up to 81.52%, from 76.90% in 2012

• FICO scores up somewhat (577 vs. 573). However, FICO not best predictor of performance in this

sector

• Collateral performance remains strong despite some weakening in 2013

• Defaults and losses are up year-over-year

• Recoveries have softened somewhat, impacting net losses

• The slight credit deterioration was expected as originators loosen underwriting standards

• Ratings performance remains predominantly positive • Standard & Poor’s has never downgraded a public subprime auto loan ABS rating for credit

reasons.

• Since 2004, we have upgraded 234 subprime auto loan ABS ratings with 139 of the upgrades

coming since the start of 2012

66

Subprime Auto Loan ABS:

570

572

574

576

578

580

2010 2011 2012 2013

FICO

100

104

108

112

116

120

2010 2011 2012 2013

Loan-To-Value (%)

70

74

78

82

86

90

2010 2011 2012 2013

WAOM >60 months

15

16

17

18

19

20

2010 2011 2012 2013

WAAPR (%)

67

Subprime Collateral Trends


0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

2005 2006 2007 2008 2009 2010 2011 2012

68

Subprime Cumulative Net Losses (By Vintage)


0.00

1.00

2.00

3.00

4.00

5.00

6.00

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

2005 2006 2007 2008 2009 2010 2011 2012

69

Subprime Delinquencies – 60+ (By Vintage)


70

Subprime Issuer Performance – CNL% by Issuance Year

.

• AmeriCredit has consistently been in-line with or better than the subprime

average

• Santander and CPS have historically been somewhat higher than the subprime

average. However, they are each outperforming the average in 2012

2006 2007 2008 2009 2010 2011 2012

Month 36 Month 36 Month 36 Month 36 Month 33 Month 21 Month 8

Subprime

Index 12.73% 14.67% 15.48% 9.85% 7.70% 4.56% 1.75%

AmeriCredit 12.91% 14.63% 14.23% 9.22% 4.51% 3.32% 1.09%

CPS 14.48% 15.60% 15.80% N/A 12.31% 5.27% 1.23%

Santander 22.97% 23.49% N/A N/A 9.62% 5.83% 1.50%


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

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Net Losses Delinquencies (60+)

71

Subprime Monthly Net Losses & Delinquencies


90

95

100

105

110

115

120

125

130

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

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Recoveries Manheim

72

Subprime Recoveries & Manheim Used Vehicle Value Index


Manheim

• Volume is expected to reach $60 billion in 2013

• This would be down approximately 10% from $67 billion in 2012

• Prime issuance should make up about two-thirds of the total volume while subprime makes up about a third

• Lower issuance by domestic captives and banks is expected to continue in the short-term

• Competition is expected to continue to put pressure on underwriting

• While many issuers are expected to remain disciplined in their approach, we do expect some to loosen credit more than others

• We expect the trend towards longer term loans (72, 84…and maybe even 96!) to continue

• Collateral performance should weaken somewhat

• Looser underwriting and lower used vehicle values should cause losses to increase in both the prime and

subprime sector

• Prime losses are expected to increase. However, 2012 and 2013 have seen record low losses for this sector, a

trend we believe is likely unsustainable.

• Subprime losses are also expected to increase. However, we don’t expect losses to reach the levels seen in the

recession .

• Ratings are expected to remain stable

• The trend of upgrades far outweighing downgrades is expected to continue

• High floors and sequential pay structures lead to deleverage and increased loss coverage

73

Auto Loan ABS Outlook:



Auto Dealer Floorplan:

Request for Comment on Proposed Criteria

James Traynor

Director

Structured Finance ABS

October 10, 2013

Finance companies originate floorplan loans to automobile dealers who, in turn, use them to purchase the manufacturers‘ vehicles (i.e., the dealers' inventory) for subsequent sale to consumers. These loans are securitized in an ABS dealer floorplan transaction

We believe a dealer's ability to repay its loans is linked to the financial health of the manufacturer and its wholly owned captive finance company.

Low Losses – at or near 0%

Historic loss performance on non-diversified auto dealer floorplan has been near zero given significant financial support from the manufacturers

• Typical support from manufacturer include: sales incentives, retail (product

warranty), repurchase agreements, and other financial assistance.

• Typical support from finance company/servicer include: Close monitoring of dealer

performance, physical collateral audits, financial audits

• Performance metrics tested to spot dealer distress early

Overview: Auto Dealer Floorplan and Related Risks

Manufacturer bankruptcy

• Consumer ability and willingness to purchase vehicles is weakened

• Aged inventory on dealer lots is increasing

• Sales incentives offered by the Manufacturer prior to the bankruptcy are increasing

Finance Company/Servicer Bankruptcy

• Our criteria will generally limit dealer floorplan ABS ratings to a six- to nine-

notch elevation above the corporate credit rating of the servicer or the

manufacturer, unless a formal backup servicer agreement is in place

S&P’s Criteria: Dual Bankruptcy Assumptions and Consequences

A high payment rate indicates strong demand relative to the supply of vehicles on dealer lots and reflects a low "day's supply" of inventory.

Historical Payment Rates

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

120.0%

Ford Ally HyundaiSource: Standard & Poor’s Ratings Services

• Dealer • Pools typically range from 100 to 4,000+ dealers/obligors

• Top dealer concentrations typically range from 4% to about 10%.

• The higher concentrated dealers are typically large dealer groups

• Manufacturer • Most active Trust’s in the US are from captive lenders and thus a single manufacturer

makes up predominantly all of the dealer inventory

• Product • Most pools contain some percentage of used collateral which is capped in the transaction

documents

Typical Concentration Considerations

On July 29, 2013 we published “Request For Comment: Global Non-Diversified Auto Dealer Floorplan Rating Methodology And Assumptions”

• The proposed criteria place increased emphasis on the related manufacturer's corporate credit rating (CCR) when assessing a non-diversified ADFP transaction's credit risk.

We are seeking responses to the following questions, among others:

• Do you agree that a manufacturer's CCR is a key factor in assessing a non-diversified ADFP pool's credit risk? As such, movement in a manufacturer's CCR may affect the ABS rating.

• Are there any additional risks or mitigating factors that you think we should consider in the base modeling assumptions?

• Do you agree with the adjustment factors?

• manufacturer and dealer-base specific

• legal jurisdictional and market-specific

• Transaction specific

S&P’s Request for Comment: Non-diversified Auto Dealer Floorplan

The cumulative net loss expectations derived from the stressed amortization scenarios will be a function of the manufacturer's CCR and the transaction's early amortization event payment rate trigger.

Cumulative Loss Assumptions

Manufacturer CCR 45% payment rate trigger

35% payment rate trigger



'AAA' 15.0 16.0 17.5 19.5

'AA' 16.0 17.5 19.0 21.5

'A' 17.5 18.5 20.5 23.0

'BBB' 18.5 20.0 22.0 24.5

'BB' 20.5 22.0 24.0 27.0

'B' 22.5 24.0 26.5 29.5

'CCC' and lower 26.0 28.0 31.0 34.5

Unlike most ABS, the ratings for non-diversified ADFP are sensitive to a change in the

rating on an affiliate of the seller/servicer. The table below shows the affect that a

manufacturer downgrade could have on the non-diversified ADFP rating. Based on

this analysis, we believe the proposed criteria are consistent with our credit stability

criteria.

ABS Rating Sensitivity to Manufacturer Downgrade

Expected ADFP rating

Current manufacturer CCR

One-category downgrade of CCR

Two-category downgrade of CCR

CCR downgraded to 'CCC'

'AAA' 'AA+' 'AA' 'BBB+'

'AA' 'AA+' 'AA' 'A-'

'A' 'AA+' 'AA' 'A'

'BBB' 'AA+' 'AA' 'A+'

'BB' 'AA+' 'AA-' 'AA-'

'B' 'AA' 'AA' 'AA'

Ford Credit Floorplan Master Owner Trust A, Series 2013-5 (closed September 2013)

•Hard credit enhancement of 24.38% available for the ‘AAA(sf)’ rated Class A Notes.

•3-year bullet maturity

•Class A-1 Coupon of 1.50%

•Class A-2 Coupon of One-Month LIBOR plus 0.47%

Ally Master Owner Trust, Series 2013-3 (closed September 2013)



•Class A Coupon of One-Month LIBOR plus 0.52%

Hyundai Floorplan Master Owner Trust (closed May 2013)



•Class A Coupon of One-Month LIBOR plus 0.35%

2013 Deal Update



S&P’s Views On The U.S. Car Rental Industry

Betsy R. Snyder, CFA

Director

Corporate and Government Ratings

October 10, 2013

The U.S. Car Rental Industry

Sector credit fundamentals

Operating and financial performance

Consolidation update

Ratings

Sector outlook

Credit outlook

Sector Credit Fundamentals

• Strong cash flow generation

• Capital intensive

• High debt leverage

• Ability to reduce capital spending as warranted

• Credit metrics differ from those of similarly rated industrials

• Free cash flow tends to be countercyclical

Relatively Stable Operating and Financial Performance

• Modest growth in demand

• Modest price increases driven by stronger leisure pricing

• Ongoing non-vehicle cost reduction efforts

• Higher vehicle costs

• Lower funding costs

Consolidation Results in Three Major U.S. Car Renters

• Hertz finally acquires Dollar Thrifty

• Avis Budget acquires Zipcar

• Ongoing small acquisitions

Ratings – U.S. Car Renters

Rating Business

Risk

Financial

Risk Liquidity

Enterprise

Holdings Inc. BBB+/Stable Satisfactory Intermediate Adequate

Avis Budget

Group Inc. B+/Positive Fair Aggressive Adequate

Hertz Global

Holdings Inc. B+/Stable Fair Aggressive Adequate

Ratings as of Oct. 4, 2013

Sector Outlook

• Demand/supply

• Pricing

• Geographic exposure

• M&A activity

• Access to capital

Credit Outlook

• Improving operating performance despite higher vehicle costs

• Improving credit metrics

• Continued access to capital

• Potentially higher ratings

91

Appendix

Corporate Ratings Criteria Summary

Business Risk

• Country risk

• Industry risk

• Competitive position

• Profitability/Peer group comparisons

Financial Risk

• Accounting

• Financial governance and policies/risk tolerance

• Cash flow adequacy

• Capital structure/asset protection

• Liquidity

92

Corporate Ratings: Business Risk/Financial Risk Matrix

93

Sector Coverage

Automakers and Truckmakers (About 50% high yield)

• 18 global automakers

• 4 global truckmakers

Auto Suppliers (mainly high yield)

• About 75 rated companies serving the global auto-related sector

• OE suppliers

• Auto retailers

• Five publically held U.S. auto retailers. Different model: sales, service and F&I.

• Other companies

• Tire manufacturers

• Whole car and insurance auto auctions

• Commercial truck suppliers

• Aftermarket parts suppliers

• Distributors (tires, truck parts)

94

Ranking Table - Rated Auto and Truck Makers – September 16, 2013

Company Ranking Ratings Business Risk

Profile

Financial Risk

Profile

GLOBAL AUTOMAKERS

Toyota Motor Corp. 1 AA-/Stable/A-1+ Strong Minimal

Honda Motor Co. Ltd. 2 A+/Stable/A-1 Strong Modest

BMW AG 3 A/Stable/A-1 Strong Modest

Volkswagen AG 4 A-/Positive/A-2 Strong Modest

Daimler AG 5 A-/Stable/A-2 Satisfactory Modest

Nissan Motor Co. Ltd. 6 BBB+/Stable/A-2 Satisfactory Modest

Hyundai Motor Co. 7 BBB+/Stable/-- Satisfactory Modest

Kia Motors Corp. 8 BBB+/Stable/-- Satisfactory Intermediate

Ford Motor Co. 9 BBB-/Stable/NR Satisfactory Intermediate

General Motors Co. 10 BB+/Positive/-- Fair Intermediate

95



Profile

Financial Risk

Profile

GLOBAL AUTOMAKERS

Renault S.A. 11 BB+/Stable/B Fair Intermediate

Jaguar Land Rover Plc 12 BB/Stable/-- Fair Intermediate

Tata Motors Ltd. 13 BB/Stable/-- Fair Significant

Fiat SpA 14 BB-/Stable/B Fair Aggressive

Peugeot S.A. 15 BB-/Negative/B Fair Aggressive

Chrysler Group LLC 16 B+/Positive/-- Weak Aggressive

Aston Martin Holdings

(UK) Ltd. 17 B+/Stable/-- Fair Aggressive

Mitsubishi Motors

Corp. 18 B+/Stable/-- Weak Aggressive

96



Profile

Financial Risk

Profile

GLOBAL TRUCKMAKERS

PACCAR Inc. 1 A+/Stable/A-1 Satisfactory Minimal

Scania (publ.) AB 2 A-/Positive/A-2 Satisfactory Modest

AB Volvo 3 BBB/Stable/A-2 Satisfactory Intermediate

Navistar

International Corp. 4 B-/Negative/-- Vulnerable

Highly

Leveraged

97

Global Auto Supplier Rating Distribution: Most Are Speculative Grade

0

5

10

15

20

25

30

35

40

AAA AA A BBB BB B CCC CC SD D

No. of Issuers

*As of September 16, 2013

98

Global Auto Supplier Outlook Distribution: Majority Are Stable

0

10

20

30

40

50

60

Positive Stable Negative Developing Watch Pos Watch Neg Watch Dev

No. of Issuers

*As of September 16, 2013

99

The Auto Sector - Our View October 2013

• Economic uncertainty remains the key variable – globally

• U.S. economy – improving…

• Europe headed for sixth consecutive year of vehicle registration decline but seems to be bottoming out

• Latin America slower growth, more competition and some tariffs complicate some manufacturing footprints

• China slower growth than in the past – growth likely to continue; new normal

• Sales recovery in U.S.

• This is supporting the results of many automakers and suppliers – both U.S and foreign brands

• Consumer confidence remains fragile and volatile and unemployment high but improving along with housing

• Replacement demand nearly sated?

• What is the new normal SAAR?

• In the U.S.? Probably there.

• In Europe? Higher, but when and what level.

• China and Brazil – growing but at a slower pace

• We believe most ratings are sustainable with mixed economic conditions: U.S improves, Europe flat and

Brazil and China are flat to up – there is some cushion in most ratings

• Our base case is for a U.S. sales and production increase in 2013 and 2014

• Will automakers maintain production-inventory-sales discipline when volatility returns?

• Will large capital expenditure plans to met with commensurate pricing power with consumers?

• How receptive will capital markets remain for automakers, suppliers and auto retail finance?

• Timing is everything – lots of refinancing has been done

• Few U.S. auto sector defaults since mid 2009

100

U.S. Corp. Spec-Grade Default Rate % And 12-Mo. F’cast {The U.S. corporate trailing 12-month speculative-grade default rate is 2.6% as of June 2013}

Auto Sector “Weakest Links” Are Few Relative To Other Sectors

Global Auto Sector: Selected Threats

S&P Perspectives Probability Time Frame EffectAffected

Parties

Double dip recession in near

term or hard landing in China.

U.S. 10% - 15%

(near low end);

Europe bottoming?

China slower but

ok?

Near to

medium term

Moderate if

brief

Automakers

and Suppliers

Adverse product mix shifts ($5

gas driven)Moderate - High Medium term

Less

severe

than 2008

bc of

improved

efficiency?

Automakers

and some

Suppliers

Rising emissions, fuel economy

and safety standards High

Medium to

long termModerate

Automakers

and some

Suppliers

Raw material price impact Moderate - High Near term Moderate

Automakers

and many

Suppliers

Unsettled capital markets High Anytime?

Positive for

now, but

this can

swing

quickly.

Automakers

and Suppliers

103

104

The U.S. Automakers

Summary Of The Three U.S. Automakers

• Ford is BBB-/Stable. The rating reflects our view:

• Very good NA performance supports cash flow generation and provides evidence of solid execution since 2009 (e.g.

global platforms, consumer acceptance, controlled incentives)

• Acting decisively in Europe on restructuring and some traction on European retail market share support case for

eventual profitability

• Improved diversification given progress in China and reasonable performance in challenging SA markets

• Higher rating: continued improvement in credit measures (cash flow generation, pension underfunding reduction),

definitive path to European profit, maintain good performance in NA and progress in Asia

• GM is BB+/Positive. The outlook reflects our view:

• Good NA sales and profitability support cash flow generation along with strong position in China

• Acting to restructure Europe but still a work in progress

• Clarifying ownership (UST exit by April 2014), capital structure (Series A Pfd at end of 2014) and finco strategy (growing

global presence)

• Chrysler is B+/Positive

• Benefits from NA. Strategic execution and linkage with Fiat (BB-/Stable) is main rating driver

• When and how does Fiat merger happen

• All three companies have returned to profitability in N.A.

• Cost reductions support expectations for sustained profits – in North America

• Cash flow positive at sales levels that formerly produced losses

• North America provides critical support to all three companies

• Financial policies appear to be focused on lowering financial risk, again, to varying degrees

105

Company Focus: Ford Motor Co. BBB- / Stable

Business Risk

Satisfactory

Financial Risk

Intermediate


Reduced cost base in N.A. = overall

profits and positive cash flow

NA segment margin better than

other domestics (>10% in H1 2013)

Improved product diversity (cars)

and consumer perception

Pension funding improving (cash

contributions and discount rate)

Mgmt continuity and strategy

Losses in Europe


trucks

Still high debt + pension

Limited, but improving, exposure

to certain attractive developing

markets


Auto cash June 2013, $25 billion


voluntary pension funding

Automotive free cash flow ~$4+ bil

expected

FMCC funding channels appear

stable

Current rating: Adjusted Debt to

EBITDA of 2.5x, FOCF/ Debt ~15%

Higher rating: < 2.5x and 20%+,

among other factors

Higher rating: More diverse

profitability and good NA, definitive

Europe profit prospects

106

Company Focus: General Motors Co. BB+ / Positive

Business Risk

Fair

Financial Risk

Intermediate



burden in NA supporting profits (>7%

H1 2013 segment margin) and

positive cash flow

Geographic diversity: strong

positions China & Brazil

IPO completed. UST stake being

eliminated

Losses in Europe


trucks

High unfunded pensions

Ownership mix temporary

Somewhat elevated level of mgt

turnover


Auto cash at June 2013, $24 billion


voluntary pension funding/derisking

Automotive cash flow >$3 bil

expected

Evolving captive finance ops

Outlook incorporates assumption

of continued profitability in NA and

Auto FOCF

For a higher rating: Adjusted Debt

to EBITDA of 2.5x, FOCF / Debt

~15%, among other factors such as

pathway to European profit

107

Company Focus: Chrysler Group LLC B+ / Positive

Business Risk

Weak

Financial Risk

Aggressive



burden leading to profits and positive

cash flow

Fiat (BB-/Stable/B) ownership a

positive for business risk

Solid positions in certain segments

(e.g. Jeep, pickups and minivan)

Good NA market conditions

Profit mix very weighted to light

trucks

2013 expect op profit margin

around 5% despite heavy NA

exposure

Limited geographic diversity

Still needs to improve consumer

perception in U.S. after 2009

Liquidity: Adequate Positive Outlook

Cash at Dec. 31, $11.6 billion

Cash flow positive >$1 bil expected

No captive finance ops

Assumes profits in N.A.

Fiat - Chrysler rating difference

will not increase

For higher rating: Fiat rating and

degree of alignment is major factor;

also FOCF >$1 bil and margin

improvement

108

• Finance remains a critical aspect of the vehicle sales process

• Retail and floor plan financing are most critical

• Lease financing is a more discretionary – but important - competitive dynamic for some brands. Returning after lease residual performance and financing markets forced cutbacks

• Provides dedicated source of financing when banks and other lenders are less willing to make loans

• But the captive business model still carries significant risks:

• Dependence on external, largely wholesale sources of funding

• Potential for turbulent profitability based on credit losses or lease residuals

• Auto ABS – Good rating performance. Far more upgrades than downgrades

• Used car prices – still strong supports residual values for now

Automotive Finance Operations

109

Three Different Strategies For Financing Consumers + Dealers

General Motors

• Relies on subprime lender General Motors Financial Co. (BB / Positive/--), former unit Ally Financial,

and various banks. One notch differential with parent due to our view it is “strategic” but not yet “core”

• Strategy is evolving; buying certain Ally international assets. Completion will provide broader coverage

of product and geography

o Assets about $30 billion at June 2013. Capital sufficient for some near term growth

Ford

• Ford Motor Credit (BBB-/Stable) is a traditional captive finance company; assets around $108 billion at

June 2013

o FCE Bank PLC is BBB/Neg; Negative outlook reflects S&P’s view of UK banking risks

Chrysler

• We view Chrysler's lack of a captive finance unit as a strategic complication; no obvious impact from

lack of a captive so far

• “Synthetic” approach: third-party financial institutions provide financing (including lease financing) for

the majority of consumers and dealers

o We assume less bank interest for sub-prime and leasing segment than for prime customers

o Private label (Chrysler Capital brand) financing agreement with Santander (SCUSA) launched May 1, 2013

110

Summary U.S. Automakers

• Ford compared to GM:

• Many similarities; both are now profitable and generating cash in N.A.

• Debt burden for both is largely pension-related; both have plans to reduce pension and funded debt

• Ford traction with consumers and margin in N.A. > GM

• GM’s presence in Brazil and China > Ford

• GM’s perceived challenges in Europe at least equal to Ford’s

• Ford Motor Credit strategy well tested. GM’s finance strategy evolving but clarifying

• Ford’s track record of management continuity and strategy execution > GM

• Biggest risks for the sector

• Economies in major markets falter or worse (U.S., China, EU) sending sales lower

• Volatility returns! Automakers lose production to sales discipline and incentives increase

• Maintaining traction with customers and pricing power in light of competition and large capital

expenditures on product

• What to watch

• Pace of U.S. economic recovery; sales have been recovering in U.S. at 7%+ unemployment

• Europe restructuring pace

• SAAR level, dealer inventories, automaker production

• Financial policy – allocation of cash to shareholders/growth/debt reduction

111

U.S. SAAR Trend

112

Pick-Up Truck Sales Estimates

113

114

North American Auto Suppliers

Global Auto Supplier Ranking (76 Public Ratings; April 25, 2013)

As of April 25, 2013

Rank Company Name Corporate credit rating Business Risk Financial Risk Liquidity

1 Robert Bosch GmbH AA-/Stable/A-1+ Strong Minimal Exceptional

2 Denso Corp. AA-/Stable/A-1+ Strong Minimal Exceptional

3 Toyota Industries Corp. AA-/Negative/A-1+ Strong Intermediate Strong

4 Aisin Seiki Co. Ltd. A+/Stable/A-1 Strong Modest Strong

5 Knorr-Bremse AG A-/Stable/-- Satisfactory Modest Strong

6 Magna International Inc.* BBB+/Stable/-- Satisfactory Modest Strong

7 Hyundai Mobis Co. Ltd. BBB+/Stable/-- Satisfactory Modest Strong

8 Autoliv Inc.* BBB+/Stable/A-2 Satisfactory Intermediate Strong

9 BorgWarner Inc. BBB+/Stable/-- Satisfactory Intermediate Strong

10 Compagnie Generale des Etablissements Michelin S.C.A. BBB+/Stable/A-2 Satisfactory Intermediate Strong

11 Johnson Controls Inc. BBB+/Stable/A-2 Satisfactory Intermediate Adequate

12 Valeo S.A. BBB/Stable/A-2 Satisfactory Intermediate Strong

13 Harman International Industries Inc. BBB-/Stable/-- Satisfactory Intermediate Strong

14 AutoNation Inc. BBB-/Stable/-- Satisfactory Significant Adequate

15 TRW Automotive Inc.* BB+/Positive/-- Fair Intermediate Strong

16 Delphi Automotive PLC BB+/Positive/-- Fair Intermediate Adequate

17 LKQ Corp. BB+/Stable/-- Fair Intermediate Strong

18 Lear Corp. BB+/Stable/-- Weak Intermediate Strong

19 Metalsa S.A. de C.V. BB+/Stable/-- Weak Intermediate Strong

20 GKN Holdings PLC BB+/Stable/-- Satisfactory Significant Adequate

Issuer Ranking: Global Auto Suppliers

*Rating/Outlook/CreditWatch Actions since April 25, 2013

Company To From Date

Autoliv Inc. BBB+/Positive/A-2 BBB+/Stable/A-2 30-May-13

Magna International Inc. BBB+/Positive/-- BBB+/Stable/-- 11-Jun-13

TRW Automotive Inc. BBB-/Stable/-- BB+/Positive/-- 13-Sep-13

Global Auto Supplier Ranking Continued



21 Group 1 Automotive Inc. BB/Positive/-- Fair Significant Adequate

22 Dana Holding Corp. BB/Positive/-- Weak Significant Adequate

23 Tenneco Inc. BB/Positive/-- Weak Significant Adequate

24 Asbury Automotive Group Inc. BB/Stable/-- Fair Significant Adequate

25 Gestamp Automocion BB/Stable/-- Fair Significant Adequate

26 Continental AG* BB-/Positive/B Satisfactory Highly Leveraged Adequate

27 Shiloh Industries Inc. BB-/Stable/-- Weak Significant Adequate

28 Stoneridge Inc.* BB-/Stable/-- Weak Significant Adequate

29 Cooper Tire & Rubber Co.* BB-/Stable/-- Weak Significant Adequate

30 Penske Automotive Group Inc.* BB-/Stable/-- Fair Aggressive Adequate

31 Piaggio & C. SpA BB-/Stable/-- Fair Aggressive Adequate

32 Sonic Automotive Inc.* BB-/Stable/-- Fair Aggressive Adequate

33 The Goodyear Tire & Rubber Co. BB-/Stable/-- Fair Aggressive Adequate

34 Pinafore Holdings B.V. BB-/Stable/-- Fair Aggressive Adequate

35 American Axle & Manufacturing Holdings Inc. BB-/Stable/-- Weak Aggressive Adequate

36 Tenedora Nemak S.A. de C.V.* BB-/Stable/-- Weak Aggressive Adequate

37 TMD Friction Group S.A.* BB-/Stable/-- Weak Aggressive Adequate

38 China Zhengtong Auto Services Holding Ltd. BB-/Stable/-- Weak Aggressive Adequate

39 Baoxin Auto Group Ltd. BB-/Stable/-- Weak Aggressive Adequate

40 Cooper-Standard Holdings Inc. BB-/Negative/-- Weak Significant Adequate




Continental AG BB/Stable/B BB-/Positive/B 24-May-13

Sonic Automotive Inc. BB/Stable/-- BB-/Stable/-- 06-May-13

TMD Friction Group S.A. NR BB-/Stable/-- 31-May-13

Tenedora Nemak S.A. de C.V. BB-/Positive/-- BB-/Stable/-- 07-Jun-13

Stoneridge Inc. BB-/Positive/-- BB-/Stable/-- 20-Jun-13

Penske Automotive Group Inc. BB-/Positive/-- BB-/Stable/-- 27-Jun-13

Cooper Tire & Rubber Co. BB-/WatchNeg/-- BB-/Stable/-- 27-Jun-13

116




41 Remy International Inc. B+/Positive/-- Weak Aggressive Adequate

42 Tower International Inc. B+/Positive/-- Weak Aggressive Adequate

43 Allison Transmission Inc. B+/Stable/-- Fair Aggressive Adequate

44 KAR Auction Services Inc. B+/Stable/-- Fair Aggressive Adequate

45 Visteon Corp. B+/Stable/-- Weak Aggressive Adequate

46 ASP HHI Intermediate Holdings Inc. B+/Stable/-- Weak Aggressive Adequate

47 Mark IV LLC B+/Stable/-- Weak Aggressive Adequate

48 Metaldyne LLC B+/Stable/-- Weak Aggressive Adequate

49 Wabash National Corp. B+ /Stable/-- Weak Aggressive Adequate

50 Grede Holdings LLC B+/Stable/-- Weak Aggressive Adequate

51 Waupaca Foundry Inc. B+/Stable/-- Weak Aggressive Adequate

52 Pittsburgh Glass Works LLC B+/Stable/-- Weak Aggressive Adequate

53 KSS Holdings Inc. B+/Stable/-- Weak Aggressive Adequate

54 Pendragon PLC B+/Stable/-- Weak Aggressive Adequate

55 PT Gajah Tunggal Tbk. B+/Stable/-- Weak Aggressive Adequate

56 ARCAS Intermediate-Holdings Entity B+/Stable/-- Weak Aggressive Adequate

57 Schaeffler AG B+/Stable/-- Satisfactory Highly Leveraged Adequate

58 International Automotive Components Group S.A. B+/Negative/-- Vulnerable Aggressive Adequate


117




59 Commercial Vehicle Group Inc.* B/Positive/-- Vulnerable Aggressive Adequate

60 Europcar Groupe S.A. B/Stable/-- Fair Highly Leveraged Adequate

61 Autoparts Holdings Ltd.* B/Stable/-- Fair Highly Leveraged Less than adequate

62 American Tire Distributors Inc. B/Stable/-- Weak Highly Leveraged Adequate

63 Transtar Holding Co. B/Stable/-- Weak Highly Leveraged Adequate

64 Fastlane Holding Co. Inc. B/Stable/-- Weak Highly Leveraged Adequate

65 August Cayman Intermediate Holdco, Inc B/Stable/-- Weak Highly Leveraged Adequate

66 Meritor Inc. B/Stable/-- Weak Highly Leveraged Adequate

67 Affinia Group Intermediate Holdings Inc. B/Stable/-- Weak Highly Leveraged Adequate

68 SANLUIS Rassini S.A. de C.V.* B/Stable/-- Weak Highly Leveraged Adequate

69 Neenah Enterprises, Inc. B/Stable/-- Vulnerable Aggressive Adequate

70 UC Holdings Inc. B/Stable/-- Vulnerable Highly Leveraged Adequate

71 UCI Holdings Ltd.* B/Negative/-- Fair Highly Leveraged Adequate

72 Federal-Mogul Corp. B/Negative/-- Weak Highly Leveraged Adequate

73 Hyva Global B.V. B/Negative/-- Weak Highly Leveraged Adequate

74 Accuride Corp. B-/Negative/-- Vulnerable Highly Leveraged Adequate

75 Exide Technologies* B-/WatchNeg/-- Vulnerable Highly Leveraged Less than adequate

76 A.T.U. Auto-Teile-Unger Holding GmbH* CCC+/Negative/-- Weak Highly Leveraged Weak




Exide Technologies CCC+/WatchNeg/-- B-/WatchNeg/-- 03-May-13

Exide Technologies D/--/-- CCC+/WatchNeg/-- 11-Jun-13

A.T.U. Auto-Teile-Unger Holding GmbH CCC-/WatchNeg/-- CCC+/Negative/-- 23-May-13

Servus HoldCo Sarl (Stabilus) B(prelim)/Stable/-- New 28-May-13

Falcon (BC) Germany Holding 3 GmbH B(prelim)/Stable/-- New 02-Jul-13

Commercial Vehicle Group Inc. B/Stable/-- B/Positive/-- 22-Jul-13

UCI Holdings Ltd. B-/Stable/-- B/Negative/-- 13-Aug-13

SANLUIS Rassini, S.A. de C.V. B+/Stable/-- B/Stable/-- 21-Aug-13

Autoparts Holdings Ltd. B-/Stable/-- B/Stable/-- 28-Aug-13 118

Auto Suppliers/Retailers Business & Financial Risk Profile

Business Risk Profile

Minimal Modest Intermediate Significant Aggressive Highly Leveraged

Excellent -- -- -- -- -- --

Strong Bosch,

Denso

Aisin Seiki Toyota

Industries

-- -- --

Satisfactory -- Knorr-

Bremse,

Hyundai

Mobis,

Magna,

Autoliv

JCI, Michelin,

BorgWarner,

Valeo, Harman,

TRW

Autonation,

GKN,

Gestamp

Continental Schaeffler AG

Fair -- -- Delphi, LKQ Group 1,

Asbury, Sonic

Piaggio, Goodyear Tire, KAR,

Pinafore, Penske, Allison,

Falcon

Europcar, Servus

Weak -- -- Lear, Metalsa Tenneco,

Dana, Shiloh,

Stoneridge,

Cooper-

Standard,

Cooper Tire,

Tenedora

Axle, Visteon, ASP HHI, Mark IV,

Metaldyne, PGW, Remy,

Tower, Grede, Waupaca,

Wabash, China Zhengtong,

Baoxin, ARCAS, PT Gajah,

KSS, Pendragon, SANLUIS

Meritor, Affinia, August

Cayman, A.T.U Auto-Teile

Unger Handels, Transtar,

Fed-Mog, American Tire,

Fastlane, Hyva, UCI,

Autoparts Holdings

Vulnerable -- -- -- -- International Automotive

Components, Neenah

UC Holdings, Accuride,

Commercial Vehicle

Business And Financial Risk Profile Matrix

Financial Risk Profile

As of September 16, 2013

119

Supplier Margins Flattening Out

120

11.6%

10.4%

9.6%

10.4%

8.5% 8.6%

11.7% 11.6%

11.0%

8.7%

8.0%

9.9%

10.8%

7.7%

7.3%

9.3% 9.1%

8.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012

Suppliers

OEMs

S&P 2013 & 2014 Assumption Summary Key Factors S&P Base-Case Assumptions

Light Vehicles (millions) 2013 2014

U.S. Light Vehicle Sales * 15.6 ( 8% YoY) 16.0 ( 3% )

North American Production 16.0 ( 4% ) 16.5 ( 3% )

Europe Production 18.9 ( 3% ) 19.3 ( 2% )

China Production 20.2 ( 11% ) 23.1 ( 14% )

Commercial Vehicles - Class 8 (‘000s)

North American Production 252 ( 10% ) 281 ( 11% )

W. Europe Production 299 ( 1% ) 291 ( 3% )

China Production 638 ( 8%) 707 ( 11% )

S&P Projections

Revenue Growth (midspread) 2.0% to 5.0% 3.0% to 6.5%

Adjusted EBITDA margins (midspread) 8.5% - 13.5% 9.0% - 14.0%

Adj. FOCF/Debt (median) ~ 5.0% ~ 6.5%

Adj. Debt to EBITDA (median) ~ 3.8x ~ 3.4x

source: LMC Automotive September 2013 (previously, a forecasting division of J.D. Power);

* Standard & Poor’s estimates

121

Is Credit Quality Improvement Flattening Out?

• Upgrades (mid-2009 – YE 2009) from crisis lows driven by improved liquidity

• Another round of upgrades (2010 - 2011) reflected evidence that profitability can be

sustained

• A few upgrades in 2012; Some upgrades in 2013

• Business risk is a key focus

Navigating Europe

• For 2013 and 2014 we are watching:

Pace of economic recovery or decline (Europe) by region

SAAR level, Dealer inventories, Automaker production

Commodity cost exposure and recovery power

Profitability – margin compression?

Financial Policy – Many have cash and are starting to spend it. Spend with caution given somewhat

fragile economic outlook?

Capital allocation possibilities: shareholder friendly actions (outright sale/recap/dividend

reinstatement); acquisitions; maintain “excess” liquidity?

122

European Global Auto Makers – Investment Grade

BMW AG A/Stable/A-1 Company Focus

Business

Strong

Financials

Modest

Rating leeway

Low High


Leading manufacturer in the

luxury autos segment

Broad geographic diversification

and strong track record of

successful products

Conservative financial policy, low

leverage, strong FOCF generation

and low dividend payments

Positive demand momentum for

luxury cars

High demand volatility of the

auto sector

Stringent environmental

requirements may challenge

product development

Short-Term Credit Factors Stable Outlook

We view liquidity as strong

BMW does not report a

standalone full set of results for the

financial service units; financing

activities of the industrial and

financial divisions are common

Auto EBIT margin maintained in

the 8-10% range and FFO to Debt

in the 50%-60% range. We expect

the company to continue to

generate FOCF.

Volkswagen AG A- /Positive/A-2 Company Focus

Business

Strong

Financials

Modest

Rating leeway

Low High


Multibrand strategy, offering wide

product and geographic diversity

>50% of earnings from premium

12% global market share, strong

in Trucks, strong in China and

several other EM

Above-European average

profitability and cash flow

generation

Commitment to a moderate

financial leverage

Aggressive Capex plans and

ambitious growth objectives

Importance of ongoing costs

optimization

Market positioning of Seat

North American operations not

contributing much to earnings

Complex Corporate governance

Short-Term Credit Factors Positive Outlook

VW group has strong liquidity and

financial flexibility

1-year time horizon

Adjusted FFO to debt close to

60% and debt/EBITDA < 1.5x; 6%

operating margin

Scania (publ), AB A- /Positive/A-2 (a- SACP) Company Focus

Business

Satisfactory

Financials

Modest

Rating leeway

Low High


Leading market positions in

Europe and South America in heavy

trucks and buses

Up-to-date product range and the

highest degree of component

commonality in the global truck

industry

A conservative financial policy and

a modest financial risk profile, very

strong profitability relative to peers'

Operations within industries

characterized by high volatility and

high capital intensity

Risk from sizable operations in

economically and politically

unstable regions (Latin America)

Lesser market diversity than

some larger peers

Short-Term Dev Stable Outlook

Softening order intake

Pre-buy effect for Euro 6?

Strong net cash position

Declining but still high profitability

and cash generation

Outlook linked to Volkswagen

Daimler AG A-/Stable/A-2 Company Focus

Business

Satisfactory

Financials

Modest

Rating leeway

Low High


Leading position in the luxury

auto segment

Broad geographic and product

diversity with historically

successful product range

Good financial flexibility

Volatile demand in the auto,

truck, and bus sectors,

High operational gearing,

Stringent environmental

requirements and still some way

to go to achieve the EU new

targets


We view liquidity as strong.

FOCF slightly below dividends

in 2013 (excl. EADS disposal)

FFO/debt 50%-60% and

debt/EBITDA < 1.5x even in

difficult years

Financials currently above

indicative ratios – headroom for

3%-4% sales drop

Volvo (publ), AB BBB /Negative/A-2 Company Focus

Business

Satisfactory

Financials

Intermediate

Rating leeway

Low High


Leading market positions in

Heavy CV, buses, and construction

equipment

Broad geographic diversity and

up-to-date product line

Strong liquidity, also in

economic downturns

Highly volatile, cyclical and

capital intensive industry

High operational gearing and

fixed costs base

Large historical swings in

profitability

Short-Term Development Negative Outlook

Softening order intake (Weak US

and APAC surprising)

Strong liquidity

Solid profitability and cash flow

expected in 2012

Performing below ratios

commensurate with rating

FFO/Debt > 35%

EBIT margin to be restored to

6%

European Global Auto Makers – Non-Investment Grade

Renault S.A. BB+/Stable/B Company Focus

Business

Fair

Financials

Intermediate

Rating leeway

Low High


Good market shares in Europe

with a focus on small cars and the

entry segment

Location of industrial footprint

(Romania, Turkey, Morocco)

Except S. Korea, non-Europe

contributing to earnings

Strategic alliance with Nissan

Solid financing arm (RCI Banque

BBB-rated)

Weak profitability

Relatively small size on its own

Still high concentration on the

European market, no direct presence

in China

Limited product offer in premium

segments

Low volumes in EV, meaningful

capex


Adequate liquidity

Generating positive FOCF

Financial flexibility, stakes in

Nissan and AvtoVAZ

Current credit ratios leave some

leeway for the ratings

Improvement in core profitability as

key rating driver going forward

Jaguar Land Rover PLC BB/Stable/-- Company Focus

Business

Fair

Financials

Intermediate

Rating leeway

Low High


Well recognized brands in the

premium segment

Positive momentum of the

demand for luxury cars

Positive track record of product

renewals within the Land Rover

brand

Currently solid operating margin

Strong credit measures

High demand volatility of the auto

sector

Need to continue to invest

significantly to relaunch Jaguar and

to enlarge LR product range

Still limited diversification when

compared with larger peers


We view liquidity as adequate

Reflects Tata Motors‘ outlook

Some weakening in operating

profit and FOCF generation is

foreseen

Rating upside linked to Tata

Motors

Fiat S.p.A. BB-/Stable/B Company Focus

Business

Fair

Financials

Aggressive

Rating leeway

Low High


Strong market positions and

sustained profitability in Brazil and

in the U.S. through 58.5%-owned

Chrysler

Positive contribution from less

cyclical luxury brands and to a

lesser degree from components

Reputed powertrain technology

that could be leveraged further

across brands

Low capacity utilization and

large trading losses in a

structurally oversupplied Southern

European market

High debt burden

Our expectation of negative free

operating cash flows over the

rating horizon

Limited access to Chrysler‘s

cash due to borrowing covenants


We view liquidity as adequate

Uncertainty associated with the

timing of cash outflows related to a

potential increase in the Chrysler

stake

Target ratios of 12% to 20%

adjusted FFO-to-debt and 4.5x to

5x Debt-to-EBITDA

Improvement in EMEA

profitability and leverage as key

rating drivers going forward

Peugeot S.A. BB-/Negative/B Company Focus

Business

Fair

Financials

Aggressive

Rating leeway

Low High


No. 2 market position in

Western Europe, 1st in LCV

Diversifiction benefits from

Faurecia (supplier) and captive

BPF

Track record of a moderate

financial policy

Severely loss-making in automotive

activities

No consolidated earnings benefit from

improving revenue diversification

outside Europe

Exposure to volume decline, excess

capacity and competitive pressure in a

structurally oversupplied Southern

European market

Execution risks around 2nd

restructuring plan

Short-Term Credit Factors Negative Outlook

We still view liquidity as

adequate

Unsustainably high rate of

cash depletation

Target ratios of >12% adjusted FFO to

debt and 5x Debt to EBITDA

Turnaround in FOCF expected to start

in 2013 and to be confirmed in 2014

Aston Martin Holdings (UK) Ltd. B+/Stable/-- Company Focus

Business

Fair

Financials

Aggressive

Rating leeway

Low High


Strong brand in niche market for

high luxury sports cars affording

pricing power

Good production flexibility,

agreement with AMG

Promising model pipeline

(Vanquish) supporting volume

growth

Equity capital increase

completed - inflow of

£125 million in April 2013

Highly cyclical end markets

Niche position for high-end

luxury sports cars / low product

diversity

Highly variable earnings

Short-Term Credit Factors Outlook

Adequate liquidity

Negative FOCF in 2013

Rating pressure when FFO/debt

sustainably below 12%

FFO/debt 2013: 10%-12% (base-

case)

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135

Documents

S&P Light Vehicles Report