China and theGlobal Automotive

IndustryDeutsche Bank

Access China Conference 2004

February 23, 2004

Your Business Partner in China

ASIMCO at a GlanceASIMCO at a GlanceASIMCO at a GlanceCompany

Founded

Financial Profile

Headquarters

Products

ManufacturingLocations

Customers

Funding

Company

Founded

Financial Profile

Headquarters

Products

ManufacturingLocations

Customers

Funding

Independent, China based manufacturing organization with tooling, casting, machining, assembly and sourcing capability

February, 1994

$350 million Sales

Beijing, PRC

Machined Castings (gray iron, ductile and aluminum); Brake Systems and Products; Diesel Fuel Injection Systems; Rotating Electrics;Camshafts; Piston Rings and Rubber Products

11 operating units in nine provinces in China; 2 manufacturing facilities and a sales and service organization in the U.S.

70% China; 30% Non China, primarily U.S.

US institutions

ASIMCO Financial SummaryASIMCO Financial SummaryASIMCO Financial Summary(US$ Million)

Sales

0100200300400500

01A 02A 03A 04P 05P

(US$ Million)

EBITDA

0

20

40

60

80

01A 02A 03A 04P 05P

(US$ Million)

Profit after Tax

0

10

20

30

40

01A 02A 03A 04P 05P

Actual: 2001 to 2003

Plan: 2004-2005 based on existing programs only

ASIMCO Anhui, CR Sub-JV

ASIMCO Tianwei, ASIMCO Casting

ASIMCO Meilian

ASIMCO Shanxi

ASIMCO Yizheng

ASIMCO Nanyue

ASIMCO Shendian; DRA Sub-JV

Beijing

ASIMCO Guangzhou

ASIMCO Intl.Cleveland,Ohio

ASIMCO CamshaftGrand Haven, MI

ASIMCO’s Global OperationsASIMCOASIMCO’’ss Global OperationsGlobal Operations

ASIMCO Products for the Sedan Powertrain and ChassisASIMCO Products for the Sedan ASIMCO Products for the Sedan PowertrainPowertrain and Chassisand Chassis

ASIMCO Products for the TruckEngine and Diesel Fuel SystemASIMCO Products for the TruckASIMCO Products for the TruckEngine and Diesel Fuel SystemEngine and Diesel Fuel System

ASIMCOASIMCO’’ss Top 20 Customers Top 20 Customers -- 20020033

The Global Auto Industry

Global Vehicle Production (Units)Global Vehicle Production (Units)Global Vehicle Production (Units)Unit: ‘000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

93 94 95 96 97 98 99 00 01 02 03 2010

Global Auto’sA Growth Industry!

Source: autopolis: “World Auto Industry Outlook to 2010,” June 2003

Future Growth by RegionFuture Growth by RegionFuture Growth by Region

2003 2010 %Unit: ‘000

Western Europe 16,443 15,603 (5%)

Japan 9,875 9,615 (3%)

NAFTA 15,333 18,169 +18%

Pacific Rim 8,909 16,424 +84%

South America 2,050 2,623 +28%

Eastern & Central Europe 2,790 3,809 +37%

Other 1,550 2,074 +34%

Total 56,949 68,316 +20%

Source: autopolis: “World Auto Industry Outlook to 2010,” June 2003

Have Recovered Somewhat, but US Components Stocks Have Still Underperformed the MarketHave Recovered Somewhat, but Have Recovered Somewhat, but US Components US Components Stocks HaveStocks Have Still Still Underperformed the MarketUnderperformed the Market

MV: Market Value of Equity as of December 31, 1998/2003 DJIA: Dow Jones Industrial Average

Source: Dow Jones, Multex

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

97 98

MV of 20 LargestComponents Companies

$61.9B $57.7B-7%

DJIA9,181 10,425

+14%

96 99 00 01 02 03

Manufacturing

• Growing Transportation Needs

• Strategy:Provide World Class Technology at Affordable Prices

• Growing Transportation Needs

• Strategy:Provide World Class Technology at Affordable Prices

ASIMCOASIMCO

• Global Pressures to Reduce Costs

• Strategy:

• Global Pressures to Reduce Costs

• Strategy:

Market

Provide World Class “QSD”at Competitive Prices

The China OpportunityThe China OpportunityThe China Opportunity

The China Market OpportunityVehicle Sales - UnitsThe China Market OpportunityThe China Market OpportunityVehicle Sales - Units

(‘000)

91 92 93 94 95 96 97 98 99 00 01 02 03E

TrucksTrucks

BusesBuses

Passenger CarsPassenger Cars+36%

+30%

WTOAsian Crisis

4,000

3,000

37% GPA

Austerity Program,Deflation

2,000

1,000

0

China - Next 10 Years“Deja Vu All Over Again!”China China -- Next 10 YearsNext 10 Years“Deja Vu All Over Again!”

Vehicles Produced(Units ’000)

12,000Japan

1965 to 198013% GPA

China1998 to 2003

21% GPA

China 2003 to 2013 10% GPA?

10,000

8,000

6,000

4,000

2,000

068 7466 7270 76 78 80

98 040200 06 08 10 12

Effect of WTOEffect of WTOEffect of WTO

Vehicle Financing None Beginning

2000 2003 %

Different Models 11 51 +364%Produced in China

Price:Buick Regal $42,322 $31,898 -24%Citroen (RLC1.4) $15,919 $10,641 -33%Changan Alto $ 7,001 $ 4,571 -35%

Passenger Car Unit Sales 612,533 1,971,601 48% GPA

The China Market OpportunityTruck Sales - UnitsThe China Market OpportunityTruck Sales - Units

(‘000) % GPA% GPA1,400

49%49%

18%18%

(9%)(9%)

1%1%

98 99 00 01 02 03E

13%13%

Heavy Trucks>14.0 Ton GVW

Light Trucks1.8-6.0 Ton GVW

Medium Trucks6.0-14.0 Ton GVW

Mini Trucks<1.8 Ton GVW

ALL TRUCKSALL TRUCKS

1,200

1,000

800

600

400

200

0

The China Manufacturing OpportunityGlobal Manufacturing TrendsThe China Manufacturing OpportunityThe China Manufacturing OpportunityGlobal Manufacturing TrendsGlobal Manufacturing Trends

Jap. China China Mexico E.Europe

Population 500 1000 1500 2000 2500 3000 3500(Millions)

2000 + U.S. W.Europe IndiaIndia

1990’s

1980’s

1970’s

1950 to1970’s

(Four Tigers: S. Korea, TW, HK, Singapore)

Jap. Mexico E.EuropeU.S. W.

Europe

Jap.U.S. W.Europe

Jap.U.S. W.Europe

U.S. W.Europe

Since the 1970’s, industrial developmenthas spread to countries with

larger populations and lower costs.

The Global Work ForceNow Larger and Lower Cost Than EverThe Global Work ForceNow LargerLarger and Lower Cost Than Ever

China China IndiaIndia

Lowest Hourly Labor Rate

Lowest Hourly Labor Rate

Jap.U.S. W.Europe

$18.50$18.50

$3.00$3.00

$1.60$1.60

$0.36$0.36

PricesPrices

As China and India develop their manufacturing capability, pressure on global prices

will intensify

3.5 billion people3.5 billion people

Jap.U.S. W. Europe

W.Europe

U.S.

U.S.

Jap.

Jap.

W. EuropeMexico

Mexico E. Europe

E. Europe

China’s “Human Capital”The Key to Unlocking China’s PotentialChinaChina’’s s ““Human CapitalHuman Capital””The Key to Unlocking ChinaThe Key to Unlocking China’’s Potentials Potential

Annual Additions to Work ForceAnnual Additions to Work Force -- 10 million

University Enrollment 2002University Enrollment 2002 13 million 9 million

Growth from Previous YearGrowth from Previous Year 3%% Engineering Majors% Engineering Majors 6%

26%39%

But, Biggest Problem Operating in China is Closing China’s “Management Gap”But, Biggest Problem Operating in China is But, Biggest Problem Operating in China is Closing ChinaClosing China’’s s ““Management GapManagement Gap””

Legacy of State Ownership and Unbridled EntrepreneurialismLegacy of State Ownership and Unbridled Entrepreneurialism

Developed EconomiesDeveloped Economies ChinaChina

Bureaucratic Entrepreneurial Bureaucratic Entrepreneurial

The China Components IndustryThe China Components IndustryThe China Components Industry

“A Fragmented Industry”1,540 Registered Enterprises3,500-8,500 Non-Registered

Components Statistics($ billion)

2001 2002 2003

Sales 21.0 28.0 36.2

Imports 2.6 3.0 7.2

Exports 1.6 2.2 5.7

Average Annual Sales Per Supplier:

$1.7 to $3.6 million

Source: China Auto Industry Year Book, 2003 figures come from China Association of Auto Manufacturers

Types of Suppliers in ChinaTypes of Suppliers in ChinaTypes of Suppliers in China

Type Comment

1. State Owned Enterprises Relatively large; generally slow to change and adapt to global standards

2. Private Chinese Companies Smaller enterprises; react quickly, but generally difficult to control and manage

3. Foreign Invested Enterprises Global standards

China: Opportunity or Threat?China: Opportunity or Threat?China: Opportunity or Threat?

Capitalizing on the Opportunity

ASIMCO’s Experience

Phases of DevelopmentPhases of DevelopmentPhases of Development

Acquisition1995 to 1997

Concept1990 to 1994

Management Development 1998 to 2001

Corporate Development2002 Forward

ActivityPeriod

IV

III

II

I

Phase

Evolution of the ASIMCO GroupEvolution of the ASIMCO GroupEvolution of the ASIMCO Group

August1990

December1991

August1992

January1993

August1993

February1994

August1994

JFP decides to start company

in AsiaJFP moves to

Hong KongJFP’s first

trip to China

Decision tofocus on

componentsASIMCOformed

Initial capital$158 million

FirstJoint Venture

100 factoriesin 40 cities!

ASIMCO’s Components StrategyASIMCOASIMCO’’ss Components StrategyComponents Strategy

To create a global, China based, multiproduct components company with:

• Internationally competitive quality and service

• Significant to dominant market shares in each of its major products

• Penetration of the OEM, aftermarket and export markets

• Economies of scale in management; and

• Access to global sources of debt and equity capital

Evolution of the ASIMCO GroupEvolution of the ASIMCO GroupEvolution of the ASIMCO Group

September

November

July June

August

December

April August November

December

ASIMCO AnhuiRubber

ASIMCO Tianwei

Fuel Injection

ASIMCO ShendianStarters,

Alternators

ASIMCO Nanyue

Fuel Injection

ASIMCO MeilianBrakes

ASIMCO YizhengPiston Rings

Hubei DRASub-JV

Chicago RawhideSub-JV

ASIMCO ShanxiEngine Blocks with

Caterpillar

ASIMCO Intl.ASIMCO Casting

ASIMCO Guangzhou

19981997199619951994

June

1999 2003

ASIMCO Camshaft

April

ASIMCO’s StrategyASIMCOASIMCO’’s Strategys Strategy

Market Opportunity in China

Strategy Provide the world’s best technology at affordable prices by manufacturing in China

Rationale Technology is key differentiating factor in China

Tactic Strategic, technology relationships

Examples License and JV:NPR – Piston Rings; Camshafts; Valve Seat Inserts

Joint Venture:Caterpillar – Engine Block and Head Castings

Acquisition: CamshaftsASIMCO R&D: Tech Center to be established

ASIMCO’s StrategyASIMCOASIMCO’’s Strategys Strategy

Manufacturing Opportunity in China

Strategy Provide globally competitive prices at internationalstandards of quality, service and delivery

Rationale Globalization and cost pressures

Tactics “Total Quality Management”Export channels through strategic relationships andASIMCO International

China’s Management GapChinaChina’’s Management Gaps Management Gap

Legacy of State Ownership and Unbridled EntrepreneurialismLegacy of State Ownership and Unbridled Entrepreneurialism

Developed EconomiesDeveloped Economies ChinaChina

Bureaucratic Entrepreneurial Bureaucratic Entrepreneurial

ASIMCO’s

“New China” Manager

Program

ASIMCOASIMCO’’s Managements Management

Management

Mindset Closed Open

Age 40 - 60 30 - 50

Education Engineering Engineering/Management

Experience SOE SOE/Global Companies

Exposure China Only China/Outside China

Old China New China

ASIMCO’s Mission StatementASIMCOASIMCO’’ss Mission StatementMission Statement

Core PurposeTo create a truly global company which is unique because of its ability to combine the best in China with the best from the rest of the world.

Core ValuesEmployees of ASIMCO believe in Teamwork and accept Personal Responsibility for meeting goals. As part of an increasingly competitive global economy, they understand the need for Continuous Improvement. Above all, they seek Opportunity and set Significant Goals for themselves and for ASIMCO.

ASIMCO’s GoalTo be recognized as the global leader in all our products.

ASIMCO Management SystemASIMCO Management System1. Common Vision, Values and Goal

2. Performance Management

3. Leadership Development

4. Incentives based upon “Equity Value Added”

5. Internal and External Functional Training

6. Best Practices – Quarterly GM Meetings

7. Modern Quality Systems

8. Transparent, US GAAP Financials

9. Fourth Shift ERP System

ASIMCOASIMCO““One of the 10 Best Employers in ChinaOne of the 10 Best Employers in China””

1. The Portman Ritz-Carlton, Shanghai

2. Microsoft (China)Co., Ltd.3. Roche(China) Ltd.

4. Abbot Laboratories – China

5. ASIMCO

6. Navion (Shanghai) Software Development Co., Ltd.

7. Anheuser-Busch Asia Inc.

8. Shanghai Hormel Foods Co., Ltd.9. Amway (China) Co., Ltd.

10. Shangri-La International Hotels & Resorts Ltd.

* Survey conducted by the Asian Wall Street Journal, the Far Eastern Economic Review and Hewitt Associates in 2001

ASIMCO Group TTM Sales GrowthASIMCO Group TTM Sales GrowthASIMCO Group TTM Sales GrowthSales Ratio:Recent / Previous 12 Months

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1996 1997 1998 1999 2000 2001

Auto unit sales growth falls from 8% to 1% in 1996

“New China”Manager Program

Auto unit sales growth 2% in 1998

“Asian Crisis” ASIMCO Vision, Values, Goal

14 of 15 companies export in 2000

2002 2003

SARS

ASIMCO Camshaft joins ASIMCO

ASIMCO Rolling 12 Month EBITDAASIMCO Rolling 12 Month EBITDAEBITDA has more than quintupled since “New China” Manager Program began in 1997

“New China”Manager Program

0

10,000

20,000

30,000

40,000

50,000

1996 1997 1998 1999 2000 2001 2002 2003

Repositioning the Global Supply Base:Repositioning the Global Supply Base:ChinaChina’’s Potential Roles Potential Role

Not an “All or None” Proposition! Not an Not an ““All or NoneAll or None”” Proposition! Proposition!

The global supply industry has to change to reflectnew economic realities

All U.S. manufacturing will move to Low Cost Countries such as China

True FalseStatement

Global Assembler:

“We may never source more than 5 to 6% of our total spend directly from China, but we hope that every one of our suppliers will be sourcing at least 50%.”

Common China Sourcing ProblemsCommon China Sourcing ProblemsCommon China Sourcing Problems

Common Problems Comment

Overall Difficulty Suppliers are spread throughout a large country

Inconsistent Quality Inconsistent implementation of quality systems

Time Difference 12 hours with U.S.; 6 hours with Europe

Distance (delivery) Long supply chain

Language Language skills less prevalent outside major cities

What do Global Customers Want? Combining the Best of China and the Rest of the WorldWhat do Global Customers Want? What do Global Customers Want? Combining the Best of China and the Rest of the WorldCombining the Best of China and the Rest of the World

Requirements Advantage

1. World Class Quality, Service and Delivery U.S., Europe, Japan

2. Development Capability U.S., Europe, Japan

3. Competitive Price China

4. Yearly Price Reductions China

ASIMCOASIMCO’’ss StrategyStrategy

Creating a “Unique” Sourcing Opportunity

Common Problems Solution

Overall Difficulty Group concept – “One Stop Shopping”

Inconsistent Quality Majority ownership, modern management

Time Difference Sales, service and product engineering support in customer’s time zone

Distance (delivery) Warehousing

Language Bilingual sales and service personnel

ASIMCO Camshaft SpecialtiesASIMCO Camshaft SpecialtiesASIMCO Camshaft SpecialtiesBecame Part of ASIMCO:

Sales:

Products:

Technology:

Customers:

Location:

Became Part of ASIMCO:

Sales:

Products:

Technology:

Customers:

Location:

April 9, 2003

$70 million

Steel, Cast and Powdered Metal Assembled Camshafts

Nippon Piston Ring

DaimlerChrysler, General Motors, Ford, Caterpillar, Cummins, Isuzu

Grand Haven, Michigan

Benefits to ASIMCOBenefits to ASIMCOBenefits to ASIMCO

1. Major Customers

2. World Class Technology

3. Leading Global Market Position in Camshafts

4. Well Performing Business

5. Good Management

6. Substantial Asset Value

7. Favorable industry trends

New ParadigmExample: ASIMCO CamshaftsNew ParadigmNew ParadigmExample: ASIMCO CamshaftsExample: ASIMCO Camshafts

US/China China China US→USChina →China

US→USChina →China

US US US US US

24 Hour Coverage Lower Cost Lower Labor &

Equipment CostCritical to

QualityCustomer

Safety

Design

Raw Material:

Casting

Forging

Bar Stock

Assembled Cam

RoughMachining

FinishedMachining

Test

Inspection

Shipping

Service

Process

Historical

New Paradigm

Advantage

New ParadigmWin/Win/Win PropositionNew ParadigmNew ParadigmWin/Win/Win PropositionWin/Win/Win Proposition

Winners Advantage

Cost advantage of China sourcing, but safetyCustomers

of dealing with a proven and trusted supplier

Increased profitability and global Suppliers

competitiveness

Employees More opportunities with a company with a future

SummarySummarySummary

1. China Automotive Market -- Rapidly assuming its role as one of the world’s largest and most vibrant automotive industries

2. Development Factors -- WTO is having a profound impact on China’s passenger car market; while the development of China’s highway system is having a similar impact on the commercial vehicle segment

3. Global Cost Pressures - Will continue, and a China manufacturing strategy will be essential to maintaining global competitiveness

4. The Components Sector - China’s components industry is fragmented, and developing professional managements remains the key issue; the global supply industry must change to adapt to new economic realities

5. New Paradigm – China’s development as both a market and manufacturing opportunity will give rise to a “New Paradigm” in the components industry