oesa automotive supplier barometer...and utilizing outside resources to help in recruiting. program...

OESAAutomotive Supplier Barometer

Detroit – Washington D. C.

January 5-7, 201585 Survey Responses

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

OESA Automotive Supplier Barometer Summary The January OESA Automotive Supplier Barometer focused on production related issues and

strategies that suppliers are deploying to manage volume increases this year and next. OESA received 85 responses to this survey and all indications are that suppliers are in a good place and seeing success.

The Supplier Sentiment Index (SSI) has continued to remain in the positive territory since January 2013. This month’s SSI came in at 61, a nice increase from November’s index of 56. Suppliers are indicating a sense of encouragement in the market, with an increase in the significantly more optimistic and more so in the somewhat more optimistic outlooks. Adding to this was a decrease in the somewhat more pessimistic view. One concern raised by suppliers is that of increasing customer pricing pressures. However, overall suppliers are more confident with new business, increasing production levels, and stabilization of economies. (See pages 5-9)

Production volumes have more than doubled between the 2009 production volume trough and the forecast volume level of 2015. Throughout this time period supplier breakeven volumes have only increased 42 percent to 13.5 million units. Companies are investing in capital and human resources, but implementing strategies that increase productivity and efficiencies has been key in keeping costs down and growing business. This is also evidenced in capacity utilization rates. Supplier bringing on idled capacity and now running at a median rate of 85% and 90 percent at the upper quartile segment, with five percent additional idle capacity. (See pages 10-12)

Suppliers are feeling less confident that customers’ production releases are matching their current sales and inventory levels as compared with last year. This decrease in confidence stems from uncertainty in gas prices and vehicle mix volumes along with model level forecasting accuracy. This is leading some suppliers to slightly inflate their releases through the supply chain though most companies continue a straight pass-through of requirements. (See pages 13-14)

OESA Automotive Supplier Barometer- January 2015Published with the support of2

OESA Automotive Supplier Barometer Summary (continued)

Though suppliers remain confident that they will meet customers’ releases over the next 12 months, there was a shift from 70 percent to 56 percent of companies feeling very confident and more now feeling somewhat confident. This is likely related to the risk associated with the continued high level of new launches, uncertainly in the accuracy of production volume releases and mix and the need to bring on-line new plant and equipment to meet demand. (See page 15)

When asked what issues suppliers will face internally in meeting increased levels of production, the lack of engineering talent and skilled labor shortages continue to be top-of-mind. To address these issues, companies are looking at workforce related strategies in the areas of recruitment, developing and growing intern, co-op and apprenticeship programs, employee training and development for succession planning and having a contingency workforce. Production overtime premiums are less of a concern this year compared to 2012-2014. Suppliers continue to implement actions related to productivity, investment and supply chain management. (See pages 16-20)

The most significant supply chain concern in meeting increased levels of production is production scheduling. Other concerns identified were material cost premiums, transportation/logistics constraints and component shortages. Companies continue to monitor their supply chain for risk, communicating on many fronts including releases/schedules, supplier capacity, capabilities and alternate/dual sourcing and transportation. (See pages 21-24)

Along with increasing production volumes, supplier also need to manage the increasing number of vehicle launches over 2015 and 2016. Over the next two years, the number of launches that companies face range from 20 to 60. Risks associated with these activities are reflected in production as well, including engineering talent and production ramp-up. Companies are developing training programs and utilizing outside resources to help in recruiting. Program management and launch process are being closely monitored. (See pages 25-29)


OESA Automotive Supplier Barometer Summary (continued)

While the industry keeps watch on Europe, most suppliers queried in this Barometer believe that the region will rebound as a below prior trend scenario. This is consistent with findings from November 2012 and January 2014. Companies over the past few months have indicated they are seeing a stabilization in the economy. (See page 30)

As the U.S. dollar is generally expected to continue appreciating in 2015 versus most major currencies, the most significant effects the various U.S. dollar foreign exchange trends have on supplier business plans are grouped into the areas of material sourcing, pricing and revenue, along with some notes related to global expansion plans. Responses or mitigation strategies that are being considered or implemented include: production relocation and localization, regional expansion and hedging. (See pages 31-35)


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

4%

42%49%

5% 0%1%

30%

58%

10%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Significantlymore optimistic

Somewhat moreoptimistic

Unchanged Somewhat morepessimistic

Significantlymore

pessimisticJan-15 Nov-14

No. of Responses = 85 OESA Automotive Supplier Barometer- January 2015Published with the support of5

Barometer Results By Company Revenue

13%

5% 7%

50%

38%

36%

50% 47

%

21%

43%

22%

44%

27%

13%

54% 64

%

50%

42%

71%

43%

44%

56%

67%

25%

8% 5% 8% 7%

33%

7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Significantly more pessimistic

Somewhat more pessimistic

Unchanged

Somewhat more optimistic

Significantly more optimistic

<$50 million

$50-$150 million

$151-$500 million

$501 million –$1 billion

>$1 billion

Global AutomotiveRevenue

# of responses

in January

# of responses

in November

<$50 million 8 13

$50-$150 million 14 14

$151-$500 million 19 24

$501 million -$1 billion 14 9

>$1 billion 25 15

NovJan

No. of Responses = 80

NovJan NovJan NovJan NovJan


Significantly More Optimistic No comments provided.

Somewhat More Optimistic Mexico will exceed growth in USA and Canada. Good volume from new product launches. Current year sales intake target exceeded; business growth in NAFTA and globally continues to remain strong. We know our main business a good year out but this year we are developing a new aftermarket line which is hard to

forecast so this could have a positive affect. Some new business opportunities have shown up due to the high vehicle build rate this year. Vehicle forecast rising is good. More OEMs are entertaining new innovations and technologies.

Unchanged New business is replacing old business at a slightly higher rate, comfortable brisk paced launches. Watching releases closely; sensing some softness - ever so slight. Continue to be optimistic. N.A. continuing in a steady but limited growth mode. Continued "mushy" recovery in Europe. China growth reined in. India

showing some life. Brazil still sputtering and I have significant concern with Russia. Still optimistic. Release requirements leveling off or declining. Domestic OEM’s increasing pressures commercially to reduce prices

globally are offset by winning new programs, but also requiring future investments that are based on OEM optimistic forecasts.

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


Somewhat More Pessimistic Feel like we are starting to peak in this cycle; volumes up more than expected, OEMs and customers are falling back on

"give more" and industry with a mindset - everything is great (what could go wrong). Headwinds on the traditional Detroit industry are increasing. Bets on consumers buying high technology content fuel-

efficient vehicles are fading due to gas prices. Diesel and HEVs are even less justified. Pricing pressure is increasing.

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


OESA Automotive Supplier Sentiment IndexCompared to two months ago,

how has your 12 month outlook changed?P

ositi

veN

egat

ive

70

50

5852

61

7166

50 51

37

52

66 6460

55

4651

55 5562 60

6660 60

56 59 6156 56

61

0

10

20

30

40

50

60

70

80

90

100


Considering North America light duty vehicle production, estimate the required 2015 industry volume needed to achieve breakeven in your North American operations (in millions of units).

Breakeven Volume (in millions units)When asked in… Median Value Range

January 2015 13.5 9-17January 2014 12.7 8-15.5

January 2013 12.0 9-15.5

January 2012 11.0 8-13.5

July 2011 10.5 8-14

January 2011 10.5 8-15

May 2010 10 6-13


North American Light Duty Sales, Production and Breakeven

Sources: IHS Automotive (December 2014) and January 2015 OESA Automotive Supplier Barometer

Considering North America light duty vehicle production, estimate the required 2015 industry volume needed to achieve breakeven in your North American operations (in millions of units).

Production will increase by 102 percent between 2009 and 2015 (using a 17.4 million projection) while breakeven levels will increase by just 42 percent

NA Sales

NA Production

0

5

10

15

20

25

Milli

ons

January 2015 Breakeven = 13.5 Million Units

9.5 Million Units = B/E Sept 200910.0 Million Units = B/E May 201010.5 Million Units = B/E January 2011 and July 201111.0 Million Units = B/E January 201212.0 Million Units = B/E January 201312.7 Million Units = B/E January 2014

OESA Automotive Supplier Barometer- January 2015Published with the support of

Breakeven point marker

11

Capacity Utilization

January 2015 May 2014 May 2013 May 2012Lower

QuartileValue

Median Value

Upper Quartile Value

Lower QuartileValue

Median Value


Lower QuartileValue

Median Value


Lower QuartileValue

Median Value


Estimate your current running capacity utilization rate80% 85% 90% 80% 90% 95% 80% 89% 95% 70% 85% 90%

Estimate your capacity utilization levels (in percent) if you were to include warm-idled capacity with current running capacity.70% 82% 90% 74% 80% 90% 70% 80% 90% 60% 75% 90%

Estimate your capacity utilization levels (in percent) if you were to include cold-idled capacity with warm-idled and current running capacity.66% 80% 86% 70% 80% 90% 65% 75% 85% 55% 75% 85%

• Current capacity utilization considers your current workforce levels and operating plant and equipment assuming 270 working days and 3 shifts (disregarding all idled capacity).

• Warm-idled capacity is defined as idled capacity but being able to ramp up production within 3 months with minor capital needed. By including warm-idled plant capacity, the utilization rate will decrease from the current capacity level defined above.

• Cold-idled capacity is defined as idled but being able to ramp up production after 3 months with moderate levels of capital required. By including cold-idled plant capacity, the utilization rate will decrease from the current and warm-idled capacity level defined above.

No. of Responses = 71-75OESA Automotive Supplier Barometer- January 2015Published with the support of12

How confident are you that your customers’ production releases are matching their current sales and inventory requirements?


0%

39%

45%

15%

0%

5%

54%

21%

20%

1%

9%

54%

16%

19%

2%

13%

34%

30%

17%

4%

0% 10% 20% 30% 40% 50% 60%

Very Confident (=1)

Somewhat Confident(=2)

Neutral (=3)

Somewhat Unconfident(=4)

Not At All Confident (=5)

2014 (2.8)2012 (2.6)2011 (2.5)2010 (2.6)


Generally, across customers and programs, are you currently tending to inflate or deflate your releases down through your supply chain?


0%

6%

25%

51%

13%

4%

1%

2%

2%

15%

68%

10%

1%

2%

0%

10%

16%

61%

8%

5%

0%

9%

6%

10%

57%

9%

5%

4%

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

Inflate over 10%

Inflate 5%-9%

Inflate 1%-4%

Pass Through

Deflate 1%-4%

Deflate 5%-9%

Deflate over 10%

2014201220112010


70%20%

4% 6%

How confident are you that you will be able to meet all of your customers' releases over the next 12 months?


‘Very Confident’ Comments There is no option but to meet the releases. We monitor them

closely for week to week changes and will challenge any releases that do not honor our required schedule timing to secure the materials in sufficient time to meet the releases.

‘Somewhat Confident’ Comments Poor planning by some customers, particularly the luxury

segment. Continuing production releases are ok, new program ramp-ups

must be closely monitored.

‘Neutral’ Comments None provided.

‘Very Skeptical’ Comments None provided.

Very Confident

4756%

Somewhat Confident

3036%

Neutral6

7%

Somewhat Skeptical

00%

Very Skeptical

11%

2013*56%

36%

3% 5%

2015

* Note: This question timeframe was over 3 months for the 2012 and 2013 surveys.

2012*


Over the next 12 months, will you face the following internalissues will you face as you meet increased levels of production?

69%

58%

48%

31%

28%

27%

24%

22%

17%

5%

71%

70%

28%

53%

37%

8%

74%

80%

27%

61%

48%

11%

59%

76%

24%

54%

53%

0% 20% 40% 60% 80% 100%

Engineering Talent or Availability

Skilled Labor Shortages

Production Overtime Premiums

Hourly Labor Shortages

Inventory Carrying Costs

Internal Manufacturing CapacityConstraints

Set-up and Change-over Costs

Outbound-Expedited Freight

Re-allocation of Resources toMonitor for Quality/Production Issue

Liquidity Shortages within your owncompany

2015

2014

2013

2012

% of respondents indicating ‘yes’


Did not ask prior to 2015

Did not ask in 2012

* Note: This question timeframe was over 3 months for the 2012, 2013 and 2014 surveys.




‘Other’ issue noted was managing growth.


What steps are you taking within your company to address the issues you identified above?

Workforce ActionsRecruiting-Related Recruiting efforts to find/groom new talent. (3 similar responses) More college recruiting. Changes in HR recruiting practices and change to shift structure. HR in intensive back-up hire program in progress including succession planning. Focused effort on recruitment. Continuously hire line workers. Interviewing and hiring is a priority now. Intensified search efforts for talent. Hiring hourly. Utilization of professional search firms. Incremental increase in hiring of skilled labor in anticipation of increased demand and kaizen activities

to reduce change time. Many recruiting activities and expanding outreach. Much higher focus on retention and recruiting of engineering talent. Hiring strategies.Co-Ops and Interns Internships. (2 similar responses) Co-op students and interns. Working with interns. Increased student early talent training and hiring. More co-op students and entry level hiring.


What steps are you taking within your company to address the issues you identified above? (continued)

Workforce Actions (continued)Training and Personnel Development Kicking off an apprenticeship program in cooperation with other companies and state agencies. More training programs. Ramped up internal training programs. Working with MEDC and NAM on training and educational initiatives. Developing new training programs and apprentice type programs. Internally developing talent. Improve training process. Working with local universities to develop curriculum for specific industry needs. We continue to develop our employees with internal training programs. Will start MAT2 training with MEDC to address turnover in the maintenance tech area. Training of hourly employees. Internal training and incentives for education. Contingency Workforce Contracting out overflow engineering services. Increased work/overtime for associates. Using many temps in operations. We will increase the number of temporary employees to help offset overtime costs. Continuing to search and keep a farm team available. Balance between temporary overtime and hiring of new employees.



Workforce Actions (continued)Salaries and Wages Proactive with pay on current employees. Attempting to be at or above market for people that are critical. Using incentives to attract talent. Pay raises.Other HR Related Increased HR focus. Retention programs. Communication and planning sessions. Restructuring technical group.

Capacity Actions-Productivity Working on operational improvements (SMED, OEE, etc.). Removing bottlenecks in operations. Specific increase of capacity to relieve bottleneck constraints. Re-invigorating/standardizing

manufacturing systems globally. Added focus of capital and tooling releases in the program launch, must be on time, no margin for

delays. Aggressive lean manufacturing. Commonize standard parts across all customers as much as possible to cut down on change-overs. Refining our operating system. Launching new initiative - production system. We swing work between plants to manage fluctuations from customers.



Capacity Actions-Physical Capital investment. Install more equipment. Restructure warehouse and logistics.

Supply Chain Actions We are reducing our inventory levels to optimize the cash flow of operation (2 similar responses) Building some inventory. (2 similar responses) More work will be delivered globally to overcome local shortages. Air shipping. Increase quantity shipped for port issues. Right-sizing inventory.

Other Actions Proactive scenario planning. Stronger cash forecasting. Rent money from bank. Establishing an Advanced Technology Development Center for both product and process in Detroit. Reducing the usage of the credit lines. Harder line with customers to meet expectations. Recovery of added costs with OEMs. Owners’ equity infusion.


Over the next 12 months, will you face the following supplierissues as you meet increased levels of production?

46%

38%

37%

33%

23%

14%

4%

23%

31%

15%

20%

34%

43%

23%

24%

40%

51%

28%

0% 10% 20% 30% 40% 50% 60%

Production Scheduling Difficulties

Material Cost Premiums

Transportation/Logistics Constraints

Component Shortages

Inbound-Expedited Freight

Raw Material Shortages

Liquidity Shortages within yoursupply base

2015

2014

2013

2012

% of respondents indicating ‘yes’



Did not ask in 2012




What steps are you taking within your supply chain to address the issues you identified above?

Scheduling/Production/Capacity: Giving them a heads up as much as possible on schedule changes and call-offs. Order ahead and follow-up. Leveling production with key suppliers at maximum capacity to avoid future peaks/overtime issues. Monthly dialogue with key suppliers including short-and long-term demand forecast for capacity planning

purposes. Validating all deliveries are on schedule that have firm POs of three months or less. Trying to best forecast/level-out the global requirements. Forecast accuracy with pressure test. Working close together with identified critical suppliers to understand capacity/output. Sending out capacity check reports to supplier to complete. Re-evaluating all critical supplier capacity utilization rates. On-going risk assessments. identifying high priority concerns of key components, including supporting release volume requirements

with acceptable and sustainable quality. Building stronger relationships, assessment of capabilities. Equipment and facility upgrades, review capacities. We have increased inventories of raw materials that move by rail. Slightly inflate our order books to our supply base.


What steps are you taking within your supply chain to address the issues you identified above? (continued)

Communication/Supplier Development: Increased follow-up. Work more closely with supply chain. Closer communication and monitoring. Improved planning, dialogue. Constant communication with suppliers. Meeting with them more to discuss their plans. Extremely close monitoring of selected suppliers, biggest issue is with directed suppliers who act

independently and escape our surveys. Monitor market monthly for supply lead times and supply risk. Active management of our suppliers to try and anticipate shortages, issues, etc. Communicate and watch the performance closely. Workshops with suppliers to optimize logistics, manufacturing times, production planning and inventory. Increase supplier quality resources. Increasing internal purchasing and supplier development efforts to better understand the detailed issues

with our suppliers. Participation in quality basics with suppliers. Additional staff for supply chain management.


What steps are you taking within your supply chain to address the issues you identified above? (continued)

Expanding Suppliers or Options: Approving multiple sources. Alternate suppliers. Additional sourcing. Creating global alternatives for every product. Dual sourcing and/or locking in capacity. Dual sourcing, work to bring some external work back in-house, beefed up internal procurement and

logistics organization. Component risk mitigation through adding alternates for standard materials. Trying to localize as much as possible. Working with critical supplier for localization. Bring in material from overseas. Alternate transportation methods. We are exporting out of east coast for China business. Air shipping. International freight management at U.S. docks requiring incremental safety stock levels. Shipping to multiple ports.

Other: Financial hedging. Building it into the price.


Given the record number of vehicle launches over the next 2 years, on average, how many new base part numbers will you be launching in 2015 and 2016?


Global Auto Revenue Lower Quartile Value Median Value Upper

Quartile Value Range # of responses

2015 Launches

More than $500 million 18 47 54 3-1500 29

$151-$500 million 12 47.5 106 2-300 12

$150 million or less 6 20 84 0-200 17

2016 Launches

More than $500 million 17 50 100 4-1100 29

$151-$500 million 7.5 42 95 5-350 12

$150 million or less 10 30 85 0-200 17


Rate your level of risk associated with the following launch related issues.

18%

11%

9%

8%

4%

39%

38%

25%

19%

25%

32%

25%

29%

39%

33%

6%

23%

23%

23%

29%

5%

4%

14%

13%

10%

0% 20% 40% 60% 80% 100%

Engineering Talent

Production Ramp-up

Production Validation

Global Requirements

TechnologyDevelopment

Most Significant=1 Rating 2 Neutral Rating 4 Least Significant=5

Average Rating *

# of Responses

2.4 82

2.7 80

3.1 79

3.1 80

3.2 80

*


For the issue you ranked as having the highest risk, what is your company doing to mitigate that risk?


Engineering Talent: We have expanded our search for talent outside of our geographic talent area. Increased working hours for current associates. We are scouring our networks for good engineers and enticing them to join our group. Headhunters

aren't working for us as they bring in the engineers who cannot find work. We are looking for aggressive, creative engineers who already have jobs because of the upswing in the market.

Many recruiting activities. Expanding outreach. Hiring talent. Hiring new engineers and other technical positions, establishing a new advanced technology

development center, due to OEM poaching of personnel - see more than normal organizational churning. Recruiting college graduates and securing retirees for assistance. Ensuring on-site engineering launch at production location with senior/experienced talent; also growing

our launch management team while and ensuring stronger training process for launch support. We have a part-time program with a local college to obtain new talent. Show succession plan to keep good talent. Collaborate with other group companies globally. Hiring, training, developing launch management. Increased engineering levels and cross-regional engineering pooling to optimize global application of

current resources. Utilization of professional search firms. Focus on engineering resource retention and engagement. Establish an apprenticeship and trainee program and hire external engineering services to manage

overflow of (specific) technical work.

27

For the issue you ranked as having the highest risk, what is your company doing to mitigate that risk? (continued)

Production Ramp-up: Strong discipline in reaching milestones, customer communication to validate launch quantities. We need to make sure new capacity matches new launches. Timing is a challenge. Attempting to manage our customers so they are not constantly in panic mode. Customer demand curve on recent launches very aggressive. Stability achieved through controlled

measurement/action plans (launch management). Technical talent for engineering an issue throughout 2014, working to identify actions for improvement.

More stringent up-front tracking/planning/APQP discipline. Better program management. Executive reviews of critical programs and providing resources to remove barriers.

Production Validation: Enhance launch heat map review process. Early non-saleable production runs. Increased working hours for current associates. Executive reviews of critical programs and providing resources to remove barriers. Production validation do to additional requirements related to overseas customers’ expectations. Utilizing external sources for validation. Launch scorecards are reviewed almost weekly at the most senior, president level. Added program

management resources, red flag exception reporting. This is usually a customer issue so we keep them informed the impact of validation delays on launch

timing. Overcapitalizing new equipment. Have implemented a launch process with stage-gate levels and senior executive sponsorship.


For the issue you ranked as having the highest risk, what is your company doing to mitigate that risk? (continued)

Global Requirements: Global demand and communication of these needs at standard lead-time is an opportunity. We are

opening communication channels early and developing revised safety stock and inventory strategies to absorb demand variation

OEMs forcing global expansion. Working to establish global partners. Having skilled engineers to support multiple plants and customers.

Technology Development: OEMs like the new technology but can be a bit impatient on time to actually develop the new technology

or mass, high volume production.


Provide the probability you would assign to the following ten-year European economic recovery scenarios.

January 2015 January 2014 November 2012Average

ProbabilityProbability

RangeAverage


RangeAverage


Range

Scenario 1 23.6% 0-100% 23.2% 0-100% 15.8% 0-70%Scenario 2 37.9% 9-80% 41.3% 10-100% 38.7% 0-80%Scenario 3 28.1% 5-90% 24.1% 0-100% 35.0% 0-100%Scenario 4 12.4% 0-60% 11.3% 0-40% 12.6% 0-50%

Scenario 1: RETURN TO NORMAL (OR BETTER): economy rebounds with steady GDP growth of 3% or moreScenario 2: BELOW PRIOR-TREND GROWTH: economy rebounds, but only GDP growth of 1-2%Scenario 3: LOST DECADE’ OF SLOW or NO GROWTH: economy encounters GDP growth of less than 1%Scenario 4: BOOM-BUST IN RAPID, SHORT CYCLES: economy encounters periods of strong GDP growth followed by GDP contraction


The U.S. dollar is generally expected to continue appreciating in 2015 versus most major currencies…


What is the most significant effect the various U.S. dollar foreign exchange trends

have on your business plan?What is the most significant response or

mitigation strategy that you will implement?Material Sourcing Related – Selected CommentsPositive in terms of slightly reduced cost for buying parts abroad.

Purchase of components in US dollar like electronic components while selling the goods in over currencies.

Some lower costs for Europe supplied material and services.

Good effect since a proportion of our material purchases is in foreign currency while our sales are in $USD.

Supplier sourcing strategies will be impacted.

Exposure due to purchase of components in EURO zone - about 10% of purchase volume.

Imported goods from China cost more.

We sell in USD so no effect there but will have favorable impact on material purchased from Europe.

Most materials is procured in USD, benefit will be in foreign factory labor and overhead.

Hedging to cash out gain versus planned budget of material costs, and continue to execute our supply strategy goal of "in the region for the region," as a natural hedge.

Investigating reallocating supply chain.

Continue to shift components from Europe to China/Asia.

Localizing production to Europe and China.

Alternative supply partners.

Accelerating our efforts for vertical integration.

Localization and working with OEMs for support.

Escalation/de-escalation clauses.

Dual sourcing.

Hedge our purchase over a longer period of time when we actually commit to purchase product.

We will delay ordering raw material from Europe, since we expect to pay a lower cost in the future.

31

The U.S. dollar is generally expected to continue appreciating in 2015 versus most major currencies… (continued)



have on your business plan?

What is the most significant response or mitigation strategy that you will

implement?Pricing and Revenue RelatedReduced revenue from EU operations.

Customer changes (whip-sawing affect) due to currency change.

Customer pricing issues who are on global Euro based contracts.

Can make our products less competitive when supplying from NAFTA to Europe.

Will hurt N.A. exports, more dual tooling expected.

Will impact pricing as imports will become competitive again.

Improved prices from Asia for tooling.

Exports to Brazil slowing.

Reduced local production and export vehicles reduces on-shoring of parts production.

Take the long-term view.

Investigate partnership opportunities in Europe. Be more selective about the new European business that we quote.

Review our Mexican strategy.

Use other facilities to supply.

Look to dual tool in U.S. and Europe.

Will continue to establish global manufacturing partners.

Carefully manage our mix.

Improve our Asian off-shore strategy.

Continued quest for higher productivity and lower material costs.

Increase productivity through lean manufacturing implementation.

32






implement?General ResponsesReduces the cost of international expansion.

China fluctuation requires attention.

A similar trading pattern may occur with the Mexican peso (MXN), with an upside potential from sizable capital inflows associated. Mexican peso is vulnerable to broadly stronger U.S. dollar and lower oil prices.

The strengthening dollar impacts all of our business globally. It is even more impactful in volatile regions such as Russia, South America and Mexico/Canada to some extent.

We are a European-based company. US revenue will look better but our imports from Europe will hurt our bottom line.

Affects global expansion. Difficult to predict financial performance and risk, especially in emerging countries.

Most of our business is U.S. but a small portion is Brazil which will shrink.

Hedging where we can and where it makes sense. In addition, producing and procuring as much as possible in the country where we produce and sell.

Expedite strategy to localize component production here.

Push to be paid in USD, implement currency fluctuation/risk agreements.

Natural hedging with import/export balancing from other regions into Europe. Contract management where possible.

Expansion to Mexico now more important and strategic.

Work closely with OEMs to be sure that our products are specified in overseas projects.

Capacity and supplier concentration.

Hedge purchases with sales so limited risk; take advantage for new quotes of lower Canadian dollar.

33






implement?Positive EffectWe are UK registered company - so profits made in the U.S.

Division are more valuable when U.S. dollar appreciates.

Improves our expectations for producing parts in Canada and Mexico but it depends on the exchange gap value.

We have our loans in Euros. This is an opportunity because we will have a positive cash flow and we will pay-off as much as possible.

Positive effect as our final reporting is in Euro.

Our production is mostly based in South Korea, so as the USD appreciates, we should be in a good position to realize higher profits.

Strive for profit in the U.S.

With our type of products, logistics still may out-weigh exchange issues so manufacturing location is key.

Use the U.S. dollar lines to pay Euro loans. This will give me a 15 percent gain.

Some currency hedging.

34






implement?No or Marginal EffectVery little. FX arrangements in place.

Not a huge issue as we are manufacturing where we sell in local currency.

Minor exposure to Canadian dollar and Peso.

Stability in currency causes issues.

Our company does approximately 80 percent of our business in USD. However, we do keep an eye on the Peso, RMB, Baht and Real.

Minor impact as most commercial activity is dollar based.

Manufacture where you sell.

Will potential invest in more Canadian hedge contracts.

Stay liquid.

Our Company uses a mix of natural and financial hedging to assure minimal budget effects due to FX factors.

Flexibility is always helpful.

Pace down of U.S. localization.

Currently evaluating the potential for hedging currency in effected regions.

35

Thank you for your participation

The OESA Automotive Supplier Barometer survey is published every other month. The next survey will be launched on Monday, March 2, 2015 and will be released Friday, March 6, 2015.

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

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

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

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


mailto:[email protected]

mailto:[email protected]

http://www.oesa.org/

oesa automotive supplier barometer...and utilizing outside resources to help in recruiting. program...

Documents