John Felice Vice President Manufacturing, Technology & Global Enterprise Chrysler Corporation LLC Vice President Manufacturing, Technology & Global Enterprise Chrysler Corporation LLC

C H R Y S L E R G R O U P Chrysler Group’s Flexible Manufacturing Strategy May 17, 2007 John Felice Vice President – Manufacturing, Technology & Global Enterprise Chrysler Group

C H R Y S L E R G R O U P Market and Competitive Challenges Tough Competition Government Regulation Consumer Demand Supply Chain

C H R Y S L E R G R O U P Aligning capacity, cost structure and capital spending with market demand Increase efficiency of all aspects of the business Strengthen and increase revenues and margins Global market opportunities with low cost sourcing Strong product pipeline $3 billion powertrain investment leads to a more fuel efficient product lineup Dealer network optimization Recovery Short-term progress on profitability Return on sales of 2.5% by 2009 Strategic Transformation Mid-term change of business model Achieve and sustain benchmark performance RTP Focuses on Short- and Long-Term Goals

C H R Y S L E R G R O U P WM1 Product Strategy / Portfolio Management Capital Management WM7 Fixed Cost Management WM2 Structural Changes / Manufacturing WM3 Material Costs Management WM4 Revenue Management WM5 Quality WM6 Chrysler Group Executive Committee WM – Work Module Seven Work Modules Focused on Short- and Long-Term Improvements These work modules are sub-divided into teams that are working on tackling costs, improving quality and efficiency and enhancing revenue across the entire scope of the company Program Office

C H R Y S L E R G R O U P Redesigned Business Model Supports Long-Term Growth Current Redesigned Business Model Product- centric Product + Customer and brand focus NAFTA-centric NAFTA + Global balance Internal resource driven Internal + Alliances and partnerships Customer driven products and processes Clearly defined uniquely American brands High brand equity and customer loyalty Manufacturing, supply and sales footprints optimized (balanced) to maximize global growth and profitability Leveraging partnerships to manage costs Creative and efficient use of alliances to quickly respond to geographic, market segment, and product opportunities

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P Flex Target State FLEX OPPORTUNITIES KEY QUESTIONS How do you develop an optimum number of quality products efficiently? How do you best use the existing asset base to build products in response to market demand swings quickly? How do you globally leverage the best cost- saving sourcing opportunities through volume bundling and commonization? How do you offer consumer-driven product lines that can achieve geographic and market segment opportunities? How do you achieve better global balance and leverage partnerships to manage cost and seize growth opportunities?  Product Development  Flex Manufacturing  Global Sourcing  Product Portfolio  Global Alliances & Partnerships

C H R Y S L E R G R O U P Name of the Game: Increase Products, Decrease Capital Spending $41.9 $30.7 $ Plan 2002 Plan 2005 Plan 28% “Do More” “Use Less” Plan Plan Plan %

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P

Product Development RWD UNIBODY 3 FWD UNIBODY 5 BODY-ON-FRAME 4 Optimize Vehicle Platforms: Reduce Number of Platforms from 12 to 7 by 2012

C H R Y S L E R G R O U P  Reduce Build Combinations  Build-in Quality and Manufacturability  Reduce Number of Parts  Reduce Parts Proliferation and the Number of Designs for Each Commodity  Increase Common Parts Sharing Product Development Reduce Design Complexity Dodge Nitro: From 167,424 possible configurations to 650

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P Body-on-frame Arch Model Unibody Arch #1 Model Unibody Arch #2 Model Other Arch Flexible Manufacturing Basis: Create a Flexible Manufacturing System to Support a Broad Product Portfolio and Pull-based Marketing Model Create Flexible Product and Manufacturing Footprints on a Global Basis Converge product portfolio into 4 potentially basic architectural families Create flexible manufacturing base aligned to architecture Plant A Plant B Plant C Plant D Plant E Plant F Plant G Plant H Plant I Plant J Plant K Plant L Plant M Plant N

C H R Y S L E R G R O U P Enabler 1: Standardize on a Competitive Common Bill of Process to Drive Manufacturing Flexibility, Efficiency, Quality and Product Design  Provide a Common Mainline Manufacturing System: - Operational Sequence - Operation Content & Dimensional Strategy - Assembly Process that Optimizes Unibody/BoF Portfolio - Common Process Framework for Subassemblies - Machine, Equipment, Tooling, Controls & Facilities Guidelines - Scope Covers Dies, Stamping, Body Structures and Closures, Paint, Trim, Chassis, Final, Powertrain, etc. - Catalog of Technology Underbody Flexible Manufacturing: Common Bill of Process

C H R Y S L E R G R O U P Enabler 2: Build a Flex Body Shop Process to Allow for Platform Derivatives and Reduce New Model Changeover by Leveraging Key Advances in Robotics Key Developments in Robotics: - More Payload range - More powerful Controllers - Reduced Cost Payload Capability (Kilograms) 1990’s2006 Payload Capability Cost 30%  Multiple Model Flexibility  Standardize Common Core Processes to Build 3 Platforms/ 4 Models  Build Old/New Models Concurrently  Produce Models from 0–100% of Capacity  Flexible Load and Weld Processes Using: - Robotic Hand-off - Geo End-effectors 133% Flexible Manufacturing: Flex Body Shop

C H R Y S L E R G R O U P Enabler 3: Plant Charter – Blueprinting Each Plant’s Build Capability to Accommodate Flexible Product Requirements IMPLEMENTATION TIMING & COST PRODUCT MAX DIMENSIONS: L/W/H PLANT CAPACITY, PLANNED VOLUME PLANT’S CAPABILITY SHIFT PATTERN PRODUCT LINE UP CAPABILITY & “PROTECT FOR” BILL OF PROCESS CONFORMANCE, ASCENDING ORDER PLANNED TECHNOLOGY LEVEL MIX FLEXIBILITY, ASSET UTILIZATION Flexible Manufacturing: Plant Charter

C H R Y S L E R G R O U P Enabler 4: Chaining – Best Utilization of Existing Asset Base, Applying Flexibility Within and Between Plants Without Facility Expense LEAN MANUFACTURING BILL OF PROCESS FLEXIBLE MANUFACTURING Plant Charter A Models Volume PLANT A Plant Charter B Models Volume PLANT B ABC Plant Charter C Models Volume PLANT C ABCABCD Demand Swings Model Mix Asset Leveling Flexible Manufacturing: Chaining

C H R Y S L E R G R O U P

Operators Supervisors Support Functions: Quality, Maintenance, PC Operations, Engineering Smart Manufacturing Operational Focus Traditional Smart Team Member

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P Global Sourcing Basis: Flexible Manufacturing & Product Development Lay the Foundation for Global Sourcing Volume Bundling Cost Savings Opportunities Global Sourcing Leveraging Low Cost Strategies Chaining (Plant to Plant Flex) Volume Flexibility Architecture/ Platform Flexibility Model Flexibility Bill of Process More Common Tools & Equipment Global Design Commonization More Common Parts REDUCE COMPLEXITY LEVERAGE THE BEST DEAL

C H R Y S L E R G R O U P Global Sourcing: Manufacturing Example Standardization of Manufacturing Requirements Has Enabled the Bundling of Manufacturing Equipment Across Platforms/Plants BIW Roller Transfer Standardization across vehicle lines/plants Vehicle Lines Covered Typical Placement Volume/ Design Complexity Prior: New: Transfer sources vary by plant Common transfer source for 5 plants Mid-Size Car, Truck, Minivan Plant Bodyshops Volume Change Average Price Change + 500% -22% - Weld Gun Standardization across vehicle lines/plants Vehicle Lines Covered Typical Placement Volume/ Design Complexity Prior: New: 300 guns per placement Avg. 200 unique designs 1600 guns bundled 12 base gun designs All Chrysler Group Vehicle Lines, Stamping & Bodyshop Requirements Volume (Guns per Design Per Placement) Average Price Change 133 guns per design per placement -30% 1.5 guns per design per Placement

C H R Y S L E R G R O U P Global Sourcing: Vehicle Part Example Global Design Commonization of Door Latches Drives Significant Cost and Complexity Reduction  Before, each business unit had similar latch concepts, but different parts and variants  Now, DCX has one common global latch concept with 83% common parts for all three business units  Economical advantages of GL1 through significant reductions: -from 400 down to 100 parts -from $35 down to $25 per car -from 3 down to 1 supplier - CG Savings: $10 M (2007), $24 M (2009)  All new CG, MCG and CVD-Van models will be equipped with GL1 by 2010; CG launch with Dodge Caliber CVD MCG CG GL1

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P Product Portfolio We Have the Tools & the Knowledge to Leverage Flexible Strategy to Drive Business Opportunity in NAFTA Avenger Grand Cherokee CRD Magnum Freshening Sebring Convertible Liberty Ram 4500/5500 Chassis Cab Dakota Freshening Viper SRT10 Sprinter Town & Country Caravan Caliber SRT4 300 & Charger Freshening JANFEBMAYJUNAPRJULAUGMAROCTDECNOVSEP New Continuing the Product Assault in 2007:

C H R Y S L E R G R O U P 2003 MY2007 MY Total VehiclesRHD Vehicle Offerings Diesel Vehicle Offerings Product Portfolio We Have the Product Expansion Strategy to Increase Offerings and Drive Business Opportunity in NAFTA and Established Markets Overseas

C H R Y S L E R G R O U P Product Portfolio Fuel Price Pressures Price Per Gallon A Crowded Marketplace, Growing Globally Our Flexible Strategy Must Be More Flexible in the Face of High Fuel Prices and Global Competition

C H R Y S L E R G R O U P Room for Growth in Small Segment Pickup SUV Minivan 70% of Chrysler Group Sales CG Product Line, Sales Dominated by Bigger Vehicles Product Line is NAFTA- Centric; Not Balanced for Global Growth Small Compact Mid-size Full-size Passenger FamilyTruck/Van Our Product Portfolio Must Be More Flexible to Meet New Domestic Demand or Leverage New International Markets

C H R Y S L E R G R O U P Product Portfolio Our Strategy: Global Balance  Defend/grow NAFTA CG strongholds  Add new non-NAFTA vehicle programs crucial to global expansion  Leverage 3 rd party alliances to cost-effectively access regional products/markets  $5+ billion additional purchasing to low cost sources – balance supplier footprint

C H R Y S L E R G R O U P How Does DaimlerChrysler Respond Effectively and Efficiently to Market Conditions and Volume Fluctuations ?

C H R Y S L E R G R O U P Select Regional Expansion Global Alliances & Partnerships  Leveraging partnerships for growth and to manage costs  Creative, efficient use of alliances to leverage geographic/market segment/product opportunity Strong NAFTA Position  Small Vehicle B SegmentChery Motors, China  Manufacturing (300C, Jeep) Magna, Austria  Retail NetworkMarketing Hyundai in Mexico  Internal ManufacturingMinivan Assembly for VW  Diesel BlueTec EngineCummins, MCG  Focused AlliancesGEMA World Engine (HMC, MMC)  HybridGM, BMW

C H R Y S L E R G R O U P Chrysler Group’s Flexible Manufacturing Strategy May 17, 2007 John Felice Vice President – Manufacturing, Technology & Global Enterprise Chrysler Group