Arnaud COMPLAINVILLE, Carolina GIRALDO, Christophe TISSOT, Nam-Jun KIM, Patrick RECASENS Group 9 (Best in France Case Study)

2 Group 9 Presentation We Thank Mr. Dominique Chauvin, former Managing Director Mr. Jon de Gaynor, Business Line Executive Ms. Catherine Dupont, Director of Diesel Operations Mr. Robert de Vaucorbeil, HR Director Mr. Philippe Bercher, Chief Engineer - Common Rail System

3 Group 9 Presentation Delphi is the world ’ s largest manufacturer of automotive components Delphi in a Nutshell Spin off from GM in 1999 (IPO) Services all car manufacturers in the world –Non GM sales = 39% (2003) Company ’ s HQ  Troy, Michigan Regional HQs ( Paris, Tokyo, Sao Paulo) 3 sectors : –Mobile electronics, Transportation components, Dynamics and propulsion Worldwide manufacturing and distribution Revenue : $ 28.1 bn (2003)

4 Group 9 Presentation In 2002, Delphi had a revenue of $27.4 Billion worldwide

5 Group 9 Presentation Our study is focused in Delphi’s Engine & Chassis division, part of the Dynamics and Propulsion sector Delphi E&C Overview E&C annual turnover = $ 9 bn Purchased Lucas Diesel Systems from TRW in 1999 for $ 800 m Benefited from Lucas’ expertise in diesel systems Cost constraint : moderate –Highly automated manufacturing –Development intensive

6 Group 9 Presentation  GASOLINE Engine Management System (EMS)  DIESEL EMS  BATTERIES & ADVANCED ENERGY  EXHAUST  FUEL HANDLING  SENSORS & ACTUATORS  BRAKES & MODULES  RIDE DYNAMICS Delphi E&C Product Portfolio Produces a comprehensive range of components such as Diesel Engine Management Systems

7 Group 9 Presentation Operation in France  3,800 employees in France  4 industrial sites (19 in Europe) Blois La Rochelle Sarreguemines Florange  2 technical centers (11 in Europe) Blois Paris It employees 3,800 people in France…

8 Group 9 Presentation And have a client base that is almost all of the automotive industry (cars, trucks and off-road) Most of the car makers are Delphi’s customers… BMW, Caterpillar/Perkins, Cummins, Daewoo, Daimler Chrysler, Fiat, GME Powertain, Ford, GM, Honda, Hyundai/KIA, Isuzu/SIA/IBC, Mitsibushi/DSM, Nissan, PAG, PSA, Renault, Rover, Suzuki, Toyota/NUMMI, Volvo Truck, GM Tier I Customers … who expects Delphi to achieve the following  Develop most effective automobile component  Concurrent engineering (new models, new engines)  Follow European Union’s regulation (exhaust)  Develop most effective automobile component  Concurrent engineering (new models, new engines)  Follow European Union’s regulation (exhaust)

9 Group 9 Presentation Historically : followed GM’s international expansion, Purchase of Lucas Diesel Today : closeness to European manufacturer, notably French Long visibility since changes in the business correspond to changes in environmental regulations (6 years / 3 to 4 years for other business units) Less labor intensive than other divisions -E&C (France) : Labor cost is around 25% -Harness (Portugal) : Labor cost = 70% Historically : followed GM’s international expansion, Purchase of Lucas Diesel Today : closeness to European manufacturer, notably French Long visibility since changes in the business correspond to changes in environmental regulations (6 years / 3 to 4 years for other business units) Less labor intensive than other divisions -E&C (France) : Labor cost is around 25% -Harness (Portugal) : Labor cost = 70% Key Findings

10 Group 9 Presentation Environment Benefits Location benefits –international airports in Paris –quality of life –closeness to French customers Good acceptance of individual compensation systems (unlike Germany) Net salaries comparable all over western Europe (excl. Portugal) People Benefits Skilled workforce –superior engineering schools; –academic system second to none (due to typical 5-years courses); –Availability of a wide-range of talents; –Seek to continuously improve processes and manufactured products; –Creates a virtuous circle whereby employees are increasingly qualified and increasingly creative. Mobility –Have to use French expats in other countries (UK, Shanghai, Seoul) –Open-minded, integrate well overseas; Key Benefits of being in France are…

11 Group 9 Presentation Environment Constraints Labor laws –35h week increases hourly rate by 12% –Poor flexibility (cost of redundancy: payback is over 2 years) Labor costs –Social charges at 47% are too high compared to other European countries (this is 15% too high) –French operators 25€/h (19€/h in the UK) People Constraints Aversion to change Limited command of English French managerial practices differ from the American ones (reporting, procedures, matrix organization) Key Constraints of being in France are…

12 Group 9 Presentation Conclusion Main assets Diesel expertise in France Qualified workforce Main assets Diesel expertise in France Qualified workforce + + Threats High labor cost Relocation of production in Eastern Europe (long run) Threats High labor cost Relocation of production in Eastern Europe (long run) - - No major expansion plan, but France is well positioned to retain value added, highly automated activities

13 Group 9 Presentation Arnaud Complainville, French, Doctor in biology Carolina Giraldo, Colombian, Banking Nam-Jun Kim, Korean, Consultant Patrick Recasens, Canadian-Spanish, Attorney-at-law Christophe Tissot, French, Finance director Study Participants

14 Group 9 Presentation uestions? ANY