DELPHI Driving Tomorrows Technology University of Michigan-Flint & Delphi Automotive Strategic Report: Motorcycle EMS North American and Western European Markets Nancy Fike, James Redumski, Frank Steiert, Carrie Warning 12/17/03

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 2 Presentation Agenda Project Purpose & Scope Motorcycle Technology EMS Technology Regulation Implications Motorcycle Market Analysis Top Motorcycle OEMs Proposed Entry Strategy

DELPHI Driving Tomorrows Technology Purpose & Scope Carrie Warning

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 4 North AmericaWestern Europe

DELPHI Driving Tomorrows Technology Motorcycle Technology 2-Cycle vs. 4-Cycle Motorcycle Engine Lifespan Jim Redumski

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 6 Manufacturing 2-Cycle vs. 4-Cycle Engines United States Europe Indonesia Japan China

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 7 FOUR-CYCLE Emission Standards Carbon Monoxide Hydrocarbon U.S. Europe TWO-CYCLE Smaller Lighter More Powerful Less Expensive Less Motion

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 8 Honda New Technology The EXP-2 Completely burns fuel Valve Positioning Pressurized Auto Ignite

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 9 Motorcycle Engine Lifespan Factors in Engine Wear Two Research Studies Cycle Trend California Government Hours of Usage per Year

DELPHI Driving Tomorrows Technology EMS Technology EMS Function Open Loop vs. Closed Loop Control System Needs Regulations EMS Advantages & Disadvantages Frank Steiert

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 11 EMS Function Controls the engine and defines the performance and uniqueness of each motorcycle brand Comprised of an ECU, software, calibrations, input sensors, and output devices. Required to meet current and future emission regulations May be either Open-Loop or Closed-Loop

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 12 Open Loop vs. Closed Loop Open-Loop systems do not have any feedback mechanism (static) Closed-Loop systems have feedback that allow the EMS to react (dynamic) to changes in the exhaust gas Closed-Loop systems incorporate an Oxygen sensor as its feedback mechanism The ECU modifies the amount of fuel injected based on the O2 sensor feedback

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 13 Control System Needs

DELPHI Driving Tomorrows Technology Regulations European Emissions California Emissions (ARB) Federal Emissions (EPA) Noise - North America & Europe

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 15 European Emissions

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 16 California Emissions (ARB)

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 17 Federal Emissions (EPA)

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 18 Noise - North America & Europe North America (EPA): Current EPA regulation is 80 dBA, established 1982 Europe:

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 19 EMS Advantages & Disadvantages Advantages: –Increased performance & improved drivability –Reduced emissions –On-board diagnostics (improved serviceability) –Improved relationship with Environmentalists Disadvantages: –Cost (development, purchase, warranty) –Less owner customization & maintenance –Opportunity for more governmental regulations –Increased motorcycle complexity

DELPHI Driving Tomorrows Technology Motorcycle Industry Demographic Market Trends Motorcycle Market Analysis Carrie Warning

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 21 Demographic Market Trends Male 45 years old Married No children Educated $78,000 per year

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 22 Motorcycle Market Analysis (NA) Class III –90% of sales –75% are 700 cc or greater –1% annual growth (2010) Top 6 OEMs –95.3% market share

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 23 Motorcycle Market Analysis (EU) 2002 –Registration 3.3% –Volume 1.325M units forecast –2.5% –1.416M units (2007) Top 5 OEMs –77.1% market share Italy –29.5% of EU sales

DELPHI Driving Tomorrows Technology Motorcycle OEMs Major OEMs Motorcycle Segment OEM Highlights Market Share Nancy Fike

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 25 Major OEMs Harley-Davidson Honda Motor Co., Ltd. Suzuki Motor Corporation Yamaha Motor Co., Ltd. Kawasaki Heavy Industries BMW

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 26 Harley-Davidson, Inc. Known as the Motor Company Only major U.S. motorcycle manufacturer #1 U.S. seller of heavyweight motorcycles Invested $1.5 billion over last 7 years to ensure market leader position Moved into new European headquarters during 2002

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 27 Honda Motor Co., Ltd. Worlds largest motorcycle producer Japans #3 automaker World leader manufacturer of internal combustion engines Operates 110 factories in 31 countries CY2005-plans to reduce total hydrocarbon emissions to 1/3 of 95 levels CY2005-plans to improve average fuel efficiency by 30% relative to 95 levels

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 28 Suzuki Motor Corporation Japans #1 minicar producer Japans #3 motorcycle manufacturer Operates in 190 countries Partnership w/ Kawasaki to develop motorcycles and ATVs Developing technology to reduce emission gases, improve fuel economy, and reduce noise

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 29 Yamaha Motor Co., Ltd. Best known for extensive line of motorcycles Operates 60 plants in 35 countries Made efforts to meet strict CO2 emission regulations, but failed

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 30 Kawasaki Heavy Industries, Ltd. Multitude of products Difficult to find motorcycle specific information

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 31 BMW One of Europes top automakers Currently expanding R&D facilities and staff Engineering & Emissions Control Test Center Represented in 130 countries

Summary of Major OEMs

OEM Research & Development Costs

46.4% 20.2% 9.8% 9.3% 7.1% 2.5% 4.6% 2002 U.S. Motorcycle Market OEMs Top 6 OEMs hold 95.3% of Motorcycle Market7

21.0% 14.8% 8.5% 6.6% 5.7% 3.5% 7.0% 2002 Europe Motorcycle Market 17.7% 15.1% OEMs Top 5 OEMs hold 77.1% of Motorcycle Market 8

DELPHI Driving Tomorrows Technology Proposed Entry Strategy Competitive Market SWOT Analysis Strategic Options Strategic Recommendations Frank Steiert

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 37 Competitive Market Many established EMS Suppliers OEMs and EMS Suppliers build strong relationships (due to length and complexity of EMS projects) EMS is considered by many OEMs to be a core competency (internal expertise) A new EMS Supplier must have technically superior systems and competitive prices

SWOT Analysis - Delphi

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 39 Strategic Options Offer EMS to high-volume OEMs with non-automotive divisions Offer EMS to high-volume OEMs with automotive divisions Offer generic EMS with tools to low- volume custom motorcycle manufacturers Offer EMS components to OEMs

DELPHI Driving Tomorrows Technology 12/17/2003 N.Fike, J.Redumski, F.Steiert, C.Warning 40 Strategic Recommendations Offer EMS to high-volume OEMs with non-automotive divisions –Offer EMS to high-volume OEMs with automotive divisions XOffer generic EMS with tools to low- volume custom motorcycle manufacturers Offer EMS components to OEMs

DELPHI Driving Tomorrows Technology Questions & Answers TEAM