1. Todays Turbulence: A Foundation for Future Success Todays Turbulence: A Foundation for Future Success David E. Cole Chairman Center for Automotive Research (CAR) NASACT Annual Conference Ritz-Carlton Dearborn, Michigan August 17, 2009

2. Title Date 2 NASA Houston We Have a Problem

3. Title Date 3 Auto We Have a Problem Mostly Revenue – with Depression Level of Sales

4. Title Date 4 Pillars of Economy s Mining s Agriculture s Manufacturing

5. Title Date 5 Manufacturing Like Rodney Dangerfield – Dont Get No Respect

6. Title Date 6 Across the Land – Amazing Level of Ignorance on Auto Industry

7. Title Date 7 The Perfect Storm Benefits Hyper Competition Competent New Players: China, India, … Auto Industry Tools Materials Policy Money

8. Title Date 8 Auto Industry of the Future A World of Vanishing Boundaries

9. Title Date 9 s Energy s Policy s Money s Survival Key Contemporary Issues

10. Title Date 10 Economic Contribution of the U.S. Automotive Industry

11. Title Date 11 Auto Manufacturing Manufacturers.... 332,000 + jobs Parts Suppliers.... 544,000 + jobs R & D Spending... $16 + billion Source: BLS, NSF *includes NAICS 3361, 3362

12. Title Date 12 Economic Contribution Per Job Auto Mfr.$329,000 Average Job$112,000 Source: U.S. Census Bureau Annual Survey Manufacturers 2005

13. Title Date 13 Economic Multiplier Auto Manufacturers – 7.5 Auto Parts Supplier – 5.7

14. Title Date 14 We Are Swimming a River That is Getting; Faster, Deeper, & Wider But!

15. Title Date 15 The Pot of Gold on the Other Side is Getting Larger s Labor Cost Reduction s Household Growth s Pent-Up Demand s Capacity Reduction s Scrappage s Return of Pricing Power

16. PALE Meeting-March 19, 200916 However, Will It Come Back.. ? U.S. Light Vehicle Sales Forecast Source: CSM Worldwide, J.D. Power +4.4 M+6.8 M+8.9 M +2.4 M -9.3 M-5.2 M -8.0 M

17. PALE Meeting-March 19, 200917 U.S. Light Vehicle Sales History and Forecast Combined J.D. Power and CSM Worldwide Forecast 2007 - 2014 Source: CSM Worldwide, JD Power, Inc. Millions

18. PALE Meeting-March 19, 200918 US Light Vehicle Sales Forecast Last update: Mar 17 2009

19. 19 The Challenge: Getting to the Other Side

20. Title Date 20 Failure of a Major OEM Would be a National Disaster s 2+ Million Job Loss s $100+ Billion Tax Impact s Prevention < $50 Billion

21. Title Date 21 First year: 2.5 to 3.0 million jobs LOST 50 to 100 Percent Detroit Three Shutdown

22. Title Date 22 After three years: $275 to $400 billion personal income $110 to $160 billion tax receipts LOST 50 to 100 Percent Detroit Three Shutdown

23. Title Date 23 Ounce of Prevention is Worth a Pound of Cure

24. Title Date 24 Beware: The Aging of the Boomers.

25. Title Date 25 Demographics s Consumer Behavior s Socio / Political s Health Care s Skilled Workers s World Issue Boomers go Boom

26. Title Date 26 Auto Industry - Thousands of New Jobs – But Only for the Educated for the Educated

27. Automotive Communities Program 17 April 2008 Kristin Dziczek, kdz@cargroup.org Bernard Swiecki, bswiecki@cargroup.org Center for Automotive Research Ann Arbor, MI

28. Title Date 28 Success Requires Improvements in: s Cost s Revenue s Agility s Innovation

29. Title Date 29 The Old Business Model is Broken

30. Title Date 30 BureaucracyPaperLinear SlowLean Individual Sequential Regional Physical Prototypes Job for Life Kings Talk CompetitionStructuredAcquisitions Vertical Integration Legalistic Old Business Model Control

31. Title Date 31 Anti-bureaucracyPaperless Collaboration Fast Lean Agile Team e-enabled Global Virtual Prototypes People Flow Coaches Listen Coopetition Parallel FlexibleAlliances Virtual Integration Trust New Business Model Empowerment

32. Title Date 32 Time Present Business Model New Business Model Real Desired Performance

33. Title Date 33 Global Integration- s Platforms s Components s R & D s Plants s Everything One Company World-wide

34. Title Date 34 Value of Global Economies of Scale are Huge

35. Title Date 35 Lean / Agile sInvestment sEngineering sManufacturing sEverything

36. Title Date 36 Collaboration Driven by Resource Shortage sNatural sFinancial sHuman sTime

37. Title Date 37 Knowledge The Competitive Edge

38. Title Date 38 Its nice to be smart and rich, but smart is more important than rich.

39. Title Date 39 Customer Pull Cars and Trucks Product and Process Technology Push

40. Title Date 40 Time Knowledge Application Knowledge CompetitiveAdvantage Innovation

41. Title Date 41 Auto Technology At the edge of a revolution?

42. Title Date 42 Future Power Plants Gasoline Diesel Hybrid Fuel Cell The Answer – ?

43. Title Date 43 Coming Fast – Plug-in, Series Hybrids or Extended Range Electric Vehicles

44. Title Date 44 Future Fuels Petroleum Bio Hydrogen The Answer – ?

45. Title Date 45 Future Gasoline Price – $ 1.50 – $ 5.00 /gallon

46. Title Date 46 Old Carbon Fuels Will Continue to be Used if they are Economic

47. Title Date 47 2 Key Developments s Lithium Batteries s Cellulosic Bio Fuels

48. Title Date 48 Developments to Watch Developments to Watch s Vehicle/Infrastructure Integration s Auto/Utility Integration

49. Title Date 49 Future Direction Its All a Matter of Economics

50. Title Date 50 World Class is a Moving Target

51. Title Date Upcoming CAR Events s October 19-21, 2009 – The Business of Plugging In. A Plug-in Electric Vehicle Conference, Detroit, Michigan Additional information available at CARs website www.cargroup.orgwww.cargroup.org 51