1. THE GOLDEN YEARS IN THE US AUTO MARKET 2010-2015 Presented to: AFLA By John McElroy September 10, 2009

2. U.S. AUTO MARKET COLLAPSED Total Industry Sales 2006 = 17 million 2007 = 16 “ 2008 = 13.1 “ 2009 = 10.3 million? = 40% decline

3. U.S. AUTOMAKERS CRUMBLED 2008 LOSSES GM = -$30.9 billion Ford = - $14.5 Chrysler = -$8 TOTAL = $53.4 billion

4. Bankruptcy Benefited Detroit 3 Debt levels slashed Labor costs slashed Work rules fixed No more Jobs Bank No more excess capacity EBITDA break-even at 10 m SAAR

5. What’s Going on With “Clunkers” According to DOT 1. Toyota Corolla 2. Honda Civic 3. Toyota Camry 4. Ford Focus FWD 5. Hyundai Elantra 6. Nissan Versa 7. Toyota Prius 8. Honda Accord 9. Honda Fit 10. Ford Escape FWD According to Edmunds 1. Ford Focus 2. Ford Escape 3. Honda Civic 4. Ford F-150 5. Toyota Corolla 6. Toyota Camry 7. Honda CR-V 8. Chevrolet Silverado 9. Hyundai Elantra 10. Honda Accord

6. U.S. AUTO INDUSTRY NEEDS INVENTORY GM: 40 Ford: 35 Chrysler: 28 Honda 25 Nissan 22 Toyota 16 Total Industry: 29 days

7. Boom Times In Used Car Market 7 Million fewer “nearly new” used Daily Rentals buy 1 million less, keep for 40,000 miles Commercial fleets buy 500,000 less 1 million “credit risks” forced into used cars 1 million turn away from new cars Tighter loan qualifying = less repos Franchise closings = more used dealers

8. WE’RE FACING A LONG-TERM SHIFT IN THE U.S. MARKET MARKET DRIVERS CAFE & CO2 legislation will force shift in market: fewer trucks & SUV’s, more small cars. Will Americans buy small cars? Car prices will have to rise to offset profit loss from trucks. $5,000/car by 2015. Can household family keep pace? No. Can auto manufacturing in U.S. survive at an 11 million SAAR? Yes!.

9. PENT-UP DEMAND IS BUILDING U.S. Scrappage rate = 5.7% = 14.25 million vehicles/year U.S. population grows 3 million/year 10 years = + 30 million people Demographics + scrappage is building pent-up demand

10. 2012-2015 = GOLDEN YEARS Pent-up demand + capacity reduction + shift in market = perfect alignment for automakers They will strain to meet demand All sales incentives can be cancelled They could be headed for record profits