The OESA Automotive Supplier Barometer is published in partnership with Deloitte LLP.

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OESA

Automotive Supplier Barometer

Focus: Asset Management

Detroit – Washington D. C.

Focus: Asset Management

The OESA Automotive Supplier Barometer is published in partnership with Deloitte LLP.

May 30

May 30 –

– June 15, 2012

June 15, 2012

93 Survey Responses

The following questions and responses relate to tooling used to produce components and assemblies

for your OEM customers. Customer-owned assets are those bailed/stored at your facilities or within

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How much tooling in progress do you typically have?

Less than $1 million 28% $1 - $5 $5 - $10 million $10 - $20 million 13% More than $20 million 12% 2 No. of Responses = 90 Comments

 Our tooling is generally inexpensive but we do 'retool' often.

 For our products, unique tooling runs about $500,000 per sourced platform and we supply to about 60 platforms.

 We now have over $20 million but usually have $1 million to $5 million.

 U.S. business only.

$1 - $5 million 34% million

13%

OESA Automotive Supplier Barometer-June 2012 Published in partnership with

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Which of the following financial sources do you utilize to

help underwrite the cost of tooling in progress?

86

46

31

0

20

40

60

80

100

Internal-working capital

Commercial line of credit

Customer progress payments

Number of respondents

7

2 Factoring

Other Answers •The toolmaker does not get paid until we do._{•Local/regional economic development programs.}

Comments

 Most OEMs pay a lump sum total after PPAP.

 Primarily working capital.

 Customer progress payments vary by customer.

 Ninety percent of customers are on progress payments with the percent differing by customer. Ten percent are amortizing tooling into piece price.

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How do you document the tooling required to produce

end-item parts?

67 53 28 27

0

10

20

30

40

50

60

70

80

Through various spreadsheets launch engineers/program managers maintain Accounting-based asset register On paper BOM (Bill of Materials) explosion in an ERP solution

No. of Responses = 93 ₄

27 17

3 BOM (Bill of Materials) explosion in an ERP solution

Exists as "local knowledge" (maintenance/tool crib)

Other Answers •VTAM•Own tooling administration system •Global reporting process

Comments

 We have a department that is responsible for all tooling administration.

 BOM in ERP coming soon.

 Specific definitions/tooling specification sheets in RFQs submitted to customer.

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What percentage of new tool orders do you review after

completion?

1-25% , 12, 13% 26-50% , 6, 6% 51-75% , 2, 2% 76-100% , 62, 67% None, we do not do this type of review , 11, 12% Comments

 This percentage has increased over the past couple of years.

 Our tool orders all resemble each other. Not much that is new and out of the ordinary. Spot checks for accuracy only.

 We do them all and track them throughout the build process.

 We will start soon. Our new ERP software allows for this type of detailed information.

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How much confidence do you have that you would know when

tooling is moved in your supply chain?

Comments

 Minimal tooling at a sub-supplier. Most is in-house.

 Confirmed through supplier audits. 0-25% confidence , 6, 7% 26-50% confidence , 10, 11% 51-75% confidence , 16, 17% 76-100% confidence 6

No. of Responses = 91 OESA Automotive Supplier Barometer-June 2012_{Published in partnership with} confidence

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For OEM customers, what percentage of obsolete tools in your

facilities do they proactively remove once tools become

obsolete?

Comments

 OEMs do not remove the tools proactively from us. We need to request it and follow a tooling disposal process. Response time and the process to follow varies from OEM to OEM. It seems some of the OEMs do not have a clear disposal system for their suppliers, the process we need to follow is not smooth and can take months. In some cases, there is no process at all.

 We have to request permission to obsolete tools.

 Zero. Even after 10-15 year service obligation ends.

 Will not give permission and never remove them. 0-25% , 68, 76% 26-50% , 8, 9% 51-75% , 9, 10% 76-100% , 1, 1% Not applicable,

we have no  _{Will not give permission and never remove them.}

 We have to keep the tooling for seven years and then we can scrap them.

 We have tools in-house that are 20-30 years old. We have great difficulty in getting customer base to move some tools.

 Normally not proactive. We request approval to remove tools.

we have no OEM customers ,

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What are the reasons that obsolete tools exist within

your enterprise?

76 38 26 25

0

20

40

60

80

No permission to scrap Not a priority Lack of visibility Lack of awareness

Comments

 It is not a priority for the OEMs. In addition it seems in some OEMs that no department at the OEMs wants to carry the responsibility to sign a document that authorizes us to dispose of tools.

 Primarily, there is no customer approval to remove after service requirements end.

 We own a piece of this as well in terms of staying on top of when a part goes past

No. of Responses = 93 ₈ 25 19 7 Lack of awareness No organizational owner Other answers ‘Other’ responses

•10 year requirement for service •Replacement cost

•Waiting

•Required for service parts up to 15 years

•We consider future use with possible modifications

required service life.

 Obsolete tools are by definition tools that are no longer useful for production or service parts fabrication. As some of our service parts requirements might extend well beyond the "normal" 15 year customer benchmark, there does tend to be a hazy cloud on the visibility of "obsolete.“

 Waiting to ensure tools are not needed for programs that are cancelled, facelifts or major engineering changes.

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For your major product area, identify the lowest level tier in your

supply chain that you have accurate information on and visibility

into (including raw material).

One , 32, 35% Two , 41, 45% Three , 13, 14% Four or more , 5, 6% Comments

 Tier4 on base raw materials down through feedstock level to Tier2 level for parts produced.

 We are primarily Tier2 and manage down to Tier3.

 We expect the lower tiers to police themselves, but are not foolish enough to think this happens in all cases, or even in most.

 Varies widely. In some cases it does not extend beyond first tier, non-critical feedstock or upstream processes. In other cases, we become very familiar with the Tier2 or even Tier3 if there are unique materials or processes utilized. We like to allow our Tier1 suppliers to run their business and not have to manage any part of it.

 From Tier1 perspective.

 Select visibility to critical Tier2 suppliers.

 High percentage of our purchases are raw material.

 We monitor Tier1 quite well and review their monitoring of the next tier down. Only when there are problems do we jump directly into Tier2.

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Do you make progress payments on tooling to your suppliers?

Yes,

77,

86%

No, 13,

14%

If no, why not?

 Only in cases where the OEM agrees to do the same with us, which are minimum. Usually we do not get paid until the part submission warrant (PSW) is signed and once all documents and information requirements are provided.

 From a process standpoint, our standard business practice is to pay for tooling when the supplier receives PPAP approval. In select instances, we may make progress payments on the tooling if it is included in a larger facility order which is funded by progress payments.

‘Yes’ comments

 In some cases, i.e. offshore tooling.

 Dependent upon supplier, specific project, and customer terms.

 If we get it from our customer.

 We do when we get them from the OEM but otherwise we try not to.

 We try to match terms with our customers, but tend to treat our suppliers better than we are treated, relative to tool progress payments.

10

No. of Responses = 90

included in a larger facility order which is funded by progress payments.

 Usually not enough dollars to warrant.

 They all want 100 percent after first part inspection passes. Regardless of our deal with OEMs.

 We match payment terms of customers with payment terms of suppliers.

 Only if our customer provides progress payments to us.

 We build the tooling ourselves.

 Our tool shops get paid in full within 12-16 weeks depending on the tool. Our company gets paid when the Tier1 PPAPs the package to their customer which necessitates the progress payments to us to support our tiered tooling supply base.

 Not requested.

 Not required.

Additional comments

 We typically tie our payment terms to customer payment terms. However, we are willing to accept progress payments if overall cost for that supplier are more competitive.

 Many suppliers are to small to accept payment terms at the end of the project completion.

 In reality, we have no choice. The good tool suppliers demand this. Typically 75 percent is paid in advance of shipping with the balance held out after tool run off and approval, then net 45 days.

 This is not a big deal since we are very vertically integrated. There is not much tooling money at our suppliers.

 Only if required and the customer offers same terms.

 Trying to match supplier payments to customer payments with some success.

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Estimate the percentage of aftermarket revenue you lose due to

sale of grey market parts.

Comments

 Limited direct aftermarket sales.

 Aftermarket revenue is a negligible portion of our overall company revenue. However, the impact is probably greater than we realize.

 We deal with safety related items so it is very rare that individuals would accept grey market parts.

 Supply flow to market is very tightly controlled.

 In our business, with a majority of our parts regulated by FMVSS standards, with high durability, aftermarket sales are dominated by crash/theft related damage. Our bigger problem with black market parts is the violation of intellectual property 0% -negligible , 63, 76% 0.25 to <1% , 5, 6% 1 to 2% , 6, 7% More than 2% , 9, 11%

with black market parts is the violation of intellectual property rights by an offshore copier, openly selling a copy of our product to the local market vehicle manufacturer.

 Parts are not cost effective to duplicate.

 We do not have those estimates.

 We are not tracking as it is not a priority (aftermarket) and we have no tool to measure.

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What percentage of final assembly components do you

manufacture in-house (versus outsource the manufacturing to

another company)?

0-25% , 16, 18% 26-50% , 13, 15% 76-100% , 52, 58% 12

No. of Responses = 89 OESA Automotive Supplier Barometer-June 2012_{Published in partnership with}

Comments

 We only outsource some machining processes and a few components.

 We have a diverse supply base consisting of OEM directed suppliers and our engineered products sourced to our global suppliers. Minimal vertical integration today. Pursuing opportunities where we can capture the appropriate value for the engineering and tooling investment.

 Capital intensive and very vertically integrated.

 We maintain the ability in some areas for R&D activities even though most is outsourced.

 Minor outsourced assembly at suppliers. 51-75% ,

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Identify your company’s North American automotive revenue for

the last fiscal or calendar year.

Number of Responses

29

20

25

30

35

13

5

15

0

5

10

15

20

Less than $50

million

$50 - $150 million

$151 - $500

million

$501 million - $1

billion

More than $1

billion

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Thank you for your participation

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Dave Andrea Kathy Reiss

Senior Vice President Director

Industry Analysis and Economics Research and Industry Analysis 248.952.6401 ext 228 248.952.6401 ext 247

[email protected] [email protected]

OESA

1301 W. Long Lake Road Suite 225

Suite 225 Troy, MI 48098 www.oesa.org

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Please note: The information and opinions contained in this report are for general information purposes. Comments are edited only for spelling and may contain grammatical errors due to their verbatim nature. Responses to this survey are confidential. Therefore, only aggregated results will be reported and individual responses will not be released or shared.

As used in this document, “Deloitte” means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP, which are separate subsidiaries of Deloitte LLP. Please seehttp://www.deloitte.com/us/aboutfor a detailed description of the legal structure of Deloitte LLP and its subsidiaries.