OESA AUTOMOTIVE SUPPLIER BAROMETER · Hiring qualified people for technical factory roles . What is the biggest barrier you see to OEM requests for increased capacity ?: JOIN. ENGAGE

JOIN. ENGAGE. ADVANCE. OESA Automotive Supplier Barometer- January 2016

OESA AUTOMOTIVE SUPPLIER BAROMETERFOCUS ON PRODUCTION

January 4-6, 201690 Survey Responses


EXECUTIVE SUMMARY (1/2):OUTLOOK OPTIMISTIC

2OESA Automotive Supplier Barometer- January 2016

Supplier Sentiment lower, but remains optimistic The Supplier Sentiment Index is 53, down 2 points from November; above 50

indicates a positive or expansionary outlook. This marks 3 straight years of positive supplier sentiment on the outlook. The positive outlook comes from positive projections for 2016 sales and production

volumes. Caution exists over 2016’s political and economic environment.

Current Production: Adding capacity while keeping breakevens down Utilization rates have moved higher – median utilization was up 5 percentage points

to 85% – pushing suppliers to add capacity. Companies continue to try and target conservative breakeven volumes: production

has increased by 112 percent while supplier breakeven volumes have only increased by 51 percent.

Suppliers are implementing tactics like flexible schedules and alternative sources to gain production efficiencies while managing investment.

Finished good inventory is declining; suppliers increasing inventories decreased from 51% to 34%.


EXECUTIVE SUMMARY (2/2):CONCERNS INCLUDE TALENT, SCHEDULING, SOUTH AMERICA

3

Supplier Challenges The primary internal supplier challenge is a talent shortage. To combat this,

companies are developing and growing intern and apprentice programs, succession planning training and bolstering recruitment.

The primary external supplier challenge is managing production scheduling. Given the uncertainty in release information received, 23 percent of suppliers inflate releases while 19 percent deflate releases.

Mexico and South America Mexico is an important region for many suppliers, who nonetheless have confidence

in their ability to meet production releases from these growing operations. South America is still a concern with most supplier expecting that the prior level of 4.0

million units of production will not be achieved again until 2020 or beyond.


CONTENT

4OESA Automotive Supplier Barometer- January 2016

Page #Detailed Summary 5

Outlook and Sentiment 8

Breakeven Analysis 9

Capacity Utilization 10

Confidence in Production Releases 15

Inventory Levels 18

Supplier Issues and Challenges 21

Sub-Tier Supplier Issues 25

Mexico and South America 28

Launch Issues and Risks 29

Appendix 1: Additional Outlook Information 34

Appendix 2: Additional time-series data 39


DETAILED SUMMARY (1/3)

5

The January OESA Automotive Supplier Barometer focused on production related issues, launch activity and strategies that suppliers are implementing to manage expected volume increases this year. OESA received 90 responses to this survey.

The Supplier Sentiment Index (SSI) has been in positive territory since January 2013. This month’s SSI is 53, down slightly from November’s index of 55. This time last year the index was 61. Between November and January, there was little change across levels of optimism overall or within revenue segments. Suppliers continue to feel good about sales and production projections, with new business awards and continued momentum going into 2016. Caution is raised around the 2016 elections, interest rates and global economics.

Though breakeven volumes for suppliers continue to increase, it is important to note that between the 2009 trough and present, production volumes have increased by 112 percent while supplier breakeven volumes have only increased 51 percent against the projected production volumes this year of 18.2 million units. That said, breakeven levels are now well above the production levels experienced in 2008-2011, arguably constituting risk in a downturn. Companies continue to focus on strategies that increase productivity and efficiencies, keeping costs down while growing business.

Capacity utilization rates have increased compared to this time last year across all quartiles. The median utilization rate moved up 5 points to 85%, the upper quartile increased from 86% to 90% along with a lower quartile increase from 66% utilization in 2015 to 75% in 2016. Supplier’s primary barriers to OEM requests for increased capacity are labor shortages, capital investment and financing, short lead-times and production volume commitments. For those suppliers at 90%+ ‘all-in’ capacity, actions taken to mitigate production risk include adding capacity through equipment or facilities, improving operating efficiencies, working flexible schedules and use of alternate sourcing.



6

Overall suppliers are feeling less confident that customers’ production releases are matching their sales and inventory levels as compared with last year; the decrease is slight but down dramatically from 2011-12. Better news is that 5 percent of suppliers now feel very confident about releases when zero did in 2015. As one respondent stated, “It is a mixed bag, some customers are right on and some are fluctuating monthly.” Given the uncertainty in release information received, 23 percent of suppliers inflate releases while 19 percent deflate releases through their supply chains.

Through continued focus and inventory management, supplier finished goods inventory levels are decreasing. In 2014, 51 percent of suppliers indicated some level of increasing inventory. This year, only 34 percent of suppliers have increasing inventory levels while decreasing levels have gained traction.

When asked what issues suppliers will face internally in meeting increased levels of production, the lack of engineering talent and skilled labor shortages continue to be top-of-mind for more than 60 percent of survey respondents. To address these issues, companies are looking at workforce related strategies in the areas of recruitment, developing and growing intern, co-op and apprenticeship programs, employee training and development for succession planning. Production overtime premiums are less of a concern this year compared to 2012-2014.

The most significant supply chain concern in meeting increased levels of production continues to be production scheduling. Companies continue to monitor their supply chain for risk, communicating on many fronts. Advanced planning is a focus along with increased supplier development activities.



7

With more than half of the survey respondents have or are planning to bring production facilities into Mexico this year, there is great confidence that customer releases to those operations will be met. Sixty percent of those suppliers feel either very confident or somewhat confident in their capabilities. Contrary, in the South American region, there continues to be concern over political and economic obstacles to a return to production volumes of 4.0 million units. Thirty-five percent of survey respondents believe volumes will return to that ‘normal’ before 2020; 26 percent believe that volume will be achieved in 2020, while 38 percent believe 4.0 million units of production will not return until after the year 2020.

Along with increasing production volumes, suppliers also need to manage the increasing number of vehicle launches in 2016 and 2017. Over the next two years, the median number of launches that companies face range from 12 to 50. Risks associated with these activities are reflected in production, including engineering talent and production ramp-up. Companies are implementing intern and apprenticeship programs, developing training programs and utilizing outside resources to help in recruiting.


3%26%

51%

20%

0%7%23%

52%

18%

0%0%

20%

40%

60%

80%

100%

Jan-16

Nov-15

OUTLOOK AND SENTIMENT: MARKING 3 STRAIGHT YEARS OF INCREASING SUPPLIER OPTIMISM

8

Outlook - 2 Months Sentiment – 5 Year

No. of Responses = 90

Describe the general twelve month outlook for your business. Over the past two months, has your opinion become:…?

+ -66

5051

37

52

6664

60

55

46

515555

6260

66

606056

5961

5656

61

5553

57

50

5553

0

10

20

30

40

50

60

70

80

90

100


0

5

10

15

20

25

Milli

ons

North American Light Duty Sales, Production and Breakeven

Sources: IHS Automotive forecast (December 2015) and January 2016 OESA Automotive Supplier Barometer

9

NA Sales

NA Production

January 2016 Breakeven = 14.3 Million Units

(vs. only 9.5 Million in 2009)

Breakeven point marker

13.5 Million Units = B/E January 201512.7 Million Units = B/E January 201412.0 Million Units = B/E January 201311.0 Million Units = B/E January 201210.5 Million Units = B/E January 201110.0 Million Units = B/E January 20109.5 Million Units = B/E January 2009


Note: Data details are shown in year-over-year appendix

Considering North America light duty vehicle production, estimate the required 2016 industry volume needed to achieve breakeven in your North American operations (in millions of units):…

PRODUCTION INCREASES BY 112% BETWEEN 2009 AND 2016 WHILE BREAKEVEN INCREASES BY JUST 51%


MEDIAN CAPACITY UTILIZATION UP 5 PERCENTAGE POINTS YEAR-OVER-YEAR; UPPER QUARTILE AT 90% UTILIZATION

10

January 2016 January 2015Lower

QuartileValue

Median Value

Upper Quartile

Value

Lower QuartileValue

Median Value

Upper Quartile Value

75% 85% 90% 66% 80% 86%No. of Responses = 79

Please estimate your 'all-in' capacity utilization levels (in percent).'All-in' capacity is the total of your current capacity utilization (current workforce levels and operating plant and equipment assuming 270 working days and 3 shifts) plus warm-idled capacity (idled capacity but being able to ramp up production within 3 months with minor capital needed) plus cold-idled capacity (idled but being able to ramp up production after 3 months with moderate levels of capital required).

May 2014 May 2013 May 2012Lower

QuartileValue

Median Value


Lower QuartileValue

Median Value


Lower QuartileValue

Median Value


70% 80% 90% 65% 75% 85% 55% 75% 85%


BIGGEST BARRIERS TO INCREASING CAPACITY ARE CUSTOMER VOLUME COMMITMENTS AND LABOR

11

Responses:Customer Commitment to Volumes: Secure long -term relationships with the OEMs to ensure payback on investment.(7 similar responses) Shifting of production to other plants globally requires approval by OEM, difficult to obtain at times. Getting the PO, commitment from the OEMs/Tier1s. Contractual issues related to investment. Short program durations and lack of longer-term program commitments. Slow response from OEM as to investment requirement approval and agreement. OEM commitment with appropriate lead-time to acquire capital equipment or tooling. OEMs willingness to commit to volumes that will justify expansion and provide a return of investment. Outlook for volumes (risk of increase capacity not being used and not underwritten by customer). Fluctuating demands and therefore required "over-invest" in capacity. Sustainability of forecasted volumes. Non-level schedules.

Labor Availability: Manpower. (7 similar responses) Skilled labor. Availability of contract workers. Support manpower - maintenance, supervision, skilled trade. Labor availability but doubt that they could push the needle far enough for that to be a factor. Hiring of experienced work force for start-up of idle capacity. Staffing third shift. Hiring qualified people for technical factory roles.

What is the biggest barrier you see to OEM requests for increased capacity?:


BARRIERS TO OEMS REQUESTS FOR INCREASED CAPACITY ALSO INCLUDE CAPITAL AND FINANCING AND INSUFFICIENT TIME PROVIDED

12

Responses: (continued)Capital, Capex, Financing: Capital investment. (6 similar responses) Raising capital to pay for additional capacity, following 4 years of heavy investment for capacity to support recovery. The capital costs needed to support the expansion. Certain manufacturing equipment is at full capacity so depending on the request significant capital outlays are required with

significant lead-times. We are building capacity now and it should start up in next few months. Unsupported capital. Price. Cash flow. Cash management constraints. Reluctance to take on debt to expand facilities. Being able to take work at expected pricing.

Timing and Delays: Lead-time for capital. (3 similar responses) Timing. (2 responses) Timeliness of capital availability. Timing to implement. Lead-times on certain processing operations. Speed of change. Lack of planning/time to adjust (increase tooling, implement further process/production efficiencies). Lack of a plan on where/when and how the capacity will be needed. Timely feedback/approvals. Only time for ramp-up of additional labor/training.



OTHER BARRIERS INCLUDE SUB-TIER AND TOOLING CAPABILITIES, OPERATIONAL CHALLENGES, AND CONCERN ABOUT MARKET RISKS

13

Sub-Tiers and Tooling: Supplier tooling. Tooling funds. Supply chain capacity. Tier 2 and Tier 3 suppliers. Tier 2 and Tier 3 suppliers have not been able to invest at the same speed as the Tier1s.

Operations and Facilities: Leased space available. Specific press tonnage. Machine capacity. Line cycle time capacity. Press capacity, floor space. Starting to get requests from Tier1 customers to hold safety stock.

Market and Competitive Risks: Potential down turn of NA vehicle market. Foreign competition- Mexico. Market. A significant increase in gas prices.

Lack of Information: Understanding the mix changes that go along with that increase. Lack of details for option breakdowns.

No Barriers: (7 responses)



THOSE AT 90%+ UTILIZATION ARE EXPANDING CAPACITY, ADDING FLEXIBLE WORK AND PRODUCTION EFFICIENCIES

14

Adding Capacity: Additional capacity is being built. Expanding in several locations in Mexico and

Central America. We are adding capacity to current facilities and de

bottlenecking. Additional equipment being ordered. May add new capacity in Mexico. Adding selective capacity. Launching a second north American facility in

Mexico. Investment. We have already implemented all non-

investment options.

Flexible Work: Working overtime (5 responses) Overtime, more tools, added shifts, alternate

suppliers Weekend work. Different shift patterns. What is wrong with 90% capacity utilization? There

is no production risk, we can stretch on weekends if needed.

Production Efficiencies: Higher inventory levels, utilizing available capacity in

other regions (Europe, SA). Heavy emphasis on operational transformation. Working to eliminate bottlenecks. Investing in throughput improvements. Cycle time improvements, improved change-over

times, longer lot runs. Inventory management. Focus on preventative maintenance, improved

yields, operating efficiency, and capital utilization. Efficiency gains through lean activities and design

changes.

Alternate Sourcing: Using the Tier2 and Tier3 supply chain. Outsourcing. Investigating contract manufacturing to supplement. Contingency plan includes getting alternate line

approval and approval on alternate material sources.

Other: Turning down new business. None at the moment, but we're constantly

monitoring it.

If your 'all-in' capacity is 90% or greater, what actions are you taking to mitigate production risk?


SUPPLIERS ARE LESS CONFIDENT IN PRODUCTION RELEASES; CONFIDENCE IS DOWN DRAMATICALLY FROM 2011-12 LEVELS

15


5%

32%

38%

25%

1%

0%

39%

45%

15%

0%

5%

54%

21%

20%

1%

9%

54%

16%

19%

2%

13%

34%

30%

17%

4%

0% 10% 20% 30% 40% 50% 60%

Very Confident (=1)

Somewhat Confident(=2)

Neutral (=3)

Somewhat Unconfident(=4)

Not At All Confident (=5)

2016 (2.9)2015 (2.8)2012 (2.6)2011 (2.5)2010 (2.6)

How confident are you that your customers’ production releases are matching their current sales and inventory requirements?


GIVEN THE UNCERTAINTY IN RELEASE INFORMATION RECEIVED, 23 PERCENT OF SUPPLIERS INFLATE RELEASES WHILE 19 PERCENT DEFLATE RELEASES.

16


2%

6%

15%

59%

13%

6%

0%

0%

6%

25%

51%

13%

4%

1%

2%

2%

15%

68%

10%

1%

2%

0%

10%

16%

61%

8%

5%

0%

0% 20% 40% 60% 80% 100%

Inflate over 10%

Inflate 5%-9%

Inflate 1%-4%

Pass Through

Deflate 1%-4%

Deflate 5%-9%

Deflate over 10%

2016201520122011

Generally, across customers and programs, are you currently tending to inflate or deflate your releases down through your supply chain?


INVENTORY REQUIREMENTS AND HISTORICAL RELEASE RELIABILITY DRIVE DECISIONS IN SUPPLY CHAIN RELEASES. (CONTINUED)

17

Comments:Increasing Releases: Bank and line-loss force us to add a bit. Depends on the component and where it is coming from. The penalties for not being able to respond timely are to great to not have the capability to ‘turn on a

dime.’ At the end of the day someone has to carry the inventory. Building safety stock to mitigate supply issues. We are increasing releases only for specific suppliers. Suppliers with production issues are getting

increases to give us more safety stock. Most suppliers do not have the ability to increase releases. In order to be able to handle variation from some customers, we are running at 15 percent over customer

purchased capacity and 10 percent above releases. Lead-times are short for release changes.

Pass-Through: Automated. Always clear. While often pass through, we do sometimes deflate. Never inflate.

Decreasing Releases: For vehicle production in NA it is getting better. For parts we provide to China we have seen big

discrepancies. Historically customer forecasts are overstated, we take a conservative approach to budgets by decreasing

the forecast by 10 percent. We generally review historical trends on all vehicles when looking at releases going forward. We still find

customers are overly optimistic. However, our deflation rate is lower than in the past.


FINISHED GOOD INVENTORY IS DECLINING; SUPPLIERS INCREASING INVENTORIES DECREASED FROM 51% TO 34%.

18

67% 4

4%

1617%

2123%

3133%

1011%

33%

11% 1

1%

March 2014

Increased 10% or more

56%

Increased 7-9%3

3%

Increased 4-6%10

11%

Increased 1-3%12

14%

No Change29

33%

Decreased 1-3%18

20%

Decreased 4-6%6

7%

Decreased 7-9%1

1%

Decreased 10% or more

45%


Compared to average 2014 levels, how have your average 2015 finished goods inventory levels changed?

Increased inventory=51%

Increased inventory=34%


DRIVERS OF FINISHED GOODS INVENTORY CHANGE.

19

‘Increased’ Responses: Sales were up 25 percent. Customer expectation for minimum stock levels of inventory. Safety stock levels have increased due to capacity constraints. Shifting customer schedules. Increased business level. Risk mitigation in long supply chain. North America market was strong in 2015, even though the China market leveled off, and slightly declined. We need inventory in anticipation of strong 2016. Common sense. Instability in some of our plants requiring higher finished goods to better balance production. Will be reduced after plants

are more stable. Launch of Ford Kansas City. Slower December releases and insurance against weather related supply chain disruptions. Higher sales volumes at OEMs. Customer scheduling/release issues. Increased sales revenue. The percent inventory declined. Volumes higher than 2014 levels, but also quick start-ups from customers in January drove higher inventory. Increased revenue. Demand volatility. Variation in customer orders and lead-time for changes. New programs. Strong dollar puts us in a better position to have product sitting in North America.


DRIVERS OF FINISHED GOODS INVENTORY CHANGE. (CONTINUED)

20

‘No change’ Responses: Increased sales but held inventory steady due to operational improvements. We do not keep finished inventory.

‘Decreased’ Responses: Better planning and inventory management. (3 similar responses) Improved 5S and inventory controls. Better production management though our operational transformation efforts. Better working capital management. Cost to carry. Greater focus on working capital. Higher demand. More consistent uptime and output eliminating need to carry extra inventory. Higher orders stressing inventory. Optimized operational performance and turn management during 2015. Net inventories reduced on increased sales. High sales rate and not being able to produce adequate inventory in some cases. More mature products as part of overall mix. Reducing the working capital required. We were sloppy, this is just our inefficiencies of production. Financial performance - Working capital targets facilitated by improved forecast processes. We don't stock a lot of finished goods. JIT!! Lower raw due to localization initiatives. Specific focus on the value stream. Cash management objectives. Don't want to take write down due to lower material costs.


TALENT SHORTAGE IS THE PRIMARY INTERNAL SUPPLIER CHALLENGE.

21

64%

60%

26%

41%

15%

29%

16%

17%

20%

10%

69%

58%

48%

31%

28%

27%

24%

22%

17%

5%

0% 20% 40% 60% 80%

Engineering Talent or Availability

Skilled Labor Shortages

Production Overtime Premiums

Hourly Labor Shortages

Inventory Carrying Costs

Internal Manufacturing CapacityConstraints

Set-up and Change-over Costs

Outbound-Expedited Freight

Re-allocation of Resources toMonitor for Quality/Production IssueLiquidity Shortages within your own

company

2016

2015

% of respondents indicating ‘yes’

2016 No. of Responses = 872015 No. of Responses = 83

‘Other’ issue noted: managing fixed costs as pricing gets more difficult.

2012-2014 Results are show in the appendix

Over the next 12 months, will you face the following internal issues will you face as you meet increased levels of production?


TO COMBAT THE TALENT SHORTAGE, COMPANIES ARE DEVELOPING AND GROWING INTERN AND APPRENTICE PROGRAMS, SUCCESSION PLANNING TRAINING ANDBOLSTERING RECRUITMENT.

22

Workforce ActionsRecruiting-Related Recruiting/Hiring. (10 responses) Using staffing agencies. (2 similar responses) Hiring more engineers. (2 similar responses) Recruiting more entry level positions to counter turnover. (2 similar responses) Add resources in customer service. More aggressive hiring practices. Advertising. Continuous interviewing. We have been hiring engineers beyond past levels. They can be deployed most anywhere, from design and

manufacturing to quality and field visits, and are the most versatile employees. Executives should beware, or find the time to obtain an engineering degree. Automotive work without an understanding of engineering will not last long, ownership is waking up to that fact.

Identify key talent. Will revisit recruiting tools, technical talent has been difficult to secure. Now have internal recruitment staff. Also direct engagement with trade organizations and universities. Hiring ahead of forecasted volume increases. Hiring temporary and full time technical support. Advancing the culture to attract and develop employees. We have hired an inside recruiter. Job fairs. Hiring part time associates. Creative recruiting. Created my own staffing company.

What steps are you taking within your company to address the issues you identified above?


TO COMBAT THE TALENT SHORTAGE, COMPANIES ARE DEVELOPING AND GROWING INTERN AND APPRENTICE PROGRAMS, SUCCESSION PLANNING TRAINING ANDBOLSTERING RECRUITMENT. (CONTINUED)

23

Workforce ActionsCo-Ops and Interns Internships. (2 responses) Apprentice program. (2 responses) We have been more aggressive over the past few years in identifying young talent during summer internships and

trying to lock down employment before the students return to school for the final year. Apprentice programs for skilled trades. More co-ops for building pipeline of front office talent. Engagement and investment with local colleges and initiatives restructuring hourly labor engagement to keep

employees intact and help them overcome non work issues that effect their attendance. Started an internal tooling apprenticeship program. Using engineering interns. It is our second year in the MATS apprenticeship program to develop skilled labor with the MEDC.

Training and Personnel Development Training. (2 responses) More emphasis on people "development and/or draft lists" so when we need people, they are already identified. More

emphasis on SMED and OEE. Training from with-in. The available applicant pool is empty. Aggressive recruiting, training, increased spending on cross training and documenting processes and set-ups. Internal training programs. Cross-training.

Contingency Workforce Movement to higher percentage of company employees to contractors improved/flexible work schedules and better work environment.



COMPANIES ARE ALSO LOOKING AT PRODUCTIVITY IMPROVEMENTS AND ADDING CAPACITY.

24

Capacity Actions-Productivity Reduce tools change-over time. (2 similar responses) Efficiency in bottleneck manufacturing areas. Absorbing inventory costs. Carefully prioritize capital spending/focus on reducing working capital. Optimize throughput on existing assets through operational transformation efforts. Eliminating bottlenecks to reduce fatigue and absenteeism Managing inventory to make sure we have the "right" inventory levels of product in demand. Cutting back on non-essential purchases/spending. Focus on preventative maintenance, improved yields, operating efficiency, and capital utilization.

Capacity Actions-Physical Add capacity. We have a capex plan to address. Looking for new production space. Balancing capacity to our alternative manufacturing location with idle capacity. Investment in production equipment.

Other Actions: Retention incentives. Trying to recover or share in added costs with customers. We have factored the higher costs into our budget. Specific task forces to work thru these issue. Deployment of external consultant as required. Regular meetings with OEM. Weekly strategic reviews. OEM demand for skilled / engineering is shrinking the talent pool.



THE PRIMARY EXTERNAL SUPPLIER CHALLENGE IS MANAGING PRODUCTION SCHEDULING.

25

46%

19%

25%

22%

18%

10%

20%

46%

38%

37%

33%

23%

14%

4%

0% 10% 20% 30% 40% 50%

Production Scheduling Difficulties

Material Cost Premiums

Transportation/Logistics Constraints

Component Shortages

Inbound-Expedited Freight

Raw Material Shortages

Liquidity Shortages

2016

2015


2016 No. of Responses = 792015 No. of Responses = 79 2012-2014 Results are show in the appendix

‘Other’ issues noted: capital, quality of incoming material, currency, shorter run requirements, OEM productivity demands, capacity (3 responses)

Over the next 12 months, which of the following issues will your sub-tier suppliers face as you meet increased levels of production?


ADVANCED PLANNING, INVENTORY STOCK AND SUPPLY CHAIN EXPANSION ARE CONSIDERATIONS FOR MANAGING PRODUCTION SCHEDULES….

26

Scheduling/Production/Capacity: Advance planning. (2 responses) Working overtime. Giving them as much lead time as possible to secure capacity. Carrying higher component stock in house. Capacity reviews and giving long horizon visibility. Work closely on understanding our schedules and those of our customers. Providing more vision to allow for flexible production planning. Longer forecasting schedules and making commitments for material on their floor helps keep things smooth. Capacity checks. Requiring higher inventory levels through winter months. Securing long-lead materials in advance. Smoothing production schedules. We manage schedules/forecasts and communicate regularly to prevent significant shortages. Manage random issues on

case by case basis. Share forecasts. Ensure we provide adequate lead-times for delivery to our plants. Increasing order quantities to adjust for last minute increases. Carrying more finished inventory.

Expanding Suppliers or Options: Seeking alternative suppliers. (2 responses) We have implemented a financial task force to review the status of our entire supply base. Our goal is to help them

manage their business efficiently. If they can't or won't cooperate with us, we will find other capable sources. Build up of additional suppliers if required. Continuous evaluation of new suppliers and partnerships. Identifying back up supply channels.

What steps are you taking with your sub-tier suppliers to address the issues you identified above?


…ALONG WITH IMPROVING COMMUNICATIONS THROUGHOUT THE SUPPLY CHAIN.

27

Communication/Supplier Development: Improved communication. (3 responses) Quick communication on production needs. Visiting key suppliers on a more frequent basis. Increased monitoring. Pass through information. On site audit and capacity verification. Advanced warning of forecasts if available. Deeper engagement with additional supplier development resources. Monitoring suppliers and more cooperation. Increasing attention from STA team. We have a formal process to monitor all supplier who may face financial difficulties. Helping with liquidity issues and scheduling. Arranging progress payments on tooling. Offering liquidity options that they did not know were available. Providing access to automation that we have expertise at.

Other: The biggest issue is shortage of components that are already tight. When this occurs our sub-tiers face big expedited

freight charges. Established supplier audit team. Re-established incoming material quality checks (not allowing supplier to be wholly

responsible). Purchasing negotiations. Certain resins trending up leading into 2016. Work on monthly monitoring of exchange rate impacts, more focus on cost breakdowns and understanding of currency

impacts on the cost structure of the product. Sub-suppliers are getting rid of less profitable customers rather than investing in increased capacity leading to greater

price demands. Passing the pressure down stream so it isn't strictly a profit drain for us.

What steps are you taking with your sub-tier suppliers to address the issues you identified above?


MEXICO IS AN IMPORTANT REGION FOR MANY SUPPLIERS, WHO NONETHELESS HAVE CONFIDENCE IN THEIR ABILITY TO MEET PRODUCTION RELEASES FROM THESE GROWING OPERATIONS.

28


Very Confident (Rating=1)

2448%

Somewhat Confident

1122%

Neutral6

12%

Somewhat Skeptical

510%

Very Skeptical (Rating=5)

48%

Average level of confidence = 2.1

SOUTH AMERICA IS STILL A CONCERN WITH MOST SUPPLIER EXPECTING THAT THE PRIOR LEVEL OF 4.0 MILLION UNITS OF PRODUCTION WILL NOT BE ACHIEVED AGAIN UNTIL 2020 OR BEYOND.

20171

1%

20189

14%

201914

21%2020

1726%

Beyond 2020

2538%



SUPPLIERS ALSO NEED TO MANAGE THE INCREASING NUMBER OF VEHICLE LAUNCHES IN 2016 AND 2017

29

Supplier Global Auto Revenue Lower Quartile Value Median Value Upper

Quartile Value Range # of responses

2016 Launches

More than $500 million 18 50 100 4-5000 25

$151-$500 million 20 25 48 4-150 10

$150 million or less 4 12 25 0-150 26

2017 Launches

More than $500 million 35 50 83 6-5000 23

$151-$500 million 30 50 130 4-250 9

$150 million or less 4 14 30 0-170 26

Given the record number of vehicle launches over the next two years, on average, how many new base part numbers will you be launching in 2016 and 2017?

Note: Reference the appendix for a comparison of launch activity results from 2015


LAUNCH RISKS ARE IN PRODUCTION, INCLUDING ENGINEERING TALENT AND PRODUCTION RAMP-UP.

30

21%

6%

3%

2%

7%

45%

33%

24%

20%

12%

15%

35%

37%

35%

28%

15%

21%

22%

34%

37%

5%

6%

13%

8%

16%

0% 20% 40% 60% 80% 100%

EngineeringTalent

Production Ramp-up

TechnologyDevelopment

ProductionValidation

GlobalRequirements

High Risk=1 Rating 2 Neutral Rating 4 Low Risk=5

2016 2015

Average Rating

# of Responses

Average Rating

# of Responses

2.4 87 2.4 82

2.9 86 2.7 80

3.2 86 3.2 80

3.3 85 3.1 79

3.4 86 3.1 80

Other Noted Concerns: OEM late ECs that change product finishes. (4 similar responses) Program management. Cross training. Staffing - blue and white.

For the following launch related issues, rate your level of risk associated with each.


COMPANIES ARE IMPLEMENTING INTERN AND APPRENTICESHIP PROGRAMS, DEVELOPING TRAINING PROGRAMS AND UTILIZING OUTSIDE RESOURCES TO HELP IN RECRUITING…

31

Engineering Talent: Bringing in talent from other regions. (3 similar responses) Hiring talent. (2 responses) Develop our own talent internally. (2 similar responses) Hiring experienced engineers. (2 similar responses) Hiring additional technical resources. Hiring ahead of forecasted volume increases. Engineering: retention plans and continuous recruiting. Serious technical talent shortage in Michigan. Reassessing onboarding programs - attempting to establish loyalty requirements for talent under 30 years of age. Retaining existing engineers, and hiring in additional engineers is critical. Launch concerns most relate to new technology products and processes, requiring high level of skills engineering and

manufacturing talent. With several launches, we need capable engineering staff to address or prevent issues dedicated to each launch. We

have assigned senior level engineers to mentor junior level people and we are grouping product families together with groups of engineers so that lessons learned on a product can be applied to all others.

Have hired a blend of highly experienced engineers to blend with the less experienced. Extensive co-op and intern programs provide the "seed corn" for future talent requirements.

Launch curve is very steep. Quality and safety concerns have increased the scrutiny. Program management, engineering: Improve resources and capabilities in these areas. Understanding the job market and trying to match non-financial incentives. Allocating the talent to meet customer requirements is our main concern. We are building an internal team of engineers and developing our external sources in advance of program launches. We need additional technical talent to launch new products. We have a campaign to promote our company in the public and at universities. We are also re-assessing our benefits and

working conditions to be in line with the expectations and desires of younger talent. We have co-op program with local university.

What is your company is doing internally or within your sub-tier supply chain to mitigate this risk.


…FOCUSING ON PRE-PRODUCTION ACTIVITIES IN VALIDATION, …

32

Production Validation: Actively include sub-tiers in our launch planning- APQP. Making the APQP process and preproduction planning process more robust. Focus on prototype as our priority. Pre-planning, pre-planning, pre-planning. Launch is not the time for trials, everything must be in place months ahead of

time. Our most significant issues generally stem from the lack of OEM discipline in adhering to their own milestone timing

charts. As such, this places pressure throughout the supply base to adjust to the last minute changes and drives timing issues and most importantly validation delays.

For a new process and material, production validation is a main concern. To address this we are doing internal run at rate studies to validate our production concepts well in advance of customer requirements.

Product design tends to cause delay from the start. Much of this is due to late customer definition.

Production Ramp-up: Starting up a new facility will stretch our existing work force for the next 6 months. Pre-production requirements may tax current assets, in advance of the new assets being installed. Global supply base getting launched. Increasing raw material and component purchases to keep a buffer. Currently adding resources to prepare for launches. Local support of global requirements, specifically in China. Many times we do not have launch volume requirements to

prepare for ramp-up. Designs are changing at launch so we are over communicating with our customers to inform them of expediting costs and

needed paperwork to allow us to ship. Last minute customer design changes seem endemic to the industry and there doesn't seem to be much we can do except

to maintain a high degree of flexibility in our operations.



…AND LOOKING AT BALANCING GLOBAL RESOURCES.

33

Technology Development: Producing tooling internally. We have high demand for new products and have new work force that is not as seasoned as we would like. Many pre-production runs. Engineering talent: driving more collaboration with suppliers to leverage their engineering expertise involvement. The risk with the technology development is joint with the OEM - close development and additional engineering resource

focus is being added to insure successful launch.

Global Requirements: Expanding and developing globally international personnel. Strengthen global program management system. Developing global partners. Trying to find regional partners. Finalized cross training of engineering and manufacturing talent in 2014 to ensure full competencies in each region.

Commonized global program management systems and measurable. Commonized global manufacturing and tooling standards to ensure consistent global bill of process.

Off shore supplier concerns regarding production readiness have required weekly monitoring and frequent site visits to ensure timing is meet.

It is early for us, but we are beginning the process of identifying partners in EU, MX, and CH.

Other Comments: Our products require different finishing options. When customers change finish mix between paint/plate this imbalance

causes capacity constraints or idle capacity that put us at risk. We are lining up sub-tier paint relationships to mitigate riskof over capacity in paint.

Additional resources. We have no major concerns for 2016.



APPENDIX 1: ADDITIONAL OUTLOOK ANALYSIS

34


SUPPLIER OUTLOOKBY COMPANY REVENUE

35

10% 13%

6% 6% 4% 5%

45%

40%

36%

22%

18% 11

%

17% 22

%

8%

20%

30%

33%

57%

56%

59% 72

%

58% 56

%

63%

50%

15%

13% 7%

17%

24%

11%

25% 22%

25%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Significantly more pessimistic

Somewhat more pessimistic

Unchanged

Somewhat more optimistic

Significantly more optimistic

<$50 million

$50-$150 million

$151-$500 million

$501 million –$1 billion

>$1 billion

Global AutomotiveRevenue

# of responses

in Jan

# of responses

in Nov

<$50 million 20 15

$50-$150 million 14 18

$151-$500 million 17 18

$501 million -$1 billion 12 9

>$1 billion 24 20

NovJan


Compared to two months ago, how has your 12 month outlook changed?

NovJan NovJan NovJan NovJan


SUPPLIER OUTLOOK COMMENTARY

Significantly More Optimistic Sales projection for 2016 increases significantly from previous levels. Current orders are increased and show forecasts that support this. New home sales are on the rise. This is good for the automotive industry.

Somewhat More Optimistic 2016 looks like it will carry momentum (from 2015) higher/farther than originally expected. Sales

and production volumes are strong. Despite changes in interest rates and the over all malaise in the markets (commodities, stock

market), everything we are seeing in auto looks solid. Volumes for 2016 by analysts are up now close to 18 million SAAR. Also Europe a bit better than

expected with headwinds in China, Brazil and Russia. Finalization of business awards for new programs confirm a good outlook for 2017. Many platforms that have been in holding patterns are now being released and the Detroit OEMs

are giving more direction to their future platforms. Volumes are slowly increasing, new launches are going well. Growing confidence in 2016 volume projections. Secured some new future contracts. We are seeing some increases for 2nd quarter. Overall business is slowly expanding.

36



Unchanged Was already optimistic. Cautious is the word. An election year does not help. Volumes have decreased from their all time high 12 months ago. Inflation is creeping in, even the

Fed is pushing rates up. The incentives that the auto industry is putting on the windshields, and the fractional ownership avenues that are being pursued is disconcerting.

We see flat growth for 2016. Don't see continued increases across the board. Watching closely global developments in Middle East and in Europe. Sales remain strong but OEM behavior is getting unreasonable again-they have short memories.

Somewhat More Pessimistic Our products focus on light-weighting and the downturn in oil prices seems to have slowed light-

weighting efforts in the near-term. We still believe there is a need long-term. Expect global issues to eventually impact US auto volumes. Seeing increased pressure from OEMs

on price reductions. Strong push from OEM on cost savings. High number of launches coming up. Some products

running at capacity limits. Some delay of launches causing reduction in sales compared to plan. Manufacturing is down. Inventory levels and interest rates have caused some concerns. Sales flat compared to 2015.

37



Somewhat More Pessimistic (continued) Chrysler Toluca shutdown and slow ramp of Chrysler Windsor. Increased competitive pressure in North America. Can it stay this good much longer? Pessimism is largely based on global exposure and continued deterioration in Brazil. Our industrial business has dropped substantially - mining, energy, construction is dropping.

38


APPENDIX 2: ADDITIONAL TIME-SERIES COMPARATIVE DATA

39


CONSIDERING NORTH AMERICA LIGHT DUTY VEHICLE PRODUCTION, ESTIMATE THE REQUIRED 2016 INDUSTRY VOLUME NEEDED TO ACHIEVE BREAKEVEN IN YOUR NORTH AMERICAN OPERATIONS (IN MILLIONS OF UNITS).

40

Breakeven Volume (in millions units)When asked in… Median Value Range

January 2016 14.3 6-18January 2015 13.5 9-17

January 2014 12.7 8-15.5

January 2013 12.0 9-15.5

January 2012 11.0 8-13.5

January 2011 10.5 8-15

2015 No. of Responses = 82


OVER THE NEXT 3 MONTHS, WILL YOU FACE THE FOLLOWING INTERNAL ISSUES WILL YOU FACE AS YOU MEET INCREASED LEVELS OF PRODUCTION?

41

71%

70%

28%

53%

37%

8%

74%

80%

27%

61%

48%

11%

59%

76%

24%

54%

53%

0% 20% 40% 60% 80% 100%

Skilled Labor Shortages

Production Overtime Premiums

Hourly Labor Shortages

Internal Manufacturing CapacityConstraints

Outbound-Expedited Freight

Liquidity Shortages within your owncompany

2014

2013

2012


Did not ask in 2012


OVER THE NEXT 12 MONTHS, WHICH OF THE FOLLOWING ISSUES WILL YOUR SUB-TIER SUPPLIERS FACE AS YOU MEET INCREASED LEVELS OF PRODUCTION?

42

23%

31%

15%

20%

34%

43%

23%

24%

40%

51%

28%

0% 10% 20% 30% 40% 50% 60%

Component Shortages

Inbound-Expedited Freight

Raw Material Shortages

Liquidity Shortages within yoursupply base

2014

2013

2012


Did not ask in 2012

Did not ask prior to 2015


GIVEN THE RECORD NUMBER OF VEHICLE LAUNCHES OVER THE NEXT TWO YEARS, ON AVERAGE, HOW MANY NEW BASE PART NUMBERS WILL YOU BE LAUNCHING IN 2015 AND 2016?

43

(January 2015 Survey)Supplier Global Auto

Revenue

Lower Quartile

Value

MedianValue

Upper Quartile

ValueRange

# of responses

2015 LaunchesMore than $500 million 18 47 54 3-1500 29

$151-$500 million 12 48 106 2-300 12

$150 million or less 6 20 84 0-200 17

2016 LaunchesMore than $500 million 17 50 100 4-1100 29

$151-$500 million 8 42 95 5-350 12

$150 million or less 10 30 85 0-200 17


THANK YOU FOR YOUR PARTICIPATION

44

The OESA Automotive Supplier Barometer is a survey of the top executives of OESA regular member companies. The OESA Automotive Supplier Barometer takes the pulse of the suppliers' twelve month business sentiment. In addition, it provides a snapshot of the industry commercial issues, business environment and business strategies that influence the supplier industry.

For questions and comments, contact:Kathy ReissDirectorResearch and Industry [email protected]

Original Equipment Suppliers Association25925 Telegraph RoadSuite 350Southfield, MI 48033www.oesa.org

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.

Antitrust Statement: This survey content is exclusively about historical data, and respondents/participants should not contact each other to discuss responses, or to discuss the issues dealt with in the survey. It is an absolute imperative to consult legal counsel about any contacts with competitors. All pricing decisions and negotiating strategies should be handled on an individual company basis.

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http://www.oesa.org/

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