Presentation to Television Bureau of Advertising

Presentation to Television Bureau of Advertising

Stephen J. GirskySeptember 2003

DisclosuresAnalyst Certification

The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Stephen J. Girsky.

Important US Regulartory Disclosures on Subject Companies

The information and opinions in this report were prepared by Morgan Stanley & Co. Incorporated (“Morgan Stanley”).

As of July 31, 2003, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in this report: Delphi, Ford, General Motors, Goodyear Tire & Rubber, Johnson Controls, Magna Intl Inc., TBC and Tower Automotive.

Within the last 12 months, Morgan Stanley managed or co-managed a public offering of securities of DaimlerChrysler AG, Delphi, Ford, General Motors, Standard Motor Products and Tenneco.

Within the last 12 months, Morgan Stanley, Morgan Stanley or an affiliate has received compensation for investment banking services from Aftermarket Technology, American Axle and Mfg., BorgWarner Inc., DaimlerChrysler AG, Delphi, Ford, General Motors, Standard Motor Products, Superior Industries, Tenneco, Tower Automotive and Visteon Corporation.

In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Aftermarket Technology, American Axle and Mfg., ArvinMeritor, Borg Warner Inc., DaimlerChrysler AG, Dana Corp., Delphi, Ford, General Motors, Genuine Parts Co., Goodyear Tire & Rubber, Johnson Controls, Lear Corp., Magna Intl Inc., Standard Motor Products, Superior Industries, Tenneco, Tower Automotive and Visteon Corporation.

The research analysts, strategist, or research associates principally responsible for the preparation of the research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and investment banking revenues.

Morgan Stanley & Co. Incorporated makes a market in the securities of Aftermarket Technology, Delphi, Dura Automotive, Ford, General Motors, Magna Intl., TBC and Tower Automotive.

Global Stock Ratings Distribution

(as of May 1, 2003)

(Continued) Coverage Universe Investment Banking Clients (IBC)

% of % of % of Rating

Stock Rating Category Count Total Count Total IBC Category

Overweight 549 30% 223 37% 41%

Equal-weight 858 47% 276 46% 32%

Underweight 416 23% 107 18% 26%

Total 1,823 606

Disclosures

Data include common stock and ADRs currently assigned ratings. For disclosure purposes (in accordance with NASD and NYSE requirements), we note that Overweight, our most positive stock rating, most closely corresponds to a buy recommendation; Equal-weight and Underweight most closely correspond to neutral and sell recommendations, respectively. However, Overweight, Equal-weight, and Underweight are not the equivalent of buy, neutral, and sell but represent recommended relative weightings (see definitions below). An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months.

Analyst Stock Ratings

Overweight (O or Over) - The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis over the next 12-18 months.Equal-weight (E or Equal) - The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis over the next 12-18 months.Underweight (U or Under) - The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.More volatile (V) - We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data, or in the analyst's view, it is likely to become materially more volatile over the next 1-12 months compared with the past three years.Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted). We note that securities that we do not currently consider "more volatile" can still perform in that manner.Unless otherwise specified, the time frame for price targets included in this report is 12 to 18 months. Ratings prior to March 18, 2002: SB=Strong Buy; OP=Outperform; N=Neutral; UP=Underperform. For definitions, please go to www.morganstanley.com/companycharts.

Analyst Industry Views

Attractive (A). The analyst expects the performance of his or her industry coverage universe to be attractive vs. the relevant broad market benchmark over the next 12-18 months.

In-Line (I). The analyst expects the performance of his or her industry coverage universe to be in line with the relevant broad market benchmark over the next 12-18 months.

Cautious (C). The analyst views the performance of his or her industry coverage universe with caution vs. the relevent broad market benchmark over the next 12-18 months.

Other Important Disclosures

For a discussion, if applicable, of the valuation methods used to determine the price targets included in this summary and the risks related to achieving these targets, please refer to the latest relevant published research on these stocks. Research is available throught your sales representative or on Client Link at www.moganstanley.com and other electronic systems.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of person who receive it. The securities discussed in this report may be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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(Continued)

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Overview

Auto Outlook: It’s not how many cars you sell, it’s how much money you make

Global Dilemma: Most participants spending for growth yet the industry does not grow.

Economic & Demographic factors suggest auto sales may bottom this year, but the recovery is likely to be modest.

Profit recovery is likely to lag for a variety of reasons: Price pressure remains brutal Market share pressures continue Excess capacity is large & more is on the way Mix covering for price declines, but is hard to sustain Higher interest rates create risk of weaker demand, weaker mix

and lower finance company earnings

Global Light Vehicle Sales: Slow Growth

45,000

47,000

49,000

51,000

53,000

55,000

57,000

59,000

61,000

1994 1996 1998 2000 2002

CAGR 1.2%

Source: LMC~J.D. Power & Morgan Stanley Research

Excess Capacity at 25%-30% or 20mm units

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008 2009 2010

70.0%

72.5%

75.0%

77.5%

80.0%Assemby Capacity

Utilization

Source: Autofacts & Morgan Stanley Research

Global Capital Expenditures to D&A

Source: Company data & Morgan Stanley Research*Adjusted to fit scale

Assets Being Put in Place Much Faster than They are Being Used Up

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

Kia

Hyund

ai

Nissan

BMW

Honda

Ford

Renau

ltVW

DCXPSA

FIAT

Toyota GM

Conclusion: Zero Sum Game

Slow growth and excess capacity suggest deflation/revenue pressures likely to continue.

Everybody can’t be a winner.

Winners will be low cost producers who deliver a good product that consumers are willing to pay for.

Source: Morgan Stanley Research

State of the NA Industry

Demand: Economic and demographic factors suggest auto sales are likely to bottom this year, but recovery is likely to be modest.

Pricing: Pricing environment unusually weak despite strong demand. Elasticity of demand is fading.

Used car pricing also weak. Competition intensifying: Industry plagued

with excess capacity, and more is on the way.


North American Sales

13.0

15.0

17.0

19.0

21.0

Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03

SAAR

3mth moving avg

Sales should bottom this year

16.2mm UnitsFY03E

Source: Autodata & Morgan Stanley Research

Economic Conditions

Better than they were, but still not robust

Source: CPI & Morgan Stanley Research

Peak Trough NowJan-02 Oct-02 Jun-03

Interest Rates

Consumer Confidence

Gasoline Prices

Used Car Prices

Employment

Weighted Median Age of a Vehicle vs. Sales

6.0

6.5

7.0

7.5

8.0

8.5

1982 1985 1988 1991 1994 1997 2000

10,000

12,000

14,000

16,000

18,000

Wavg

Sales

1 Year Lead Correlation 77.6%

Source: Polk & Morgan Stanley Research

Off Lease Vehicles Begin to Decline

Source: Manheim & Morgan Stanley Research

Fewer Consumers Being Forced Back to the Dealerships

2,890

3,275

3,452

3,303

2,765

2,383

2,000

2,400

2,800

3,200

3,600

2000 2001 2002 2003 2004 2005

385

177(149)

(538)

(382)

Taking Longer to Establish Consumer Equity

Source: FRB & Morgan Stanley Research

($10,000)

($5,000)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56Payment Months

Eq

uit

y V

alu

e

1.9% 72 mnths - domestic0.0% 60 mnths - domestic0.0% 36 mnths- domestic

Pos. Equity in 44 mnths



Affordability Near 20 Year Best

17

18

19

20

21

22

23

1Q80 4Q83 3Q87 2Q91 1Q95 4Q98 3Q02

Number of Weeks of Income to Purchase a Vehicle

Source: FRB & Morgan Stanley Research

Revenue Pressures Worst Since 1970’s

-6%

-3%

0%

3%

6%

9%

12%

Mar-68 Jan-74 Nov-79 Sep-85 Jul-91 May-97 Mar-03

7

9

11

13

15

17

New Car CPI

Avg Lt Dom Sls

New Car CPI vs. Domestic Light Vehicle Sales


Y/Y Change in Monthly New Car CPI

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03


Price Reductions Pressure Manufacturers

Every 1% Decline in Prices is Worth $1.0bn at GM $850mm at Ford $550mm at DCX


Big Three Market Share Continues to Slide

59%

64%

69%

74%

85 CY 88 CY 91 CY 94 CY 97 CY 00-CY 03-YTD

76.0%

60.5%

61.7%

Every 1% Point of Share is Worth Roughly $1bn in Profit


Market Share Winners / Losers – 2003YTD


Jul-03Gainers % Pts of Shr Losers % Pts of ShrHonda 1.1% GM -0.8%Toyota 0.6% Mitsubishi -0.4%Nissan 0.2% Ford -0.3%BMW 0.2% DaimlerChrysler -0.3%Hyundai 0.1% VW -0.3%Subaru 0.1% Mazda -0.1%

Big Three Share of Sales by Segment: 2003YTD vs. 2002 FY


-4.3%

-2.2%

-2.0%

-0.4%

-0.2%

0.2%

1.1%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0%

SUV/Sport Wagon

Minivans

Luxury Car

Small Car

Middle Car

Large Pickups

Small Pickups

NA Capacity Additions, Despite Flat Outlook

2005

2003

FordNissanMitsubishi

(170)250

60140

2004

FordHyundai

(292)235(57)

= 100,000 units

GMFordDCXHondaNissanToyota

125100

80180200240925

Net Increase Of 1.2mm Units or Roughly 6.0% of NA sales

2006

Toyota 150

Source: Company data & Morgan Stanley Research

Excess Capacity & More Is On The Way

Every 1% Pt. of Market Share Translates into $1.0bn in Profits1.2mm Units of Added Capacity is 6.0% of NA Capacity,

or $6bn in Pretax Profits

NA Pretax Profit

Big Three

FY03E (in MM)

$3,710

Source: Morgan Stanley Research Estimates

The Big Three

Each Company Faces Unique Challenges:

GM has operational momentum, but faces pension and health care issues.

Ford share is under attack and Revitalization Plan is just getting out of the gate.

DCX continues to struggle.


General Motors

Significant operational momentum.

Balance sheet risks may be out of company’s control.

Strategy: GM appears to have a variable cost advantage versus Ford and DCX, which it is using to cut price and drive volume.

Strategy has enabled GM to gain share and has put severe pressure on Ford and DCX.

This strategy may benefit them in the near term, but poses longer term risks.


GM Car / Light Truck / Total Market Share


23%

28%

33%

38%

43%

86 CY 88 CY 90 CY 92 CY 94 CY 96 CY 98 CY 00-CY 02-CY

GM Car ShareGM Truck ShareGM Total Share

Big Three NAO Profit per Unit FY02 vs. FY01

GMFordDCX^

GM b/(w)* FordGM b/(w)* DCX

$401 ($143) ($849)

$545$1,250

$352$775

$1,180

Source: Company data & Morgan Stanley Research*b/(w)=Better or Worse; ^Operating profit/unit incl pension/OPEB expense

$753 $632 $331

$121 $422

2002 2001 Change

Big Three NAO Profit per Unit FY02 vs. FY01

Excluding U.S. Pension & Healthcare Costs

GMFordDCX^

GM b/(w)* FordGM b/(w)* DCX

$1,158 $246 ($470)

$913 $1,628

Adjusted2001

$1,705 $1,091 $670

$614 $1,035

Adjusted2002

Source: Company data & Morgan Stanley Research*b/(w)=Better or Worse; ^Operating profit/unit incl pension/OPEB expense

U.S. Pension Fund & Healthcare Liabilities

Source: Company data & Morgan Stanley Research (In MM)

GMFordDCX

U.S. Pension $19,300 $7,300 € 4,250

Healthcare$51,500$22,741€13,701

2002

U.S. Pension & OPEB Expenses – 2003E

Source: Company data & Morgan Stanley Research (In MM)

GMFordDCX

U.S. Pension $2,812 $270 $517

OPEB$4,400$2,500$1,519

2003E

U.S. Healthcare & Pension Cost/Unit FY03

Source: Company data & Morgan Stanley Research

$1,134

$601

-300

200

700

1,200

1,700

2,200

GM Ford DCX

Pension

OPEB

$1,159 $814 $889

$740

$1,899

$902 $1074

$185$88

Ford Motor Company: Riders On The Storm

Ford’s fall from grace is well documented. Costs Quality Market share Profitability

Revitalization Plan is starting to help, but is it enough?

Ford is spending a lot of money; Will they get bang for their buck?


Ford Car / Light Truck / Total Market Share


11%

16%

21%

26%

31%

36%


Ford Car Share Ford Truck Share Ford Total Share

DaimlerChrysler: Struggling to Its Feet

Chrysler profitability unstable.

Cost performance is fair but revenue performance is lagging.

DCX still very exposed to light truck segment. Focus on cars important.

New product is critical.


DCX Car & Lt. Truck Sales As A % of Parent

23.9%

76.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

FY02

$1,134

Cars

Light Trucks


DCX Car / Light Truck / Total Market Share


5%

10%

15%

20%

25%


DCX Car Share DCX Truck Share DCX Total Share

Global Operating Margins FY02

Source: Company data & Morgan Stanley Research*Morgan Stanley Estimates

PorscheNissanBMWHondaToyotaHyundaiPeugeotKiaVWGMRenaultDCXFordFiat

16.4%10.6% 8.9% 8.4% 8.1% 6.1% 5.0% 4.7% 4.0% 2.0% 1.7% 3.1% 0.2% -6.2%

Global Operating Margins FY02

Source: Company data & Morgan Stanley Research*Morgan Stanley Estimates

Excluding Pension & OPEB Expense for the Big Three

PorscheNissanBMWHondaToyotaHyundaiGMPeugeotKiaVWDCXRenaultFordFiat

16.4%10.6% 8.9% 8.4% 8.1% 6.1% 5.7% 5.0% 4.7% 4.0% 3.8% 1.7% 1.8% -6.2%

Implications

GM will continue to pursue its “grow our way out” strategy.

DCX improved cost structure is keeping it in the game. New product is critical to alleviating revenue pressure.

Foreign OEMs are likely to continue to add capacity in NA. Imports are likely to rise.

Ford remains the odd man out in a zero sum game. If the company does not execute, another crisis may be on the horizon. Q1 results may be a start.

On the bright side, the Big Three product is the best its ever been.


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