WABCO CORPORATE OVERVIEW 2010
© 2010 WABCO Holdings Inc. All rights reserved.
2010 2
FORWARD LOOKING STATEMENTS
Comments in this document contain certain forward-looking statements, which are based on management’s good faith expectations and beliefs concerning future developments. Actual results may differ materially from these expectations as a result of many factors. These factors include, but are not limited to, the risks and uncertainties described in the “Risk Factors” section and the “Forward Looking Statements” section of WABCO’s Form 10-K, as well as in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Information Concerning Forward Looking Statements” section of WABCO’s Form 10-Q Quarterly Reports. WABCO does not undertake any obligation to update such forward-looking statements. All market and industry data are based on Company estimates.
This presentation contains certain non-GAAP financial measures as that term is defined by the SEC. EBIT and sales excluding the effects of foreign exchange are non-GAAP financial measures. Additionally, gross profit, gross profit margin, operating income, operating income margin, EBIT, EBIT margin, net income and net income per diluted share on a "performance basis" are non-GAAP financial measures that exclude separation and streamlining costs, one-time impact from the Indian joint venture transactions, discrete and other one-time tax items, as well as a one-time transitional impact from a new accounting standard (ASC topic 805, formerly known as SFAS No. 141(R)) that WABCO adopted in 2009, as applicable. Lastly, "free cash flow" presents our net cash provided by operating activities less purchases of property, plant, equipment and computer software. These measures should be considered in addition to, not as a substitute for, GAAP measures. Management believes that presenting these non-GAAP measures is useful to shareholders because it enhances their understanding of how management assesses the operating performance of the Company's business. Certain non-GAAP measures may be used, in part, to determine incentive compensation for current employees. Reconciliations of the non-GAAP financial measures to the most comparable GAAP measures are available in WABCO’s quarterly results presentations posted on the company’s website.
2010 3
Sales of $1.5 BILLION in 2009
GLOBAL TECHNOLOGY LEADER in commercial vehicle industry
Over 8,100 EMPLOYEES in 31 countries; 1,250 ENGINEERS
16 MANUFACTURING LOCATIONS in 10 countries
Listed on NYSE with the stock symbol WBC
ABOUT WABCO
Sales of $2.6 BILLION in 2008
2010 4
MARKET FOCUS
Products, systems, servicesand support for vehiclemanufacturers andaftermarket customers
TRUCK
CNHTC
DAIMLER
HINO Motors
MAN
PACCAR
SCANIA
TATA Motors
VOLVO
among others
CIMC
GREAT DANETRAILERS
KÖGEL
KRONE
SCHMITZCARGOBULL
WABASH
among others
TRAILER
AUDI
BMW
DAIMLER
GENERALMOTORS
PSAPEUGEOTCITROEN
SSANGYOUNG
among others
CAR
BUS
EVOBUS
MAN
NISSAN
YUTONG
among others
AFTERMARKET
Supportingfleet and truckowners over
vehiclelifetime
Distributors
Workshops
Fleets
2010 5
MANUFACTURING LOCATIONS
(2)
2010 6
1981 1986 1996 1998 2000 2001 2003 2004 2006 2007 2008 2009
TECHNOLOGY AND INNOVATIONLEADER
PneumaticTransmissionAutomation
System
ElectronicallyControlled AirSuspension
(ECAS)
Two StageCompressor
Trailer EBS - E
IntegratedVehicle TireMonitoring
Roll StabilitySupport for
trailers
TractionControlSystem
Anti-LockBrakingSystem
ElectronicStabilityControl
AdaptiveCruise Control
ECASfor automotive
Trailer Electronic Braking System
New GenerationAir Disc Brake
Air SystemProtector
HydraulicTransmissionAutomation
System
OnGuard™CollisionMitigationSystem
RSSplus™Roll Stability
SupportTrailer System
>Trailer Telematics
TransmissionAutomation System
OnGuardMaxTM
Autonomous Emergency Braking
System
High OutputCompressor
ElectronicBrakingSystem
ESCsmart™
Trailer OptiTurn™
Trailer OptiLoad™
C-comp clutchcompressor
2010 7
COMMERCIAL VEHICLE AIR CYCLE
Generates andpressurizes the air to be
used in the brakingsystem and other
air-based applications
Dries, cleans, storesand distributes the
compressed air to enableproper system operation
under all conditions
MECHANICALService brakes, Parking brakes
ActuatorsFoundation brakes
ELECTRONIC/ELECTRO-MECHANICALAnti-lock Braking Systems
Electronic Braking SystemsTransmission Automation
Electronic Suspension Control
AIRMANAGEMENT
AIRCOMPRESSION
AIRAPPLICATION
2010 8
Others 6%
% 2009 Sales
PRODUCT PORTFOLIO
Air Compressors 13%
Air Processing 11%
Conventional Brake Controls 13%
Actuators 10%
Foundation Brakes 6%
Suspension Control 6%
Anti-Lock Braking Systems 11%
Car Products 4%
Transmission Automation,Clutch Control 11%
Electronic Braking and StabilityControl Systems 9%
2010 9
CUSTOMER VALUES
WABCO is working on global TECHNOLOGY trends relevant to our customers
We have a clear path to enhance VEHICLE EFFICIENCYand ENVIRONMENTAL SUSTAINABILITY by 20%
Our vision is to improve ADVANCED SAFETY and DRIVER EFFECTIVENESS, and reduce the number of commercial vehicle accidents by 50% by 2020
We are involved in developing PRODUCTS and FUNCTIONALITIES to better meet these needs
2010 10
AFTERMARKET CAPABILITIES
Servicecenters
WABCOUniversity
Services,customersupport
Extensiverange of
products andsystems
Universalcustomer
hotline
Regionalcustomer
teams
Customerpartnerprogram
Globaldistributornetwork
Sales,promotion
andmarketing
SUPPORTING FLEETAND TRUCK OWNERS
OVER VEHICLELIFETIME
Diagnosticssolutions
2010 11
CUSTOMER DYNAMICS
TRUCK AND BUS MANUFACTURERSLARGE VOLUMES, LONG CYCLES 30+ Customers
TRAILER MANUFACTURERSSMALL VOLUMES, SHORT CYCLES 2,000+ Customers
AFTERMARKETSMALL VOLUMES, SHORT CYCLES 3,000+ Customers
CAR MANUFACTURERSVERY LARGE VOLUMES, LONG CYCLES ~10 Customers
Few, large, consolidating, globalizingUse technology to meet regulation, comfort, safety and economicsNeed for global suppliers and development partners with system expertise
Very many, small, local or regionalClosely follow truck and bus technologyDependent on suppliers for product and technical support, services and knowledge
Small, many, local/regional; dependent on suppliers for product, services and knowledgeMultiple step distribution: distributors, repair shops, and fleet operators2 channels: independent aftermarket and original equipment supply
Few, large, global, sophisticatedMany competitive suppliers for most technologiesVery high expectations for quality, program management and supplier support
2010 12
GLOBAL TRUCK & BUS PRODUCTION(over 6 tonnes Gross Vehicle Weight)
'07 '08 '09
IndiaIndia
100% = 2,749K100% = 2,749K 100% = 2,734K100% = 2,734K
100% = 2,089K100% = 2,089KChinaChina
Japan/KoreaJapan/Korea
S. AmericaS. America
N. AmericaN. America
EuropeEurope
10%10%
31%31%
10%10%
7%7%
14%14%
28%28%
9%9%
32%32%
10%10%
8%8%
12%12%
29%29%
10%10%
49%49%
9%9%7%7%
10%10%
15%15%
2010 13
GLOBALIZATION
All regions managed by local teams
No expats in key leadership positions
9 Nationalities from 4 continents in leadership team
Took over JV in India
#1 Position in all Asia countries, especially in China and India
#1 Position at Kamaz
Local MarketConnectivity
4 factories in China
- Benchmark Lean processes
- 2 new factories opened in 2010
3 factories in India
- Multiple Award Winning
1 Factory in Brazil
- Lean transformation under way
LocalManufacturing
Local SupplyChain
Local strategic sourcing teams connected to global commodities
Strong supply base covering core commodities
Local supplier management
Leveraging BCC capabilities for global manufacturing sites
ProductDevelopment
2nd Product Development pillar in India to address emerging countries specificity and conventional product design (150 engineers)
Software development center in Chennai (85 engineers)
Test & design center in Poland to support Hanover (100 engineers)
2010 14
TRUCK & BUS REGIONAL ATTRIBUTES
SOUTH AMERICA <$1,500 $65K
JAPAN & KOREA <$1,000 $80K
CHINA & INDIA <$300 $30K
NORTH AMERICA <$1,000 $80K
WESTERN EUROPE >$3,000 $130K
EASTERN EUROPE <$500 $70K
Typical heavy truckprice in market
Estimated content per vehicle based on total applicable market$ $K
Less advanced technology vs.Western EuropeLarge OEMs: Daimler, Volvo, PACCAR, ITE Large fleets, able to influence OEM design
Less advanced technology – mostly from BrazilMain OEMs: Daimler, VW, Volvo, Scania
Advanced technology, high electronics penetration6 OEMs: Daimler, Volvo, MAN, Iveco, PACCAR, ScaniaFew large, pan European fleets
Expected to Return to Fast growing production in the FutureImproving quality and safetyGlobal and local OEMs: KamAZ, MAZ,
Technology moving towards Western EuropeMain OEMs: Hyundai, Hino, Isuzu, NDTargeting global market
Basic technology; advanced technology penetration under 10% of total market Large OEMs: FAW, DFM, CNHTC in China;
TATA Motors & Ashok Leyland in India
2010 15
COMPETITIVE OVERVIEW
KNORR HALDEX LCC COMPETITORSTechnical capabilities similar to WABCONo position in transmission automation or carsStrong position in North America following BENDIX acquisitionTrailing in emerging markets
Challenger positionLower electronics capabilities compared to WABCO and KNORRStrong automatic slack adjuster businessEntering into special products for diesel engines
WABCO KNORR HALDEX LCC competitors(2009 Estimated Commercial Vehicle Sales) ($1.5B ) (~$1.7B ) (~$0.4B) (All Under ~$0.1B)
Anti-lock Braking Systems Electronic Braking SystemsConventional ProductsTransmission AutomationAir CompressorsAir ProcessingActuatorsSuspension ControlFoundation Brakes
Complete Offering Partial Offering Niche Offering
LCC COMPETITORS
Strong low cost / low tech solutionsMainly mechanical capabilities Targeting specific markets with specific product rangesLow price strategy in Aftermarket
sources: KNORR-BREMSE website, HALDEX website
2010 16
Global
North AmericaEurope
Asia
South America
-10%
-5%
0%
5%
10%
15%
20%
Car
SALES BY REGION AND CUSTOMERTYPE
2009 SALES BY REGION 2009 SALES BY CUSTOMER TYPE
South America
North America
Europe
Trailer
Aftermarket
Truck & Bus 55%
4%
32%
9%65%
6%
8%
Asia 18%
Other 3%
Perc
enta
ge
SALES 5-YEAR CAGR*
* Compound annual growth rate in local currencies from 2004 to 2009
2010 17
PERFORMANCE FROM GROWTH
ABOVE MARKET SALES GROWTH THROUGH 2014*
2014
CAGR4 - 6%
2009
Cars
AftermarketExpansion
OE Truck,Bus andTrailer
OE TRUCK, BUS AND TRAILERINCREASING VALUE PER VEHICLE
Air Disc BrakesTransmission Automation ControlsElectronic Stability ControlDriver Assistance Systems
GLOBALIZATIONChinaEastern Europe / RussiaIndia
AFTERMARKET EXPANSION Enhanced Penetration10% Year-of-yearNew Product RangesNew Services (e.g. Diagnostics, Training)East Europe, North America and Asia
AUTOMOTIVE PENETRATIONElectronic Air SuspensionVacuum Pumps
*Assumes commercial vehicle production flat at 2009 levels
2010 18
INNOVATION: AIR DISC BRAKES
SALES PROJECTIONSIndexed (2009 Sales = 100)
2009 2012 2014
CAGR47%
100
427
688
New generation for heavy dutytrucks and buses
Patented reinforced single-pistontechnology delivers high performance at lowest weight
Increased reliability, longer brakepad life, extended service intervals
NG22MAX
2010 19
Mandatory in EU in Nov. 2011
Includes yaw control to keep vehicle on steered course and avoid jack-knifing
Roll Stability Support mitigates roll-over situations for coaches, trucks and trailers
ESCsmart™: Industry’s first technology that uses computational simulation to certify ESC. Breakthrough homologation system approved in 27-country EU and in 20 other countries
INNOVATION:ELECTRONIC STABILITY CONTROL
SALES PROJECTIONSIndexed (2009 Sales = 100)
100
292
473
2009 2012 2014
CAGR 37%
2010 20
INNOVATION: TRANSMISSION AUTOMATION SYSTEMS
Provides fuel savings, reducedclutch wear, improved serviceability, reduced driver training
Developed modular version to meetrequirements of new customers in emerging markets
Standardized components provideimproved cost position and reducedapplication engineering
SALES PROJECTIONSIndexed (2009 Sales = 100)
100
145
182
2009 2012 2014
CAGR 13%
New OptiDriveTM Transmission Automation system
2010 21
GLOBALIZATION: CHINA
SALES PROJECTIONSIndexed (2009 Sales = 100)
100
190
300
2009 2011 2014
CAGR 25%
2005 to 2008 sales grew at 70% CAGR
Signed long term agreement with CNHTC through 2016 including sole supplier of transmission automation systems
Joint venture with Fuwa, world’s largest maker of trailer axles, to produce air disc brakes in China
Growing weight in WABCO’s global manufacturing network and an internal benchmark for Six Sigma Lean
2010 22
GLOBALIZATION: INDIA
SALES PROJECTIONSIndexed (2009 Sales = 100)
100
155
214
2009 2011 2014
CAGR 21%
Strongly anchored market leader
Preferred supplier for all OEMs
Nationwide sales and service network
Extensive product & software development capabilities
Lean and TPM driven manufacturing
High record of industry awards
2010 23
PERFORMANCE THROUGH EXECUTION
We are globalizing constantly: growing, leveraging and optimizing our network of
capabilities in manufacturing, sourcing and engineering
The WABCO Operating System is our roadmap andone of the most advanced
management environments in our industry
GLOBALIZATIONGLOBALIZATIONGLOBALIZATIONWABCO OPERATING SYSTEM
WABCO OPERATING WABCO OPERATING SYSTEMSYSTEM
2010 24
WABCO OPERATING SYSTEM
Accountability and alignment across the
value chain
Integrated supply chain supported by Lean
processes from suppliers to customers
Processes based on Design For Six Sigma drivingspeed and reliability
Establish partnerships as competitive differentiator
Hoshin-like management system
in place
Vision
OrganizationalDevelopment
Six Sigma Lean
Common Development
Process
Customer Partnership
Total Employee Involvement
Pillars
© 2010 WABCO Holdings Inc. All rights reserved.
2010 25
GLOBALIZATION:MANUFACTURING STRATEGY
Supporting Local Markets from LocalFactories
Leveraging Manufacturing Capabilitiesin China and India to Lower Costs
Accelerating Six Sigma LeanDeployment in all Facilities
Global Manufacturing StrategyGlobal Manufacturing Strategy Share of Workforce By:Share of Workforce By:High Cost Country Best Cost Country
90%78%
58%47%
32%
10%22%
39% 42%53%
68%
61%
2000 2002 2004 2006 2008 2010
2010 26
GLOBALIZATION:SOURCING STRATEGY
Focusing Purchasing Strategy on 3 Main Regional Clusters - Western Europe, Central/Eastern Europe and Asia
Consolidating Supply Base
Driving Quality Improvement and Six SigmaLean Implementation at Key Suppliers
Leveraging Broad Internal and External Capabilities in India and China
Performing Continuous Supplier Risk Management Analysis
Global Sourcing Strategy Share of Sourcing By:High Cost Country Best Cost Country
90%78%
70% 65% 60% 57%
10%22%
30% 35% 40% 43%
2000 2002 2004 2006 2008 2010F
2010 27
GLOBALIZATION:ENGINEERING STRATEGY
Global Engineering StrategyGlobal Engineering Strategy Engineering Workforce by:Engineering Workforce by:
2002 2004 2006 2008 2010F
High Cost Country Best Cost Country
ASIADevelopment of products for region specificsSoftware developmentDesign and calculation support
AMERICASConnectivity to US and South American OEMsRegional variant developmentApplication development
WESTERN EUROPEAdvanced products and SystemsConnectivity to European OEM developmentTechnology, Process, Data and Systems
CENTRAL EUROPEConventional productsDesign SupportStandards, material and Requalification Test Center
Growth in Resources(Indexed to 2002)
100
114121 123
130
96% 86% 83%73% 69%
31%27%17%14%
2010 28
FINANCIAL PERFORMANCE Q1 2010
Sales $491.1 $491.1 36.2%
Gross Profit 140.2 140.5 63.1%28.5% 28.6% +474 bps
OPEX & Other (97.1) (96.0) (16.9%)(19.8%) (19.5%) +327 bps
Operating Income 43.1 44.5 1,250.0%8.8% 9.1% 801 bps
Equity Income 1.8 1.8EBIT $38.7 $42.2
7.9% 8.6%Taxes 7.6 8.2Net Income $30.7 $33.6
EPS $0.47 $0.51
PerformanceQ1 Q1 vs. 2009
Reported Performance In Local Curr. Performance Drivers
(In $ Millions except per share data)
(2),(3) (1)
• Volume & Mix: $32.9• Productivity:
–Materials: $10.9–Conversion: $4.0–OH Absorption & Other: $9.3
• OPEX & Other: ($12.9):–Reinstate suspended costs: ($7.9)–Labor inflation/India Opex: ($4.5)–Bonus Accrual Above Target: ($3.2)–Savings net of new investments: $2.7
Strong Financial Performance Generates 31% Incremental Margin
• +11% versus Q4 ’09• Order Book at $721M, Up 28% YoY• Price: ($5.7) or (1.2%)
• Meritor WABCO JV Up $1.6M Versus Last Year
• Versus ’09 Reported of ($0.57) and Performance of ($0.08)
• Streamlining $0.1 vs. ($30.9) in ’09• Separation ($3.6) vs. ($2.9) in ’09
• ~20% Performance Tax Rate
(1) Adjusted for currency translation, streamlining and separation costs(2) Adjusted for streamlining and separation costs(3) Adjusted for streamlining and separation costs, and discrete and other one-time tax items
© 2010 WABCO Holdings Inc. All rights reserved.
2010 29
Key InputsKey Inputs2010 Guidance as of May 5, 20102010 Guidance as of May 5, 2010
FY 2010 GUIDANCE
Raising Full Year 2010 Guidance
Structural Incremental Margin
2010Incremental
Margin
SalesSales
Performance Performance Op MarginOp Margin
PerformancePerformanceEPSEPS
15% - 20%
5% – 7%
$1.00 - $1.40
$1,835 - $1,910
23% - 28%
6.5% – 8.5%
$1.40 - $1.80
Original Revised
(2)
(3)
($ Millions, except per share data)
Low End – High End Low End – High End
Free Cash Free Cash Flow Flow
ConversionConversion(4)
80% - 90% (Excluding Stream. &
Separation)
80% - 90%(Excluding Stream. &
Separation)
Price erosion level of 1.7% or betterMaintaining strong levels of productivityRaw materials pricing expected to degrade margins by ~90 bps starting in Q2Additional investments of ~$3M in new business opportunitiesNet interest expense at current ratesPerformance tax rate of ~20%Streamlining & separation cash payments: ~$50MImpact from EC fine not included
(1 EURO = 1.37 USD)(1 EURO = 1.37 USD)
(1)
(1)
Note: Guidance as announced on May 5, 2010. Inclusion of this information in this presentation is not an update or reaffirmation of those financial assumptions(1) Adjusted for currency translation(2) Adjusted for streamlining and separation costs(3) Adjusted for streamlining and separation costs, and discrete and other one-time tax items(4) Net cash provided by operating activities less net cash used for the purchases of PP&E and computerware as a percentage of net income© 2010 WABCO Holdings Inc. All rights reserved.
2010 30
WABCO SUMMARY
Industry leader, we continue to be well prepared and sufficiently FLEXIBLEto take full advantage of increasing demand for new commercial vehicles in
2010, while maintaining our commitment to long term growth STRATEGY
Power to remain THE TECHNOLOGY LEADER adding breakthroughs to portfolio of technologies and products for full connectivity to all markets
WABCO Operating System, one of our industry’s most advanced
management environments, delivers continuous OPERATIONALimprovements
We drive PERFORMANCE by connecting with and adapting to
CUSTOMERS everywhere in the world and continuing to anticipate and satisfy their needs
PASSION© 2010 WABCO Holdings Inc. All rights reserved.
2010 32
TRUCK AND TRAILER PRODUCTS
TRUCKElectronic Control UnitsAdaptive Cruise ControlEBS Proportional Relay ValvePedal Unit with EBS Brake Signal TransmitterABS Modulator ValveAutomatic Temperature ControlElectronically Controlled Air SuspensionShock AbsorberFront Air Disc BrakeSteering Angle SensorTransmission AutomationClutch ControlRetarder ControlAir CompressorRear Air Disc Brake(Electronic-) Air Processing Unit ReservoirEBS Trailer Control ValveElectronic Stability Control ModuleEBS Axle Modulator
TRUCK AND TRAILERBrake ChamberTristop® CylinderAir BellowIntegrated Vehicle Tire Monitoring ECUIVTM Wheel ModuleDouble Diaphragm Spring Brake
TRAILERTrailer Central ElectronicSmartBoardTrailer Electronic Braking SystemElectronically Controlled Air SuspensionTrailer Air Disc Brake
123456789
1011121314151617181920
21222324
2526
2728293031
EBS: Electronic Braking System
ABS: Anti-Lock Braking System
ECU: Electronic Control Unit
1
2
3
4
5
67
8
9
10
11
12
13
14
15
16 1718
19
20
21
22 2324
25
26
27
28
2930
31
2010 33
BUS PRODUCTS
EBS Brake Signal TransmitterEBS Proportional Relay ValveABS Solenoid Modular ValveElectronic Stability Control UnitEBS Backup ValveEBS Axle ModulatorAdaptive Cruise Control ModuleHand Brake ValveIVTM DisplayIVTM Wheel ModuleIVTM Electronic Control UnitAutomatic Traction Control Water ValveATC Operating ConsoleATC SubstationElectronic Control Units EBS, CVCECAS Electronic Control Unit ECAS Solenoid valveECAS Level SensorAir Disc BrakeBrake ChamberTristop Cylinder(Electronic) Air Processing UnitCompressorMTS SensorMTS Door CylinderMTS Electronic Control UnitMTS Door Valve
123456789
1011121314151617181920
EBS: Electronic Braking System
ABS: Anti-Lock Braking System
CVC: Central Vehicle Controller
IVTM: Integrated Vehicle Tire Monitoring
ECAS: Electronically Controlled Air Suspension
MTS: Door Control for Bus
21222324252627
1
2345
6
7
89
10
11
12
1314
15
16
1718
19
20
21
22
23
24
25
2627
2010 34
CAR PRODUCTS
Air BellowElectronic Control Unit for ECAS & ESACVacuum PumpAir Supply UnitHeight SensorAir ReservoirSolenoid Valve Block
1
2
3
4
5
6
7
1
2
3
4
56
7
ECAS: Electronically Controlled Air Suspension
ESAC: Electronic Shock Absorber Control