Global Automotive Market Growth Opportunity & Strategy Discussion With China OEMs
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Transcript of Global Automotive Market Growth Opportunity & Strategy Discussion With China OEMs
July, 2009
Global Automotive MarketGrowth Opportunity & Strategy
Discussion With China OEMs
© 2009 Deloitte Touche Tohmatsu2
Appendices• Deloitte Automotive Experience
• Deloitte Team Resumes
Table of contents
1 The Global Automotive Industry – Our Point of View
2 Creating Growth Strategy
3 M&A Considerations
4 Acquisition Integration
5 Supplier Network Development
6 Next Steps
© 2009 Deloitte Touche Tohmatsu3
Auto OEMs – Example Clients
• BMW• Brilliance• Chrysler• Daimler• FAW• Fiat
• Automobile Manufacturer #5• General Motors• Geely• Honda• Automobile Manufacturer #3• Jaguar/Land Rover
• Kia• Mitsubishi• Automobile Manufacturer• PSA Peugeot/Citröen• Porsche
• Renault• SAIC• Tata• Automobile Manufacturer #6• Automobile Manufacturer #1
About Deloitte
Our Global Organization
Over 160,000 professionals
670 offices in over 140 countries
Serves nearly 750 companies with sales or assets in excess of $1 billion
Our Automotive Practice Over 5,000 professionals Multi-Disciplinary Service
Offerings:‒ M&A and Finance‒ Strategy and Operations‒ Information Technology‒ Human Capital‒ Tax
$27 B revenue140+ countries
Consulting: 30,000 professionals, $3.0B revenue
• Strategy and Operations• Technology Integration• Enterprise Applications• Human Capital• Financial Analysis• Outsourcing
• Consulting• Audit• Tax• Financial Services
Auto Practice5,000+ professionals
Deloitte serves 90 percent of Fortune global 500 companies in the Auto industry
Asia Pacific Region• Australia• China• India• Indonesia• Korea• Japan• Malaysia• New Zealand• Singapore• Philippines• Taiwan• Thailand• Vietnam
Our Asia Practice Over 3,300 professionals
serving manufacturing clients Extensive experience with auto
dealerships and national and state governments as well as auto OEMs and Suppliers
© 2009 Deloitte Touche Tohmatsu4
• Today’s global automotive market offers your company unprecedented opportunities to build its business and technology base, either organically or through acquisition.
• Today’s market also offers unprecedented risks and challenges.
• Our objective today is to share our insights and help you advance your thinking regarding the strategy and direction.
• In particular, we will discuss:‒ Our view on the global automotive market today, and the implications for value
creation in the automotive sector.‒ Approach to creating a growth strategy in the automotive supply market‒ Considerations and key questions to create an acquisition strategy‒ Our experience and lessons learned during complex acquisitions‒ Approach and analytic framework for developing a strong supplier network.‒ Path forward.
Today’s Discussion
© 2009 Deloitte Touche Tohmatsu5
Table of contents
1 The Global Automotive Industry – Our Point of View
2 Creating Growth Strategy
3 M&A Considerations
4 Acquisition Integration
5 Supplier Network Development
6 Next Steps
© 2009 Deloitte Touche Tohmatsu6
Dramatic Structural Change Due To The Global Downturn
• Poor capacity utilization and lack of manufacturing flexibility• Non-viable OEMs and suppliers requiring dramatic
restructuring – insufficient capital to operate and invest for the future
• Brands lacking identity and customer emotion• Bankruptcies, mergers and acquisitions• New global combinations (e.g., Fiat and Chrysler, Acquired
Company... and ??)• New players (e.g., Penske and Saturn)
Changing Customer Needs and Preferences
• Desire for “green” vehicles (without paying more)• Higher levels of urbanization shifting markets to smaller, more
utilitarian segments• Desire for “individualization”• Unique requirements in many emerging markets
Uncertainty Over Future Powertrain and Other Technologies
• Diverse greenhouse gas and safety requirements are being enacted in most markets
• Fossil fuel prices have become unstable, but are generally expected to rise
• Alternative powertrain and fuel developments have been unpredictable, but require long-lead-time infrastructure development
Current assessment of the global auto industry
© 2009 Deloitte Touche Tohmatsu7
After the near term liquidity crisis, we expect a major restructuring of the auto industry followed by a period of renewed growth
Current assessment of the global auto industry (cont.)
Liquidity Crisis Re-Restructurethe Industry
Grow the“New” Industry
2010-2012• Significant structural
changes after first two phases
• Newly-consolidated global OEMs and suppliers
• New companies born from restructuring
• Emergence of new technologies (powertrain, telematics, other)
• Emergence of new business models
2009-2010• Capital availability improves• Large-scale asset sales• Strong balance sheets lead
consolidation• New players and
consolidators emerge, especially in emerging markets
2008-2009• Major assembly and
component capacity reductions in NAFTA and W. Europe
• Re-sourcing to stronger suppliers
• Government loans• Bankruptcy and
restructurings• Liquidations
© 2009 Deloitte Touche Tohmatsu8
Our view of the future industry
Improving Fuel Efficiency • Permanent structural shift to higher fuel economy and alternative powertrain cars
Safety and Technology • Increased emphasis on vehicle technology and safety – electronic controls, lighter materials, reduced friction, etc.
Supply Chain Regionalization • Increased logistics and inventory costs will drive more supply chain regionalization vs. globalization (while globalization of R&D and OEM programs continue to increase)
Global Organizations and Global Management
• More sophisticated commodity cost strategies and management tools will be adopted to manage financial and cost volatility
• OEMs and suppliers will better match revenue and cost footprints to reduce currency exchange risk
• Companies will adopt global organizational strategies to facilitate lower-cost support structures, global tax optimization, and cash repatriation
© 2009 Deloitte Touche Tohmatsu9
• Global platform volumes are increasing as a result of global product strategies, more flexible platform architectures, and more flexible production systems
Our view of the future industry (cont.)
Source: Automotive News
2003 Top 10 Global Platform Volumes(Millions of Units Produced)
2007 Top 10 Global Platform Volumes(Millions of Units Produced)
GM T800 (Silverado, Tahoe, Escalade, etc.) 1.67 Automobile Manufacturer #1 A5 (Golf, Passat, A3, TT, etc.)
2.58
Automobile Manufacturer #1 PQ35 (Golf, Bora, Beetle, A3, etc.)
1.42 Automobile Manufacturer #6 MC (Camry, Avalon, ES) 1.87
Automobile Manufacturer #6 NCV (Corolla) 1.31 Renault/Automobile Manufacturer X85/B (Clio, Micra, Logan)
1.86
Honda CYR (Accord, Odyssey) 1.18 Automobile Manufacturer #5 C1/P1 (Focus, 3 & 5, S40, V50, C70)
1.66
Automobile Manufacturer #6 TMP (Camry) 1.08 Automobile Manufacturer #6 NBC (Vitz/Yaris, Aygo, etc.) 1.53
Automobile Manufacturer #1 PQ24 (Polo, Ibiza, Fabia) 1.04 Renault/Automobile Manufacturer X84/C (Megane, Serena)
1.16
Automobile Manufacturer #5 CW170/C1/P1 (Focus, C-Max, etc.)
0.97 Automobile Manufacturer #1 AO4 (Polo, Fox, Fabia, Ibiza, etc.)
1.12
Automobile Manufacturer #5 PN96/P221 (F-Series) 0.92 Automobile Manufacturer #6 NCV (Auris/Corolla, Matrix, etc.)
1.06
Honda Civic (Civic, CR-V) 0.91 GM T900 (Silverado, Sierra, Escalade EXT) 1.06
Renault-Automobile Manufacturer X65 (Clio, Kangoo, Platina)
0.88 Honda GCP (Civic, CR-V, Integra, etc.) 0.98
Total 2003 Top 10 11.38 Total 2007 Top 10 14.88
+30%
Globally-integrated capabilities will be increasingly critical for suppliers to win and retain major platform business.
© 2009 Deloitte Touche Tohmatsu10
As the global auto market recovers, production is expected to shift from Japan, Korea, and Europe to the Americas and South Asia to align with regional demand; China growth remains strong
Our view of the future industry (cont.)
2008
2009
2010
2011
2012
2013
2014
2015
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
South America
North America
Japan/ Korea
South Asia/ India
Greater China
Middle East/ Africa
Europe
33.8%
23.9%
20.0%
22.3%
2009
EMEA
China/ S. Asia
Japan/ Korea
Americas
30.1%
26.2%17.9%
25.8%
2015
EMEA
China/ S. Asia
Japan/ Ko-rea
Americas
Light Vehicle Production ForecastMillions of Units/Share of Production
Source: CSM Worldwide, April 2009
30.7%
15.6%
3.1%
15.7%
8.3%
20.0%
27.1%
15.5%
10.6%
17.9%
18.8%
6.6%
3.0%
7.0%
© 2009 Deloitte Touche Tohmatsu11
Our view of the future industry (cont.)
From the 2009 low point of 60%, global capacity utilization is projected to steadily improve to 80% by 2013 even as capacity increases from about 93 million to 100 million vehicles
Source: CSM Worldwide (March 2009)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
120
100
80
60
40
20
0
2008 2009 2010 2011 2012 2013 2014 2015
Glo
bal S
trai
ght T
ime
Cap
acity
(Mill
ions
) Global Straight U
tilization %
Global Capacity Utilization
South Asia
South America
North America
Middle East/Africa
Japan/Korea
Greater China
Europe
Global Utilization %
© 2009 Deloitte Touche Tohmatsu12
Nearly 80% of volume growth is expected to be driven by the B, C and D vehicle segments from 2009-2015
Our view of the future industry (cont.)
Source: CSM Worldwide (March 2009)
A
B
C
D
E
F
0 5 10 15 20 25
4.1
9.2
12.9
10.7
5.2
10.2
9.6
19
23.1
16.1
5.4
7.8 20152011200720021997
Units in Millions
Global Production by Global Segment
2009-2015 CAGR%(volume Change)
A12%
B27%
C29%
D23%
2009-2015 Growth Share
+1.9%;(+0.8 million)
+5.4%;(+1.4 million)
+7.1%;(+5.4 million)
+6.0%;(+6.8 million)
+7.2%;(+2.8 million)
+5.9%;(+2.8 million)
© 2009 Deloitte Touche Tohmatsu13
The industry structure will continue to evolve, becoming more globally balanced, with China-based OEMs and suppliers becoming more prominent• OEM restructuring will continue, resulting in major volume players based in six major
markets (W. Europe, Japan, US, Korea, China, India)‒ Large players with excess capacity in mature markets will restructure to align capacities and
brands with market share‒ Emerging market players will acquire more spin-offs by bigger OEMs and troubled suppliers as
seeds to gain capabilities and market access‒ Several medium-sized and emerging market OEMs will consolidate to gain further scale and
balanced market access
• Vehicle production will continue to migrate to regional low cost locations for sale within local trade regions (EU, NAFTA, ultimately an Asian trade bloc)
• OEMs and suppliers will adopt more local-region low cost sourcing to reduce their global supply chain risks and reduce their exposure to exchange rate fluctuations
• OEM partnerships will increase with players from other industries (electronics, energy, etc.) and with each other to support new technologies and manage risk
Our view of the future industry (cont.)
© 2009 Deloitte Touche Tohmatsu14
• Supplier loan covenant violations, insolvencies, bankruptcies and liquidations will continue during 2009 and 2010 due to a combination of global credit-tightening and overcapacity
• A restructuring of suppliers and capacity is underway, creating opportunities for strategic and financial investors
The supplier market is also under stress – valuations are low
0
50
100
150
200
250
300
-10%
-5%
0%
5%
10%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09Auto Suppliers Average Net Margin
Dow Jones Auto Suppliers Stock Price Index
Ave
rage
Net
Mar
gin
(%)1
Dow
Jones Auto S
upplier Index 2
Source: (1) Company 10Q and other filings from Capital IQ, Average net margin (excluding one time items) of 3 largest public auto suppliers each in U.S., Japan, Europe; (2) DJIndexes.com (13/03/2009), Index used (DJUSAT) consists of 13 broad cap auto suppliers listed in the U.S., (53 Economist Intelligence Unit, “Crunch time for component makers” (11/02/2009)\
Global Auto Supplier Performance(2000-2009 YTD)
© 2009 Deloitte Touche Tohmatsu15
In the past few decades different factors have driven OEM / supplier relationships
Opportunities to create value
Traditional• Brake systems• Glass• Tires & rubber parts
Premium Brand• Entertainment systems (Bose,
Boston Acoustics, Mark Levinson, Sirius XM)
• Electronics (JCI HomeLink)• Brakes (Brembo)• Steering (ZF)• Struts (Bilstein, Tokico)
Outside Capacity• Vehicle assembly (Automobile
Parts Manufacturer #1)• Stampings (Tower, Martinrea)• Machining (Linamar)
Labor Arbitrage• Acquired Company...ing (JCI,
Lear, Automobile Parts Manufacturer #1)
• Interior trim (Lear, Grupo Antolin)
• Modular pre-assembly (Mobis, Visteon, Lear, CalsonicKansei)
• Wiring harnesses (Delphi, Yazaki, Lear)
Supplier Technology• Safety systems (Autoliv, TRW,
Takata)• HVAC (Denso, Delphi, Behr)• Fuel management (Bosch,
Delphi, Denso)• Mirrors (Gentex, Automobile
Parts Manufacturer #1)• Sunroofs (Webasto, Inalfa)• Electronics (Bosch, Continental,
Delphi, Denso, Continental)
New Material Application• Plastic truck bed (Automobile
Manufacturer #6/Continental Plastics)
• Plastic fuel tank (Automobile Manufacturer/Inergy)
“Cleansed ECC client’s Logo”
© 2009 Deloitte Touche Tohmatsu16
Over the past 10-15 years, rapid supplier growth has resulted from one or more of four primary drivers:
Opportunities to create value (cont.)
Material Substitution• Alcoa Automotive• GKN• Inergy• Automobile Parts
Manufacturer #1• Superior Industries
Growing Customers• Aisin Seiki• Denso• Hitachi• Jtekt• Mando• Mobis• Takata• Toyo Seiko• Automobile Manufacturer
#6
AWD• American Axle• BorgWarner• Automobile Parts
Manufacturer #1• ZF
Diesel• Bosch• Continental• Delphi• Denso
Safety• Autoliv• Takata• TRW
Electronics• Aisin Seiki• Bosch• Continental• Johnson Controls• Communications
Equipment Manufacturer #4
• Valeo
ABS/Ride Control• Aisin Seiki• Bosch• Continental• Delphi• TRW
Technology or FeaturesDe-integration/ Outsourcing
• American Axle• Continental• Faurecia• Johnson Controls• Lear• Linamar• Automobile Parts
Manufacturer #1
• De-integration/outsourcing • New technology or features
• Material substitution • Selling to more rapidly growing customers
© 2009 Deloitte Touche Tohmatsu17
Despite growth and concentration, today an unprecedented number of global automotive suppliers face financial distress.
Recent bankruptcies in North America and Europe include:North America
• Fluid Routing Solutions• Foamex• Grede Foundries• Hayes Lemmerz • Intermet• J. L. French• Key Plastics• Lear• Metaldyne• Noble International• Plastech• Visteon
Distressed supplier market
Europe• Edscha• Eybl International• Geiger Technologies• Goertz + Schiele Holding• Henniges Automotive• Karmann• Kittel Supplier• Sakti Germany• Stankiewicz GmbH/Gimotive• TMD Friction Holding• tedrive Holding• Wagon Automotive
The global recession, while a great challenge to all players in the auto industry, presents a unique opportunity for companies with strong balance sheets and carefully-considered growth strategies.
© 2009 Deloitte Touche Tohmatsu18
Future sources of supplier growth and value
Expanding global footprintTier 1 suppliers continue to develop more extensive and integrated global networks to better compete for and serve global vehicle platform programs.
Mastering new technologies
As new powertrain, safety, telematics, and other technologies emerge, winning suppliers take the lead in mastering the new product development, production, distribution, and support capabilities.
Aligning with evolving industry structure
Successful suppliers adapt to the shifting global OEM structure, aligning with growing OEM networks while maintaining customer base diversity and a balance of power that allows pricing flexibility.
Creating new business models
To meet the investment requirements of new technologies and manage risks, top suppliers will create new networks of alliances and JV’s, including non-traditional partners, and adopt virtual company paradigms.
Growing through acquisition and consolidation
Suppliers with strong balance sheets take advantage of weaker players and cheap asset valuations to grow in value-creating segments.
With the change in structure and dynamics of the global auto industry, the future will see different paths of supplier growth and value creation.
© 2009 Deloitte Touche Tohmatsu19
• The changes in the industry plus the stress on suppliers has created a wealth of investment opportunities in N. American and Europe.
• There is obviously risk, however, as many suppliers will not survive and many assets, despite low market prices, will not be utilized.
• The following pages discuss some of the analyses that Deloitte has done to help clients assess opportunities and risks in the N. American and European supplier markets.
Opportunities for growth in the supplier market
© 2009 Deloitte Touche Tohmatsu20
Deloitte and CSM Worldwide have developed a Supplier Health Rating which assesses overall financial strength and stability, strategic positioning, and exposure to high-risk OEMs and platforms
N. American supplier market
Revenue concentration with high-risk
OEMs/platforms and customer diversification
Deloitte/CSM Supplier Health
Rating
OEM Exposure
Global coverage, company and product diversification,
and capabilities
Strategic Positioning
Liquidity, debt and cash flow
Financial Strength
• Altman Z-score (bankruptcy risk)
• Debt • Debt Maturities• Cash Burn Rate
Financial Metrics
• Global Presence• Company Diversification• Product Diversification• Breadth of Capabilities• Unique or Proprietary
Technology
• Customer Diversification• High-risk OEM Exposure• High-risk platform
exposure‒ Short-term‒ Longer-term
Strategic Metrics Exposure Metrics
HealthyAt RiskUnhealthy0 50 75 100
Rating Scale
© 2009 Deloitte Touche Tohmatsu
Electronics /Electrical
Product Family
Exteriors
Interiors
Powertrain
Chassis / Mechanical
Climate Control
Key Insights
Significant excess capacity will drive additional consolidation – weaker players are extremely vulnerable OEMs are unbundling interiors, reducing supplier value add and increasing exposure to commodity
prices Average Health Rating: 53 HHI: 5.5 Consolidation potential: High
May see further consolidation in lighting OEMs are moving away from exterior modules (e.g., doors), forcing a restructuring of this business Many weak and few strong players in this segment Average Health Rating: 46 HHI: 6.7 Consolidation Potential: Medium
Very diverse and globalized segment for both development and production with more strong players Growth in differentiating technologies will continue despite economic downturn Segment will continue to require investment to remain competitive Average Health Rating: 53 HHI: 7.1 Consolidation Potential: Medium
Significant investment and new players in hybrid/electric systems, but volume growth will be slow Rapid growth in relatively inexpensive fuel efficiency actions (e.g., direct injection with turbo) Relatively weak, fragmented segment with significant consolidation likely Average Health Rating: 46 HHI*: 4.2 Consolidation Potential: High
Fuel economy regulations will drive migration to electrically-driven components (e.g., electric steering, brake-by-wire) and impact current sourcing patterns
Many traditional suppliers (frames, casting, forgings, axles) are struggling with excess capacity Average Health Rating: 48 HHI: 4.5 Consolidation potential: High
Segment dominated by major global suppliers – Asian players are generally strongest Some additional consolidation likely Average Health Rating: 55 HHI: 15.5 Consolidation Potential: Medium
* HHI is the Herfindahl-Hirschman Index, a market concentration metric
Some product families will see greater consolidation
© 2009 Deloitte Touche Tohmatsu
The OEMs will drive much of the consolidation
OEMs are assessing the health of their suppliers and have stated they will force significant consolidation (e.g., Automobile Manufacturer #5 from current 1,600 production suppliers to 750 globally)
Powertrain Chassis Exterior Interior Climate Control ElectronicsChr Ford GM Other Chr Ford GM Other Chr Ford GM Other Chr Ford GM Other Chr Ford GM Other Chr Ford GM Other
SupA
SupB
SupC
SupD
SupE
A B A C B C
Potential Outcomes
OEM Pressure
• Surviving Tier 1 suppliers must have:
‒ A “best cost”, global production footprint which supports customers’ platform needs locally
‒ Globally-deployed R&D and customer support centers‒ Strong product technology and system integration capabilities‒ Financial stability
© 2009 Deloitte Touche Tohmatsu26
Product Family Example: exhaust manifold
Exhaust Manifold Summary D3 are heavily weighted
towards cast manifolds (90%) Asian and European OEMs
use about 90% fabricated manifolds
Wescast has nearly 50% of the cast market in N.A. – a very high share
Technology developments could alter future industry sourcing patterns
C
Exhaust manifolds is one of 17 specific component groups within powertrain
“Cleansed ECC Client”
© 2009 Deloitte Touche Tohmatsu28
Top European suppliers ranked by revenue
Rank Company
2008 Auto OEM Revenue
(US$ billions) HQ Country Ownership1 Robert Bosch GmbH US$ 33.9 Germany Private - trust
2 Continental AG 25.0 Germany Public
3 Faurecia SA 17.7 France Public
4 ZF Friedrichshafen AG 16.9 Germany Private - trust
5 ThyssenKrupp 11.3 Germany Public
6 Valeo SA 10.3 France Public
7 Benteler 9.3 Germany Private - family
8 Schaeffler KG 7.9 Germany Private - family
9 Magneti Marelli 7.6 Italy Fiat Group
10 Mahle GmbH 6.3 Germany Private - trust
11 Hella KGaA Hueck & Co. 5.7 Germany Private - family
12 Behr GmbH 4.9 Germany Private - family
13 Michelin Group 4.3 France Public
14 GKN PLC 4.2 United Kingdom Public
15 Brose 4.1 Germany Private - family
Source: Automotive News
© 2009 Deloitte Touche Tohmatsu29
Climate Change• Electrification of the Automobile (zero tailpipe emissions):
‒ Vehicle manufacturers will continue to work with battery suppliers on issues like energy density, durability and recharge times.
• Alternative Fuels:‒ Issues like sustainable fuel production, quality and the development of comprehensive re-fuelling infrastructure remain key to encouraging
wider take-up of these vehicles.
Sustainable Mobility / Regulatory Framework (especially the regulation CARS 21)• Reduce waste / recyclable parts
‒ In the manufacture of vehicles, sustainable mobility means finding more sustainable materials in vehicle manufacturing, improving logistics in the supply chain to cut unnecessary waste, and designing more parts to be recycled at the end of their lives rather than being sent to landfill.
• Reducing man-made CO2 emissions / CO2 - based taxes‒ The automotive industry is actively working to reduce CO2 emissions from cars and commercial vehicles in-use, but also from its production
sites, logistics and transport operations. Tax incentives encourage motorists to consider the environmental impact of vehicle choices and to use vehicles responsibly.
Road Safety• Intelligent Transport Systems (ITS):
‒ Further technological progress with complementary Intelligent Transport Systems (ITS) measures, improved driver training, better road design and enforcement of existing traffic regulations promise safer roads for all.
Competitiveness• Deliver quality products around the globe:
‒ Opportunities to develop trade abroad should be pursued and manufacturers support steps to remove barriers such as unreasonable import tariffs and non-tariff barriers (NTB).
• Integrated Innovations‒ In a world of ever-increasing globalization and international competition, the automotive industry will work to keep costs down, to retain R&D facilities and
production in Europe, and to safeguard the quality of its products.
Key issues facing European supplier market
© 2009 Deloitte Touche Tohmatsu30
There has been a wave of insolvencies.• Over the past nine months in Germany alone, more than 70 automotive
suppliers and suppliers with plants there have filed for insolvency.
• Many of the troubled or insolvent suppliers have strong technology positions.
A wide variety of assets are for sale, from healthy companies focusing on core operations and from troubled or insolvent companies who are reorganizing.• In Germany, for example, over
20 insolvent suppliers are currently ‘for sale” (chart at right).
The Europe supplier market is also restructuring
Category No. Companies
Turnover Range (€ MM)
Powertrain 4 40 – 500
Exterior 3 10 – 1,500
Interior 5 10 – 1,100
Electronics 1 160
Climate 1 110
Metalworking 11 10 - 170
Strategic buyers are reviewing supplier asset opportunities in Europe, both for technology acquisition and for market entry / expansion.
© 2009 Deloitte Touche Tohmatsu31
Table of contents
1 The Global Automotive Industry – Our Point of View
2 Creating Growth Strategy
3 M&A Considerations
4 Our Perspectives on Acquisition Integration
5 Supplier Network Development
6 Next Steps
© 2009 Deloitte Touche Tohmatsu32
Creating a growth strategy for the auto business involves answering these fundamental questions:1. What is your company’s strategic intent?
2. Where to compete?
3. How to compete?
4. When and how to invest?
5. How to align existing relationships?
Strategic Questions
The following discussion centers on growth in the auto parts business. Many of the same considerations apply, however, to planning for growth in the OEM / finished vehicle markets.
© 2009 Deloitte Touche Tohmatsu33
Strategic Question #1: Strategic Intent?
What is your objective for your parts business? How will the investment create value for the organization?
Example Objective Example Implications
Create a global, tier 1 parts business, profitable on a stand-alone basis
• Global scale and capabilities• Complex interactions / conflicts with existing JV’s• High level of investment and competence• High risk
Create a tier 1 parts business focused on the China market, profitable on a stand-alone basis
• Competing against global suppliers• Exposure to the dynamics of the China market• Less scale, but equally high level of competence required• Medium risk
Create stakeholder value through an early IPO
• Select attractive, high-growth segment(s)• Leverage existing assets, acquire cheap assets – build scale
quickly, position for high-return growth
Create strategic options for alternative engine / powertrain futures (protect the OEM vehicle business)
• Invest in multiple engine technologies at exploratory levels• Mix of investment mechanisms• Priority is capability – technology and market – over near
term profits
Different strategic objectives will lead to different answers to the following strategic questions. It is important that your management have clarity on the objectives at the start, and that the objectives are focused.
© 2009 Deloitte Touche Tohmatsu
Strategic Question #2: Where to Compete?
Strategic Intent
Where to Compete
Product Family
Technology
Geography
OEM Market
-- CHINA --
“Cleansed ECC logo”
© 2009 Deloitte Touche Tohmatsu35
Determining which product family will include consideration of:
• Market growth
• Impacts of technology change
• Strength of current suppliers
• Potential to acquire assets at favorable prices
• Your existing capabilities and JV relationships
• Strategic intent
Strategic Question #2: Where to Compete? (cont.)Which product families / systems? Which technologies (product and production?)
Passenger / Light Vehicle
Chassis
Brake Assembly
Brake Controls
Control Arms
Damper
Fuel Tank
Steering Gear
Steering Wheel
Climate
Ducting
Heat Exchanger
HVAC Compressor
HVAC Condenser
HVAC Controls
HVAC System
Electronics
Adaptive Cruise Control
Airbag ECU
Brake Lighting
CHMSL
Forward Lighting
Front Entertainment System
Junction Box
Keyless Entry Control Unit
Keyless Entry Transmitter
Navigation System
Occupant Classification Sensor
Rear Entertainment System
Tire Pressure Monitoring System
Wire Harness
Exterior
Bumper Fascia
Convertible Top Assembly
Door Hardware Module
Exterior Mirror
Sunroof
Vehicle Structure
Window Regulator
Interior
Airbag Cushion
Airbag Inflator
Airbag Module
Door Trim Panel
Floor Console
Floor System
Headliner
Instrument Cluster
Instrument Panel
Package Tray
Seat Adjuster
Seat Assembly
Seat Backrest Frame
Seat Belt
Seat Cover
Seat Cushion Frame
Seat Recliner
Trunk Liner
Powertrain
Camshaft
Catalytic Converter
Crankshaft
Cylinder Block
Cylinder Head
Drive Axle
Drive Shaft
Engine ECU
Exhaust Manifold
Fuel Injector
Hybrid System
Intake Manifold
Throttle Body
Torque Transfer
Transmission ECU
Turbo/Supercharger
Variable Valve Timing
© 2009 Deloitte Touche Tohmatsu36
Strategic Question #2: Where to Compete? (cont.)Which OEMs / customers? In which geographies?
OEMs 2007 Global Production
Global Market Share
Cum. Market Share
OEMs 2007 Global Production
Global Market Share
Cum. Market Share
1 Automobile Manufacturer #6 9,498,000 13.5% 13.5% 21 Tata 578,952 0.8% 93.4%
2 GM 8,818,409 12.6% 26.1% 22 Chongqing Changan 546,253 0.8% 94.2%
3 Automobile Manufacturer #5 6,365,456 9.1% 35.1% 23 China FAW 509,449 0.7% 94.9%
4 Automobile Manufacturer #1 6,213,332 8.8% 44.0% 24 Dongfeng 503,868 0.7% 95.6%
5 Automobile Manufacturer #3-Kia 3,987,267 5.7% 49.7% 25 BAIC 454,321 0.6% 96.3%
6 Honda 3,911,813 5.6% 55.2% 26 Chery 387,880 0.6% 96.8%7 Automobile Manufacturer 3,431,398 4.9% 60.1% 27 Shenyang Brilliance 293,588 0.4% 97.3%8 PSA/Peugeot-Citroen 3,233,000 4.6% 64.7% 28 Hafei 231,488 0.3% 97.6%9 Fiat 2,813,870 4.0% 68.7% 29 AvtoGaz 223,122 0.3% 97.9%10 Renault 2,635,753 3.8% 72.5% 30 Zhejiang Geely 216,774 0.3% 98.2%
11 Suzuki 2,596,179 3.7% 76.2% 31 Anhui Jianghuai 209,880 0.3% 98.5%
12 Chrysler 2,572,203 3.7% 79.9% 32 Iran Khodro 196,007 0.3% 98.8%13 Daimler 2,096,893 3.0% 82.8% 33 Mahindra 178,982 0.3% 99.1%14 BMW 1,541,503 2.2% 85.0% 34 Proton 148,424 0.2% 99.3%15 Mitsubishi 1,411,975 2.0% 87.0% 35 SsangYong 122,857 0.2% 99.4%
16 Automobile Manufacturer #7 1,286,808 1.8% 88.9% 36 Great Wall 122,605 0.2% 99.6%
17 AvtoVaz 785,970 1.1% 90.0% 37 Jiangxi Changhe 112,083 0.2% 99.8%18 Isuzu 628,800 0.9% 90.9% 38 Porsche 101,844 0.1% 99.9%19 SAIC 610,028 0.9% 91.8% 39 Soueast (Fujian) 59,089 0.1% 100.0%20 Fuji 585,028 0.8% 92.6% Total 70,221,151
© 2009 Deloitte Touche Tohmatsu37
Strategic Question #3: How to Compete?
BasicComponent
Supplier
DiversifiedComponent
Supplier
SystemSupplier
ModuleSupplier
• Cost leadership• High quality• Efficient manufacturing• Short “time-to-market"
• R&D capabilities• Multiple core
competencies
• Strong innovation & technology base
• Engineering integration capabilities
• Assembly know-how• Efficient partnering• Local production
Increasing capabilities required
Different bases of competition
Technology Disruption• R&D leadership• M&A and network
development• Strategic commitment and
investment
© 2009 Deloitte Touche Tohmatsu38
Strategic Question #4: When to Invest? And How?
Existing capability platform and relationships
New capabilities and relationships
Future / emerging capabilities
Extend/defend core business
Integration Opportunities
Highest Value-add and risk
Diversified component supplier
System supplier
Module supplier
Investment Decisions
Organic Technology Acquisitions Joint Venture Acquisition
Level
Mechanism
Strategic Options Learning / Signaling Full Commitment
Basic component supplier
Increasing Capabilities
Increasing Investment
Priorities Product technology Production technology Production capacity
Distribution footprint Aftermarket footprint Manufacturing footprint
R&D capability Sales / customer support Brand
© 2009 Deloitte Touche Tohmatsu39
Question #5: How to Align Existing Relationships?
Alliance Rationale
Form aPowerful
CompetitiveForce to dominate
target markets
ShareFinancial
Risks
Increase Return from Operations
Participate in
attractive markets
and brands
Participate in the
development of new and emerging
technology
Manufacture more
effectively and
efficiently
Manage Global Alliance Structure
Asia North America Europe ROW
Overarching Objective –Strategic Advantage
Broader Value
Focused, TacticalValue
Consolidate and Gain Protectable Competitive Advantage From Existing Partners and Alliances
• Increasing Value• Increasing Commitment• Increasing Investment and Risk
Limited value / no strategic fit
© 2009 Deloitte Touche Tohmatsu40
Growth strategy development
External Analysis
Internal Analysis
Synthesis Action
OEM / Customer Market
Supplier Market
Product Segments
Technologies
Regulatory / Externalities
Chin
a
Glo
bal
Capabilities
Relationships / Network
Project Management
People and Change Management
Strategic Intent
Opportunities
Challenges / Risks
Financials / Business Case
M&A Plan
Internal Development Plan
Risk Management Plan
Implementation RoadmapStrategy Document
Organization Change Plan
Performance
Scenario Analysis
Chin
a
Glo
bal
© 2009 Deloitte Touche Tohmatsu41
Analytic Framework for Strategy Development
External Analysis
OEM / Customer Market Segmentation and prioritization – growth, health,
profit potential Sales & service models Channels Location footprint / proximity requirements Competitors and ‘white space’ Customer strength / pricing power OEM attractiveness Aftermarket attractiveness Target customers
Product Segments Segment trends
‒ Price, volume, market size, and growth rate‒ Product and production technology‒ Maturing / life cycle analysis
Capacity / demand balance Competitor map / concentration analysis Market capability requirements Scale requirements / economies of scale Asset base requirements Service requirements Product development approach and resourcing
Technologies Product and production technologies Emerging technology assessment
‒ Potential / risks‒ Relationship to different externality scenarios
(energy, environment, safety) Technology maturity map Supplier / technology map Opportunity map
Regulatory and Externalities Regional analysis
‒ Current regulations and trends‒ Impact on OEM / customer market‒ Impact on Supplier market‒ Impact on Product segments‒ Impact on Technology development
Global trends: energy cost, consumer behavior
Chin
a
Glo
bal
Supplier Market Positioning – strengths and weaknesses
‒ Product and product technology‒ Production capacity and capability‒ Cost structure‒ Asset base‒ Financials‒ Sales and distribution‒ Management / people‒ Brand
Customer networks and relationships Strategic intent / investment direction
Competitor View M&A / JV View
Note: these analyses should be done with two ‘views’, China market and global
market (depending on your intent)
© 2009 Deloitte Touche Tohmatsu42
Analytic Framework for Strategy Development
Internal Analysis
Capabilities Product R&D and technology Production R&D and technology Supply chain Sales and service, complex customer relationship
management Information systems and controls, governance Global experience Supplier network (tier 2-n) M&A experience, JV management Management People
PerformanceUnderstand your current performance and
performance management, identify gaps versus strategic objectives.
• Product technology• Production technology• Production cost and quality• Overall cost• Customer satisfaction• Management systems and controls• Financial performance – margins, operating income,
net income, ROCE, ROA, etc.• Performance management systems Ch
ina
Glo
bal
Relationship / Network Assessment of current JV’s / other relationships
‒ Competitive position: product, quality, cost, service, customer / OEM relationships
‒ Technology capabilities‒ Geographic footprint‒ Strategic importance
Portfolio analysis Product / market / alliance – JV map
‒ Existing coverage‒ Precluded areas (contractual / non-competes)‒ Open areas
Note: these analyses should be done with two ‘views’, China market and global
market (depending on your intent), particularly the Capabilities analysis.
Note: Internal Analysis also includes assessing leadership alignment on Strategic Intent,
and on commitment and willingness to invest and
change.
© 2009 Deloitte Touche Tohmatsu43
Analytic Framework for Strategy Development
Synthesis
Opportunities Product segments Technologies Customers / segments Geographic markets Supplier market – acquisition / partnering Fit with strategic intent
Strategy Document Strategic intent Target markets – customer, geographic Target product segments Portfolio Investment requirements and priorities
‒ Capabilities‒ Technologies‒ Production capacity‒ Investments for strategic options (vs. full scale
commitment) Targets / expected outcomes Organization and accountability
Business Case Sales and market share projections Investment and resource details Financial targets and projections Tax impacts Qualitative targets and benefits Risks Contingencies
Challenges / Risks Dependencies on externalities Capability gaps / dependencies Competitor response Impact on existing network / business
Strategic IntentClear statement of your strategic objectives for the
parts business Market positioning Relationship to your OEM business Financial returns
Scenario AnalysisCreate hypotheses, evaluate under different
environmental scenarios, e.g.: Energy / oil cost scenarios Environmental regulation scenarios Powertrain technology disruption scenarios Market access disruption scenarios Industry reconfiguration scenarios
© 2009 Deloitte Touche Tohmatsu44
Analytic Framework for Strategy Development
Action
Internal Development Plan Investments Assets Technology / R&D People and management – recruiting, training, etc. Capabilities
Implementation Roadmap Graphical sequence of all major activities Detailed workplans Resource plans Responsibilities Time line and dependencies Milestones and measurement points Execution threads:
‒ Project management‒ Change management and communication
Organization Plan Targeted end state Change plan Communication plan Roles and responsibilities
M&A Plan Objectives and priorities Secure advisors Target screening Deal parameters and negotiations Due diligence Integration
Risk Management Plan Major / identified risks Mitigation plan Measurement and reporting Responsibility matrix
© 2009 Deloitte Touche Tohmatsu45
No company can make major investments in every possible technology or future direction.
Investment strategy: invest to create a portfolio of capabilities and options. • Make selected major commitments now.
• Invest in a more limited, focused way in other areas to create and maintain options.
Scenario Analysis
Michael E. RaynorDeloitte Consulting LLPDistinguished Fellow, Deloitte Research
Synthesis
© 2009 Deloitte Touche Tohmatsu46
Scenario Analysis: basic steps
Key Idea – Invest to Create Options
Anticipate• Identify drivers of change• Define the range of possible
futures• Determine which are truly
plausible
Formulate• Develop an optimal strategy
for each scenario• Compare optimal strategies to
define “core” and “contingent”elements
Accumulate• Acquire those capabilities needed to
implement the core strategy• Take options on capabilities needed
for contingent strategies
Operate• Execute the core strategy• Monitor the environment• Exercise or abandon options as
appropriate
© 2009 Deloitte Touche Tohmatsu47
Example scenario analysis framework
Tech
nology
Reg
ulat
ion
Macro-economy
Each vertex could bea plausible scenario
Continued Recession / Slow Growth
Recovery / Return to
Higher Growth
New Carbon Limits
Current C Limits, Growth
Incentives
Electric
Advances
Gasoline
Advances
How to create capability options?
• Partial / seed investment
• Pilot projects• JV’s• Academic R&D• Development rights• Licensing – inbound
and outbound• Etc.
Scenario analysis can help determine where to invest (e.g., product family / technology) and how to invest (e.g., early commitment / ‘big bet’ versus creating options).
© 2009 Deloitte Touche Tohmatsu48
Example (from Deloitte work with another OEM)
Fuel Prices
Regulatory Environment
Infrastructure to Support Engine Technology
Consumer Appetite for Debt
Lifestyle Choices
Emerging Market Geopolitical Stability
Wor
st C
ase
Best
Cas
eM
ost
Pro
babl
e C
ase
Scenario 1: Car-mageddonMacroeconomic slide leaving automotive in an extended recessionary limbo
Scenario 2: Status QuoNo significant change in the situation from the current state
Scenario 3: Shifting GearsWe emerge from the current recession and largely shift back to pre-recessionary days
Scenario 4: Consumer’s Paradise The economy not only fully recovers but is now on the fast track, with fast adoption of new technologies
What are the key external drivers of uncertainty in the industry?
What are the range of scenarios that these drivers point to in the industry?
Anticipating the market
Illustrative
There is no significant change in the situation from the current state
Auto lenders and banks keep tight strings on financing
Limited demand for luxury cars, SUVs and crossovers
Limited investment in new technologies
Consumers are averse to take on debt
Low capacity utilization in the industry
There is considerable deterioration in the macro-economic environment
Auto industry struggles with margin pressures and domestic competition
Consumers prefer basic transportation such as telecommuting and mass transit systems
New category of “bare bone” vehicles that cater to basic transportation needs, e.g. Tata Motors’ Magic and Ace
We largely shift back to pre-recession days – consumer outlook is brighter and engine technology begins a gradual transition
Internal combustion engines still dominate in the short term but technologies such as all-electric vehicles gain traction
Automakers invest in new technologies due to high fuel prices
Prices stabilize and efficiency improvements lead to improved profits
Economic growth and an regulatory environment advantageous to consumers mean innovation advances quickly
Increased proliferation of new technologies, including an array of options as well as fuel cells and electric vehicles
Regulatory environment is favorable for new players as barriers to entry fall
Innovative business models crop up for cars, e.g. fractional ownership
Car-mageddon Status Quo Shifting Gears Consumer’s Paradise
Negative Impact Positive Impact
Range of Possible Scenarios* for the Automotive Industry
1. Determine external factors shaping the industry’s future.
2. Define a manageable number of planning scenarios
EngineTechnology
Internal combustion (IC)
Hybrid (H)
All-electric (E)
Hydrogen fuel cell (HF)
What is the continuum of strategic options that exist for the business?
Which is the right set of core commitments (and contingent options) based on common elements across all scenarios?
Developing and executing a strategy
IC H E HF
IC E HF
IC H E HF
IC H E
Car-mageddon
Status Quo
Shifting Gears
Consumer’s Paradise
IC H E HFOverall Strategy
Core Commitments
Contingent Options(trigger-dependent)
ObservationsInvest in improving fuel efficiency of internal combustion engine
Take options on hybrid and all-electric technologies
Keep an eye on hydrogen fuel cells as it becomes commercially viable
HF
Example
Green indicates level of investment
H
All electric (E)
3. Assess the impact of each scenario on different technology / product segment options. Develop investment strategy: commitments, options, defer / exit.
© 2009 Deloitte Touche Tohmatsu49
As noted, this is a time of disruptive technology changes in automotive. The future path of development is uncertain.• Assessing different technologies requires analysis to answer several different
questions…
Assessing emerging technologies External Analysis / Synthesis
Likelihood of Adoption?
Advantages
Maturity
Disadvantages
Infrastructure Requirements
Government Support
Competitive Intensity / Profit
Potential?
Concentration
Current Players
Level of Commitment
Exit Costs
Sources of Advantage (IP, manufacturing, customer intimacy…)
Required Capabilities?
Manufacturing
R&D / IP
Sales & Service
Supply Chain
Investment Options?
People / Talent
IP
Physical Assets
Network / Infrastructure
Ubiquity (e.g., supports many other technologies)
Fit with strategic intent and current capabilities
© 2009 Deloitte Touche Tohmatsu50
Base Technology VariationsGasoline Gasoline – advanced technologies
Flex Fuel (ethanol blends)Multi Fuel (gasoline plus other hydrocarbon fuel)
Diesel Diesel – advanced technologiesBiofuels
Gasoline – Electric Hybrid Parallel (propulsion from gasoline and electric motors)Serial (propulsion from electric motors)
Diesel – Electric Hybrid Parallel (propulsion from diesel and electric motors)Serial (propulsion from electric motors)
Electric Plug In BatteryFuel Cell / Battery
Alternate Fuel Internal Combustion
Natural GasLPGHydrogen
Example: powertrain alternatives (cont.)
© 2009 Deloitte Touche Tohmatsu51
Technology Description Supporting Technologies
Advantages Dis-advantages
Players (Examples)
Prospects (Deloitte Point
of View)
Gasoline Continuing improvements to conventional gasoline engines to improve efficiency and mileage
• Variable valve actuation
• Multiple displacement
• Turbo / supercharging
• Fuel stratified injection
• HCCI• CVT• DCT• Advanced
electronic engine controls
• Builds on existing technologies
• No major new infrastructure investment
• More certain / positive economics
• Continued reliance on fossil fuels / vulnerability to oil prices
• Continued CO2 emissions
• Trade-offs around complexity, reliability, certain emissions
• All OEM’s• Aisin• Bosch• Borg Warner• Continental• Magneti Marelli• Eaton• Honeywell • Etc.
Baring major disruption in oil supplies, gasoline will continue to be the dominate passenger vehicle engine option in US and Asia for the next 10 years. Efficiency improvements of up to 20% are likely.
Diesel Continuing improvements to conventional diesel engines to improve efficiency and mileage
• Piezoelectric injectors
• Variable geometry turbochargers
• Exhaust scrubbing
• HCCI• CVT• DCT• Advanced
electronic engine controls
• Higher level of efficiency compared to gasoline
• Builds on existing technologies
• No major new infrastructure investment
• More certain / positive economics
• Higher build cost than gasoline
• Continued reliance on fossil fuels / vulnerability to oil prices
• Continued CO2 emissions
• Trade-offs around complexity, reliability, certain emissions
• Automobile Manufacturer #1, Daimler, BMW, Peugeot, etc.
• Bosch• Continental• Valeo• BorgWarner• Tenneco• Etc.
Baring major disruption in oil supplies, diesel will continue to be a major passenger vehicle engine option in Europe for the next 10 years, while gaining some share in the US. Continued efficiency improvements, though not to the extent of basic gasoline engines.
Example: powertrain alternatives (cont.)
© 2009 Deloitte Touche Tohmatsu52
Technology Description Supporting Technologies
Advantages Dis-advantages
Players (Examples)
Prospects (Deloitte Point of
View)
Gasoline Plus Other Hydrocarbon Fuels
Burn gasoline and other fuels in same engine.
• Flex fuel – gasoline / ethanol blend
• Multi fuel – burn gasoline or natural gas / LPG / other (separate tanks and feeds).
• Engine control systems
• Emissions control systems – sensors, catalytic converters
• Extension of existing technologies.
• Ability to take advantage of varying pricing/ availability of different fuels in different markets.
• Ethanol: renewable, reduced net greenhouse gases.
• Ethanol: vehicle performance issues (e.g., lower mileage per volume, cold starting), infrastructure investment, impact on food costs.
• Multifuel: complexity, vehicle cost, infrastructure requirements (fueling, service).
• Fiat, GM, Automobile Manufacturer #5, Automobile Manufacturer #7, Honda, BMW, Acquired Company..., Automobile Manufacturer #3, etc.
• Bosch• Etc.
Ethanol: US economics driven by government incentives, break-through required in cellulosic ethanol commercialization. High potential in markets with appro-priate agriculture conditions and no oil (e.g., Brazil).Multifuel: This will remain a niche application in markets with high petroleum costs or uncertain gasoline/ diesel supplies.
Diesel Biofuels
Burn crop-derived or other organic fuels with petroleum-based diesel.
• Injectors• Engine control
systems• Catalytic
converters / scrubbers, sensors
• Extension of existing technologies.
• Reduce dependence on imported oil.
• Reduced emissions (with some exceptions).
• Leverage existing infrastructure
• Limits on the mix % (currently 5% in most engines).
• Potential impact on engine wear and performance.
• Most / all diesel OEM’s and suppliers.
Widespread adoption likely, but limited impact due to practical limits on the percent of the fuel mix derived from biofuels.
Example: powertrain alternatives (cont.)
© 2009 Deloitte Touche Tohmatsu53
Technology Description Supporting Technologies
Advantages Dis-advantages
Players (Examples)
Prospects (Deloitte Point
of View)
Gasoline – Electric Hybrids
Gasoline engine works with batteries and electric motor, either in series or parallel, to provide propulsion.
• Parallel – gasoline and electric motors can both provide propulsion.
• Series – electric motor(s) provide propulsion, gas motor drives a generator.
• Batteries• Electric motors• Regenerative
braking• High current
electrical systems
• Drive controls• Auto shutoff /
start (ignition systems)
• Increased efficiency / mileage.
• Reduce emissions.
• Utilize existing infrastructure.
• Cost, economics.
• Advantages primarily in urban driving.
• Automobile Manufacturer #6, Honda, Automobile Manufacturer, Automobile Manufacturer #7, Automobile Manufacturer #5, GM, Chrysler, Daimler, Automobile Manufacturer #3, etc.
• Battery suppliers
• Electric motor suppliers
Hybrids currently represent about 1% of global sales. Within 10 years this may approach 10%, but unlikely to be much higher (barring major oil supply disruption or regulatory change). Economics and diminishing efficiency advantage over advanced gasoline and diesel will inhibit growth.
Example: powertrain alternatives (cont.)
© 2009 Deloitte Touche Tohmatsu54
Technology Description Supporting Technologies
Advantages Dis-advantages
Players (Examples)
Prospects (Deloitte Point
of View)
Electric Electric drive, driven by batteries or batteries + fuel cell or other power source. (Better Place is developing a removable battery which allows “filling station-style” replace-ment.)
• Batteries• Electric motors• Regenerative
braking• CVT• Drive controls• Power
management systems
• High current electrical systems
• Zero vehicle emissions.
• Reduced dependence on oil.
• Vehicle performance – range, driving
• Charge time.• Battery life,
replacement costs
• High cost, economics.
• Infrastructure investments
• Impact on power grid.
• Battery disposal.
• LI sources.
• Automobile Manufacturer/Renault (with Better Place)
• Aptera• BYD• Commuter Cars• Dynasty Electric
Car (Canada)• ElBil Norge
(Norway)• Fly Bo (China)• Fisker (US)• Lightning Car
Co. (UK)• Miles Electric
Vehicles (China mfg)
• Myers Motors• Reva (India)• Think (Norway)• Twike (Switz)• Tesla (US)• Zap (US)• Battery makers• Electric motor
manufacturers• PE / VC firms
Economics and battery performance issues will continue to be major hurdles.Not a significant factor within the next 10 years. Limited to niche urban markets, areas / groups that are highly environmentally sensitive. More uses in commercial / mass transit applications.
Example: powertrain alternatives (cont.)
© 2009 Deloitte Touche Tohmatsu55
Base Technology
Variations Power-train
Chassis Interior Exterior Electronics
Climate
Gasoline Gasoline (advanced)
Flex Fuel Multi Fuel
Diesel Diesel (advanced)Biofuels
Gasoline – Electric Hybrid
Parallel
Serial
Diesel – Electric Hybrid
Parallel
Serial
Electric Plug In BatteryFuel Cell / Battery
Alternate Fuel Internal Combustion
Natural GasLPGHydrogen
In scenario planning we consider cross-impactsDisruption Potential on Current Technologies & Segments
Changes in base powertrain technology will impact other auto systems. Understanding these correlations is important in crafting your overall growth / investment strategy for parts.
© 2009 Deloitte Touche Tohmatsu56
Lead Acid Battery
NiMH Battery
Li Ion Battery
H2 Hydride
H2 Gas
Natural Gas
LPG
Ethanol
Diesel
Gasoline
0 10 20 30 40 50 60
0.15
0.25
0.600000000000001
1
120
54
49
32
47
47.5
0.36
0.5
1
4
0.25
10
26
24
36
34
Energy Density
VolumeWeight
MJ / kg or L
Fundamental physics will affect technology evolution
Electric - Battery
Fuel Cell
Diesel
Gasoline
0% 10% 20% 30% 40% 50% 60% 70% 80%
Engine Efficiency
Today
Improvements w/ Existing Technologies
Physical factors suggest the continued dominance of fossil fuels for the next 10+ years.
© 2009 Deloitte Touche Tohmatsu57
Technology Example: maturity analysis
Relative Technology Maturity
Bus
ines
s an
d Te
chni
cal R
isk
Fuel Cell / H2
Electric Steering
Regener-ative
Braking
Venture Capital Development Partnership Supplier Acquisition
Typical Sources of Leading Technologies
New Battery
Technol-ogies
Li-ion BatteriesOrganic
Batteries
New Combus-
tion Technol-
ogies
Different technologies at different stages of maturity carry different risks and investment requirements. New technologies may require different approaches to building or acquiring capabilities .
“Traditional”“Non-Traditional”
© 2009 Deloitte Touche Tohmatsu58
Table of contents
1 The Global Automotive Industry – Our Point of View
2 Creating Growth Strategy
3 M&A Considerations
4 Acquisition Integration
5 Supplier Network Development
6 Next Steps
© 2009 Deloitte Touche Tohmatsu59
Opportunities to create value via M&A – OEM level
Many OEM cross-border acquisitions of brands have been unsuccessful
Buyer Acquisition Date Current Status AssessmentSuccessful Acquisitions
Automobile Manufacturer #1
Acquired Company...
19XX Integrated into Automobile Manufacturer #1 Group
Highly successful, Acquired Company... retains own HQ and identity but shares product platforms with Automobile Manufacturer #1
BMW Mini (part of Rover Group)
1994 Integrated into BMW in 2000 and operated as a sister brand
Became successful after the brand was brought into the BMW engineering and management processes
Daimler smart 1994 Integrated into Mercedes Car Group Started as a standalone JV with swatch; not successful until integrated into Mercedes in 2006
Renault Dacia 1999 Integrated into Renault Maintains own HQ and identity, but shares Logan platform globally with RenaultGM/ SAIC/ Suzuki
Daewoo Auto 2002 Integrated into GM Asia-Pacific Integral to GM global product development and production networks; Daewoo brand generally discontinued outside Korea
Mixed Success or UnsuccessfulAutomobile Manufacturer #1
Acquired Company...
19XX Integrated into Automobile Manufacturer #1 Group
Difficulty establishing brand outside Spain, relatively high cost base
GM Saab 1989 Insolvent; agreement to sell Maintains own HQ and identify, shares platforms with GM/Opel, but cost structure/ exchange rate has limited success
BMW Rover Group 1994 Sold Land Rover to Ford and MG Rover to investors in 2000
BMW was not able to overcome past brand problems and did not integrate Rover
Daimler Chrysler 1998 Chrysler sold to Cerberus in 2007 Never achieved synergies due to limited shared platforms or functionsFord Volvo Cars 1999 Attempting to sell Maintains own HQ and identify, shares platform with Ford, but cost structure/
exchange rate has limited profitability
SAIC Ssangyong 2004 Insolvent; plant closed due to strike After initial turnaround success, limited product range of large vehicles and poor labor relations have caused major disruption
Too Soon to TellNanjing MG Rover 2005 MG production re-started; Rover
platform basis for Roewe brandSAIC appears to be using MG Rover to expand internationally
Tata Jaguar/Land Rover
2008 Operating as an independent subsidiary
Difficult timing for Tata with the downturn, but brands may strengthen with new products and technology transfer may be valuable
Fiat Chrysler 2009 Fiat acquired a 35% ownership Fiat and Chrysler intend to introduce Fiat platforms and products into NAFTA as soon as possible
Koenigsegg Saab 2009 Transaction being finalized Business plans not known
© 2009 Deloitte Touche Tohmatsu60
Opportunities to create value - OEMs
Cross-border brand acquisitions have typically fulfilled one or more of four strategic objectives for the buyer
AccessNew Market
AcquireTechnology
Acquire aStrong Brand
Build Scale
“Cleansed ECC Client”
• GM/ Suzuki/ SAIC – Daewoo Auto: low-cost small car design• Tata – Jaguar/Land Rover: premium vehicle design• SAIC – Ssangyong: SUV and premium car design• Nanjing – MG Rover: volume vehicle design
• Tata – Jaguar/Land Rover: luxury car and SUV brands• Automobile Manufacturer #5 – Acquired Company...: premium brand• GM – Saab: premium brand
• Automobile Manufacturer #1 – Acquired Company...: add volume to existing platforms• Renault – Dacia: build volume for a new low-cost platform• Fiat – Chrysler: bring Chrysler products onto Fiat platforms
Strategic Objective Transaction Examples
© 2009 Deloitte Touche Tohmatsu61
Opportunities to create value - OEMs
There have been some general patterns of success and failure in the examples of cross-border automotive brand acquisitions
Success patterns Failure patterns
Effectively shared product platforms and leveraged procurement across brands
Maintained a high cost structure relative to brand price positioning
Maintained sufficient brand uniqueness and a strong identity with the acquired brand
Were unable to build upon and strengthen the brand
Were able to leverage the acquired brand into new markets
Exposure to currency fluctuations for high proportion of exports eroded margins for extended periods
Developed a cost structure which supported brand price positioning
Cultural challenges limited ability to work together and achieve synergies
Successfully matched leadership and management style and structure to the culture and needs of the business
Were unsuccessful in developing a management structure and process which achieved objectives
© 2009 Deloitte Touche Tohmatsu62
Opportunities to create value - OEMsToday, there are three primary alternatives for building a global automotive brand – they will all require significant investment and risk, and acquisition success is unknown
Acquire Standalone OEM (e.g., Acquired Company...)
Acquire Dependent Brand (e.g., Hummer) Build New Global Brand
• Consolidate position in existing markets
• Introduce/grow brand in China market
• Develop low-cost production footprint
• Extend brand into new markets
• Secure transition production support from seller
• Acquire technology and hire/ contract product development capabilities
• Develop models and prepare production for export
• Develop low-cost production footprint
• Extend brand into new markets
• Acquire technology and hire/ contract product development capabilities
• Establish/grow brand in China market
• Contract with distributors for export markets
• Develop models and prepare production for export
• Develop low-cost production footprint
• Extend brand into new markets
Pros
• Fastest route to growth• Brand and products are known
quantities
• Faster entry into existing markets• Brand is known and established
• Can “design” brand and image
Cons
• Could be prohibitively expensive• Potential cultural/political issues• Acquire legacy problems (e.g.,
contingent liabilities, image issues)
• Need to develop vehicles• Requires investment in brand,
engineering and facilities• Potential cultural/political issues
• Will take significant time to grow• May not own distribution channels• Requires investment in brand,
engineering, facilities
© 2009 Deloitte Touche Tohmatsu63
Opportunities to create value - OEMs
There are a very limited number of OEMs or brands which can be considered as potential targets for acquisition
Potential Target
Stand-alone
Market Cap($US billion)
Geographic Breadth
2007 Vehicle Sales (Mils)
Holden Partial NA Australia 0.2
Hummer* No NA NAFTA 0.1
Automobile Manufacturer #7
Yes $3.7 Global 1.3
Mitsubishi Yes $10.7 Global 1.3
Opel (Europe)* Yes NA EU 1.3
Saturn* No NA US/Canada 0.3
Acquired Company...
Partial NA EU 0.4
Subaru Yes NA Global 0.6
Suzuki Yes $11.4 Global 2.4
Acquired Company...*
Partial NA Global 0.5*Deal announced or pending
© 2009 Deloitte Touche Tohmatsu64
Evaluation and prioritization of external market opportunities should consider each product segment and balance potential value creation with your company’s needs
Developing a parts investment / acquisition strategy
• Segment-Based Strategy Questions‒ Which product segments are most
attractive?‒ How and where will value be created in
each product segment?‒ What level of scale is needed to be
competitive in the long term?‒ What is the optimal global footprint?‒ Which companies are most at-risk? Will
their customers continue to support them? Are they an attractive candidate? Should we be interested?
‒ Do I need/want deal partners?
• Risks and Issues Specific to Your Company ‒ Globalization and your plans to expand outside
China (or focus on China market)o Access to new or expanded markets through your
existing channels – U.S./Europe/ Latin America/Asia
‒ Importing and integrating technology (e.g. transmissions) back to Chinese market – your current R&D efforts / know-how vs. future technology directions
‒ How to most efficiently capitalize on your China labor force and home market position
‒ Your exposure to / ability to manage currency risks
‒ Your capabilities to integrate acquisitions, manage offshore entities / facilities
© 2009 Deloitte Touche Tohmatsu65
Growth Opportunities
Consolidation Potential
Proprietary Technology Positions
Relative Market
Valuations
Powertrain Chassis/
Mechanical Exteriors Interiors Climate Control
Electronics/ Electrical
= High = Low= Medium
Growth-by-acquisition (roll-up) strategies should focus on one or two product families and consider long-term prospects
Assessing the market (cont.)
• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners?
© 2009 Deloitte Touche Tohmatsu66
Value Drivers
Technology/Innovation• Unique product or technology positioning
• Overall product segment growth potential
There can be multiple sources of value creation – this should be a key foundation for the overall business development strategy
Assessing the market (cont.)
Capacity Utilization/Scale• Facility consolidation potential
• Product design commonization
Pricing Leverage• Ability to maintain/improve customer pricing
• Improved sourcing leverage
Market & Customer Access• Ability to more rapidly enter new markets
• Potential to leverage existing products to new customers
• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners?
© 2009 Deloitte Touche Tohmatsu
For most components, there will be a limited number of dominant suppliers, each with global coverage and the ability to invest in technology development
Assessing the market (cont.)
Production Scale
Market Share
Geographic Coverage
R&D Scale
Single Line Multiple Plants
Smallest Largest
Local Market All Markets
Single Application Multiple Technologies
Supplier A = Supplier B = Supplier C =
67
• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners?
© 2009 Deloitte Touche Tohmatsu68
The optimal global, regional and local footprint will be determined primarily by the type of product produced and the customer portfolio
Assessing the market (cont.)
Asia EU NAFTA ROW
Product transportability
Customer locations
Production cost structure
Local supply base capabilities
Political stability
Cultural fit
Example Footprint Evaluation Criteria• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners?
© 2009 Deloitte Touche Tohmatsu69
Stronger suppliers are gaining business at the expense of weaker competitors; it is critical to understand the competitive positioning of a potential acquisition target
Assessing the market (cont.)
Powertrain Supplier Profiles
SupplierFinancial
RatingStrategic
Rating
N.A. Exposure
Rating
D/CSM Health Rating
Supplier 1 30 75 77 58 Supplier 2 20 15 23 20 Supplier 3 75 60 68 69 Supplier 4 20 58 59 43 Supplier 5 100 80 50 76 Supplier 6 30 60 97 63 Supplier 7 10 73 40 34 Supplier 8 90 45 0 45 Supplier 9 15 48 53 37 Supplier 10 5 58 40 29 Supplier 11 80 80 83 81 Supplier 12 15 43 59 38 Supplier 13 48 53 47 48 Supplier 14 30 63 47 43 Supplier 15 10 50 43 31 Supplier 16 10 38 49 31 Supplier 17 20 68 77 52 Supplier 18 55 65 68 62 Supplier 19 25 13 24 22 Supplier 20 50 23 0 25 Supplier 21 15 55 73 46 Supplier 22 100 50 100 90 Supplier 23 35 63 58 49
• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners?
© 2009 Deloitte Touche Tohmatsu70
One strategy could be to acquire an existing strong supplier as the roll-up platform; however, banks and private equity investors (PEIs) are also possible partners
Assessing the market (cont.)
Exhaust Manifold Supplier Profiles
Supplier Country HQ Owner-ship Major Shareholders Market Cap ($M)
Supplier A Japan Public Automobile Manufacturer (47%) $168
Supplier B Japan Public Automobile Manufacturer #6 (22%) $4,040
Supplier C USA JV Emcon (50%)/Sango (50%) -
Supplier D Germany Private Family owned -
Supplier E Japan Public Automobile Manufacturer (42%) $285
Supplier F China Public $145
Supplier G Germany Private Family owned -
Supplier H USA PEI One Equity Partners -Supplier I France Public PSA (72%) $321
Supplier J China JV Lioho (55%)/Sumitomo (45%) -
Supplier K Portugal Private Fiat/Teksid (84%) -Supplier L USA Public $12
Supplier M Japan Public Hitachi Ltd. (54%) $9,780
Supplier N Japan/USA PEI Asahi Tec - 100% $155
Supplier O France PEI Zen Group (Italy) -
Supplier P USA Private Wescast (49%) (minority bus) -
Supplier Q Canada Public LeVan family (majority) $11
Banks
PEIs
Strong Supplier
Potential Partners
?
• Which product segments are most attractive?
• How and where will value be created in each product segment?
• What level of scale is needed to be competitive in the long term?
• What is the optimal global footprint?
• Which companies are most at-risk? Will their customers continue to support them? Are they an attractive candidate?
• Do I need/want deal partners? Is a JV preferable to an acquisition?
© 2009 Deloitte Touche Tohmatsu71
There is an enormous range of uncertainty and choicesin today’s parts market
Passenger / Light Vehicle
Chassis
Brake Assembly
Brake Controls
Control Arms
Damper
Fuel Tank
Steering Gear
Steering Wheel
Climate
Ducting
Heat Exchanger
HVAC Compressor
HVAC Condenser
HVAC Controls
HVAC System
Electronics
Adaptive Cruise Control
Airbag ECU
Brake Lighting
CHMSL
Forward Lighting
Front Entertainment System
Junction Box
Keyless Entry Control Unit
Keyless Entry Transmitter
Navigation System
Occupant Classification Sensor
Rear Entertainment System
Tire Pressure Monitoring System
Wire Harness
Exterior
Bumper Fascia
Convertible Top Assembly
Door Hardware Module
Exterior Mirror
Sunroof
Vehicle Structure
Window Regulator
Interior
Airbag Cushion
Airbag Inflator
Airbag Module
Door Trim Panel
Floor Console
Floor System
Headliner
Instrument Cluster
Instrument Panel
Package Tray
Seat Adjuster
Seat Assembly
Seat Backrest Frame
Seat Belt
Seat Cover
Seat Cushion Frame
Seat Recliner
Trunk Liner
Powertrain
Camshaft
Catalytic Converter
Crankshaft
Cylinder Block
Cylinder Head
Drive Axle
Drive Shaft
Engine ECU
Exhaust Manifold
Fuel Injector
Hybrid System
Intake Manifold
Throttle Body
Torque Transfer
Transmission ECU
Turbo/Supercharger
Variable Valve Timing
Base Technology VariationsGasoline Gasoline – advanced
Flex Fuel Multi Fuel
Diesel Diesel – advanced Biofuels
Gasoline – Electric Hybrid
Parallel Serial
Diesel – Electric Hybrid
Parallel Serial
Electric Plug In BatteryFuel Cell / Battery
Alternate Fuel Internal Combustion
Natural GasLPGHydrogen
Direction of base fuel and powertrain technology
Impact on other part families / vehicle systems
Changes in powertrain and other technologies will create opportunities in many different auto systems / parts families.
© 2009 Deloitte Touche Tohmatsu72
Table of contents
1 The Global Automotive Industry – Our Point of View
2 Creating Growth Strategy
3 M&A Considerations
4 Acquisition Integration
5 Supplier Network Development
6 Next Steps
© 2009 Deloitte Touche Tohmatsu73
Our insights come from assisting clients in over 600 post-merger integration and separation situations
Auto & Manufacturing Hi Tech & Finance Process & Life Science China & Consumer Products
Automobile Manufacturer #5 HP acq. of Compaq Dow acq. of Union Carbide Nanjing Auto acq. of MG Rover
Automobile Manufacturer #5 HP div. of Agilent Exxon merger with Mobil Lenovo acq. of IBM PC business
General Motors div. of Delphi Sprint acq. of Nextel Chevron acq. of Texaco J&J acq. of Dabao
General Motors acq. of Daewoo Agilent Technologies div.of Avago Pharmacia acq. of Monsanto Pharmaceutical Preparation
Manufacturer #2
DaimlerChrysler div. of MTU Brocade acq. of McData BP acq. of Amoco Bayer div. of medical diagnostics business to Siemens
Mitsubishi div. of Fuso Sun Microsystems acq. of StorageTek Monsanto div. of Solutia
J&J acq. of Pharmaceutical Preparation Manufacturer #2
consumer business
Goodyear div. of Engineered Products business
Activision acq. of Vivendi games business
Domtar acq. of Weyerhaeuser paper business
Nomura acq. of Lehman Bros. Asia
Hill-Rom div. of Hillenbrand Adobe acq. of Macromedia Cargill acq. of Degussa Huls PetroChina acq. of PetroKazakhstan
Arcelor acq. of Corus JP Morgan acq. of Chase Bayer AG acq. of Schering AG Unilever acq. div. of BirdsEye
Boeing acq. of McDonnell Douglas
First Data Corp. acq. of Western Union
Bayer acq. of Roche consumer health business
Kraft acq. of Danone biscuit business
Rockwell Collins acq. Of Kaiser Aerospace
Credit Suisse acq. of First Boston
Philips Medical acq. of Agilent Technologies Nestle acq. of Dreyers
Auto Significant China component
EXAMPLES
© 2009 Deloitte Touche Tohmatsu74
The key challenge in any acquisition is the ability to successfully execute across multiple dimensions, balancing a compressed timeframe while maintaining business as usual activities.
Rapidly capture cost and revenue synergies
Streamline organization structure and critical business processes
Minimize disruption to customers
Execute an issue-free transition
Maintain focus and current business momentum
Retain key people and talent, transfer key technologies and capabilities
Synergies, post-merger, not achieved in 70% of cases
45% of executives leave by the third year
Customers see and are frustrated by change
First 4 to 8 months productivity reduced by 50%
And building a strategic platform…
New customer value proposition
New processes New organization
How do you deliverbenefits…..
Personnel reduction Sourcing/Purchasing Facilities consolidation
Whileintegrating…….
Systems Customers Management Channels Processes Employees
Without negativelyimpacting…..
Customers Channels Employees Shareholders Financial performance
Source: *Deloitte Consulting M&A survey; DC analysis
The Principal Challenge Areas Impacted Desired Outcomes* Typical Results
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu75
PMO Launch
2 to 4weeks
8 to 26weeks
1 to 4weeks
Phase 1Integration Blueprint
Strategic imperative for integration delineated
Integration structure and management processes implemented
Day 1 priorities identified and successful launch defined
Cost and headcount baseline for synergy review and budgeting completed
Level 1 organization design and Level 1 leadership defined
Establish location consolidation decision framework
Customer integration approach
End-state guiding principles
Top - down functional synergy targets
“Adopt and Go” decisions
Brand and product plans for launch
Level 2 and 3 functional leadership assigned
Day 1 policies, initiatives and processes (customer, R&D, finance)
Functional integration plans
Synergy initiatives and integration costs
Compensation, titles and benefit rationalization
Product roadmap
Brand initiatives
External and internal communication
Economic development incentive negotiations
Customer facing resource training
Customer and employee retention initiatives
Rapid customer team integration
Successful Day 1
End-state planning integrated with synergy plans and integration costs
Financial plan integrated with synergies and integration costs
Financial process controls implemented
IT integration and rationalization
Real Estate consolidation
Integrated HR model
Rationalized product portfolio
Headcount targets achieved
Sourcing benefits achieved
BLUEPRINT
CLOSE
LA UNCH
Phase 2Detailed Planning
Phase 3Implementation
Phase 4End-State
12 – 18months
Key to success – follow a structured processThe typical integration roadmap has four phases
Our perspectives on acquisition integration
Day 1
© 2009 Deloitte Touche Tohmatsu
Carve-out transactions offer a unique set of opportunities and risks Carve-outs represent a different risk profile than other types of M&A transactions
• Identification and understanding of shared functional support is required to develop standalone requirements• Transition periods during which the two entities transition to standalone operations often involve complex and
far reaching functional activity• Creation of stand-alone infrastructure of corporate functions from scratch is required to replace functions and
processes previously provided by the corporate seller • Critical knowledge of business operations and functional processes are often left with former parent
Carve-out risks• Insufficient pre-deal diligence• Underestimating complexity, cost, and timing of separation, and establishing stand alone infrastructure and
capabilities• Over- or under-reliance on transition service agreements (TSAs) or insufficient TSA drafting attention• Building standalone capabilities appropriate to the carve-out entity
Carve-outs create opportunities to significantly improve financial and operational performance for the new stand-alone company• Buyer can optimize tax and legal entity structure tailored to the operating model of the stand-alone entity• Buyer can design and configure the infrastructure, geographic footprint, and corporate functions to the specific
size and needs of the stand-alone entity, often eliminating corporate overhead taxes that the divesting entity allocates to its business units
Our perspectives on ‘carve-outs’ (like Opel from GM)
Speed is critical – both to minimize transition service costs and to take advantage of the “window for change.”
© 2009 Deloitte Touche Tohmatsu77
Deloitte has identified six leading practices for post-acquisition planning
Outcomes Integration Challenges Leading Practices
Start with the End in Mind
Blueprint for the future– Establishing a common understanding of integration
objectives among stakeholders– Energy consumed on positioning and politics
Upfront established a clear integration strategy and rationaleDeveloped detailed blueprint which defined end state vision
by function, high level org design within first few weeks Clearly defined decision making protocol
Launch “Command and Control” Integration
Program
Who is doing what with whom– Maintaining current momentum, Day 1 needs, synergy
capture and longer term migration– Co-chief Integration Officers; two in a box– Capitalizing on best practices of both companies
Centralized command and control Program Management Office (PMO ) with clearly delineated decision making process/authority
Did not use integration as a re-engineering or re-architecting effort – used ‘adopt-and-go’
Disciplined decision making and executionEmployed “clean teams” for key sensitive areasSelected strong functional leads supported by centralized PMO
Focus on an Issue-Free
Day 1
Some assembly required– Distinguishing mandatory and nice-to-haves– Preventing market disruption– Balancing a multi-year transition with Day 1
Identified list of “must-have” requirements for Day 1 from a customer, employee, back office perspective
Bifurcated integration effort to focus first on Day 1 and then longer term integration
Expand and Front-Load Synergies
Synergies Matter– Jump starting synergy capture within regulatory constraints – Identifying “who owns what and how is it measured”– Managing synergy leakage
Targeted 30% to 50% above expectationsDocumented and managed top-down/bottom-up
synergy targetsRigorously managed synergy tracking
Plan Customer Strategies
Before Day 1
Hearing the voice of the customer– Preventing customer attrition (consumer and dealer)– Meeting customer requirements Day 1– Disparate sales approaches and products
Integrated from the customer in and communicated early onCreated customer playbooks and ensured no let up in customer
experiencePerformed a comprehensive review of customer contractsCreated a unified sales and customer approach
Retain Key Talent
It’s always personal– Stabilizing the workforce segments– Retaining key personnel– Creating a fair selection process – Creating 3600 communications program to protect corporate
reputation and drive delivery on the value proposition..
Developed a clear, fair, workforce transition processOrganization charts with clearly identified reporting lines Early integration of Total Rewards programs and HR policiesSelective retention bonuses and rapid knowledge transferDetermined communication needs/barriers (pre Day 1, Day 1 and
post day 1)Developed an integrated communications strategy and key
messages for all stakeholders
1
2
3
4
5
6
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu78
Degree Of Integration &
Control
Key Principles
Vision & Strategy
Risks & Issues
Program Managemen
t
Synergy Benefits
Key Milestones
Integration Blueprint
At the heart of the merger
blueprint is an agreed end state view
1. Start with the End in Mind: Integration Blueprint: The integration blueprint defines the overall integration strategy and scope for Day 1 and End State
Why are we merging? Is there an aligned view of how we achieve the strategy? What is the design for the organization on Day 1? After 12
months? How will we communicate the strategy?
What are the sources of benefits? Where are there cost reductions? What is the target revenue growth? What is the value and blend? Who owns the benefits? How can they be tracked and
measured?
How will the programbe structured?
Who are the key managersrunning the program?
What is the decisionmaking process?
What are the key program milestones? What has to be in place for
Day 1? In 30, 60, 90 days? How can the program be accelerated?
What issues/risks must be answered now?
What decisions have to be taken now?
What do people have to do to respond?
To what degree will the two organizations be integrated?
What parts will be kept separate and for how long?
If the acquired organization is to be maintained as a separate entity or unit, how will the acquirer ensure control (mechanisms and degree).
What are the guiding principles? How much focus is on program priority
vs. business as usual? What are the principles for employee
selection? What are the key priorities? To what degree of openness and information
access is each organization comfortable?
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu79
2. Launch Command and Control Integration Program (Integration Team Structure): A focused integration team structure and approach is critical to manage the effort
– Coordinate integration of individual functions
– Drive savings identification, business design, and implementation planning
– Focus on operating issues and concerns
– Coordinate all integration activities across functions
– Drive savings identification and capture
– Resolve transaction specific issues
– Set direction – integration strategy, priorities, synergy mergers and timing
– Resolve major issues, identify and address risks
– Sign-off on major decisions and communications
Cross-Functional Teams
Finance and Tax
Functional Integration Streams
Manufacturing andOperations
HumanResources Other…Information
Technology
SalesandMarketing
Chief Integration Officer
CIMO
Steering Committee
Day 1 Readiness
Synergy Capture(including Clean Room)
Other …Transaction Support (legal, regulatory, etc.)
Organization Development and Selection
Change, Communication and Culture
Overall ResponsibilitiesIntegration Team Structure
Our perspectives on acquisition integration
Chairman, CEO, Top Management
© 2009 Deloitte Touche Tohmatsu80
Day 1
Day 1 Vision(set out in the Blueprint)
Day 1 Checklist (by Workstream)
BusinessUnitDay 1 Plans
FunctionDay 1 Plans
Mandatory
Nice to Have
Defer
The principal focus on Day 1 lies with enabling Workstreams e.g. IT, HR. All Workstreams will require Day 1 plans.Day 1 activities are prioritized according to business necessity i.e. compulsory to be in place for Day 1.
3. Focus on An Issue Free Day 1: A single face to the market, employees, customers, and regulators is required while meeting legal, regulatory, and financial control requirements.
Coordinate all integration activities and develop integration playbook
Define Day 1 must-haves from corporate level
Establish integration team structure Manage internal and external
communications Manage execution of prioritized Day 1
activities Transition to post Day 1 ‘business as
usual’ activities
Key marketing processes that will be affected by the merger are identified: Pricing, Promotion planning, Product/brand management, Marketing program management
Existing levels of autonomy between sales and marketing identified.
High level strategy for brand integration / management
Key messages to all stakeholders Retention plan agreed and messages
formed Payroll transfer in place Severance policy agreed Retention and incentive plans in place Knowledge transfer processes in
place Definition of total rewards and HR
policy integration plan Initial choreographed employee
experience activities
Clear cut-over plan in place Month-end financial and management
reporting process in place Day 1 organization roles and
responsibilities defined Delegated authorities agreed Disbursements and Receivables
integrated at macro level Regulatory and SOX and tax
requirements complete Compliance requirements complete
Link inter-company firewalls, access controls, email, and website
Telephony and data networks integrated
Administration and application support processes in place with proper controls
Define help procedures and linkages Link email and other employee
systems
Corporate
Sales and Marketing
HR Finance Technology
Supply chain priorities and key levers for Detailed Planning and Quick Win Execution timeframes
“Quick hit” plan for sourcing and procurement synergies
Pre-integration supply chain operating procedure (high level playbook)
Synergy plans and operating strategy for sourcing, operations, and distribution.
Manufacturing and Operations Rollout of customer and partner “Question
and Answer” document/webpage Customer experience model defined which
describes “Day in the life of a customer” at Day 1. Day 30, Day 90 etc.
Updated point of contact information, policies and procedures communicated to customers and distribution network
Sales summit conducted with sales force Immediate customer service level
requirements and issues identified Web sites linked and re-branded
accordingly
Customer Experience Real Estate / Facilities Obtain buy-in from real estate and facilities
stakeholders for the initial 3 week plan Gather internal data through interviews
and workshopo Develop real estate portfolio databaseo Inventory any real estate transactions
and capital projects in processo Inventory facilities and site services
vendors Develop baseline cost Define Day 1/Day 2 priorities of business
requirements Identify implementation options
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu81
4. Expand and Front-Load Synergies: Several keys tools and methodologies exist to drive cost synergy, depending on timing and urgency.
Cost Synergy Framework(Estimated Percentage of Operational Expenditure Baseline)
Pur
chas
ed G
oods
& S
ervi
ces
(~30
%)
Facilities (~20% )
Staff Functions (~10%)
HR Finance IT
Sales and Marketing
Business processes within BUs (~40%)
Manufacturing and Operations
Information Technology
Human Resources
1. Organization SimplificationReduce headcount by simplifying and streamlining the organizationTypical Savings: 10~25%
2. External Spend ReductionEmploy demand management, sourcing and tax strategies to reduce procurement costsTypical Savings: 5~15%
3. Business Process OptimizationReduce process-based costs via “adopt and go”, streamlining, automation, outsourcing and redesignTypical Savings: 5~20%
4. Infrastructure RationalizationRationalize projects, platforms, space and associated supportTypical Savings: 10~20%
Marketing (Other…)
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu82
5. Plan Customer Strategies Before Day 1: Protecting and growing the customer base is critical to delivering the business value promised
Plan Stabilize Grow
When Immediately Prior to and through Day 1 During integration period and
beyond
What
Analyze customer base and create profiles:– Products/services bought– History and relationship– Geographies– Revenue and margin realized– Issues and risks– Switching costs and competitive
plays– Deal benefits
Develop “playbook” per profile
Implement retention playbook for each profile– Frequent and consistent communication
to customers– Nerve center to coordinate, track and
refine messaging, monitor and respond to competitor initiatives
– Resources prioritized to match customer value/risk profile
– Prepared positions to respond to anticipated situations (e.g., pricing arbitrage) depending on client profile
Identify and prioritize specific cross-sell opportunities
Create incentives for cross product line cooperation
Track and publicly reward desired behaviors
Migrate to cross product line client relationship teams for most significant customers and targets
How
Business leads drive profile development
Subset of “clean teams” handle customer data, with firewalls as needed
Use existing sales/relationship teams as much as possible, but deal with competing teams immediately at close
Create mechanism for senior management support as specific flight risk issues arise
Post close, move as quickly as possible to a unified syntax and approach to customer management, encoding best practices from each organization
Our perspectives on acquisition integration
For automotive deals, these strategies should include dealers and service networks as well as consumers in different markets.
© 2009 Deloitte Touche Tohmatsu83
6. Retain Key Talent: Retention of critical talent, design of the new organizational structure and open communication are key to managing the people transition and stabilizing the workforce
Inputs End-state org vision,
including financial and operational goals
Guiding principles for integration
Synergy targets Two separate
organizations, cultures, operating models, and geographic footprints
Baseline headcounts, HR policies, and compensation/benefits programs
Regulatory constraints and notice period requirements by location
Outputs Streamlined, integrated
organization Redundant positions
released Clear responsibilities
and reporting lines Retention and effective
deployment of top talent
Organization Design Define end-state org
structures Set staffing levels by LOB/
function and geography Develop position
descriptions
Critical Talent Retention Develop short, medium,
and long-term retention strategy
Develop criteria for identifying top talent
Establish and manage talent lists
Create financial and non-financial retention programs
Selection/Deselection Determine selection
approach Identify
– Unaffected positions– Affected: work
elimination, staff reduction, job restructuring
Develop assessment approach and tools
Draft candidate slates Fill slots Notify employees of
individual status Track outcomes Develop training plans
to support transition
Separation Develop severance
packages Transition work to
remaining employees Prepare systems to
process increased separation volume
Deployment Confirm reporting and
stakeholder relations Relocate departments/
individuals as needed Confirm overall
resource deployment
HR Policies and Programs
Communication
Integrate comp/benefits programs (including titling/leveling) Standardize performance/career management
Communicate openly and promptly on selection processand progress
Speed and timing of employment release is important Headcount reduction represents a significant portion of total integration savings; tight PMO management of the people transition is
needed to meet merger targets; it is vital to understand the relevant labor laws and union contracts in each market and business unit Frequent and transparent communications around staffing process are critical for remaining employees to commit to the new
organization
Management of People Transition
Key Considerations
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu
• Launching a stand-alone Opel presents both opportunities and risks
• Deloitte is uniquely positioned to assist in this endeavor
Potential Opportunities• Ability to rapidly leverage and develop leading product
development capabilities and technology into your company
• Platform to build a major new brand in the China market and throughout Asia
• Ability to reshape and grow a major European icon into a more global brand
• Opportunity to create a more competitive player in the European automotive marketplace
Potential Risks• Maintaining focus on ongoing operations during the transition• Aligning people to the future operating vision• Developing a comprehensive understanding of Day 1 transition
items to prevent risk of business interruption• Retaining key talent, establishing appropriate controls over
acquired operations• Properly structuring and managing post-closing arrangements with
General Motors (engines, common parts, intellectual property, transition services, others)
Significant Automotive Experience• Over 2,000 industry-focused resources world-wide• Extensive functional depth and expertise, including global
network of specialists• Experience in divestitures to both Strategic and Private
Equity Investors• Supported the separation of Jaguar and Land Rover,
Automobile Manufacturer #5’s acquisition of ACH plants from Visteon, as well as many other carveouts
Leading Carve Out Practice• Over 700 previous transaction experiences• Recognized divestiture market leader• Global network of experienced resources• ‘Battle Tested’ divestiture toolset, accelerators and project
management capabilities• Integrated change management (World’s 2nd largest Human
Capital practice)
The separation of Opel into a stand-alone entity brings both significant opportunities and risks
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu
Separation will raise operational transition questions in nearly every functional area
Product Development• How will engineering resources be shared and
managed for development of common platforms? What happens to common platforms if GM sells additional brands?
• How will engineering/ design changes be managed for common parts?
• How will new IP generated on common development efforts be addressed?
Finance• Which Finance services will be provided to Opel
during the transition? • How will Opel’s payables be isolated within
payments made to a common supplier?• Will Opel have to recreate some of GM’s
Finance systems and processes (stand-alone controls, policies and compliance requirements for the new organization)
Systems and IT• How are the application licenses being
addressed?• How will any updates and maintenance to the
applications be managed?• How will the IT costs be allocated?
Materials, Planning and Logistics• Will GM transportation and logistics contracts be
assigned to Opel?• Will communication (e.g. EDI) links to suppliers
and customers have to be re-established?
Manufacturing & Quality• What restrictions on use of IP may prevent
future/geographic development?• How will supplier quality tracking and
evaluations be done for shared suppliers?
Purchasing• How will common tooling be assigned? How will
capacity allocated for shared parts?• Which supplier contracts will be assigned to
Opel? Which will need new contracts? • Who will manage the relationship with common
suppliers during transition?• What special requirements need to be
addressed for distressed suppliers?
Marketing, Sales and Service• What is the message going out to dealers,
customers and media?• What services does GM provide in planning
incentives and sales programs?• How is communication to customers and media
being coordinated?
Credit• How will ongoing retail financing for vehicles
work? • Should Opel make changes to the wholesale
financing structure?
Facilities and Property• What is the approach for shared facilities and for
segregation?• Which services would need a reverse TSA from
Opel to GM for shared facilities with Saab?
Human Resources• How will the new organization being designed
for the stand-alone company?• What new skill sets must be recreated within the
new organization (treasury, tax, legal, others?)• How will secondees be managed between GM
and Opel?
Aftermarket• How will GM SPO support Opel during the
transition? • How are common service and aftermarket parts
being managed?• How will warranty costs and recall campaigns
related to pre-separation products be managed post-Day 1?
Legal and Regulatory• What are the lobbying and regulatory services
that Opel participates in with GM? Saab? How will Opel ensure it’s needs are addressed during the transition?
• How does GM Corporate Legal Counsel support Opel? How can this capability be replaced?
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu
Deloitte has significant large-scale carve-out experience and is prepared to assist with the Opel acquisition
Sample Clients Highlights Issue Free Day 1
Automobile Manufacturer #5 and Jaguar Land Rover
• Supported in the creation of a standalone entity over an 11 month period• Enabled a successful Day 1 and launch. Provided continued support with the separation
projects to exit TSAs.
Automobile Manufacturer #5 and Automotive Components Holdings
• Supported in the creation of $1 billion per year Service Level Agreement and developed an organisational structure of “purchased services” and “temporary” leased employees
• Supported successful Day 1 and Launch and on-going strategic plant divestitures
General Motors and Delphi
• Enabled successful IPO by achieving divestiture milestones ahead of schedule• Developed and supported work plans to guide design, modification, testing, and installation of
information systems and data modified to support standalone Organisation
DaimlerChrysler and MTU • Developed an integrated separation work plan, including prioritization, cross-functional linkages and key milestones, for the sale of a $2B company to Private Equity Investors
• Mapped the manufacturing order-to-delivery supply chain process improvements into the post-separation environment
Agilent Technologies and Avago
• Accelerated the separation and functional carve out and stand up of semiconductor unit, reducing time to Day 1, and reducing the reliance on TSAs for sale to Private Equity Investors
• Led the carve out and selective outsourcing across 40+ countries and legal entities
IBM and Lenovo • Supported the $10B carve-out and integration of IBM’s PC business to Lenovo• Established a global operating model in 66 countries• Created a new finance and accounting organisation and supported change readiness
Bayer Healthcare and Siemens
• Led the successful carve-out of a €4.2 billion ($6.1 billion) transaction with ~6,000 employees • Led carve-out activities in all major functional areas including IT, Finance, Human Resources,
Regulatory, Research and Development, Manufacturing, Distribution, Procurement
Our perspectives on acquisition integration
© 2009 Deloitte Touche Tohmatsu
Transaction Summary Transition Scope and approachAutomobile Manufacturer #5 divested Jaguar Land Rover (JLR), a $16 billion business unit, in 2008 to Tata Motors, an Indian automotive company. • The divested business was a
significant and integrated business unit of Automobile Manufacturer #5, requiring a complex carve-out of business and IT operations.
• The carve-out included over 16,000 employees and 27 National Sales Companies (NSC) covering over 120 countries.
Deloitte led the Overall Separation Planning, focused on delivering a successful Day 1 and a charting the path for JLR to eliminate Automobile Manufacturer #5 dependence and become a standalone subsidiary of Tata Motors. The approach included the following:• Global program office coordinated and managed the separation planning, TSA set up and
development and Day 1 Readiness • Developed detailed functional blueprints for 13 business functions covering over 2500+
processes and 27 National Sales Companies (NSC)• Regional Teams spanned the globe focusing on all aspects of NSC separation planning and
post-close execution activities• Developed and supported work plans to guide design, modification, testing, and installation of
information systems and data modified or cloned to support standalone organization• Developed the Day 1 validation process, across functions for 8 business process scenarios
and 3 different business units across all geographies• Led end-to-end Global validation workshops with over 100 participants testing critical Day 1
validation scenarios and operated Global Day 1 Launch Centre• Executive Team fully engaged in transition efforts with direct reports on a weekly basis to the
Board
Applicability to Opel• Many of the challenges of separating
JLR from Automobile Manufacturer #5 are very similar to those which will occur with Opel
• Deep familiarity with the complex connections between the organizations, along with lessons learned from the JLR separation provide for a more orderly, efficient and lower-risk transition
Selected results
Deloitte delivered an Issue Free Global Day 1 with no disruption to Automobile Manufacturer #5 or JLR business operations. • Day 1 was completed in less than 45 business days after deal announcement. • Managed separation of 27 National Sales Companies, across multiple business entities
tracking 54 Day 1 and 80 Separation projects (including Project Charters, detailed Project Plans, and Resource and Cost Estimates).
• Led development of over 200 TSAs supporting 1000 processes. • Developed new processes to plan, budget and manage the execution of $100M in annual
Engineering Transitional Services over a 5-7 year period .
Case Study – Automobile Manufacturer #5 Divestiture of Jaguar-Land Rover Our perspectives on acquisition integration
1 Our Understanding
2 The Global Automotive Industry – Our Point of View
3 Our Perspectives on Acquisition Integration
4 Supplier Network Development
5 N. American Market
6 Next Steps
© 2009 Deloitte Touche Tohmatsu89
Assuring overall competitiveness of the network, now and in the future
• Technology and product development direction
• Cost• Financial health• Innovation
Assuring appropriate supplier base diversity and balance of power
• Concentration• Pricing
Assuring appropriate relationship with suppliers • Investment of time and effort• Joint development• Information sharing• Avoiding network conflicts
Measuring and managing supplier performance • Different expectations and metrics• Different rewards and incentives
Organizing the internal sourcing and procurement function for the best results
• Global• Focused supplier contacts• Leveraging volumes
Managing time and priorities • Spending time with the right suppliers• Spending time on the right things
Challenges in developing the supplier network
There are never enough time or resources to spend with all suppliers – by necessity OEMs must prioritize.
© 2009 Deloitte Touche Tohmatsu90
1. Clear strategy and priorities for supplier network
2. Structured approach
3. Appropriate organization structure
4. Capable people
5. Supplier categorization, different levels of engagement and investment
6. Comprehensive, tailored performance measures and supporting IT systems
7. Communication, internally and externally
8. Commitment to the program and to strategic relationships
Keys to success
Developing a world-class supplier network takes time. Commitment and building trust with key suppliers are important requirements
© 2009 Deloitte Touche Tohmatsu91
Developing and managing an automotive supplier network requires a structured approach
Foundation: Design and Build
Define Supplier Categories
Define Supplier Engagement Model
Design and Build Procurement Organization
Design Supplier Management
Processes
Design Sourcing & Procurement Technologies
Execute
Define Supplier Performance Metrics
Categorize Suppliers
Develop a Transformation
Roadmap
Change Organization, Assign
Responsibility
Develop Talent
Measure Supplier Performance
Engage Suppliers, Manage Individual
Supplier Performance
Review and Manage Supplier Portfolio
© 2009 Deloitte Touche Tohmatsu92
Define supplier categories
Strategic Importanceof Product or Service
Mar
ket
Conc
entr
atio
n /
Com
plex
ity
Group 2
Group 1
Group 3 Level 3
Level 2
Level 1
Level 1: These suppliers provide business critical components (or services). Products are non-commodity, relatively few suppliers exist. Products are important to end vehicle performance and differentiation. Technology innovation and product performance are extremely important. Very high switching costs for these suppliers. Relationships tend to be global.
Level 2: These suppliers provide components (or services) on a long-term basis. Products are non-commodity, but there are more choices of suppliers. Products are important to end vehicle performance but are not a major source of differentiation. Technology innovation and product performance are important but must be balanced with cost competitiveness. Relationships tend to be long term, but switching is possible. Relationships can be regional or global.
Level 3: These suppliers provide components (or services) on a medium-term basis. Products are commodity, with some customization or value add. Cost competitiveness is the major consideration, while technology and product performance must be on par with competing vehicles. Relationships tend to be medium term, regional or country level. Switching is possible.
Example (Heavy Equipment)
Others: These suppliers provide components (or services) on a contractual or transaction basis. Products are commodity, with little or no customization. Cost competitiveness is the major consideration, with acceptable quality and performance. Relationships tend to be regional or country level.
© 2009 Deloitte Touche Tohmatsu93
Define supplier engagement model
Business Relationship
Complete Ownership (Vertical Integration)
Partial Ownership (Keiretsu)
Joint Ventures / Partnering
Exclusive, Long Term Contracts
Transactional
Automobile Manufacturer #5 1914
Automobile Manufacturer #6
Automobile Manufacturer, Mercedes
Automobile Manufacturer #5
Chrysler 1970
Relentless focus on cost.Broadly diversified supply base.Internal technology / product development
Balanced performance measures.Focused supply base.
Shared technology / product development
Engagement Dimensions• Technology development• Joint product development• Joint marketing• Facility planning / location• Value add
• Component design• Supplier manufacturing
process• Logistics integration / JIT
• Cost management• Delivery performance• Quality
OEM’s typically use a mix of engagement models for different component categories. The trend is toward the middle of the spectrum.
© 2009 Deloitte Touche Tohmatsu94
Define performance measures for each supplier category
35%
30%
Estimated costs are equal or below market or benchmark pricing Historic “supplier bid evaluations” demonstrate competitive pricing practices Pricing remains competitive vs. the market over time Demonstrated investment in being cost competitive
20%
Continuous process improvement and development of leading edge ideas, concepts or technologies
Contributes to development of competitive advantage for Company Contributes to new products / services / innovative solutions through collaborative
development and problem solving
Demonstrated corporate responsibility that reflects Company’s core values Overall corporate citizenship (e.g., environmental, social, etc.) Adherence to environmental, health and safety regulations Exceptional industrial relations Alignment with Procurement diversity objectives (US & PR suppliers only)
5%
Non-Supply
50%
25%
15%
Supply
Quality
Service
Ongoing Cost Competitivenes
s
Process Innovation
Corporate Responsibility
Assigned WeightMetric Group Description
10% 5%
Materials / services meet or exceed expectations Materials / services are within regulatory compliance and Company specifications
and acceptable quality levels Operational activities (e.g., billing, reporting, etc.) are accurate Measured in terms of compliance with expectations (“right the first time”)
Demonstrated effort and flexibility toward exceeding expectations Delivery of products and services within agreed time window Operational activities (e.g., billing, reporting, etc.) are timely Adequate system and process redundancies and up-times Measured in terms of degree of proactive responsiveness and adherence to
agreed upon timings / processes
Example (Life Sciences)
Performance measures will differ by supplier and component category. It is important that the measures are clearly communicated to suppliers.
© 2009 Deloitte Touche Tohmatsu
Design and build procurement organization
Optimal Balance of Governance / Control and Responsiveness
Continuous Improvement In Cost Of Purchased Goods and Services
Internal Process Efficiencies and Savings
Competitive Advantage – Cost, Technology, Features, Vehicle
World-Class Procurement
2. Organization
4. Technology
Obj
ectiv
es
3. Processes
Enhanced Supplier Management Capabilities
Center-Led Procurement Strategy & Operation
Systematic Buying and Fulfillment Processes
Integrated Procurement Information System
Integrated Measurement, Tracking, & Reporting Infrastructure
Change Leadership / Knowledge Management & Training
Infr
astr
uctu
re
Institutionalize Change & Sustainability of Results
1. People
© 2009 Deloitte Touche Tohmatsu
Center-Led CentralizedDecentralized
Description Sourcing and procurement activities occur in various regional and/or functional areas
Part-time responsibilities for sourcing and procurement activities occur within each of the functions and businesses
Sourcing and supplier management are center-led for most categories and decentralized for only localized buys
All procurement and strategic sourcing activities/decisions are made within a centralized procurement organization
Benefits
Maximum use of local suppliers
Strategic purchasing/ sourcing decisions are made by businesses
Formalized interaction between divisions
Greater capability to leverage purchasing across the organization
Business area experts still own requirements but “non-core” purchasing activities are off-loaded to experts
Ability to enforce commonality and standards
Commonality/alignment across divisions
Uniform approach to suppliers Ability to focus on leverage with
suppliers Improved control (quality and
standards)
Risks
Little to no cross-divisional leverage exists for pricing/volume discounts
Supplier base is large and hard to manage (minimal formal agreements)
Duplication of efforts is likely to occur
No full-time focus on procurement/sourcing
No efficient focal point for executive and cross-process communication
Difficult to maintain a degree of commonality/ standardization
To avoid conflicts around sourcing strategy and vendor selection, goals/incentives between procurement and business areas must be aligned and active executive leadership must exist
Often requires great organizational changes
Cultural resistance to “VP of Procurement” and line organization concept
Weakened link to field operations
Slower response time Fewer “local suppliers”
Distributed Governance
The leading practice for procurement organizations is to progress toward a center-led or centralized governance model
Trending
Design and build the procurement organization (cont.)
Organizational
Dimensions
Process
Commodity / Service
Business Unit / Vehicle Model
Geography / Region
Assembly Factory
© 2009 Deloitte Touche Tohmatsu97
Design supplier management processes
Supplier Performance & Development Process - Draft Version 5.0
Supp
ly C
hain
Hub
(SC
H)
Sou
rcin
g (P
SM
)PS
Sup
plie
rA
ccre
dita
tion
Sup
pli e
r Per
f orm
anc e
& D
evel
opm
ent
SCH 3.0 - IdentifyBenchmarkmeasures
SA 2.0 - Audit andapprove suppliers
PSM 4.0 - Developcontracts
SCH 11.0 - Obtain suppliercommitment to performance and
development process
SPD 1.0 - Defineperformance
metrics
SPD 2.0 - Definemetric data
collection process
SCH 13.0 -Aggregate
performance datafor suppliers within
a SCH
SPD 9.0 -Produce supplier
scorecards
SPD 12.0 -Produce reports
SPD 13.0 -Communicate
performance tostakeholders
SPD 8.0 - Assignownership for
SCH relationships
SA 1.0 - Developsupplier profiles
SPD 10.0 -Assess supplierperformance and
relationship
SCH 4.0 - Definegoals with
suppliers anddevelop plans
SA 3.0 - Conductongoing compliance
audits
SPD 3.0 - Definerecognition or non-
performancecategories and
criteria
SPD 11.0 -Nominate supplierfor recognition ornon-performance
SPD 14.0 - InitiateSuppliers
recognition based onperformance
PSM 3.0 -Negotiate
agreements
SCH 7.0 -Categorisesuppliers
SCH 5.0 - Assesscurrent service
categories
SCH 6.0 - Defineservice vision and
goals
SCH 2.0 - Definespecifications and
requirements
PSM 5.0 - Selectsuppliers and
award contract
PSM 1.0 -Develop and issue
RFI, RFQ, andRFP
PSM 2.0 -Evaluate supplier
proposals
SPD 15.0 - InitiateSupplier corrective
action for non-performance
SCH 12.0
SCH 12.0 - Assistend user withcompletion of
supplierperformanceevaluation
SPD 4.0 - Communicateand train stakeholders on
supplier evaluationscorecard and datacollection process
SCH 14.0 - Senddata to SP&D
team
SCH1.0 - AssessSCH business
needs
SCH 9.0 - Implementand execute Supplier
recognition orcorrective action
SPD 6.0 - ValidateAggregated
Performance Data
SPD 5.0 -Aggregate Data
for Supplierproviding Services
Across SCHs
SPD 7.0 - Collectand Aggregate
Data for Suppliernot Linked to a
SCH
SCH 8.0 -Participate in
SupplierPerformanceEvaluation
SCH 10.0 -Communicate
Performance toSuppliers
Start
End
Example (Oil and Gas)
© 2009 Deloitte Touche Tohmatsu98
Design sourcing & procurement technology architecture
Suppliers
EDIEDIEDI
XMLXMLXML
FAXFAXFAX
EMAILEMAILEMAIL
HTMLHTMLHTML
Suppliers
EDIEDIEDI
XMLXMLXML
FAXFAXFAX
EMAILEMAILEMAIL
HTMLHTMLHTML
EDIEDIEDIEDIEDIEDI
XMLXMLXMLXMLXMLXML
FAXFAXFAXFAXFAXFAX
EMAILEMAILEMAILEMAILEMAILEMAIL
HTMLHTMLHTMLHTMLHTMLHTML
Supplier Network
TxnRouting
TxnRouting
cXMLcXMLEDIEDI
HTMLHTMLFAXFAX
EmailEmail
Supplier / BuyerReg / Acct AdminSupplier / Buyer
Reg / Acct Admin
ContentManagement
ContentManagement
SupplierDiscovery & Sync
SupplierDiscovery & Sync
InvoicingPO/Non-POInvoicing
PO/Non-PO
SupplierDoc & Training
SupplierDoc & Training
BUYER
SUPPLIER
- XML- HTTPS
- Master data
- Business documents
-Accounting- Business documents
CORPORATESYSTEMS
ERP / MRP
GL
AP/AR
Inventory
AssetMgmt
Mfg
Projects
HR
Security
CORPORATESYSTEMS
ERP / MRP
GL
AP/AR
Inventory
AssetMgmt
Mfg
Projects
HR
Security
ARIBASPEND
MANAGEMENT
Analysis
CategoryManagement
Procurement
EnterpriseSourcing
SPENDMANAGEMENT
AnalysisAnalysisAnalysis
CategoryManagement
CategoryManagement
CategoryManagement
ProcurementProcurementProcurement
EnterpriseSourcing
EnterpriseSourcing
EnterpriseSourcing
-Content- POs- Invoices- Timesheets- Sourcing- Status- OCs, ASNs- Public RFx-Collaboration
CorporateNetwork Internet
Public RFxPublic RFx
CollaborationCollaboration
SOURCING & PROCUREMENT IT ARCHITECTURE COMPONENTS • Spend data and spend management• Category management• Supplier performance reporting• Transaction support• Communications• Document management• Integration with corporate systems• Analytics• Etc.
Example
Technology design should follow organization and process design.
© 2009 Deloitte Touche Tohmatsu
Develop a transformation roadmap
A procurement transformation roadmap defines the spend management, process, organization and technology initiatives to capture and sustain value from procurement.
---Illustrative---
© 2009 Deloitte Touche Tohmatsu100
Categorize suppliers
Rank suppliers in order of total score
Top 5 suppliers identified as Level 1 suppliers. All remaining suppliers categorised as Level 2
Review / Refresh periodically (e.g. every 6 months) or when a trigger factor instigates a change (e.g. when spend with a supplier significantly increases
Calculate the overall supplier score based on the weighted score and the criticality to Client X's business
Complete supplier weighting survey for each Level 1 or Level 2 supplier
Review categorised suppliers to identify any missing from list (e.g. future strategic supplier)
Capture spend data from AP system: (Current suppliers October 07 to March 08 = 539)
Assess whether the supplier is a network critical
supplier
Assess if spend >£1m p.a.
Is the supplier a sole supplier for a category?
Supplier categorised as Level 1 or Level 2
Supplier categorised as Level 3
NO NO NO
YES YES YES
5
6
7 8 9 10 11
2 3 4
12
Company XYZSupplier
Management Manual
2009
Example
© 2009 Deloitte Touche Tohmatsu101
Measure supplier performance
SPD 1.0 - Define performance
metrics
SPD 2.0 - Define metric data
collection process
SPD 5.0 – Aggregate data for Supplier providing services across
Categories
SPD 12.0 – Produce Reports
SPD 13.0 – Communicate
supplier performance to
Category Manager
SPD 5.0 – Communicate and
Train stakeholders on
supplier evaluation and data collection
process
SPD 9.0 – Produce supplier
scorecards
SPD 3.0 - Define recognition or
non-performance categories &
criteria
SPD 6.0 – Validate aggregated
performance data
DefinePerformance
Measurements
Collect and Aggregate
Data
ReportSupplier
Performance
Perf
orm
ance
Mea
sure
men
t
SPD 8.0 – Assign ownership for
supplier relationship
SPD 10.0 – Access supplier performance and
relationship
SPD 7.0 – Collect and Aggregate
data for suppliers not linked to a
Category Manager
Example
Supplier Management Scorecard
Fiscal Year 02/03 Quarterly Update April 1, 2003 Supplier Background Objective Results Products Currently Supplied: Bag-in-box bags with valves
Manufacturing Locations: Northlake, IL*; Merced, CA; Rancho Dominguez, CA; Chilhowie, VA; England, Netherlands; Australia; Canada - Scholle Corporation Brazil to open 5/2002 – See attached
JD Annual Spend FY99/00:
Global SCJ Spend FY99/00:
Supplier status as SC Johnson Customer: Purchase limited amounts of plant cleaning and air freshener products for operations
Number of exclusivity arrangements Purchase orders only
Growth Opportunities: Additional N. American business;
Comments:
Cost Objective Results Cost Reduction FY99/00: Negotiated cost savings only
Cost Reduction FY00/01 YTD: Working towards nylon-free wax bag
Cost Reduction Ideas Generated: IPN “Clean-Clic” valve and fitment technology (available 6/01)
Nylon-free wax bag Low-cost fitment for waxes
Ideas Implemented:
Savings due to supply chain integration
Technology Objective Results Technical Seminars Conducted: 1/01 – Northlake plant tour for Waxdale
associates; JWP personnel not allowed to see bag forming equipment
Sales of new products with supplier technology
Number of ideas generated High-barrier bag structure for cleaners. Number of patents due to supplier technology Quality Objective Results Variance from Established Metrics 1% tolerance
Service Objective Results Roll in JDE Scorecard (on-time delivery, cycle time)
Comments on sales representation, environmental reporting, invoice discrepancies
Customer service issues in 99/00; lack of technical support; “Can’t Do” attitude towards new technology and cost-savings ideas.
N. American contract fillers for BIBs, 2/01.
New Business Development Objective Results Access to new customers/new markets Selling Through Introductions to Clients Sales of new products as a result of supplier’s ”green technology”
Supplier Scorecard
© 2009 Deloitte Touche Tohmatsu102
Engage suppliers and manage performance
SPD 11.0 Nominate suppliers for
recognition or non-performance
SPD 14.0 - Initiate Supplier Recognition
based on performance
SPD 15.0 - Initiate Supplier corrective
action for non-performance
Initiate Development Intervention
s
Initi
ate
Dev
elop
men
t
Example
Improvement Areas / Initiatives
Cost• Supplier mfg
process improvement
• Joint material sourcing
• DFM
Quality• Defect root
cause analysis• 6 sigma / other
programs• Product/process
redesign
Delivery Performance
• Exception reporting and root cause analysis
• JIT program
Technology• Maturing
assessment & benchmarking
• Joint development
Innovation• Evaluation• Process reviews• Network
development
Joint Value
• Joint evaluation• Early vehicle life
cycle engagement
The level of OEM investment in supplier improvement will differ by supplier category – more effort and resources for strategic or Level 1 suppliers, less for commodity suppliers.
© 2009 Deloitte Touche Tohmatsu103
Review and Manage Supplier Portfolio
KeyIndirect supplier with no contractDirect supplier with no contractDirect supplier with valid contract
Passenger / Light Vehicle
Chassis
Brake Assembly
Brake Controls
Control Arms
Damper
Fuel Tank
Steering Gear
Steering Wheel
Climate
Ducting
Heat Exchanger
HVAC Compressor
HVAC Condenser
HVAC Controls
HVAC System
Electronics
Adaptive Cruise Control
Airbag ECU
Brake Lighting
CHMSL
Forward Lighting
Front Entertainment System
Junction Box
Keyless Entry Control Unit
Keyless Entry Transmitter
Navigation System
Occupant Classification Sensor
Rear Entertainment System
Tire Pressure Monitoring System
Wire Harness
Exterior
Bumper Fascia
Convertible Top Assembly
Door Hardware Module
Exterior Mirror
Sunroof
Vehicle Structure
Window Regulator
Interior
Airbag Cushion
Airbag Inflator
Airbag Module
Door Trim Panel
Floor Console
Floor System
Headliner
Instrument Cluster
Instrument Panel
Package Tray
Seat Adjuster
Seat Assembly
Seat Backrest Frame
Seat Belt
Seat Cover
Seat Cushion Frame
Seat Recliner
Trunk Liner
Powertrain
Camshaft
Catalytic Converter
Crankshaft
Cylinder Block
Cylinder Head
Drive Axle
Drive Shaft
Engine ECU
Exhaust Manifold
Fuel Injector
Hybrid System
Intake Manifold
Throttle Body
Torque Transfer
Transmission ECU
Turbo/Supercharger
Variable Valve Timing
Perform an annual review of the overall supplier portfolio:• Update portfolio map and matrix of supplier / product family
• Review product family coverage
• Review supplier category / level assignments
• Identify concentration gaps vs. targets (too few or many suppliers in a category)
• Identify risk areas based on individual supplier performance and health
Supplier Portfolio Map
Impo
rtan
ce t
o Bu
sine
ss
AB C
DE
F GH
I
J
K
L
MO P
Q
R
S
TU
V
W
Y
Z
A1
B1
C1
D1 G1
H1
I1
J1
L1
N1
O1
P1
T1
M
X
E1
F1
K1
M1
Q1R1
S1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0 1 2 3 4 5 6 7 8 9 10
Market Complexity
Identify supplier portfolio initiatives:• Product families to add or reduce suppliers
• Suppliers that are candidates for level upgrade or downgrade
• Suppliers that are candidates for removal
• New suppliers to approach• Verify responsibilities for actions (by supplier)
1 Our Understanding
2 The Global Automotive Industry – Our Point of View
3 Our Perspectives on Acquisition Integration
4 Supplier Network Development
5 N. American and Europe Supplier Markets
6 Next Steps
© 2009 Deloitte Touche Tohmatsu105
• The global automotive market faces a period of unprecedented change.‒ Restructuring and failures‒ Shifting demand‒ Technology and regulatory disruptions
• There are many options and much uncertainty around the future direction of powertrain and other key auto component technologies.‒ No one knows which scenarios and technologies will come to dominate.
• The market offers extraordinary risks, but also extraordinary investment opportunities.‒ Historically cheap assets, many suppliers for sale.‒ Available talent.
• This situation calls for a structured, careful approach to developing the strategy for your parts business.‒ Answering the strategic questions and determining investment priorities.‒ Part of this strategy will involve investing to create ‘capability options’ for the future.
Key takeaways
While we believe you should undertake the analyses to develop a robust strategy, there are steps you can take now to position the company to take advantage of the current opportunities.
© 2009 Deloitte Touche Tohmatsu106
• Confirm your strategic intent (1st strategic question)
• Review analyses that have been completed, determine what remains to be done
• Complete analyses – answer the remaining strategic questions
• Complete strategy articulation and business case
• Secure board / executive management approval on strategy and business case
• Complete implementation roadmap
• Launch development and M&A activities
Next StepsExternal Analysis
Internal Analysis
Synthesis Action
OEM / Customer Market
Supplier Market
Product Segments
Technologies
Regulatory / Externalities
Chin
a
Glob
al
Capabilities
Relationships / Network
Project Management
People and Change Management
Strategic Intent
Opportunities
Challenges / Risks
Financials / Business Case
M&A Plan
Internal Development Plan
Risk Management Plan
Implementation RoadmapStrategy Document
Organization Change Plan
Performance
Scenario Analysis
1. What is your company’s strategic intent?
2. Where to compete?
3. How to compete?
4. When and how to invest?
5. How to align existing relationships?
© 2009 Deloitte Touche Tohmatsu107
Given the uncertainties in the market, the risks, and the magnitude of potential investments, a rigorous analysis (as above) is prudent.
However, you not need to wait for the completion of the analysis before taking action. Immediate steps can include:• Discussions with current JV partners on technology direction and planned
investments.
• Discussions with other suppliers who are potential acquisitions or asset sellers (test the market).
• Discussions with non-traditional players (PE, venture capital) to ascertain interest and direction.
Next Steps (cont.)
© 2009 Deloitte Touche Tohmatsu
Appendix – Deloitte Automotive Experience
© 2009 Deloitte Touche Tohmatsu
• We know the automotive industry and serve the entire automotive value chain, including OEMs, suppliers, distributors and retailers
• Deloitte serves 32 of the 35 top automotive companies in the Global Fortune 500 and offers a broad range of audit, tax, consulting and financial advisory services
• Client service teams, drawn from a pool of over 2,500 dedicated automotive professionals in all corners of the world, combine insight and innovation from multiple disciplines with business knowledge and industry specialization
• Our client service approach integrates our broad service capabilities, including audit, tax, financial advisory, risk management, and management consulting
• Deloitte serves 88% of the manufacturing companies on the Fortune Global 500®
Deloitte has extensive global automotive experience
For more information visit our web site: www.deloitte.com/manufacturing
© 2009 Deloitte Touche Tohmatsu111
Our experience encompasses OEM’s, suppliers, finance companies, dealerships, and other segments
OEMs
• BMW• Brilliance• Chrysler• Daimler• FAW• Fiat
• Automobile Manufacturer #5• General Motors• Geely• Honda• Automobile Manufacturer #3• Jaguar/Land Rover
• Kia• Mitsubishi• Automobile Manufacturer• PSA Peugeot/Citröen• Porsche
• Renault• SAIC• Tata• Automobile Manufacturer #6• Automobile Manufacturer #1
Off Highway/Trucks/Recreation OEMs
• Bombardier• Case New Holland• Construction Machinery
Manufacturer #1• Club Car (Ingersoll-Rand)
• Daimler Trucks• Deere• Fuso• Harley Davidson
• J. B. Poindexter• Komatsu• Navistar
• Scania• Acquired Company...• Yamaha
Captive Finance Companies
• BMW Financial Services• Chrysler Financial Services• Daimler Financial Services
• Automobile Manufacturer #5 Motor Credit
• GMAC• John Deere Credit
• Automobile Manufacturer Acceptance
• Renault Credit International
• Automobile Manufacturer #6 Motor Credit
• Acquired Company... Commercial Finance
Suppliers
• Aisin• American Axle• ArvinMeritor• BorgWarner• Bosch• Bridgestone/Firestone
• Continental/Schaeffler• Dana• Delphi• Denso• Eaton• Federal-Mogul
• GKN• Keihin• Lear• Linamar• Automobile Parts Manufacturer
#1• Mahle
• Michelin• ThyssenKrupp• Timken• TRW• Valeo• ZF
Dealerships, Distribution and Support
• Allied Holdings• AutoNation
• Construction Machinery Manufacturer #1 Logistics
• CN Rail
• OnStar• MBCL (China)
• Vector
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Our global automotive network of 2,500 professionals covers all major markets, including:
We have a large, global network of professionals serving the industry
Europe, Middle East and Africa Region
• Belgium• Czech Republic• Finland• France• Germany• Hungary• Ireland• Italy• Netherlands• Norway• Poland• Romania• Russia• Slovak Republic• Spain• South Africa• Sweden• Turkey• United Kingdom
Asia Pacific Region
• Australia• Cambodia• China• India• Indonesia• Korea• Japan• Malaysia• New Zealand• Singapore• Philippines• Taiwan• Thailand• Vietnam
Americas Region
• Argentina• Brazil• Canada• Chile• Colombia• Mexico • United States• Venezuela
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Asia Pacific regional automotive profile
• Large footprint in the Asia Pacific region to match that of our automotive clients
• Regional manufacturing industry practice comprising of more than 3,300 people across 13 markets
• More than 1,500 partners and professionals focused on serving automotive OEMs and suppliers
• Dedicated Asia Pacific retail motor industry services team providing services to auto dealerships and OEM sales companies
• Experience assisting state and national governments with automotive industry assessments
• Multidisciplinary skills to deliver audit, consulting, financial advisory and tax services to the automotive industry
Asia Pacific Region• Australia• China• India• Indonesia• Korea• Japan• Malaysia• New Zealand• Singapore• Philippines• Taiwan• Thailand• Vietnam
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We have perspective and analyses which your team can leverage
• Evaluate potential roll-up strategies and consolidation alternatives‒ Supplier assessments‒ Stakeholder analysis – customers, banks, potential investors ‒ Roll-up scenario modeling/planning‒ Industry intelligence – suppliers and OEMs‒ Risk assessment
• Potential partner strategies‒ Partner strategy alternatives development‒ Alternative investor financial modeling and scenario development
• Acquisition and/or divestiture planning and execution‒ Buy-side planning and due diligence‒ Integration planning and execution‒ Sell-side planning and due diligence‒ Carve-out divestiture planning and execution
Deloitte helps automotive clients define and execute their growth and M&A strategies
© 2009 Deloitte Touche Tohmatsu115
Deloitte has global experience in automotive M&A
Approach Execution
• Supported US Private Equity firms’ evaluation of various potential targets, including Global Auto OEM’s, Tier 1,2 & 3 Suppliers, Aftermarket Distributors and Remanufacturers, Commercial Vehicles
• Led post-close separation activities (operational support and transition to buyers) for the finance function of a $10+B supplier divesting multiple manufacturing facilities
• Led development of TSAs covering $200M+ per annum in transition services for divestiture of a global OEM
• Led end-to-end validation workshops with over 100 cross-functional participants for multiple Day 1 operational scenarios for global network of OEM National Sales Centers involved in transition
• Supported transition associated with divisional divestiture and stand-up of a $1.5B automotive supplier
• Assisted private equity buyer in development of future state processes, SAP reconfiguration/ roll-out and coordinated training efforts for financial processes of auto supplier acquisition
• Supported IT Testing, program management, process documentation and multi-country transition in South America for business unit divestiture of Tier 1 automotive supplier
• Established and supported ongoing transition governance process for divestiture planning of global Tier 1 automotive supplier
• Strategic assessment of hold, sell, or restructure alternatives for various assets of a Global Auto supplier
• Assisted Chinese automotive OEM with strategy development for North American market entry including potential M&A alternatives
• Led global OEM client team through validation and finalization Purchase and Transition Service Agreements for $12B acquisition
• Supported the validation of Day 1 requirements and established a Day 1 issues resolution and support center for acquisition of NA-based Tier 1 supplier
• Established Project Management and supported functional planning efforts for the integration of an acquired $2B business unit into an global automotive OEM
• Supported $8B Tier 1 manufacturer in post-close stabilization and ongoing management of a $1B/yr transition services arrangement
• Supported Tier 1 supplier post-transaction in developing multiple cross-functional resolutions required to mitigate operational issues not fully contemplated in the transactional documentation
• Assisted large US supplier in separation efforts required to exit post-close transition service arrangements
• Assisted global OEM in defining post-transaction Target Operating Model for network of 25 National Sales Companies
• Led sell-side divestiture due diligence for large automotive supplier, including development of primary functional cost baseline, identification of country specific divestiture considerations and quantification of incremental transition services and one-time investments
• Conducted Financial and Tax diligence on a Global Tier One Supplier and a US OEM for an Asian automotive company
• Conducted financial and operational due diligence on a European OEM for a China automotive OEM
• Led global automotive OEM through development of Day 1 functional blueprint and requirements for the divestiture of $16B subsidiary
• Analyzed Definitive Agreement details for all functions and geographies of a global automotive transaction and advised on the long-term implications to changes in the deal terms
• Led functional separation and Transition Services definition for carve-out of off-highway diesel engine business from major diesel engine manufacturer to a Private Equity firm
• Supported Tier 1 Supplier in development of draft Transition Service Statements of Work (SOWs) by function in support of manufacturing facilities sold to another Tier 1
• Assembled global automotive team in 26 countries for US based OEM acquisition of a Korean OEM, and led cross functional due-diligence, Day One readiness and Integration activities worldwide.
OverviewDeloitte’s Automotive Industry professionals serve the entire automotive value chain, including OEMs, suppliers, distributors and retailers.Client service teams, drawn from a pool of more than 2500 dedicated and specialized automotive professionals globally, help automotive clients create powerful business solutions. This integrated service approach combines insight and innovation from multiple disciplines with business knowledge and industry specialization to help automotive industry clients excel.
Pre-announcement CloseAnnouncement
M&A Strategy Target Screening Due
DiligenceTransaction Execution DivestitureIntegration
Deloitte Automotive M&A Lifecycle Experience - Examples
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Deloitte provides insights on industry and market developments to help clients shape their responses to business issues. Some of our automotive perspectives include:
Industry thought leadership
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• Transforming the Automotive Industry: The Road To Recovery • Transforming the Automotive Industry – SG&A Savings Can Put
Cash Back in Your Business• Fast tracking Indian automotive logistics• Convergence in the automotive sector• Innovation in emerging markets. 2008 Annual study. • Ladies and gentlemen. Start your service engines.• Managing strategic risks in China’s unpredictable automotive
market.• Managing the talent crisis in global manufacturing. • Why finance transformation matters in global manufacturing. • Exports – Opportunities and challenges for the Chinese automotive
industry. • Future drivers of the China automotive industry.• The Automotive Summit - Discussion with Sales & Marketing VPs
at GM, Automobile Manufacturer #5, Automobile Manufacturer #6 and Chrysler, Audio MP3 recording
• Prospering from the automotive service revolution.• Creating the “Wholly Sustainable Enterprise” A Practical Guide to
Driving Shareholder Value Through - - Enterprise Sustainability• Automotive Update. Quarterly News and Analysis of the European
Automotive Market• Great Minds Think Alike. Practical ideas about how auto makers
and dealers can sell more cars and make more money.• Integrated Lead Management. Managing across channels to sell
more vehicles
• Driving Value: 2006 Asian Automotive Tax Survey.• Collaborative Commerce In the Automotive Industry• IT Trends in Automotive (survey with OESA) Demand-Driven
Automotive Sales and Distribution - Asian Automotive Performance in the U.S. Market
• Besonderheiten der Rechnungslegung in der Automobilzulieferindustrie (specific features of the accounting in the automotive supplier industry - Germany)
• Innovation in Emerging Markets. 2007 Annual Study• Automotive manufacturers seek revenue growth in emerging markets. • Innovation in Emerging Markets. Strategies for Achieving Commercial
Success• Laboratories of Innovation. Leveraging Emerging Markets for
Commercial Success• The Service Revolution in Global Manufacturing Industries• Unlocking the Value of Globalisation: Profiting from Continuous
Optimisation• Mastering Innovation: Exploiting Ideas for Profitable Growth• Growing the Global Corporation: Global Investment Trends of U.S.
Manufacturers• Mastering Complexity in Global Manufacturing: Driving Profits and
Growth through Value Chain Synchronization• Reducing Earnings Volatility: A Short Course in Energy Cost
Management• RFID: Critical Considerations for Manufacturers
A selection of Deloitte thought leadership publications relevant to the automotive sector include:
Industry thought leadership (cont.)
Visit our web site to obtain or request copies of these reports: www.deloitte.com/manufacturing
Appendix – Resumes
© 2009 Deloitte Touche Tohmatsu
Your Deloitte Team – Head of Global Automotive
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Dr. Martin HölzPartnerHead of Global Automotive Deloitte Consulting GmbH
Löffelstraße 4270597 StuttgartGermany
Dr. Martin HölzHead of Global AutomotivePartner
Tel: +49 711 16554 [email protected]
Professional Experience Dr. Martin Hoelz joined Deloitte Consulting as Partner in March 2007. He has spent his career in the automotive industry since 1994, including several leading positions in big automotive companies. His professional experience ranges from medium-sized companies to multinational corporations like DaimlerChrysler AG, Audi AG as well as Automobile Manufacturer #1 AG.Martin leads the global automotive practice in which all activities regarding OEMs, suppliers, financial services and wholesalers/ retailers are combined.Selected automotive project experiences include business transformation and organizational development, developing and implementing template-based global process and IT-strategies for manufacturing plants world-wide, Corporate Audit regarding reviews and Management consulting services in sales and marketing strategies within Asia-Pacific, IT-Governance and IT-Architecture, Process Integration Officer (PIO) etc. Martin was awarded his PhD title in business economics (Doktor der Wirtschaftswissenschaften, Dr. rer.pol.) and he has completed an IT master degree (Diplom-Informatiker).
Representative clients served:
• Audi• Daimler• Mercedes-Benz• Automobile Manufacturer #1• Automobile Manufacturer #5• Acquired Company...
• Bosch• Automobile Parts Manufacturer #1• Acquired Company...• SAS Automotive Systems• ZF Friedrichshafen
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Your Deloitte Team – Automotive Consulting Leader
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Randy MillerPrincipleDeloitte Consulting Deloitte Consulting LLP
600 Renaissance Center,Detroit, MI 48243USA
Randy MillerDeloitte ConsultingPrinciple
Tel: (313) [email protected] www.deloitte.com
Professional Experience Randy is a principal with thirty years of automotive industry experience. He has extensive international automotive consulting experience, including six years resident in Germany leading our European automotive practice. He previously served as our automotive industry consulting practice leader globally. Prior to joining Deloitte, he held various positions in car product development at Automobile Manufacturer #5 Motor Company. His clients have included automotive OEMs and suppliers around the world, including North America, Europe, Asia and Africa.Randy has focused on many aspects of strategy and operations, including business and process strategies, acquisitions and divestitures, shared services, and cost management. He has led several automotive industry studies and has spoken often about critical industry issues.
Representative clients served:
• Chrysler• Daimler• Detroit Diesel• Automobile Manufacturer #5• Automobile Manufacturer #3• Linamar
• ThyssenKrupp• TRW• Valeo• Visteon• Automobile Manufacturer #1
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Your Deloitte Team – Asia / Pacific Manufacturing Leader
121
Kevin GromleyPrincipleDeloitte ConsultingAsia / Pacific Manufacturing
Kevin GromleyDeloitte ConsultingPrinciple
Deloitte Consulting LLP600 Renaissance Center,Detroit, MI 48243USA
Detroit, USA &Shanghai, China
Tel: (313) [email protected] www.deloitte.com
Professional Experience Kevin is our cross-functional regional lead for Manufacturing in Asia / Pacific, splitting his time between Shanghai and his home in Detroit. He has extensive manufacturing experience, including:
• Merger integration• Reengineering and lean manufacturing• Manufacturing supply chain redesign and optimization• Growth and China market entry strategies• Finance transformation, business and financial planning
Kevin also practiced Japan for 3 years, during which he acted as the Asia manufacturing lead for Deloitte Consulting.
Representative clients served:
• GM• Chrysler• Automobile Manufacturer #6• Mitsubishi Motors and Fuso• FAW-Automobile Manufacturer #1• Geely• Delphi• Zexel - Valeo
• Armco Steel• Dow Chemical• Owens-Corning• Wheeling-Pittsburgh Steel• Rhodia• Ingersoll-Rand• Applied Materials• Network Equipment Manufacturer #1
© 2009 Deloitte Touche Tohmatsu
Your Deloitte Team – Automotive M&A Transaction Services
122
Andrew WilsonPartnerM&A Transaction Services Deloitte & Touche LLP
111 South Wacker DriveChicago, IL 60606 USA
Andrew WilsonM&A Transaction Services Accounting Partner
Tel: (312) [email protected]
Professional Experience Andy specializes in providing accounting and finance services relating to mergers and acquisitions transactions. He has worked with many of our most significant strategic and private equity clients, leading due diligence services for domestic and international transactions. In connection with this work, Andy has also developed significant expertise in helping companies maximize the value of dispositions through effective sell-side due diligence. While serving as our national M&A Automotive M&A leader, Andy’s experience covers a broad range of industries, including industrial products and chemical, as well as general manufacturing, distribution and services. Andy has significant global experience working with clients in Brazil, Mexico, U.K., Germany, France, Italy, Poland, Spain, India and China, with transactions covering most global manufacturing centers. He has significant experience in managing complex, carve-out transactions and an in-depth knowledge of our global resources.
Representative clients served:
• Affinia• ArvinMeritor• Blackstone• Centerbridge Partners• General Motors• Goodyear• Federal-Signal
• Keystone Automotive• Linamar• Mark IV• Navistar• Penske• TRW• Visteon
© 2009 Deloitte Touche Tohmatsu