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  • PEOPLEPEOPLE

    OPERATIONAL EXCELLENCE

    OPERATIONAL EXCELLENCE

    SUSTAINABLE GROWTH

    SUSTAINABLE GROWTH

    INTERIM REPORT中 期 報 告

    20172017

    IN T

    E R

    IM R

    E P

    O R

    T 2017 中

    期 報 告

  • Corporate Profile 2 Corporate Information 3 Business Overview 4 Financial Highlights 11 Management Discussion and Analysis 13 Corporate Governance/Other Information 21 Report on Review of Interim Financial Information 28 Interim Condensed Consolidated Balance Sheet 30 Interim Condensed Consolidated Income Statement 32 Interim Condensed Consolidated Statement of Comprehensive Income 33 Interim Condensed Consolidated Statement of Changes in Equity 34 Interim Condensed Consolidated Statement of Cash Flows 35 Notes to the Condensed Consolidated Interim Financial Information 36

    Contents

  • NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 201702

    Corporate Profile

    Nexteer Automotive Group Limited (the Company) together with its subsidiaries are collectively referred to as we, us, our, Nexteer, Nexteer Automotive or the Group. Nexteer Automotive is a global leader in advanced steering and driveline systems, advanced driver assist systems (ADAS) and autonomous vehicle technologies. In-house development and full integration of hardware, software and electronics give Nexteer a competitive advantage as a full service supplier.

    Our vision is to remain a leader in intuitive motion control – leveraging our strengths in advanced steering and driveline systems. We maintain product focus on electric power steering (EPS), a socially responsible technology that offers automakers increased fuel economy and reduced emissions. Nexteer Automotive has put more than 40 million units on the road since 1999, saving more than 4 billion gallons of fuel.

    Our ability to integrate our systems seamlessly into automotive original equipment manufacturer’s (OEM) vehicles is a testament to our 110-year heritage of vehicle integration expertise and product craftsmanship. Our corporate culture inspires employees to achieve personal and corporate growth by focusing on the Company’s core values across all aspects of the enterprise: people, operational excellence and sustainable growth.

    We seek to be the partner of choice for our customers and suppliers by delivering dependable safety-critical products and building enduring relationships.

    Nexteer provides real-world, vehicle-level solutions:

    • Customer Focused: Respected and trusted for delivering on commitments

    • Proactive: We listen carefully to understand customer requirements

    • Innovative: A market leader in steering and driveline innovation

    • Agile: Able to respond quickly with high-quality, cost-effective solutions

    • Global: Committed to exceeding customer and vehicle needs every time, everywhere

    GLOBAL FOOTPRINT

    World Headquarters: Auburn Hills, Michigan, United States of America (USA or US)

    Manufacturing Plants: 24, including 1 non-consolidated joint venture

    Technical Centres: 3

    Customer Service Centres: 12

    Full-Time Equivalent Global Workforce: 13,600+

    Global Customers: 50+, including BMW Group (BMW), Fiat Chrysler Automobiles N.V. (FCA), Ford Motor Company (Ford), General Motors Company and Subsidiaries (GM), PSA Groupe (PSA), SAIC General Motors Co., Ltd. (SGM or Shanghai GM), SAIC-GM-Wuling Automobile Co. Ltd. (SGMW), Toyota Motor Corporation (Toyota) and Volkswagen Group (Volkswagen) as well as domestic automakers in India, China and South America

    Products: EPS, Hydraulic Power Steering (HPS), Steering Columns and Intermediate Shafts (CIS), Driveline Systems (DL), ADAS and Automated Driving (AD)

  • NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 2017 03

    Corporate Information

    BOARD OF DIRECTORS Executive Directors ZHAO, Guibin (趙桂斌) (Chairman and Chief Executive Officer) RICHARDSON, Michael Paul FAN, Yi (樊毅)

    Non-Executive Directors WANG, Xiaobo (王曉波) YANG, Shengqun (楊勝群) (appointed with effect from March 14, 2017) Lu, Daen (錄大恩) (resigned with effect from and upon the conclusion of the board meeting held on March 14, 2017)

    Independent Non-Executive Directors TSANG, Hing Lun (曾慶麟) (passed away on June 4, 2017) LIU, Jianjun (劉健君) WEI, Kevin Cheng (蔚成) YICK, Wing Fat Simon (易永發) (appointed with effect from August 15, 2017)

    JOINT COMPANY SECRETARIES FAN, Yi (樊毅) MOK, Ming Wai (莫明慧) (FCIS, FCS)

    AUTHORISED REPRESENTATIVES FAN, Yi (樊毅) MOK, Ming Wai (莫明慧) (FCIS, FCS)

    LEGAL ADVISERS As to Hong Kong Law DLA Piper Hong Kong

    As to Cayman Islands Law Maples and Calder

    AUDITOR PricewaterhouseCoopers

    AUDIT AND COMPLIANCE COMMITTEE WEI, Kevin Cheng (蔚成) (Chairman) TSANG, Hing Lun (曾慶麟) (passed away on June 4, 2017) YANG, Shengqun (楊勝群) (appointed with effect from March 14, 2017) Lu, Daen (錄大恩) (resigned with effect from and upon the conclusion of the board meeting held on March 14, 2017) YICK, Wing Fat Simon (易永發) (appointed with effect from August 15, 2017)

    REMUNERATION AND NOMINATION COMMITTEE TSANG, Hing Lun (曾慶麟) (Chairman) (passed away on June 4, 2017) LIU, Jianjun (劉健君) WANG, Xiaobo (王曉波) YICK, Wing Fat Simon (易永發) (Chairman) (appointed with effect from August 15, 2017)

    HEADQUARTERS 1272 Doris Road Auburn Hills, Michigan 48326, USA

    REGISTERED OFFICE P.O. Box 309, Ugland House Grand Cayman, KY1-1104, Cayman Islands

    PRINCIPAL PLACE OF BUSINESS IN HONG KONG 36/F, Tower Two Times Square 1 Matheson Street Causeway Bay Hong Kong

    PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Maples Fund Services (Cayman) Limited P.O. Box 1093, Boundary Hall Cricket Square Grand Cayman, KY1-1102 Cayman Islands

    HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Computershare Hong Kong Investor Services Limited Shops 1712–1716 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

    PRINCIPAL BANKERS Wells Fargo Capital Finance Bank of China Shanghai Pudong Development Bank China CITIC Bank The Export-Import Bank of China PKO Bank Polski Bank Pekao SA China Construction Bank

    STOCK CODES Share Listing Ordinary Shares The Stock Exchange of Hong Kong Limited (Stock code: 1316)

    Senior Notes Listing US$250,000,000 5.875% Senior Notes due 2021 The Stock Exchange of Hong Kong Limited (Stock code: 5826)

    COMPANY WEBSITE http://www.nexteer.com/

  • NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 201704

    Business Overview

    STRATEGY FOR PROFITABLE GROWTH

    • Strengthen technology leadership

    • Expand and diversify revenue base

    • Capitalise on EPS as enabler for ADAS

    • Target China and emerging market growth

    • Optimise cost structure

    • Pursue select acquisitions and alliances

    FIRST HALF OF 2017 BUSINESS HIGHLIGHTS The following are business highlights for the first half of 2017 which demonstrate Nexteer’s focus on delivering profitable growth:

    • Successfully launched 15 new EPS and DL programmes across multiple regions and customers

    • Strong backlog of US$24.0 billion reflected by all business awarded but not yet delivered to customers

    • Continued engagement with key global customers to jointly develop ADAS functionality

    • Received industry recognition for multiple accomplishments

    NEW PRODUCTION LAUNCHES With the launch of 15 customer programmes during the first six months of 2017, inclusive of 1 programme from our non-consolidated joint venture, we introduced new or improved product applications in DL and EPS. These programmes included incumbent and conquest business. Customer programmes that began production during the six months ended June 30, 2017 included:

    OEMs Vehicle Nameplate Our Products

    North America GM Chevrolet Equinox DL

    Buick Terrain DL Chevrolet Traverse Rack-assist EPS, DL

    Europe & South America FCA Fiat Argo Column-assist EPS (CEPS) GM Opel Crossland Single pinion-assist EPS (SPEPS)

    Asia Pacific BMW 1-Series SPEPS

    X1 SPEPS *Changan Changan CS55 CEPS Dongfeng Liuzhou Jingyi S50 EV CEPS

    Jingyi SX3 CEPS GM Buick Velite DL

    Chevrolet Equinox DL Renault Nissan Renault Lodgy DL Tata Motors Ace, Iris, Majic, Zip DL

    * Related to a non-consolidated joint venture

  • NEXTEER AUTOMOTIVE GROUP LIMITED INTERIM REPORT 2017 05

    Business Overview

    BACKLOG OF BOOKED BUSINESS We begin to realise revenue under a new business contract at the start of production as steering systems and driveline products are first shipped to vehicle manufacturers at the time of product launch. Product launches have historically lagged the date of contract award by an average period of 24 to 30 months. We have calculated a booked business backlog value which includes the value of awarded business for as yet, undelivered product generating revenue between the time of launch through the end of the life of the respective award (the “order to delivery” backlog valuation model). We estimate the value of all booked business under contracts that have been awarded, but for which we have undelivered products, which amounts to approximately US$24.0 billion (the Booked Business Amount or Booked Business) as at June 30, 2017, compared to US$25.6 billion as at December 31, 2016. The backlog decreased due to the partial cancellation of a programme, as well as other platform adjustments, as a result of GM’s plan to sell its Ope