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GKN Driveline Business overview and strategy Steve Markevich | CEO GKN Driveline Disclaimer Cautionary statement This presentation contains forward looking statements which are made in good faith based on the information available to the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be regarded as a profits forecast. 2 GKN CAPITAL MARKETS DAY – 21 MAY 2013 GKN Driveline – An excellent global footprint GKN Driveline end-2012 £3.24 billion Sales U.K. France Spain Italy Slovenia Turkey United States c.22,000 Employees 45 Plants 22 Countries Sweden Poland Germany South Korea Japan China India Mexico Thailand Manufacturing plant Singapore Colombia Taiwan Malaysia Joint Venture Corporate office / Engineering centre Brazil 3 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Australia GKN Driveline performing as the market leader Delivering on a commitment Clear and compelling strategy Integrated Getrag AWD into Driveline Technology roadmap aligned to market needs Global customers with strategic relationships Selective wins with pricing discipline Prioritised investments Integrated global network − people, process, systems, standards, etc. Creating distinct competitive advantage 4 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Sales growth above market 3,500 3,000 Driveline sales £m 180 Acquisition of Getrag Driveline in Q4, 2011 160 140 2,500 120 2,000 100 80 1,500 60 1,000 40 500 20 0 0 2007 2008 2009 2010 2011 Organic growth of c.5% above market driven by: − Leading positions and share gains in growth markets − Global customer mix and premium brands − Increasing share and content of AWD 5 GKN CAPITAL MARKETS DAY – 21 MAY 2013 2012 Global light vehicle production index (2007 = 100) Unrivalled driveline product and systems capability Market leader in CVJ sideshafts and AWD systems Future hybrid and electric drivetrains CVJ Systems All-Wheel Drive 61% of Sales 39% of Sales 6 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Leading positions in our core product segments CVJ Sideshafts GKN NTN Nexteer Hyundai WIA Wanxiang/Neapco Propshafts GKN Dana IFA Rotorion American Axle JTEKT AWD PTU/FDU AWD Couplings Performance Diffs Electric Axle* GKN JTEKT GKN GKN Magna BorgWarner Eaton Magna Dymos GKN American Axle American Axle Hyundai Wia Honda Dana BorgWarner American Axle Magna (inc. WIA JV) JTEKT Linamar Source: GKN estimated rankings on 2013 basis; excludes in-house. 7 GKN CAPITAL MARKETS DAY – 21 MAY 2013 *Emerging product segment Balanced global footprint with excellent regional balance Sales by region of origin 2012 Sales growth by region Europe • Customer mix • Export demand • AWD acquisition £m 919 2010 1105 1196 2011 2012 Asia 29% Europe 37% Americas 34% Americas • NA market strength • CVJ share gain • AWD acquisition • Brazil slowed by vehicle imports 1115 £m Asia • Strong growth in China • Japan weaker £m 8 GKN CAPITAL MARKETS DAY – 21 MAY 2013 668 815 2010 2011 2012 846 875 925 2010 2011 2012 Operational excellence on a global scale Global best practices Simplifying global supply chains Mexico Relentless focus on waste reduction World class quality disciplines Defect parts per million (ppm) 19 14 2007 China 9 GKN CAPITAL MARKETS DAY – 21 MAY 2013 2008 10 2009 7 6 5 2010 2011 2012 Expanding capability for high growth markets CVJ – Key investments Mexico Poland Russia China Sideshaft capacity expansion and new forge Sideshaft capacity expansion. Under review. Sideshaft capacity expansion. Add propshafts AWD – Investment supports global growth India Ramp-up new Pune plant and expand Oragadam. United States Propshaft capacity expansion. New 4WD FDU supply. Thailand Italy Sideshaft capacity expansion. AWD and eDrive capacity expansion Add propshafts and 4WD FDUs Sweden AWD capacity expansion China Extension of SDS JV to AWD and eDrive products 10 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Full driveline capability in China SDS JV now includes AWD and eDrive Systems GKN Torque Shanghai now part of SDS Participating in rapidly growing SUV and AWD market Expanding local engineering capability GKN Driveline sales (China with SDS at JV share) 8 manufacturing plants 3,800 people 297 £m 209 232 GKN/SDS locations 2010 2011 OEM plant locations 2012 11 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Well positioned with global customers and platforms Sales by customer 2012 Others, 20% Volvo Car Geely, 4% VW Group, 15% RenaultNissan, 11% JLR-TATA, 5% GM, 10% Mitsubishi, 5% BMW, 4% Toyota, 6% FIAT Ford, 10% Chrysler, 10% Footprint aligned with customer needs Strategic relationships with early involvement Value of global reach and scale Global account management and program launch capability Common platforms with optimised designs Mega-platforms an opportunity to accelerate global growth 12 GKN CAPITAL MARKETS DAY – 21 MAY 2013 The leading component, solutions and systems supplier 2015 Components 2020 Selective growth (BRIC) and disciplined with market opportunities Global customer and manufacturing footprint Solutions Systems Greater deployment of advanced technology products Fuel-efficient, light-weight, high performance Strategic development partner Next generation AWD systems and electric drivetrains 13 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Market leadership in CVJ systems Global shares 2012 Selective wins, controlled growth Other Reducing fixed cost structure In-house GKN 41% Wanxiang/ Neapco Optimising LCC sourcing strategy Recovering material costs / inflation Driving operational excellence Wia Favourable capacity / competitor dynamic Kofco Strong margin management actions Nexteer NTN GKN positioning in key growth regions N. America Brazil China GKN Driveline 14 GKN CAPITAL MARKETS DAY – 21 MAY 2013 India Technology leadership in CVJ systems FWD vehicles GKN Driveline SX8 RWD vehicles Progressing with roll-out of new light-weight, fuel-efficient CVJ technology GKN Driveline VL3 − Lighter and smaller package space − 1% fuel saving / CO2 reduction − 50° for premium applications − Lighter (up to 3.8kg per car set) − Packaging space reduction (9%) − Higher power transfer and efficiency 15 GKN CAPITAL MARKETS DAY – 21 MAY 2013 3 MILLION/YEAR GROWING TO 8 MILLION IN 2018 TARGET TO LAUNCH IN 2015 The making of the global leader in AWD Systems Major milestones 1985 Commercialisation of the viscous coupling begins – becomes a global industry standard for AWD in 1990s 2011 GKN acquires Getrag Driveline Products 2013 Will launch 1st AWD disconnect system 2011 Launch of 1st electric axle 1990 …. 2000 2010 2006 GKN establishes Torque Shanghai 2004 GKN acquires Tochigi Fuji Sangyo 2013 GKN’s SDS JV expanded to include AWD 16 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Globally balanced sales and customer profile in AWD £453m £423m Americas £384m Europe Based on 2012 sales 17 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Asia Vehicle driveline content increasing Rear-Wheel-Drive (RWD) Front-Wheel-Drive (FWD) with independent suspension Front sideshafts Directional Value Index 100 500 Rear Propshaft Rear sideshafts Rear Final * Drive Unit * Limited slip differentials (LSD) sometimes fitted in Rear FDU 18 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Vehicle driveline content increasing All-Wheel-Drive (AWD) Four-Wheel-Drive (4WD) with independent suspension Front sideshafts Front Axle* Power Transfer Unit Propshaft Coupling Rear Final Drive Unit Directional Value Index 900 1200 Front sideshafts Front Propshaft Transfer Case (incl. Coupling or TMD) Rear Propshaft Rear sideshafts Rear Final * Drive Unit * Option fitment Rear sideshafts 19 GKN CAPITAL MARKETS DAY – 21 MAY 2013 of Limited Slip Differential (LSD) or Locker Growing demand for AWD Consumers like AWD − Safety, assured driving, performance and image OEMs like AWD − Improves vehicle performance and image − Sellable feature with content and margin Both want acceptable fuel economy and CO2 Front-wheel drive 20 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Traditional All-wheel drive Technology roadmap addresses legislative challenges The challenge of tougher legislation for emissions and fuel efficiency EU Legislation 2015 2020 130gCO2/km 95gCO2/km 2025 75gCO2/km GKN Driveline’s technology response Today’s AWD Optimised AWD Fuel / CO2 Improvement < 1.5% Disconnect AWD 4% to 5% Hybrid/electric AWD 20% - 40% GKN can influence market technology uptake – systems capability important 21 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Positioned to continue outperforming the market Global LV market growth Mega-platforms AWD systems content Mega-platforms and AWD growth and content GKN Driveline target growth c.2% ahead of market Unrivalled global positioning − Geographic footprint − Broad customer base − Strength in growth markets Technology leadership / increasing AWD content − Response to tighter legislation − Customer co-developments − Fuel-efficient products 22 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Globally competitive − Increasingly lean and agile cost structure GKN Driveline All-Wheel Drive Systems Lars Christiansson | MD GKN Driveline Köping & Bruneck Joining GKN Driveline’s AWD business Highlights – personal observations Köping and Newton plants integrated from October 2011 Worked together early to adopt best practices Cultural fit with focus on safety and excellence Expanded product and development capability Well-received by customers – business continuing to grow High employee satisfaction 24 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Technology leadership in AWD 25 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Technology leadership in AWD Three key technologies for GKN Driveline AWD Disconnect systems Electric axle & hybrid AWD Full AWD systems integration Link to video 26 GKN CAPITAL MARKETS DAY – 21 MAY 2013 AWD Disconnect – The best of both worlds Traditional AWD is less fuel efficient than 2WD − Additional weight − Drag, friction and churn losses AWD Disconnect − Eliminates many of the losses − Improved fuel efficiency Seamless connect and disconnect 3 customer launches in 2013/14 27 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Mainstream AWD disconnect application Targets broad market for SUVs and Crossovers Challenging technology development with major fuel efficiency benefits 28 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Premium AWD disconnect application With a twin-clutch, TWINSTER® rear-drive module for enhanced vehicle dynamic Unique GKN capability 29 GKN CAPITAL MARKETS DAY – 21 MAY 2013 AWD hybrid with electric axle Full AWD performance GKN patented disconnect system (e-Axle in-use only when needed) Hybrid functionality Electric-only driving (short range) 40% fuel efficiency improvement 7 customer programmes launched or under development 30 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Source: PSA New product launch – 2-speed electric axle Launching 2014 Performance & efficiency 31 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Unique full AWD systems capability Design, manufacture and sourcing of components Complete development, test and validation capability Vehicle dynamics tuning, software & electronic controls Customer co-developments 32 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Summary Technology leadership is aligned with market trends for fuel efficiency and low CO2 AWD disconnect systems launching this year Growing customer interest in hybrid AWD with electric axle Unique AWD system capability – GKN has the product and the technology Important and successful acquisition of Getrag Driveline gives GKN a market leading AWD footprint 33 GKN CAPITAL MARKETS DAY – 21 MAY 2013 GKN Driveline Conclusion Andy Reynolds Smith | CEO, GKN Automotive GKN Driveline summary Growth c.2% above market AWD volumes with higher content Excellent position in growth markets Global footprint serving megaplatforms Margin range 8% to 10% ROIC >20% Selective business wins Disciplined pricing behaviour Operational excellence Lean cost structure Strategic outsourcing policy Business performance Strong cashflow 35 GKN CAPITAL MARKETS DAY – 21 MAY 2013 Prioritised investment Disciplined capital allocation
