Join. Engage. Advance. - Amazon S3...Join. Engage. Advance. UPCOMING EVENTS 6 May 17-18 MEMA 2016...

Join. Engage. Advance.


CHIEF EXECUTIVE OFFICER COUNCILMay 3, 2016


WELCOME

Julie A. Fream

President and Chief Executive Officer, OESA

2


AGENDA

3

11:45 a.m. Registration and Buffet Luncheon

12:45 p.m. Welcome and Introductions

• Housekeeping – September 21, November 1 – Proposed December 6 or December 9

• Upcoming Events

• Remaining 2016 CEO Council meeting dates

1 p.m. The North American Outlook: The Gathering Clouds,

Charlie Chesbrough, Director of Industry Analysis & Senior Principal Economist, IHS Automotive

2 p.m. YLC3 Talent Committee Status Report

3 p.m. The Future of Mobility, the Impact to Suppliers, and the Changing Process for Driving Innovation,

Neal Ganguli, Director, Deloitte Consulting LLP

Jason Coffman, Principal, Deloitte Consulting LLP

4 p.m. The CEO Roundtable: An Open Dialogue on Key Issues facing Automotive Industry CEO’s,

Sheldon Klein, Shareholder, Butzel Long

5 p.m. Adjourn


ANTI-TRUST GUIDELINES

• Approved agenda for each meeting. Stick to the agenda.

• Complete and accurate minutes.

• Business conducted at formal meetings--no rump sessions.

• No agreements, discussions or understandings concerning:

• Prices, discounts, terms or conditions of sale

• Profits, margins, cost data

• Market shares, sales territory, markets

• Selection, rejection, termination of customers or suppliers

• Restricting territories, markets, or customers

• Any matter inconsistent with the exercise of independent business judgment in pricing of

services and products, dealing with customers and suppliers, and choosing markets in

which to compete

4


HOUSEKEEPING

• OESA Wi-Fi:

Network: OESAguest

Password: oesaGuests!

• Restrooms: Located through the glass doors in the hallway

on the left (just before the elevators)

• Refreshments: Located in the back of the room or in the

café refrigerator; please help yourself!

5


UPCOMING EVENTS

6

May 17-18 MEMA 2016 Legislative Summit

Mandarin Oriental Hotel, RFK Stadium, Washington, DC

Jun. 2 Cyberliability

The Townsend Hotel, Birmingham, Mich.

Jun. 23 AlixPartners Meeting

The Townsend Hotel, Birmingham, Mich.

Oct. 12 OESA Terms & Conditions Meeting (Save the Date)

MSU Management Education Center, Troy, Mich.

Nov. 2 OESA Annual Conference (Save the Date)

COBO Center, Detroit, Mich.


OESA MEMBERS-ONLY OEM TOWN HALLS

7

May 4 Nissan Town Hall Meeting

Suburban Collection Showplace, Novi, Mich.

Jul. 20 Toyota Town Hall Meeting (Save the Date)

The Inn at St. John’s, Plymouth, Mich.

Oct. 4 FCA (Save the Date)

COBO Center, Detroit, Mich.

Oct. 13 Honda Town Hall Meeting (Save the Date)

Burton Manor, Livonia, Mich.

Dec. 2 Ford Town Hall Meeting (Save the Date)

Ford Headquarters, Dearborn, Mich.


PRESENTATION

8

Charlie Chesbrough, Director of Industry

Analysis & Senior Principal Economist,

IHS Automotive

© 2016 IHS

Presentation

ihs.com

IHS AUTOMOTIVE

United States

Economic and Automotive Outlook

Clouds on the Horizon

May 2016

Charles ChesbroughSenior Principal Economist and Director of Industry Analysis

IHS Automotive - Detroit

[email protected]

© 2016 IHS

Contents

• Introduction

• Global and US Economic Outlook

• Implications for the US Automotive Market

• Appendix

10

© 2016 IHS

Introduction

Charles Chesbrough

Senior Principal Economist and Director of Industry Analysis

IHS Automotive

Charles joined IHS in 2006 and is responsible for developing and integrating statistical models and economic scenarios into IHS global automotive forecasts. Charles represents IHS forecasts and research to organizations, clients and media, and as a speaker at various professional seminars and international industry events.

Prior to IHS, Charles worked for Ford Motor Company's marketing strategy group as well as two technology start-up companies and two market research firms. He began his career as a floor trader at the Chicago Board of Trade.

Charles earned a bachelor’s degree in economics from the College of Business at Michigan State University and a master’s degree in applied economics from the University of Illinois at Chicago. He returned to Michigan State University and completed courses for the economics PhD program.

Charles has won many economic forecasting accuracy awards and is a board member and former President of the Detroit Association for Business Economics and member of the National Association for Business Economics.

11

© 2016 IHS

Contents

• Introduction



• Appendix

12

© 2016 IHS 1313

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8

World UnitedStates

Japan Eurozone Brazil Russia India China

2015 2016 2017 Avg 2018-2023

GDP Growth Rate %

Source: IHS Economics

World Average

2016 = 2.6%

World: Economic Growth RatesEmerging market slowdown having global implications

© 2016 IHS

-15

-10

-5

0

5

10

15

China India Japan Russia United States Brazil Eurozone Germany

World: Industrial ProductionWeakness widespread - impacting commodity prices

March

2016

Source: IHS Economics, 3 month average of annual percentage change, historical actual and current estimate

Industrial Production (annual change, %, 2013-2016)

© 2016 IHS

0

2

4

6

8

10

12

14

China Japan Russia UnitedStates

Brazil Eurozone Germany

World: Unemployment RateMost labor markets tightening; Russia/Brazil feeling impact of recession

March

2016

Source: IHS Economics, monthly, in percent, historical actuals and current estimate

Unemployment Rate (%, 2013-2016)

© 2016 IHS 16

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1.0

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1.4

1.6

1.8

2.0

2.2

2.4

2.6

China India Japan Russia Brazil Euro United Kingdom

April

2016

Source: IHS Economics, monthly exchange rate vs US$, indexed to rate in January 2013

World: Exchange RatesDollar making huge gains against most currencies – as intended

January

2013

Local vs US$, (indexed, January 2013=1)

© 2016 IHS 17

World: Crude Oil Price ForecastGradual increase expected as weak global economy improves

$0

$25

$50

$75

$100

$125

$150

2000 2005 2010 2015 2020 2025

Current US$ Constant US$


Brent Blend Crude Oil Price ($/barrel)

Price near bottom, rises as global economy improves;

some disruption as suppliers return to market

• Crude Oil price has fallen dramatically since

2014 levels of $120 – now trading near $40.

• Price bottom expected this spring as

production adjustments are incorporated into

the market – Iran now adding over 500k

barrels to daily supply

• Price expected to rise over mid-term as

recovery in emerging markets, strong demand

in W Europe and N America, leads to

increase in demand growth; expected to

outpace supply gains over the next decade.

• Spot price expected to reach pre-crash levels,

but constant price remains relatively low –

only reaches $100/barrel by 2025 in today’s

value.

• Price recovery over the mid-term will be

volatile, impacted by Oil Producers returning

to market as profitable levels return – jagged

as supply rises and price adjusts.

• Low oil supports a robust global vehicle

market – sales lifted by more money in

everyone’s pockets; manufacturers and

consumers.

© 2016 IHS 18

World: Automotive Materials Cost IndexFalling commodity prices reducing production costs – profit margins strengthening

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

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AMCI commodity basket:

Steel

Aluminium

Plastic Resins

Rubber

Glass

Iron

-51% since

2011

Source: IHS Automotive Material Cost Index of combined commodities, monthly data

Material Costs in Typical 3500lb US Vehicle

• IHS’ Automotive Materials Cost Index has

fallen 51% since 2011 – like all commodities

recently, too much supply and weak industrial

demand driving down price.

• Material input costs are near $1000, down from

$2100 five years ago, a savings of over $1100

per vehicle - expected to remain low over mid-

term but AMCI will rise as global economy

improves.

• Global economy’s recent slow growth providing

manufacturing cost savings – expected to

continue through 2018, rising with emerging

markets strengthening.

• Vehicle profit margins for manufacturers should

be relatively strong – allowing more pricing

flexibility for OEMs and Suppliers.

• Low oil and material prices support a robust

global market over near-term: vehicle sales

lifted by more money in everyone’s pockets,

manufacturers and consumers

• Stronger economic conditions will lead to

higher commodity prices by the end of the

decade – margins to weaken.

© 2016 IHS 19

US: Economic SummaryImproving US economy will keep vehicle market on positive growth path

• Real GDP – Economic signals mixed; Consumer confidence and many

sectors improving, but strong dollar hurting trade. Growth weaker this

year: 2.1%, improving next year towards 3% before declining.

• Monetary Policy – FED expected to continue to raise interest rates,

weak global conditions causing delays. US labor market key; do rising

wages support tightening?

• Fiscal Policy – Spending will rise in 2016 thanks to recent budget

deal, contributing to growth for first time in years; adds stability.

• Consumption – Real consumer spending improving – stronger labor

markets, falling energy prices and improved household balance sheets

all contributing.

• Housing – Plenty of recovery left to go, Housing Starts only at 2/3 of

pre-crash averages. Sector will gain momentum as household

formation and labor markets improve.

• Employment – Job creation averaging above 200,000 per month -

conditions should lead to robust wage growth - not yet due to weak

participation rates.

• Foreign Trade – Strong dollar is hurting trade balances, a drag on the

US economy through 2018. Recent yuan devaluation, coupled with

already weak euro and yen, will impact OEM sourcing decisions.

• Investment – Strong profits, stock prices, suggest business fixed

investment will accelerate; low oil prices are a “surprise” cost savings,

but within the oil sector a major pullback is occurring.

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Real GDP Growth (%)


© 2016 IHS

US: Purchasing Manager IndexesEconomy facing dichotomy – services relatively strong, trade impacting manufacturing

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Manufacturing index Nonmanufacturing index

Source: Institute for Supply Management, monthly survey data

Co

ntr

ac

tin

g

Ex

pa

nd

ing

ISM Purchasing Indexes (monthly, 50 = neutral)

Services (non-manufacturing) much stronger

than Manufacturing;

Both starting to recover from recent declines

© 2016 IHS 21

$1,320

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

$400

$500

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$1,000

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$1,200

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$1,400

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Student Loans Outstanding Annual Growth

Total Student Loans Outstanding (millions US$)

US: Student Loan DebtExplosion in debt likely hindering vehicle sales among younger buyers

Source: Federal Reserve, Student Loans Outstanding

Now over 1.3 trillion $,

up 175% over last decade

Annual Growth

Growth rate declining,

still very high

© 2016 IHS

US: Housing Starts ForecastLots of recovery left to go, but growth will slow after next year

-50%

-40%

-30%

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0%

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20%

30%

40%

0.4

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Single-Family Multi-Family Growth Rate

22

Housing Starts (millions) Annual Growth (Total)

Growth rate slows significantly

by 2018; Multi-Family

construction gaining importance

1.2 million

Starts in 2016

© 2016 IHS 23

$100

$150

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Median, Existing Houses Median, New Houses

Median Home Sale Price (thousand US$)

US: Home PricesNew houses above pre-crash levels while existing homes near par

Source: IHS Economics, current quarterly forecast

Existing Home prices now

above pre-recession peaks;

New Home prices much

higher – demand strong, new

construction supply low

© 2016 IHS 2424

US: Labor Market WagesGrowth rates remain far below long-term averages – FED watching closely

$21.37

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

$8

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$24

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Average Earnings $/hr - L Annual Change 3m avg - R

Average Hourly Earnings

Source: Dept of Labor, BLS Unemployment Report, Production/Nonsupervisory employees, seasonal/monthly

Annual Change

Wage growth weak;

FED watching closely

as inflation spark

Average Annual

Wage Growth

1986-2009: 3.2%

2010-2016 2.1%

© 2016 IHS 2525

Source: US Department of Labor

US: Wage Rate Growth ObstaclesParticipation at 38 year lows – limited skills likely keeping some workers away

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No High School Diploma

Some College

HS Graduate

College Graduate

Labor Force Participation Rate % Unemployment Rate % by Education Level

Participation now increasing

from 38 year lows – limited

skills still keeping folks away?

Source: US Department of Labor, Percent Working or Looking

© 2016 IHS 2626

Source: IHS Economics, US Department of Labor

US: Labor Market ConditionsFalling unemployment now; history suggests a new direction approaching

5.0

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Unemployment Rate (%)

Source: Dept of Labor, BLS Unemployment Report, Production/Nonsupervisory employees, seasonal/monthly

Historic

Average

© 2016 IHS 27

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Federal Funds%

10-Year Treasury%

30 yr Mortgage%

Effective Federal Funds Rate (%, overnight)

US: Key Interest RatesFED monetary policy to tighten further – global weakness may delay

Source: IHS Economics, current quarterly forecast

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Interest Rate Forecasts (%)

FED raised rates during 1970s

inflation, then lowered 1980-

2015 to spur growth – never

raised to create growth

Global weakness, US labor

wage growth will impact rate

increase decisions

Cost of borrowing to rise across

economy – vehicle affordability to

weaken. Vehicle sales response?

© 2016 IHS

Contents

• Introduction



• Status of Demand

• Appendix

28

© 2016 IHS 29

US: Status of Automotive Market Consumer buying desire remains high; stronger wages will improve ability

• Buying Conditions Favorable – confidence increasing, job creation consistent, wages improving albeit slowly,

credit conditions strong, low gas prices, and lots high tech products.

• Strong Demand – Modest pull-back in March’s selling rate (16.5 million) from the recent 17+ pace over last

quarter, and 18+ pace last fall, but expected to gain steam as weather and economy improves.

• Low Oil Prices - Helping consumer spending, and autos in particular, but oil volatility may make consumer

skeptical thus moderating potential gains.

• Material Costs Low – Manufacturing cost pressures will remain low over near-term due to weak commodity

prices globally.

• Housing Recovery – Housing Starts only at 2/3 of pre-crash averages. Sector will gain momentum as labor

markets improve and credit standards ease.

• Employment – Job creation strong and expected to continue. Housing market has much more recovery to

come which will help sales through jobs and wealth.

• New Products – Number of new/refreshed nameplates to increase over near-term, will bring buyers into

showrooms.

• Strong OEM Margins – transaction prices high, material costs low; lots of room to increase incentives to

support sales slump.

• Credit Available – rates low, availability may be changing, lengthening loan maturity is an issue.

• Sales Cycle Changing – growth rate slowing, pent-up demand spent and wants based demand replacing

needs based. Loyalty to brands becoming more important than ever.

© 2016 IHS

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1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Total Car Light Truck

US: Light Vehicle Sales SAARCars passed by Light Trucks again – trend to continue

30

“Keep America

Rolling” “Employee Pricing

For All”

“Cash For

Clunkers”

Monthly Sales (SAAR, millions)

Source: IHS Automotive, Seasonally Adjustment, monthly light vehicle data

Light Trucks driving sales,

outpacing cars – current

CUV popularity similar to

SUV craze of 2000s

© 2016 IHS 31

US: Housing Starts and Light Vehicle SalesSectors recovering at different speeds; housing has a long way to go

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500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

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Housing Starts - L LV Sales - R

Sources: IHS Automotive, Light Vehicle Sales SAAR, Department of Commerce

Housing Starts (thousands,12m avg) Light Vehicle Sales (millions,12m avg)

Housing Starts recovery

lagging while Light Vehicles

are back: V recovery

Upside potential from

Housing will support strong

job creation, Lt Truck market

Housing Bubble

© 2016 IHS 32

US: Consumer Sentiment and Light Vehicle SalesOptimism improving rapidly; still far below pre-2001 levels

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Consumer Sentiment - L LV Sales - R

Incentives

Bubble

Sources: IHS Automotive, Light Vehicle SAAR, University of Michigan sentiment survey, 1966=100

Consumer Sentiment (12m avg) Light Vehicle Sales (millions,12m avg)

Labor agreements of early 2000s

contributed to “Incentive Bubble”

price discount strategy: Real

demand fell, but Detroit 3 UAW

contracts required labor be paid,

utilized or not, less loss to employ

large discounts support sales

© 2016 IHS

US: Oil Price Impact on StatesRecent price shock impacting oil producing states’ light vehicle demand

33

Oil States’ Share of Nation – All Vehicles

9.0%

9.2%

9.4%

9.6%

9.8%

10.0%

10.2%

10.4%

10.6%

10.8%

2010 2011 2012 2013 2014 2015

8.0%

8.2%

8.4%

8.6%

8.8%

9.0%

9.2%

9.4%

9.6%

9.8%

2010 2011 2012 2013 2014 2015

Oil States’ Share of Nation – Luxury Only

Oil States’ Share of Nation – Pick Ups Only

16.0%

16.2%

16.4%

16.6%

16.8%

17.0%

17.2%

17.4%

17.6%

17.8%

18.0%

2010 2011 2012 2013 2014 2015

Annual Change in Registrations

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015

Oil States

Rest of Nation

Sources: IHS Automotive, Oil Producing States=Texas, Wyoming, Alaska, North Dakota, New Mexico

© 2016 IHS

Contents

• Introduction



• Buying Conditions

• Appendix

34

© 2016 IHS

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Consumption Rate - L LV Sales - R

Source: Consumption Rate=1-Savings Rate, Department of Commerce

Consumption Rate (%,12m avg) Light Vehicle Sales (millions,12m avg)

Correlation = 0.61

Prior 2010 = 0.66

Post 2010 = 0.30

US: Consumption and Light Vehicle SalesDivergence in recent years – Savings less important

Inflated Demand

easy credit, housing bubble

© 2016 IHS 36

14%

16%

18%

20%

22%

24%

26%

2010 2011 2012 2013 2014 2015 2016

Lease Share Fleet Share

Lease and Fleet Share of New Registrations

US: Lease and Fleet Penetration Leasing increasing as OEMs utilize to gain share and leverage loyalty

Source: IHS Automotive, GVW<10K, Light Vehicle Registrations Data – January 2016

Leasing remains strong in 2016;

Fleet share rising may be early warning

© 2016 IHS

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Loans Outstanding - L Annual Change - R

US: Auto Credit Availability At record levels; recent growth remains relatively strong and stable

37

Total Motor Vehicle Loans Outstanding and Securitized (billions $)

Source: Quarterly Data, Federal Reserve Bank

Annual Change (%)

© 2016 IHS 38

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Direct (Bank) Loans Indirect (Dealer) Loans

Delinquency Rate (%, Accounts 30 days past due)

US: Auto Loan Delinquency Rates – Accounts Past Due

Credit quality strong - remains at record lows

Source: American Banker Association Survey

Auto loan 40 year

Averages

© 2016 IHS 39

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US: New Auto Financing Low rates and long terms support robust vehicle market

Source: Federal Reserve Bank, commercial bank 48 month loan rate,

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Interest Rate 48 month loan (percent) US Average Loan Length (months)

Source: Federal Reserve Bank, New Car Loans at Finance Companies

© 2016 IHS 40

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Stronger Demand for Auto Loans

Tighter Standards for Auto Loans

Net

Res

po

nd

en

ts “

Ye

s”, in

pe

rce

nt

US: Auto Loan AvailabilityBanker survey suggests market may be cooling; demand falling, restrictions rise

Sources: Federal Reserve, Federal Reserve Loan Officer Survey, 4 quarter average

$27,986

$24,500

$25,000

$25,500

$26,000

$26,500

$27,000

$27,500

$28,000

$28,500

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US Average Amount Financed Auto Loan Availability

For a 4%, 5 year loan of $28K,

each 1% increase in rates

adds $13 to monthly payment,

or about $800 total.

FED rate increases may add

$2,000+ over near-term

© 2016 IHS 41

7.5m

10.3m

4

6

8

10

12

14

16

18

20

196

7

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

201

7

201

9

202

1

202

3

Pre-Crash

40 year trend:

+140k annually

41

US: Light Vehicle Sales ForecastSales cycle peak approaching; return to previous long-term trend level possible

Annual Sales (millions)

Source: IHS Automotive, current light vehicles sales forecast

16.5m

Peak 2017

18.2m 17.8m

17.4m

Car – sales flat now, rises

with slower economy, new

product, greater affordability

Lt Truck – peaks in 2018,

weaker housing, higher gas,

regulation all force decline

Market peaks in 2017 – weaker buying

conditions, slower job creation, rising

oil prices start next cycle

Some return to cars likely by 2023

© 2016 IHS 4242

Source: IHS Automotive

• Higher Interest Rates – monthly payments increase; forces shift to lower cost vehicles.

• High Transaction Prices – Rising faster than consumers’ incomes; a high perch to fall from

in the next down cycle.

• Oil Prices Rising – Higher ownership costs hits spending and confidence, consumer

behavior and vehicle preferences impacted.

• Government Regulations – OEM efforts to meet EPA standards likely to impact vehicle

pricing.

• Recovery Phase Changing - Household formation/Housing growth rates slow, less job

creation – particularly in Midwest and Northeast.

• Weaker OEM Margins – Higher material costs, higher borrowing cost; incentive support.

Market more competitive – loyalty importance rising.

• Urban Mobility Changes – Uber/technology/social media all impacting the need and desire

for vehicle ownership.

• Region Changing – Strong fundamentals a regional market of 20m+ annually through the

decade. Production moving to Mexico, now source of sales growth while US/Canada slow.

US: After The PeakWeaker buying conditions, higher ownership costs slow market

© 2016 IHS

Contents

• Introduction



• Appendix

• Long-term concerns

43

© 2016 IHS 45

78.9

20

30

40

50

60

70

80

90

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

New Buyers

Used Buyers

All

Average Length of Ownership (months)

US: Consumer Behavior ChangingConsumers “investing”: keeping vehicles longer and using them less

Source: IHS Automotive, Light Vehicle Registrations Data

4

5

6

7

8

9

10

11

12

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

197

0

197

5

198

0

198

5

199

0

199

5

200

0

200

5

201

0

201

5

Miles Traveled - L

Miles Per Person - R

Source: Dept. of Transportation

Miles Traveled (trillions) Per Person Usage (000s)

Usage remains muted since

recession – just starting recovery

© 2016 IHS 46

9.0

9.5

10.0

10.5

11.0

11.5

12.0

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

CAR LIGHT TRUCK TOTAL

Vehicle Age in Years

US: Average Vehicle Age in VIOVehicle fleet age continuing to rise; replacement demand will suffer

Source: IHS Automotive, Light Vehicle Registrations Data

© 2016 IHS

US: Motor Vehicle PenetrationAmerica loves cars – does the romance continue?

0

100

200

300

400

500

600

700

800

900

190

0

191

0

192

0

193

0

194

0

195

0

196

0

197

0

198

0

199

0

200

0

201

0

202

0

Sources: IHS Automotive, U.S. Department of Transportation, Federal Highway Administration Statistics, LV+HV

Motor Vehicles in Use Per 1000 People

Great Depression

World War 2

Great Recession

Gulf War INo One Two 3+

vehicles vehicle vehicles vehicles1960 21.5% 56.9% 19.0% 2.5%

1970 17.5% 47.7% 29.3% 5.5%

1980 12.9% 35.5% 34.0% 17.5%

1990 11.5% 33.7% 37.4% 17.3%

2000 9.4% 33.8% 38.6% 18.3%

2010 9.1% 33.8% 37.6% 19.5%

US Census Household Ownership Survey ?

Disruptive

Technology

Shared/Autonomous Technologies –

Friend or Foe?

Ownership Impact:

If 10% of households changed categories,

ownership reverts to 1980 levels – no car

households rise by 5 million

© 2016 IHS 48

0

1

2

3

4

5

6

7

8

9

10

0

1

2

3

4

5

6

7

8

2020 2025 2030 2035

Level 4 - No Driver Needed Level 5 - No Driver Controls % New LV Sales

Millions of Capable Vehicles Sold

World: Autonomous Vehicles ForecastAre driverless vehicles a friend to the industry? Ownership less, but accessibility high

Source: IHS Automotive Estimates

Autonomous Share of Global LV Sales (%)

New Opportunities from New Consumers• World population = 7bn: Licensed drivers = 1bn (15%),

Unlicensed drivers = 6bn (85%) –many more potential users

• Big savings from shared ownership; cost per mile will fall

• Scrappage rate much higher from usage

• Many AVs will be inexpensive, shared, no frills “taxis”

Vehicles per household will fall – how much is the key question?


PRESENTATION

49

YLC3 Talent Committee Status Report

JOIN. ENGAGE. ADVANCE.


YOUNG LEADERSHIP COUNCIL 3

Talent Committee Update


Issue

Industry leaders consider talent retention to be

a priority issue in the automotive supplier sector

EXECUTIVE SUMMARY

51

POSITIVES / LEADING PRACTICES

More than 2/3rd of survey respondents indicate

high likelihood of staying

Leadership and career progression through

positive impact to industry, company and self

a key success driver

Challenging and rewarding workplace while

maintaining work-life balance a retention

catalyst

Misalignment between career position

aspirations and related opportunities

Stagnant role and responsibilities in

foreseeable future

Lack of communication between employees

and their immediate managers

NEGATIVES / RETENTION ISSUES

Talent retention survey findings not unique to the automotive supplier industry;

capitalize on leading practices and target addressable retention issues

Approach

Survey based methodology adopted to

understand and validate talent retention, leading

practices and recommended path forward


TALENT RETENTION INITIATIVE OVERVIEW

52

Explore and expose industry cultural issues affecting talent retention in the automotive

supplier industryMission Statement

Assessment Approach

Assessed automotive supplier industry retention issues by surveying OESA’s Young Leadership Council (past and

present) and representatives identified by the CEO, SMEP and HR Councils

Survey Summary

Designed and conducted a 30 question retention survey

Tested survey results against initial hypotheses for industry retention issues

Received a total of 286 responses (~40% YLC members)

Retention Survey Synopsis

Assesses retention issues impacting the automotive

supplier industry

Retention Issues focused on ‘high potential’

employees

Outlines the primary issues and leading retention

practices

Provides a high level set of recommendations

What the initiative IS

Initiative does not encompass talent acquisition

Does not address talent issues among associates that

are not identified as ‘high potentials’

Does not provide visibility of issues and leading

practices by company to maintain anonymity

Effectiveness of recommendations not included

What the initiative IS NOT


of respondents average

6 to 15 years of experience50%

SURVEY DEMOGRAPHICS OVERVIEW

53

40% YLC members

286survey respondents

of respondents with

Bachelors degree or above85%

Retention horizon:

2 – 5 years

Likelihood of staying:

Greater than 75%

Lower than 74%

HIGH

LOW

Focus Points

Public and Privately held companies

equally represented

44% Publicly traded

56% Privately owned


KEY TAKEAWAYS

54

Results gender and

YLC membership agnostic

68% of the respondents indicated

HIGHlikelihood of staying

43% If leaving current employer

would leave automotive

32% respondents indicated

LOW likelihood of staying

65% If leaving current employer

would leave automotive

Likelihood of staying

in the next 2 – 5 years286

survey respondents


ISSUES: MANAGEMENT COMMUNICATION

55

25%Lack of clear and open communication

of respondents indicated

29%do not see a career path at current employer

of respondents

“Establishing open communication and a good relationship with employees allows

them to voice opinions and concerns. When you can do this, you feel like you have

support from the company.”

- Interview participant

“I have found as I progress in my career that I

have fewer career path conversations with my

direct manager(s).”

“I have been told that there is a career plan

for me however it is not communicated.“

“Sometimes I just feel as though I am

alone and trying carve out my own career

path.”


ISSUES: PATH TO INCREASED RESPONSIBILITY

56

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

95-100% 75-94% 50-74% 25-49% 6-24% 0-5%

No, I don’t see a path to increased responsibilities in the next 2 – 5 years

Yes, I see a path to increased responsibilities in the next 2 – 5 years

Perception of increased responsibility in 2 – 5 year horizon highest among those who indicate high likelihood of staying

Limited path to increased responsibility among those who indicate low likelihood of staying

A small number of associates who indicate high likelihood of staying don’t see a clear path of increased responsibilities

A large percent of employees that indicate a low likelihood of staying don’t see a path of increased responsibility

Key Takeaways

High likelihood of staying Low likelihood of staying

High likelihood

of staying

Low likelihood

of staying

Yes, I see a path to increased responsibilities

No, I don’t see a path to increased responsibilities


ISSUES: CAREER PROGRESSION

57

CEO Other Exec(Head of

Prod.Devel,CIO, CFO)

SeniorManagement(VP, Director)

Management(Manager,Supervisor)

Domainexpert/ Techexpert/ Functexpert/ Indivcontributor

CEO Other Exec(Head of

Prod.Devel,CIO, CFO)

SeniorManagement(VP, Director)

Management(Manager,Supervisor)

Domain expert/Tech expert/Funct expert/

Indivcontributor

Career progression is a key success factor when considering employee retention

Overall perception of level achievable versus desired career level is aligned except for senior executive roles

Larger disparity in perceived versus desired career level among associates who indicate LOW likelihood of staying with

current employer in the next 2 – 5 years

Key Takeaways

High likelihood of staying

68% of respondents

Low likelihood of staying

32% of respondents

Perceived ability to achieve career level

Desired career level In interviews conducted, one respondent believed so strongly in career

progression, he developed his own career path with management. This

also reinforces to his management that he is a ‘high potential’ associate.


ISSUES: DEVELOPMENT PROGRAMS

58

Low likelihood of staying

High likelihood of staying

Education Opportunities and/orreimbursement

Rotational Programs Management Development Programs Other Programs for High PotentialEmployees

Respondents whose companies have a formal management development program are 7% more likely to stay at their

current employer than the survey average (75% vs 68%)

77% of respondents indicating high likelihood of staying indicate management development programs compared to 58%

of those indicating low likelihood of staying

Key Takeaways


ISSUES: CULTURE MOTIVATORS

59

Least motivating factor for those wanting to leave is Management and Lifestyle

of respondents23%with LOW likelihood of staying

Indicated that primary deterrents are

management and lifestyle

“Environment is very aggressive and the future looks like it is more challenging

(do more with less) and it's hard to motivate teams under such aggressive

environments.”

JOIN. ENGAGE. ADVANCE. 60

RETENTION THROUGH COMPANY CULTURE

Identifying Culture Deterrents

Work environment stressful, lacks leadership

and poor communication with employees

Functional silo based organization and lack

of trust

Closed culture, lack of coaching and

motivated by the bottom line

Promoting Positive Culture

Encouraging, entrepreneurial approach with

friendly competition

Open communication and trusting environment

Enhanced team oriented culture with

importance given to work life balance


LEADING PRACTICES: COMMUNICATION

61

67%Open and clear communication

of respondents indicated

71%See a career path at their current employer

of respondents

“Active coaching and discussions at least

monthly…very supportive.”

“My direct manager has a mindset of

developing his associates and makes a

point to assign tasks relevant to this

goal.”

Key Takeaway: Actively engaging in career discussions with employees in periodic

intervals can promote retention.


LEADING PRACTICES: CAREER ADVANCEMENT

62

75% of respondents with

likelihood of staying

HIGH

Controllable factors Non-controllable factors

Likely to have family members in

the area

Motivated by opportunity for

career advancement and learning

and development

Have a favorable outlook for

increased responsibility in the

next 2 – 5 years

Indicated


TAKEAWAYS AND RECOMMENDATIONS

63

Key Takeaways Recommendations

Increased disparity in desired versus perceived

attainable career level necessitates better alignment

of career aspirations with opportunities

Understand misalignment between desired and

perceived career opportunities

Promote formal and informal mentoring between

‘high potentials’ and senior executives

Leadership communications with employees has

positive impact on retention; limited communication

indicated as key driver for voluntary attrition

Promote open, clear and frequent communication in

town hall and small group settings

Identify and engage in career discussions with ‘high

potentials’ on a regular basis

Career progression with increased responsibility

and the ability to influence impact in the industry is a

primary influencer to improved retention

Invest in small group or one-on-one meetings to

discuss career progression

Support associates in developing a roadmap with

increased responsibilities

Positive, open and entrepreneurial company

culture is essential to retaining ‘high potential’

associates

Assess perception of company culture by breaking

down organization into smaller groups

Foster culture with commitment to trust, teamwork

and competitive spirit


THANK YOU FOR YOUR TIME

64

YLC Talent Committee

Laura Johnson, Attorney, Butzel Long

Raj Iyer, Manager, Mergers & Acquisitions, Deloitte Consulting LLP

Paul Delfin, Senior Sales Manager, DENSO International America

Christy Roadknight, Account Manager, Eaton

Bob Busch, Account Manager, Lacks Enterprises, Inc.

John Back, Director Purchasing, Mann+Hummel USA, Inc.

Brian Dwornick, Manager, Customers Projects, Mubea NA, Inc.

Lindsey Dluzynski, Sales Manager, NGK Spark Plugs (USA), Inc.

Jeremy Cellarius, Skill Team Leader, AVL North America, Inc.

Pete Lakso, Director of Sales, North America, BorgWarner, Inc.

Leslie Bednarz, Global Director, Advanced Supply Chain, Inteva Products

Eric Fryer, Financial Analyst, KSR International

Rodrigo Diaz, USA/CAN Business Development Manager, Nemak

Rob Erfurt, Vice President, Program Management and Product Engineering, Pittsburgh Glass Works LLC

Luke Hugel, Chief of Staff, Office of the President, Robert Busch LLC


PRESENTATION

65

Neal Ganguli, Director, Deloitte Consulting LLP

Jason Coffman, Principal, Deloitte Consulting LLP


MEMBER ROUNDTABLE

Sheldon Klein, Shareholder, Butzel Long

• Recent Auto Supply Chain Contract Cases

• Whistleblower Developments

66

Recent Auto Supply Chain

Contract CasesSheldon Klein 248.258.1414 [email protected]

BRC RUBBER & PLASTICS, INCORPORATED v.

CONTINENTAL CARBON COMPANY,

• Facts– BRC buys carbon black from CCC for automotive rubber.

• Contract: "It is the intent of this agreement that CCC agrees to sell to BRC

approximately 1.8 million pounds black annually."

• CCC declined to supply > 1.8 MM lb; BRC demanded requirements

• Held: No promise, so no enforceable contract. -- “Nothing . . . convinces us that the

agreement required BRC to buy carbon black from Continental.”

• Takeaway – If you mean requirements, say requirements and promise to buy them.

• Reason – a contract w/o a quantity promise is unenforceable.

JD Norman Industries, Inc. v.

Metaldyne, LLC ,

• Metaldyne exclusive supplier of connector rods

• JDN alleges Metaldyne threatened supply cutoff if JDN enforced contractually agreed upon price downs and sued for breach

• Metaldyne responded by cutting off supply based on “late payments” of 1-2 days

• JDN seeks prelim. Inj.

• Holding: (1) late payments not material; (2) Prelim. Inj. Granted: supply chain consequences are irreparable and JDN should not be required to pay ransom.

• Takeaway: Don’t assume that you can’t get a preliminary injunction

AUTOMOTIVE MEXICO BODY SYSTEMS, v. PITTSBURGH

GLASS WORKS, LLC,

• Facts: Requirements contract for PGW to supply 100% of AMBS’ specialty glass

• PGW has capacity problem and refuses to fill 100% req’ts. AMBS seeks preliminary injunction.

• Prel. Inj. denied, for lack of irreparable harm:

– One month OEM line shutdown not irreparable

– At first hearing, AMBS said OEM assembly lines would shut down, but it didn’t happen

– PGW offers substitute product, but not adequate for 1 customer (VW)

• Takeaway: Don’t assume you will get a Preliminary Injunction

Whistleblower

DevelopmentsSheldon Klein 248.258.1414 [email protected]

MAP-21 – NEW DEVELOPMENTS

MAP 21 (Sec. 31307)

• 2012 Anti-Retaliation statute for OEM and Supplier

employees

• Prohibits:

– any adverse action;

– against employees

– by OEMs and suppliers

– for engaging in “Protected Conduct”

• DOL/OSHA has enforcement authority

Protected Conduct

• In connection with any defect, non-compliance or

reporting violation

– Providing info to the employer or DOT or

– filing a proceeding or

– testifying (or assisting another in testifying); or

• Objecting to or refusing to participate in any FMVSS

or other NHTSA violation

• Note—also prohibits “anticipatory retaliation”.

New (3/16/16) MAP-21 Interim Rules

• Effective immediately, but

• 60 day comment period (EXPIRES IN 10 DAYS)• Retaliation prohibited if Employee had subjectively and objectively

reasonable basis for believing violation occurred, even if incorrect

• Complaint process:– Employee has 180 days from learning of retaliation to file complaint with

DOL

– OSHA then has 60 days to determines if “reasonable cause” to believe that protected activity was a “contributing factor” to adverse action

– Employer may rebut OSHA conclusion with “clear and convincing” evidence that it would have taken the same action w/o protected activity.

Interim Rules: Relief

• If reasonable cause, OSHA must order “appropriate

relief,” to make complainant whole, such as

– Preliminary reinstatement,

– Affirmative action to abate the violation,

– Back pay with interest,

– Compensatory damages, and

– Reasonable attorney and expert witness fees, and costs.

Interim Rules: Relief from OSHA

Determination

• Employer may appeal administratively but

– if OSHA ordered reinstatement, not stayed by appeal

• Complex and multi-step administrative appeal

process

• Limited ultimate access to Court

• Settlement requires OSHA and Employee approval

Motor Vehicle Safety

Whistleblower Act of 2015

MVSWA – Adding a Bounty for Industry

Whistleblowers

• Financial reward for disclosing OEM or Supplier failure to report defects "likely to cause unreasonable risk of death or serious physical injury.“

• Elements:– Gov’t Action that recovers > $1MM

– Based on “original information” reported by to employee or contractor

• Original Information = (i) independent knowledge of WB; (ii) not otherwise known to gov’t; and (iii) not “exclusively derived” from gov’t action or press reports.

Whistleblower Rewards

• Between 10% and 30% of recovery

• Who and how much in discretion of Secretary

• BUT – No reward if OEM or Supplier has whistleblower

protection problem, unless the employee

“reasonably believed: that program was ineffective

or that information was already known to OEM or

supplier.


MEETING WRAP UP – ADJOURN

81

Remaining Dates for 2016:

• September 21

• November 1 – proposed Dec. 6 or Dec. 9


CLOSING REMARKS

82

Julie A. Fream, President and Chief Executive Officer

Join. Engage. Advance. - Amazon S3...Join. Engage. Advance. UPCOMING EVENTS 6 May 17-18 MEMA 2016...

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