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Lars Holmqvist , CEO CLEPA European Association of Automotive Suppliers

Lars Holmqvist , CEO CLEPA European Association of Automotive Suppliers Relocation in the Automotive Industry, EESC 29 June 2006. Facts about CLEPA 3000 member companies in total, representing 2500 SMEs 3 Million employees 300 billion Euro sales.

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Lars Holmqvist , CEO CLEPA European Association of Automotive Suppliers

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  1. Lars Holmqvist, CEO CLEPA European Association of Automotive Suppliers Relocation in the Automotive Industry, EESC 29 June 2006

  2. Facts about CLEPA • 3000 member companies in total, representing 2500 SMEs • 3 Million employees • 300 billion Euro sales

  3. CLEPA, the European umbrella membership organisation for the global automotive supply industry • 20 National Trade Associations • 69 Corporate members

  4. Facts about the automotive suppliers • 75% of the value of the car comes from the suppliers • 50% of the R and D spending from the suppliers • A majority of patents are from suppliers Some examples: • ABS • Airbags • Electronic stablility programmes • High pressure injection systems • Diesel particulate filters • Navigation systems

  5. Automotive Key Figures Vehicle Production 2003 20082013p.a. Europe16.8 18.0 18.9 1.2% Nafta16.3 17.5 18.5 1.3% Asia 21.1 26.1 30.2 3.3% World 60.1 69.4 76.4 2.4% Supplier Potential 2.4% per annum growth in world production 1.3% per annum growth through outsourcing 0.4% per annum growth through new technologies = 4.1% per annum total potential growth

  6. The European Automotive Manufacturing Industry

  7. Move to New Countries • New potential markets: • China, India, Russia, Poland • Low cost production: • Baltic States, other Eastern European countries

  8. RELOCATION – The Automotive way • Most components are unique to a specific model of a car i.e. “VW Golf 1.8 TDI 2002-2007” • For each new model (5-7 years) a new purchasing contract is negoitiated • This lead-time is 2-3 years • Re-location is a way to meet the price pressure from the VMs • Re-location is gradual and progressive • “Made in Germany” could mean that 75% of the car is made outside of Germany

  9. Automotive Manufacturing in Western Europe under threat? • Currently, 33% of Western European Supplier (WES) has operations in Eastern Europe and 15% in China • Soon, 50% of WES will be operating in Eastern Europe and/or China • 39% of all WES intend to transfer parts of production process to Eastern Europe in the next 5 years • 23% of all WES planning similar investments in China Source: Ernst & Young

  10. VMs moving eastwards • Hyundai – informal agreement to invest approx $1.2 billion in a new 300,000-a-year Czech assembly plant, adding 10,000 jobs • Toyota and Peugeot – new plant in Czech Republic, having capacity to make 300,000 cars a year, investment of approx €1.5 billion • Slovakia set to be the world’s biggest car producer per capita • Slovakia – home of PSA Peugeot-Citroën’s newest European plant, forecast to make 1million cars a year by 2008 • Kia will invest €835m in Slovakia, production should reach 300,000 cars a year from 2008 • Peugeot will invest €1.1bn in Slovakia, production should reach 450,000 cars a year by 2009

  11. VMs moving eastwards • Hyundai, Toyota have set up car assemblies in Turkey • General Motors rapidly expanding its manufacturing operations in Russia, also expanding in Kalingrad – GM’s 2006 target in Russia is 100,000 sales, up from 76,578 last year • Ford has an assembly plant in St. Petersburg • Toyota will open its assembly plant in St. Petersburg this year • Renault has a joint venture in Moscow that began building the Logan last year • Sales of foreign automakers in Russia more than doubled to 600,000 units last year • in 2005, total unit-sales volume in Russia was 1.6 million – expected to reach 2 million before 2010

  12. Key location factors • low production costs • low wage costs • sound employee qualifications • good engineering skills • flexible and motivated labour markets • good working attitudes • proximity to attractive sales markets • demand for cars set to grow swiftly • political and economic stability Source: Ernst & Young, FT

  13. Parts market: growth and manufacturing attractiveness 2003-2010 (100 = best in peer group) Average 47.1 100 China 55 United States 50 40 Cumulative automotive parts market growth 2003-2010e1 30 Brazil Germany South Korea Japan Russia France 20 Italy India Czech Republic 3 1 Mexico Canada Average 12.8 Turkey 4 2 United Kingdom 10 Slovakia Poland Indonesia Argentina Slovenia Philippines Malaysia Hungary Ukraine Lithuania Spain Romania Latvia Vietnam Bulgaria 0 Colombia Portugal Estonia 0 15 30 45 60 75 90 Manufacturing attractiveness rating2 1 Combined OEM and aftermarket for automotive parts 2 Based on manufacturing opportunity weighted with political/financial stability and investment flexibility Source: Roland Berger Strategy Consultants

  14. Conclusions • The automotive industry is a growth market • The outsourcing continues • The growth comes from new markets and new technology • Investment and employment moves to Eastern Europe and Asia • The Competition is truly global both for carmakers and suppliers

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