Bernd Stephan, Capital Markets Day 29.Nov. 2018

Automotive and Aerospace

© SKF Group

SKF Automotive and Aerospace

Top customers

A&A Product portfolioA&A Sales by region

Employees

10 000

Auto bearings

market sharesAero bearings

market shares

A&A footprint

• Nr.1 in HBU

• Nr.4 in Auto brgs

• Nr.6 in Seals

• Nr.1 in Aero brgs

• Top 3 in Composites

• Nr.5 in PED & sealsRevenue

27 BSEK

Tudela, ESP

Puebla, MEX

Busan, S.KOR

Cajamar, BRA

St Cyr, FRA

Airasca, ITA

Muhlheim, GER

Shanghai ATC1 & ATC2, CHN

Elgin, USMuskegon, USColebrook, US

Falconer, USBaltimore, US

Ladson, US

Clevedon, UKStonehouse, UK

Valenciennes, FRA

Lons Le-Saunier, FRA

Villar Perosa, ITA

St.Vallier, FRA

Elgin, US

Kalofer, BUL

Varese, ITA

Leverkusen, GER

Mysore, IND

Daegu, S.KOR

Wuhu, CHN

Guadalajara, MEX

Zapopan, MEX

VP Poggio Rusco, ITA

VP Singapore

VP Hebron, US

Vehicle parts ATC, CHN

Vehicle parts, BRA

VP St. Cyr, FRA

Villanova, ITA

SEALING SOL.

10 Factories

AUTOMOTIVE

9 Factories & 6 VP

Kitting centers

AERO

12 Factories

ASIA

6 locationsEUROPE

15 locations

AMERICAS

11 locations

West Europe

East Europe

North America

South America

China

IndiaRest of Asia

SCHAEFFLER

NSK

NTN

SKF

JTEKTTIMKEN

ILJIN

CHINESE

OTHERS

SKF

SCHAEFFLER

TIMKENMINEBEA

NTNJTEKT

NSK

CHINESE

OTHERS

AM Brg Specials

Aero Brg SpecialsCompo

sites

Seals

Standard Brgs

Other

Automotive Bearing Business Unit Turnaround Plan delivered

© SKF Group

Profitability development 2018

Excellent• profitability development in most markets

US tariff effect compensated•

Strong growth in (NEV) New Energy Vehicle• segment

AUTOMOTIVE BEARING BUSINESS UNIT

TURNAROUND PLAN 2015-2017 DELIVERED

Automotive Operating profit

0

100

200

300

400

500

600

700

Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318

Gearing up for the future

© SKF Group

Gearing up for the future

Capture customer value

Profitability management

Innovation leadership

Cost reduction

Organizational

efficiency & effectiveness

1

2

3

4

5

New product offering for New Energy Vehicles (NEV)❖

Convert market trends in new business models❖

Strong customer and product portfolio management❖

Convert market & technology trends into new product portfolio❖

Leadership in friction & weight reduction❖

❖ Design-to-cost

❖ Competitiveness through continuous added value & purchasing

cost reduction

❖ Strengthen Business Unit concept

❖ Implement World Class Manufacturing (I 4.0)

❖ Business Process digitalization

Targeting robust operating margin over business cycle

© SKF Group

Delivering value through a strengthened organisation

Automotive & Aerospace

Automotive Bearing

Business Unit

Sealing Solutions

Business Unit

Aerospace

Business UnitVSM

Business Unit

Separated OEM and Aftermarket •

Business Units => more focus

Business Units dedicated to •

market segments

Strengthened BU mgmt in •

Aerospace and Seals

© SKF Group

Strategic repositioning

Automotive

1. Maintain leading position as expert & cost competitive supplier

2. Delivering increased value to customers with a focused leadership

3. Profitability improvement plans

• Innovation focus on new energy vehicles

(NEVs) for bearings and seals

• Launching additional product lines in the

aftermarket and broaden assortment

• Footprint optimization for supply base

• North America footprint for Seals

(USA to Mexico)

Aerospace

Strong growth in • 2018/2019

Focus on profitability improvement•

Implementation of Industry • 4.0

technology in factories

North American footprint optimization•

2018 and beyond

© SKF Group

Reduced emissions & CO2 targets for ICE powertrain

Innovation drivers

• Light weighting new designs & materials

• Mechanical system efficiency further friction reduction

New Energy Vehicles (NEV)

Electrification • application specific products & solutions

Hybrid bearing development •

Acquisition of ceramic powder manufacturing VESTA-

More investment in ceramic ball and roller production-

High speed, low noise bearings & seals•

Bearing sensor technology for autonomous driving•

New products for electric driven accessories•

Energy efficient aero engines. Weight reduction in Airframe

New bearing technology •

New World class Manufacturing (I • 4.0)

Light weight materials for Airframe products•

© SKF Group

New worldwide CO2 test cycle

Effective September • 01, 2018

Based on real• -driving data of 12 countries

in 3 continents (Asia, EU, USA) matching

better on-road performance

Effect on vehicle sales 2018 Q3

For new vehicles, all engine / transmission / chassis / tire •

combinations need to be tested and certified

OEMs started certification process too late•

Significant drop in EU vehicle sales for Volkswagen Group in •

Sep 2018 (-41%)* /Oct (-19%) due to lack of certified WLTP

vehicles, other OEMs less affected

Worldwide harmonized Light vehicle Test Procedure (WLTP)

* https://www.volkswagenag.com/en/media/volkswagen-group-media-services/2018/10/volkswagen-group-deliveries-in-september-affected-by-wltp-change.html

NEDC vs WLTP

Designed in the • 1980‘s

Based on theoretical driving•

Has become outdated•

Effective Sep • 2018

Based on real driving data•

Better matches onroad •

performance

Focus areas

© SKF Group

Key focus areas

Cost Pricing Innovation

Automotive OEM ̶ Product focus on bearings, seals and modules.

NEV. Not a systems supplier & not competing with our OEM & Tier 1 customers

Automotive Aftermarket ̶ New product lines & broader assortment

Global Business Unit. Right product portfolio. More chassis than engine. B2C implemented.

Aerospace ̶ Extremely high sales volume growth.

Footprint optimisation. Ramp up of new I4.0 production channels.

© SKF Group

SKF Automotive (OE bearings and seals)

Dramatic changes in automotive propulsion system for cars, •

trucks and buses in next 10 years.

Business opportunities for SKF Automotive to gain rolling bearing •

and seals business by offering right product technology.

Strategic direction to remain in the component and module •

business avoiding competition with our customers.

MSBU HBU PWT Total

SKF Automotive Bearing NEV content

2018 2021

Chassis Wheel Powertrain Total

© SKF Group

SKF Aftermarket

Amazon,

KFZ-

Teile24,

…

Steering &

suspension,

driveshaft..

Cost

Initiative

Purchasing

Outpace market

growth

Improve

profitability

Be ready

for disruption

Re-establishment of global business unit

Tailor and offer the best

assortment

Increased focus on

efficiency and costs

Digitalise distribution and

sales channels

Keeping you

mobile!

© SKF Group

• Focus on airframe, MRO, helicopter

• Profitability management

• New market offer

o Airframe & composite material

o Wing of the future

o MRO repair market

• World Class Manufacturing

o Four new I4.0 channels in 2018 /19

o Cost reduction on OEM business

o Foot print optimization

• Cash Flow management

o Inventory management

o Supply chain

o Material flow simplification

SKF Aerospace

SKF Automotive & Aerospace is delivering high performance and high quality products and solutions that help customersgear up for the future.

Conclusion