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  • More information: www.plasticsmarketwatch.org

    Automotive & Transportation

    A SERIES ON ECONOMIC-DEMOGRAPHIC-CONSUMER & TECHNOLOGY TRENDS IN SPECIFIC PLASTICS END MARKETS SPRING 2015 | ISSUE I

    WATCHING:

    Plastics IN THE FAST LANE

    http://www.plasticsmarketwatch.org

  • Copyright and Disclaimer

    © 2015 SPI: The Plastics Industry Trade Association. All rights reserved.

    This report has been prepared by SPI as a service to the industry. The information is offered in good faith and is believed to be reliable, accurate, and complete, but is provided without any warranties, express or implied, including (without limitation) warranties of merchantability and fitness for a particular purpose. SPI does not assume, and hereby disclaims, any liability arising out of or relating to the use of or reliance upon any information contained in this report.

  • PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION iii

    Automotive & Transportation

    A SERIES ON ECONOMIC-DEMOGRAPHIC-CONSUMER & TECHNOLOGY TRENDS IN SPECIFIC PLASTICS END MARKETS

    Contents Foreword .................................................................. 1

    Current Economic State ...................................... 4

    Economic Trends .................................................. 7

    Demographic Trends ......................................... 14

    Policy Trends .........................................................18

    Technology Trends .............................................22

    Labor Trends .........................................................31

    Culture Trends .....................................................36

    Conclusions ........................................................ 40

    SPI: The Plastics Industry Trade Association

  • iv PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION SPI: The Plastics Industry

    Trade Association

    Special thanks to the SPI Plastics

    Market Watch work group for their

    guidance and input on this Automotive &

    Transportation Report.

    n Conrad Bessemer, Novatec, Inc.

    n Fred Daniell, Kureha America Inc.

    n Larry Doyle, Conair

    n James Clark, Printpack Inc.

    n Jay Cude, ITW Medical

    n Tad McGwire, Industrial Heater Corp.

    n Jeff Mengel, Plante & Moran

    n Jim Murphy, Davis-Standard, LLC

    n Dave Preusse, Wittman Battenfeld, Inc.

    n Phil Wilson, BASF

    Materials compiled, written and edited by Hansel (Hank) Cox, with editorial assistance from Michael Taylor and Kendra Martin, SPI.

  • PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION 1

    Foreword

    As we look for ways to better serve our SPI membership and the broader plastics industry supply chain, one area of continued discussion is the impact of the consumer on our businesses. Factors such as demographics, cultural trends, new technol- ogies, and public policy direction impact the way we make our products and how they are consumed.

    With this as a backdrop, SPI is undertaking a unique report series that will explore key factors—including demographics, economics, public policy and technology—that

    impact the plastic industry’s key end markets. This report is about the plastics revolution in transportation—primarily, but not limited to—cars and trucks. It will be followed by reports on Plastics in Medical Device Applications, Plastics in Packaging, and Plastics in Housing & Construction.

    Our goal is to come up with forward- looking reports for our members and the industry that blend economic data and demographic data to paint a true picture of where we are headed in these critical markets. Where it is relevant, we will weave in other factors such as public policy, technology trends, and resource issues. These reports can then be used to

    present information on key drivers back to company personnel as input for their own strategic planning activities.

    We plan to conduct presentations and webinars in conjunction with each report to discuss our findings, and hope that these will provide important food for thought, whether you are an equipment manufacturer, materials supplier, processor, recycler or brand owner. As always, we welcome your feedback.

    Kendra L. Martin Senior Director, Industry Affairs (Brand Owners) SPI: The Plastics Industry Trade Association

    SPI: The Plastics Industry Trade Association

    Key Drivers for End Markets

    Market

    Consumer Trends

    Resources

    Economic Indicators

    Policy

    Demographics

    Technology

  • 2 PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION SPI: The Plastics Industry

    Trade Association

  • PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION 3

    Automotive & Transportation

    Current Economic State

    SPI: The Plastics Industry Trade Association

  • 4 PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION

    Current Economic State

    SPI: The Plastics Industry Trade Association

    Current Performance The recently published 2015 North American Plastics Industry Study conducted by

    Plante Moran indicated that the median company had year over year earnings growth exceeding 14 percent for the past two years, and the top quartile exceeded 42 percent earnings growth. Below is a sample of key performance characteristics of plastics processors that have at least 25 percent of their sales to the transportation industry.

    The transportation industry is supported by a few large plastics processors while the rest are predominantly small- to mid-sized.

    Transportation Range of Data by Quartile 2012/Data Lower 25% Median Upper 25%

    Size Total Sales $ 14,829,359 $ 24,176,000 $ 45,316,622

    Total Assets $ 7,177,777 $ 11,121,847 $ 21,000,000

    Total FTE 99 138 260

    Productivity Performance Value Add per Employee $ 69,981 $ 82,082 $ 92,862

    Value Add per Loaded Labor $ $ 1.70 $ 1.84 $ 2.06

    Operational Metrics Press Utilization (based on 24/7)—Injection Molding 34.3% 41.9% 55.4%

    Customer PPM 4 116 660

    Internal PPM 9,901 18,603 25,759

    Delivery % 97.4% 99.0% 99.8%

    Inventory Turns 6.7 8.9 11.1

    Earnings Performance Earnings before Interest, Taxes, Depreciation, Amortization

    6.9% 9.5% 12.8%

    Return on Assets 4.3% 8.5% 14.9%

    Growth Trends Two Year Sales Growth 4.1% 10.1% 20.5%

    Two Year EBIT Growth (14.2%) 14.1% 42.7%

    Balance Sheet Health Current Ratio 1.2 1.6 2.7

    Debt to Equity 0.5 1.4 3.2

    The remainder of this report will address the emerging trends—including demographics, economics, policy and technology—that impact the transpor- tation industry. The statistics below indicate where we are now, but knowing where we are going will help you develop strategies and tactics to take advantage of the emerging trends.

  • PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION 5

    Automotive & Transportation

    Economic Trends

    SPI: The Plastics Industry Trade Association

  • 6 PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION SPI: The Plastics Industry

    Trade Association

    The year 2015 opened

    with modest but

    steady expansion of

    the U.S. economy with

    solid growth and job

    creation prevalent in

    most sectors of the

    economy—including

    the plastics industry.

  • PLASTICS MARKET WATCH: AUTOMOTIVE & TRANSPORTATION 7

    Economic Trends

    SPI: The Plastics Industry Trade Association

    Plastics and Automobiles The year 2015 opened with modest

    but steady expansion of the U.S. economy with solid growth and job creation prev- alent in most sectors of the economy— including the plastics industry. The strong economy is reflected in sales of automo- biles and light trucks, which rose from a low of 10.4 million units in 2009, and are expected to hit 16.8 million in 2015. This is less than the record 17.1 million sold in 2001, but still a solid number that bodes well for the overall economy—and also the plastics industry, which is heavily involved in motor vehicles of all types.

    The global manufacture of cars and trucks in 2014 was just over 87 million, expected to rise to 91.2 million in 2015. Eventually, according to its state-run People’s Daily, China aims to produce more than 100 million vehicles each year.

    The dynamics of the automobile industry are such that declines of the magnitude that occurred in 2009 inev- itably lead to major disruptions among suppliers. The rapid recovery of the auto- mobile industry has been a key driver of the overall recovery of U.S. manufac- turing which lost 5.7 million jobs in the first decade of the new century. Much of the bounce-back can be attributed to pent-up demand from the down years when many consumers for financial reasons and uncertainty about the future of the economy delayed purchasing new cars and trucks.

    There are at present an estimated 250 million vehicles on the road in the

    U.S., of which the average vehicle is 11.4 years old, projected to rise to 11.7 by 2019, suggesting they will soon need to be replaced. In the U.S., Canada and Mexico, light vehicle sales are expected to hit 20.3 million