Ron HarbourPresident, Harbour Consulting

Automotive News World Congress January 18, 2006

The Changing Face of the North American Auto Industry

© 2005 Harbour Consulting. All Rights Reserved

Areas of ExpertiseHarbour Performance

Manufacturing AssessmentsLean Manufacturing Implementation/TransformationStrategic PlanningProduct and Process DesignProduct Launch Support

Harbour BenchmarkingTotal Cost and Investment ModelingCooperative Benchmarking StudiesCost and Investment BenchmarkingProduct TeardownsState of the Industry

Harbour Report GlobalNorth America annually since 1993 (public)Europe annually since 1996 (private)Heavy-duty truck study (future) South America and Asia (future)

Harbour Performance

Harbour Benchmarking

Harbour Report Global

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Recent Clients

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North American Automotive Manufacturing

Vehicle Assembly 13 21 25 7 4 7 9 86

Stamping 7 9 18 3 3 4 6 50

Engine 6 7 10 4 2 2 1 32

Transmission 3 4 6 1 1 2 0 17

Total 185Harbour has visited most of these

plants over the last 5 years and tours 30 to 40 each year

Others Total

© 2005 Harbour Consulting. All Rights Reserved

North American Vehicle Sales(Millions)

1992 1995 2000 2005

14.8 16.5

19.8 19.6Millions ofVehicles

U.S.73.1%10.8 M

Japan23.8%Korea

0.9%Europe3.6%

U.S.71.6%11.8 M

Japan21.5%Korea

1%Europe3.3%

U.S.65.2%12.9 M

Japan25.3%

Korea2.7%

Europe6.9%

U.S.56.9%11.1 M

Japan32.2%

Korea4.3%

Europe6.5%

Domesticbrands stillhave 69%

of assembly

plants

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North American Vehicle Assembly Plant Openings and Closings (1990 -- 2005)

DaimlerChrysler 4 2 +2Ford 1 2 - 1General Motors 3 16 -13Toyota 2 - +2Honda 3 - +3Nissan 2 - +2

Total - 6

New Plants Closed Plants Net Change

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Chrysler Group North American Vehicle Assembly Capacity

0

1

2

3

1992 1995 2000 2005

Millions of Vehicles

Change from 1992 to 2005NA Capacity rose 14%(11 to 13 plants)

2.52.75

2.95 2.87

© 2005 Harbour Consulting. All Rights Reserved

0

5

1992 1995 2000 2005

Ford North American Vehicle Assembly Capacity*

Millionsof vehicles

4.34.83 4.8

4.0

* Includes AutoAlliance Inc.

Capacity rose through the1990’s, but fell 18% from 1995 to 2005(22 to 21 plants)

© 2005 Harbour Consulting. All Rights Reserved

012345678

1992 1995 2000 2005

Millions of vehicles

General Motors North American Vehicle Assembly Capacity

7.356.4 6.2

5.1

Change from 1992 to 2005NA capacity fell 31%(38 to 25 plants)

© 2005 Harbour Consulting. All Rights Reserved

Honda North American Vehicle Assembly Capacity

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1992 1995 2000 2005

Number of Vehicles

Change from 1992 to 2005NA Capacity rose 129%(4 to 7 plants)

© 2005 Harbour Consulting. All Rights Reserved

Nissan North America Vehicle Assembly Capacity

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1992 1995 2000 2005

Numberof vehicles

Change from 1992 to 2005NA Capacity rose 192%(3 to 4 plants)

© 2005 Harbour Consulting. All Rights Reserved

Toyota North American Vehicle Assembly Capacity*

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1992 1995 2000 2005

Number ofVehicles

* Includes Toyota production from NUMMI

Change from 1992 to 2005NA Capacity rose 216% (5 to 7 plants)

© 2005 Harbour Consulting. All Rights Reserved

North American Vehicle Assembly Capacity

02468

1012141618

1992 1995 2000 2004

Millions of vehicles

GM GM GM GM

16.317.3 16.9

15.9

Ford Ford Ford

DCX DCX DCXDCX

ToyotaToyota

ToyotaHonda

NissanHonda

Ford

HondaNissan

Nissan OthersOthersOthers

Others

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North American Stamping (Domestics)

0

5

10

15

20

1995 20040

5

10

1995 2004

GM

No. of StampingPlants

No. of StampingPlants

Ford

01234567

1995 2004

No. of StampingPlants

dcx92

LIN

ES 66LI

NES

33O

Lin

es

241

Line

s

162

Line

s

109

Line

s

More stamping facilities, but most are smaller plants with fewer, better and more productive presses

1418 9 9

7 7

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North American Stamping (New Domestics)

0

2

4

1995 20040

2

4

1995 2004

Number ofStamping plants

Toyota

14 line

s

22 lines

Number ofStamping plants

Nissan

11 lines

14 li

nes

0

2

4

1995 2004

Number ofStamping plants

Honda

6 lin

es

4 lin

es

Japanese assemblyplants always includea small on-siteStamping plant

© 2005 Harbour Consulting. All Rights Reserved

North American Engine Capacity(Domestics)

0

5

1995 20040

5

1995 2004

Millions of engines

GM

Millions of engines

Ford

0

1

2

3

1995 2004

DCXMillions ofengines

2.16 2.78

5.95

5.39

3.95

2.98

Domestic •7.5% less capacity

•9.8% less production

•15% fewer plants

How will shrinkingassembly capacity

impactpowertrain capacity?

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North American Engine Capacity(New Domestic)

0200,000400,000600,000800,000

1,000,0001,200,0001,400,000

1995 2004

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1995 2004

Toyota

Number ofEngines

Number ofEngines

Nissan

0200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,000

1995 2004

HondaNumber ofEngines

New Domestics•125% more capacity

•113% More production

• Grew from 4 to 9 engine plants

Stronger yenhas driven theshift in powertraincapacity

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2005 North American Vehicle Capacity Utilization111%97% 97% 93% 87%

79%

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Flexibility Drives Capacity UtilizationNo. of No. of No. of 2005 capacity lines platforms body styles utilization

Honda East Liberty 1 2 3 81%

Honda Alliston #2 1 2 3 95%

Nissan Smyrna 2 35 124%

Toyota Cambridge 2 2 3 109%

Ford Chicago 1 1 3 98%

GM Oshawa 2 1 4 93%

DCX Brampton* 2 1 3 127%

* Operated on 3 shifts for most of 2005

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What Caused Today’s Overcapacity Predicament?

• Significant market share loss– Domestic manufacturers slid from 73.1% in 1992 to 56.9% in 2005

• Lack of factory flexibility• Restrictive labor agreements• Overly optimistic sales projections• Significant performance improvement

– Better throughput– Higher first-time through quality– Improved equipment uptime

• New shift patterns– 3 crews working 2 shifts– 3 shifts

© 2005 Harbour Consulting. All Rights Reserved

35.85

46.81

36.9836.76

34.33

46.52

32.0231.90

29.4330.79

27.9030.25

1998 1999 2000 2001 2002 2003 2004

0%23%

4%

2004vs.

1998

GM excludes medium duty. Honda, Nissan and Toyota data includes partial reporting of North American plants.

North American History of Total Hours per Unit – (Assembly, Stamping, Powertrain)

26%

0%

8%

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8581

126

109

123

104

129

95

119

106

140

118116113

149

2001 2002 2003 2004 2005

J.D. Power Initial Quality SurveyProblems per 100 Vehicles

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Translating Perception to Reality

© 2005 Harbour Consulting. All Rights Reserved

Translating Perception to Reality