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1 The Canadian Automotive Sector Overview and Competitive Advantages Jerry Suyavong President, M.E. International Inc. Vice President, Linear Transfer.

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Presentation on theme: "1 The Canadian Automotive Sector Overview and Competitive Advantages Jerry Suyavong President, M.E. International Inc. Vice President, Linear Transfer."— Presentation transcript:

1 1 The Canadian Automotive Sector Overview and Competitive Advantages Jerry Suyavong President, M.E. International Inc. Vice President, Linear Transfer Automation Inc. ProExport Colombia Seminar July 23, 2013 Jerry Suyavong President, M.E. International Inc. Vice President, Linear Transfer Automation Inc. ProExport Colombia Seminar July 23, 2013

2 2 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. TABLE OF CONTENTS 1.Canada Automotive Industry Overview 2.Competitive Advantage 3.Automotive R&D Centre 4.Next Generation Vehicles 5.Outlook, Challenges and Opportunities

3 3 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Snapshot of Canadas Auto Sector Manufacturing – Canada produces passenger and commercial vehicles, auto parts and systems, truck bodies and trailers, as well as machines-tools-dies-moulds (MTDM) and tires Automotive is the largest manufacturing sector in Canada. In 2012 it accounted for: 10% of manufacturing GDP $80.4 billion in revenues 115,025 in direct employment 21% of merchandise trade 16% of NAFTA vehicle production (2.45 million units) Highly concentrated in Ontario; also in Quebec, Manitoba and B.C. Very export intensive (three-quarters of annual output)

4 4 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Assembly: 19 passenger and commercial vehicle plants, 37,155 employed 87% exported,16.5% of North American vehicle production over the last 5 years 2.45M vehicles produced in 2012 Auto parts: ~10% of North American parts shipments ~350 automotive parts plants, including leading Canadian parts supplier and large Multinationals ~300 Tool, Die and Mould makers 1,240 facilities, 64,305 employed, $27.5 billion revenues, 46% exported Key Inputs & Services: Reliable access to raw materials, such as, steel, metals, plastics, alternative materials, as well as business services and automotive sales and service Snapshot of Canadas Auto Sector

5 5 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Vehicle Assembly Locations

6 6 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Parent Plant / LocationProducts Chrysler [FIAT] Brampton Assembly Plant (Brampton ON) Chrysler 300/300C; Dodge Charger and Challenger; Lancia Thema Windsor Assembly Plant (Windsor ON) Chrysler Town & Country; Dodge Grand Caravan; Lancia Voyager; Ram Cargo Van FordOakville Assembly Complex (Oakville ON)Ford Edge and Flex; Lincoln MKX and MKT GM CAMI Automotive (Ingersoll ON)Chevrolet Equinox (2010MY) and GMC Terrain (2010MY) Oshawa Car Plants 1-2 (Oshawa ON) Buick Regal and Regal eAssist; Cadillac XTS; Chevrolet Camaro, Equinox and Impala HondaHCM Plants 1-2 (Alliston ON)Acura MDX and ZDX; Honda Civic and CR-V Toyota North and South Plants (Cambridge ON)Toyota Corolla and Matrix; Lexus RX 350 West Plant (Woodstock ON)Toyota RAV4 and RAV4 EV Assembly Plants in Canada Parent Plant / LocationProducts Blue BirdMicro Bird (Drummondville PQ)Type A school buses Hino [Toyota]Hino Motors Canada (Woodstock ON)Class 4-7 trucks (CKD) Lion BusLion Bus Inc. (St. Jerome PQ)Type C school buses MCIMCI International (Winnipeg MB)intercity buses New FlyerNew Flyer Industries Canada (Winnipeg MB)urban transit buses PACCARPACCAR of Canada (Ste. Therese PQ)Class 6-7 trucks Volvo Bus Nova Bus Corporation (St. Eustache PQ)urban transit buses Prévost Car (Ste. Claire PQ)intercity buses Light Vehicles Heavy Trucks and Buses

7 7 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Exceptional Quality and Productivity J.D. Power Plant Quality Awards 1990Toyota Cambridge (Gold) 1991Toyota Cambridge (Gold) 1992Toyota Cambridge (Silver) 1993Toyota Cambridge (Bronze) 1994Ford St. Thomas (Silver) 1995Toyota Cambridge (Gold) 1996Toyota Cambridge (Gold), Honda Alliston (Silver) 1998Ford St. Thomas (Gold) 1999GM Oshawa 1 (Bronze) 2000Toyota Cambridge (Bronze) 2001Toyota Cambridge (Gold) 2002GM Oshawa 2 (Gold) 2003GM Oshawa 1 (Gold) 2005GM Oshawa 2 (Gold), GM Oshawa 1 (Silver) 2006GM Oshawa 2 (Gold), Chrysler Windsor (Silver) 2007GM Oshawa 2 (Silver) 2009GM Oshawa 1 (Silver) 2010Toyota Cambridge (Gold) 2011Toyota Cambridge (Platinum) 2012Toyota Cambridge (Gold) + Woodstock (Bronze) The J.D. Power & Associates Initial Quality Awards are the auto industrys benchmark for new vehicle quality manufacturing Canadian assembly plants have won one- third of all J.D. Power plant quality awards for North America, which is double Canadas share of regional production Twenty-one J.D. Power & Associates Initial Quality Awards have been presented to Ontario plants since 1990 The only Toyota plant outside Japan to produce Lexus vehicles is in Canada Also home to the production of luxury vehicles by Acura, Cadillac and Lincoln.

8 8 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Canadian Vehicle Production OEM GM964,239589,323347,363529,568661,884683,058 Chrysler534,774479,046314,504475,382496,081585,923 Toyota302,749287,395319,547458,729412,829519,215 Honda390,580383,011259,796278,366254,051409,849 Ford349,808306,764237,952320,608320,396255,924 Total2,542,1502,045,5391,479,1622,062,6532,145,2412,453,969 Country NORTH AMERICA15,102,75212,616,9168,626,38411,954,84313,153,24015,449,563 Canada2,542,1502,045,5391,479,1622,062,6532,145,2412,453,969 Mexico2,006,8712,060,9211,526,2572,257,6172,551,7712,874,460 United States10,553,7318,510,4565,620,9667,634,5738,476,22810,121,034

9 9 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Ontario has been NAFTAs Leading Sub-National Jurisdiction for Vehicle Assembly since 2004 Source: Wards Automotive Ontario Michigan Ohio Indiana Kentucky Alabama

10 10 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Part of a Huge North American Market Motor Vehicle Sales in North America (in millions of units) Forecast Source: Industry Canada, from IHS | CSM Worldwide Note: Figures include passenger and commercial vehicles Canada is part of a fully integrated North American market with annual sales of 20 million units, normally Although the U.S. market collapsed in , sales have started to recover and should return to peak levels by 2013 Lost production is being restored, and North America should remain one of the worlds largest and most lucrative automotive markets The N.A. Free Trade Agreement (NAFTA) ensures duty-free trade for originating goods throughout the region

11 11 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Top 15 Countries Light Vehicle Production & Global Ranking Source – Wards/AMIP/AutomotiveCompass (Brazil, Russia, India, China)

12 12 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Top 15 Global Brands Light Vehicle Production & Global Ranking Source – Wards/AMIP/AutomotiveCompass

13 13 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. COMPETITIVE ADVANTAGE

14 14 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. The N.A. Free Trade Agreement integrates Canada into a market with annual sales of 20 million vehicles. No tariffs on OE parts imported into Canada (vs 2.5% tariff in the U.S.) Canada and the U.S. are actively expanding border capacity. Los Angeles Detroit/Windsor Chicago Atlanta Seattle Miami Mexico City 800 km 400 km CANADA U.S.A. MEXICO Montreal Toronto Part of an Integrated North American Market

15 15 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Canada is Strategically Located © Automotive News There are 37 high-volume assembly plants within a 500 km radius of the Windsor-Detroit border. These plants produced 7.2 million vehicles in Canada is also close to all major automotive R&D centres in Michigan and Ohio.

16 16 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. 139 Million Consumers within a Days Drive Daily Two-way Goods Trade between Ontario-USA for 2011 Valued at C$716 million Sources: Industry Canada, Statistics Canada and US Census Bureau

17 17 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Low Import Tariffs Source: Finance Canada. The Federal Budget, and World Trade Organization. Trade Profiles. Transport equipmentElectrical machineryNon-electrical machinery Average Applied MFN Tariffs On $100 Million In Imports $ millions

18 18 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited Combined Federal and State/Provincial Competitive Corporate Taxes on Manufacturing

19 19 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Corporate Income Tax Rates on Manufacturing Federal16.5%15.0% Ontario10.0% Combined26.5%25.0%

20 20 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Accelerated Capital Cost Allowance Manufacturing and Processing Equipment (M&P): Since 2007, the depreciation rate for eligible M&P equipment has been temporarily increased to a 50% straight line rate (Class 29 as defined by the Canada Revenue Agency) for eligible machinery and equipment purchased after March 18, 2007 and before Companies who locate in Ontario can take advantage of this generous rate of write-off for capital expenditures in manufacturing or processing machinery and equipment each year up to the end of ACCA claims can be deferred indefinitely to subsequent years.

21 21 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Accelerated Capital Cost Allowance Asset ClassEligible AllowanceDepreciation RateDepreciation MethodHalf-Year Rule 43 Capital Cost Allowance (CCA) 30%Declining BalanceYes 29 Accelerated Capital Cost Allowance (ACCA) 50%Straight LineYes ACCA Benefits Allows business to completely depreciate qualified capital cost over a three year period. Provides additional cash flow in the three years following the capital expenditure by reducing the taxable income. Provides higher return on capital in the long term.

22 22 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. The Ontario government offers Training Tax Credits to encourage employers to hire and train apprentices and workers in specific skilled trades. Ministry of Training, Colleges and Universities: Apprenticeship Training Tax Credit: Maximum $10,000 per apprentice over 48 months. Employer Signing Bonus: $2,000 signing bonus if a new apprentice is registered. Employment Ontario: Wage incentives and other recruitment support. Ontario Youth Apprenticeship: School to work transition program. Ministry of Finance: Co-op Education Tax Credit: Refundable tax credit of up to $3,000 per placement. Training Tax Credits in Ontario

23 23 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Corporate Tax Reform: The governments comprehensive tax package is providing $4.8 billion in overall tax relief over three years, including CIT cuts that started July 1, 2010: - The general Corporate Income Tax (CIT) rate was lowered from 14 per cent to 12 per cent - The CIT rate for manufacturing and processing was lowered from 12 per cent to 10 per cent Infrastructure Investment: Support for Detroit-Windsor gateway, including the Detroit River International Crossing and the Windsor-Essex Parkway to ensure people and goods move safely and efficiently through the US-Canada border Tax Rates & Other Support for the Auto Industry

24 24 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Foreign direct investment projects in Ontario, by source country, 2011 Source: FDI Intelligence, March 2012 For example, Ontario Attracts Investors from Many Countries

25 25 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. AND... Ontario is Home to the Majority of Foreign-Controlled Head Offices in Canada Foreign Head Office Distribution in Canada, 2011 Source: Statistics Canada

26 26 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. AUTOMOTIVE INTERIORS ABC Group AGS Automotive Systems Aisin Canada ArcelorMittal Tubular Bend All Brose Canada Canadian General-Tower Limited Commercial Spring and Tool Co. DBG Enstel Manufacturing Inc. Exco Technologies Limited Falcon Tool & Die (1979) Ltd. Freeway Washer Limited H. Paulin & Co. Ltd. Hayashi Canada Inc. Hematite Manufacturing Invotronics JYCO Sealing Technology Lear Canada Magna International Inc. Martinrea International Inc. Marwood Metal Fabrication Matcor Automotive Inc. MetriCan Stamping Co. Inc. Mitchell Plastics Omron Dualtec Automotive Inc. Papp Plastics PlasmaTreat North America Inc. Salflex Polymers Ltd. Samuel Automotive Schukra Of North America Ltd. Sealed Air (Canada) Co./Cie. Stahlschmidt Cable Systems The NARMCO Group The Woodbridge Group Tiercon TG Minto Corp. Toyota Boshoku Canada TS Tech Van-Rob Inc. Vari-Form Velcro Canada Inc. Windsor Mold Group Woodstock Stampings Inc. PRODUCTION HANDLING ABB Inc. Marwood Metal Fabrication ODG Group Panasonic Canada Inc. Schaefer Systems Inc. Schenker DB Logistics Sealed Air (Canada) Co./Cie. SEW Eurodrive The NARMCO Group Valiant Tool & Mold Inc. AUTOMOTIVE EXTERIORS 3M ABC Group AGS Automotive Systems Amino North America Corp. Essar Steel Algoma Inc. ArcelorMittal ArcelorMittal Tubular Enstel Manufacturing Inc. Canadian General-Tower Ltd. Commercial Spring and Tool Co. DBG Delhi-Solac Inc. Exco Technologies Limited F&P Manufacturing Inc. Falcon Tool & Die (1979) Ltd. Flex N Gate Freeway Washer Limited H. Paulin & Co. Ltd. Henkel Canada Corporation KSR International Inc. Lanex Manufacturing Inc. Magna International Inc. Martinrea International Inc. Marwood Metal Fabrication Matcor Automotive Inc. Maxtech Manufacturing Inc. MetriCan Stamping Co. Inc. ODG Group PlasmaTreat North America Inc. PPG Canada Quality Safety Systems Company Salflex Polymers Ltd. Samuel Automotive Sealed Air (Canada) Co./Cie. Sinteris The Butcher Engineering Limited The NARMCO Group The Woodbridge Group Tiercon Trimont Manufacturing Inc. Van-Rob Inc. Vari-Form Warren Industries WEGU Manufacturing Windsor Mold Group Woodstock Stampings Inc. HVAC ABC Group ArcelorMittal Tubular Burlington Technologies Inc. Commercial Spring and Tool Co. DANA Corporation H. Paulin & Co. Ltd. Linamar Corporation Magna International Inc. Martinrea International Inc. Nichirin Incorporated Omron Dualtec Automotive Inc. COMFORT & CONVENIENCE ABC Group AGS Automotive Systems ArcelorMittal Tubular DBG Exco Technologies Limited Magna International Inc. Matcor Automotive Inc. QNX Software Systems Van-Rob Inc. Vari-Form Windsor Mold Group PRODUCTION CONTROL EQUIPMENT AUTOMATION & DESIGN ABC Group ABB Inc. Altair Engineering Canada, Ltd. Applied Precision Inc. ArcelorMittal Tubular Armada Toolworks Ltd. Bend All Cannon Automotive Solutions Centreline Clover Tool Mfg. Ltd. DBG Engineered Solutions Corp. (ESC) Exco Technologies Limited Falcon Tool & Die (1979) Ltd. FANUC Robotics Canada Ltd. Giffels Associates Limited/IBI Group Henkel Canada Corporation Husky Injection Molding Huzura Manufacturing Ltd. Logikor Magna International Inc. Marwood Metal Fabrication ODG Group OES, Inc. Omega Tool Panasonic Canada Inc. PlasmaTreat North America Inc. PricewaterhouseCoopers LLP QNX Software Systems RWDI AIR Inc. Sanyo Canadian Machine Works Schenker DB Logistics Siemens PLM Software (CA) Ltd. Solarsoft Business Systems Stahlschmidt Cable Systems Tech Con Automation The NARMCO Group Tutelar Technologies Valiant Tool & Mold Inc. Van-Rob Inc. Vari-Form Windsor Mold Group CHASSIS ABC Group AGS Automotive Systems ArcelorMittal Tubular Armada Toolworks Ltd. Bend All Enstel Manufacturing Inc. Burlington Technologies Inc. Canadian Autoparts Toyota Inc. DANA Corporation DBG DYNA-MIG Manufacturing Inc. Electromac Group F&P Manufacturing Inc. Falcon Tool & Die (1979) Ltd. Flex N Gate Global Technologies H. Paulin & Co. Ltd. Jefferson Elora Corporation Kautex-Textron Kumi Canada Corp. Linamar Corporation Magna International Inc. Martinrea International Inc. Matcor Automotive Inc. MetriCan Stamping Co. Inc. MMSC Canada Musashi Auto Parts Canada Inc. Nichirin Incorporated ODG Group Sanoh Canada Ltd. Showa Canada Inc. Sinteris Toyotetsu Canada Inc. The NARMCO Group Van-Rob Inc. Vari-Form Wescast Industries Inc. Windsor Machine & Stamping Windsor Mold Group Woodbine Tool & Die Woodstock Stampings Inc. BRAKING CTS Systems DANA Corporation DYNA-MIG Manufacturing Inc. F&P Manufacturing Inc. KSR International Inc. Linamar Corporation Martinrea International Inc. Maxtech Manufacturing Inc. Nichirin Incorporated Sinteris COMMUNICATION & INFORMATION ABC Group AGS Automotive Systems ArcelorMittal Tubular DBG Exco Technologies Limited Magna International Inc. Matcor Automotive Inc. Omron Dualtec Automotive Inc. QNX Software Systems Tutelar Technologies Van-Rob Inc. Vari-Form Windsor Mold Group POWERTRAIN ABC Group AGS Automotive Systems ArcelorMittal Tubular Bend All Burlington Technologies Inc. Commercial Spring and Tool Co. D & V Electronics Ltd. DANA Corporation DBG Electrovaya Exco Technologies Limited F&P Manufacturing Inc. Freudenberg-NOK Inc. H. Paulin & Co. Ltd. Invotronics Linamar Corporation Magna International Inc. Martinrea International Inc. Musashi Auto Parts Canada Inc. Nichirin Incorporated NTN Bearing Mfg Canada Sinteris The NARMCO Group UltraFit Manufacturing Van-Rob Inc. Vari-Form Zenn Motor Company AIR INTAKE / EXHAUST SYSTEMS ABC Group Enstel Manufacturing Inc. Commercial Spring and Tool Co. DBG Falcon Tool & Die (1979) Ltd. H. Paulin & Co. Ltd. Huarong Purification Inc. Linamar Corporation Magna International Inc. Martinrea International Inc. Marwood Metal Fabrication THE NARMCO GROUP Van-Rob Inc. Wescast Industries Inc. Windsor Mold Group Woodstock Stampings Inc. ENGINE MANAGEMENT Invotronics Magna International Inc. Omron Dualtec Automotive Inc. Zenn Motor Company TRAINING ABB Inc. Engineered Solutions Corp. (ESC) Exco Technologies Limited Henkel Canada Corporation HumberCollege Magna International Inc. Ontario Centres of Excellence The PIC Group PlasmaTreat North America Inc. RWDI AIR Inc. ECONOMIC DEVELOPMENT Canada's Automotive Corridor Canada's Technology Triangle Inc. City of Brantford City of Hamilton Durham Region Greater Toronto Marketing Alliance London Economic Development Corp. Municipality of Chatham-Kent Niagara Economic Development Corp. Regional Municipality of Halton Sarnia-Lambton Economic Partnership South Western Ontario Marketing Alliance WindsorEssex Economic Development EDUCATION & RESEARCH Advanced Design & Manufacturing Institute (ADMI) AUTO21 Inc. CON*NECT Conestoga College Georgian College Humber College McMaster University-MAC Auto Mohawk College Ontario Centres of Excellence Seneca College of Applied Arts & Technology University of Waterloo - WatCAR University of Windsor MANUFACTURING MACHINERY, TOOLS & EQUIPMENT ABB Inc. ArcelorMittal Tubular Burlington Technologies Inc. DBG Electromac Group Falcon Tool & Die (1979) Ltd. Flex N Gate Magna International Inc. The NARMCO Group ODG Group Stahlschmidt Cable Systems Valiant Tool & Mold Inc. Van-Rob Inc. Exco Technologies Limited PlasmaTreat North America Inc. J.P. Bowman Limited ABC Group Anchor Danly Husky Injection Molding Vari-Form Windsor Mold Group FANUC Robotics Canada Ltd. Nachi Robotic Systems Inc. Yaskawa Motoman Canada Ltd. TRW ENGINE COOLING Bend All Brose Canada Denso Manufacturing Magna International Inc. Martinrea International Inc. The NARMCO Group Vari-Form BODY SYSTEMS ABC Group AGS Automotive Systems ArcelorMittal Tubular Armada Toolworks Ltd. Cannon Automotive Solutions Commercial Spring and Tool Co. DBG Enstel Manufacturing Inc. Exco Technologies Limited F&P Manufacturing Inc. Falcon Tool & Die (1979) Ltd. Flex N Gate Freeway Washer Limited H. Paulin & Co. Ltd. Hematite Manufacturing Huzura Manufacturing Ltd. KSR International Inc. Lanex Manufacturing Inc. Magna International Inc. Martinrea International Inc. Marwood Metal Fabrication Matcor Automotive Inc. Maxtech Manufacturing Inc. MetriCan Stamping Co. Inc. Multimatic ODG Group Omega Tool Omron Dualtec Automotive Inc. Samuel Automotive Sinteris The NARMCO Group The Woodbridge Group Tiercon Van-Rob Inc. Vari-Form Warren Industries WEGU Manufacturing Windsor Mold Group Woodstock Stampings Inc. Yachiyo of Ontario Manufacturing SAFETY ABC Group Intertec Systems Magna International Inc. Quality Safety Systems Co. Tyco Electronics Canada Ltd. ELECTRICAL & ELECTRONICS Commercial Spring and Tool Co. D&V Electronics Ltd. DBG Denso Manufacturing Canada Digital Dash Intertec Systems Invotronics Kasai Canada Inc. KSR International Inc. Magna International Inc. Omron Dualtec Automotive Inc. QNX Software Systems Schukra Of North America Ltd. Spatial View Tyco Electronics Canada Ltd. Van-Rob Inc. Windsor Mold Group Canada has Suppliers in Every Product Category

27 27 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Canada Supply Base is Second to None Top OEM Suppliers with Plants in Canada Global Rank 2011 #2Denso (Japan) #3Continental (Germany) #4 Magna International (Canada) #5Aisin Seiki (Japan) #6Faurecia (France) #7Johnson Controls (U.S.) #10Delphi (U.S.) #12TRW (U.S.) #13Lear (U.S.) #17Toyota Boshoku (Japan) #20Autoliv (Sweden) #22Visteon (U.S.) #35Toyoda Gosei (Japan) #37Brose (Germany) #54Nemak (Mexico) #56Flex-n-Gate (U.S.) #76Linamar (Canada) #78Martinrea (Canada) Source: Automotive News Many of the largest global suppliers have facilities in Canada, along with steel and other material producers Some of the biggest and most capable suppliers are Canadian-based including ABC Group, AGS Automotive, Linamar, Magna, Martinrea, Multimatic, Valiant, Wescast and Woodbridge Foam Other Canadian companies – such as Ballard, QNX Software and Westport Innovations – are recognized global leaders in their field Assemblers and Tier 1s in Canada also have access to supply chains in the U.S. and Mexico

28 28 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. For Example, Ontario is a Significant Player in the NAFTA Auto Parts Industry Share of NAFTA Parts Shipments, 2009 Source: Statistics Canada, US Bureau of Economic Analysis Ontario parts firms are leaders in the development of innovative components, such as, stampings, modules and systems, & lightweight and composite materials

29 29 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Areas of Automotive Expertise Information and Communications Technology Software engineering Navigation and positioning Wireless technologies and networks Microchip design, system-on-chip, engineering Semi-conductor technologies (MEMS, RF) Telematics, communications Micromachining Intelligent systems Photonics and optoelectronics Nanotechnology Enhanced synthetic vision Advanced Design, Visualization and Manufacturing Inspection and vision systems Laser imaging Tooling and robotics Stereo-lithography, laser deposition Virtual design Metal Processing Advanced casting of light metals Cutting and machining Sheet and tube forming Welding and joining Powder metallurgy Advanced Materials Lightweight materials Nano-materials Bio-materials Advanced Technologies Mechatronics Powertrain engineering Clean diesels Homogenous charge compression ignition Fuel cells, hydrogen and alternative fuels

30 30 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Canada Has Highly Educated and Multicultural Workforce 1 OECD. Education at a Glance International Institute of Management Development. World Competitiveness Yearbook World Economic Forum. Global Competitiveness Report Canada ranks #2 in the G7 in terms of the availability of qualified engineers in its workforce, according to the IMD 3 The WEF ranks Canada #3 in a 139- country study on the quality of management schools 2 Canada ranks #1 in the OECD for its college completion rates (23.6% of working-age Canadians have graduated from college) 1

31 31 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Ontario has a Highly Educated Population Post-secondary Educational Attainment (%), Select Markets, 2010 (Age 25-64) Overall, 64% of Ontarios population has completed post-secondary education University: 30% College: 27% Apprenticeship: 7% Note: Not all jurisdictions count apprenticeship as post-secondary education Sources: Statistics Canada and OECD, 2012

32 32 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Ontario is a Leader in Recruiting and Retaining a Highly Skilled Workforce RankCity 1New York City 2Toronto 3Singapore 4Montreal 4London 6Los Angeles 7Boston 8Chicago 9Vancouver 9Copenhagen 9Hong Kong Out of 131 global cities examined, Toronto ranked second for low risks associated with employment and redeployment. Canadas strengths are derived from strict enforcement of equal opportunity laws, clear government- mandated health and retirement benefits, low levels of corruption, and the high quality and broad availability of training facilities. Overall People-Risk Rankings, 2012 Source: AON Consulting, 2012

33 33 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Among major auto producing nations*, Canada: has the highest quality of life; has the second lowest cost of living and the lowest apartment rents; is among the safest places to live and do business; and is among the least afflicted by pollution. Other Canadian advantages include: high-quality, low-cost education; universal health care; cosmopolitan cities; and Multi cultural society * US, Canada, UK, France, Germany, Spain, Korea, Japan, Mexico, China World Rank - Quality of Life Factors 8th 25th 15th 12th 10th 20 19th 17th 54th 18th 27th Source: IMD, World Competitiveness Yearbook 2006 US=1.00 Canada is a Great Place to Live!

34 34 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. RESEARCH & DEVELOPMENT

35 35 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Snapshot of Automotive R&D in Canada Annual R&D spending in the motor vehicle and parts industry averaged $450 million in the last decade Over 1,400 auto-related patents granted to inventors based in Canada. Expertise in light weighting, biomaterials and composites, advanced safety systems, software and the connected car, alternative fuels (particularly EVs), vehicle testing, and more Focus on private and collaborative R&D Climatic wind tunnel at UOIT-ACE Source: Statistics Canada Automotive R&D Expenditures (in CAD$ millions) average $450M/year

36 36 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Automotive OEM R&D Centres Ford Motor Company of Canada Ltd. Ford Manitoba Extreme Cold Weather Test Facility (Thompson MB) Ford Powertrain Engineering Research & Development Centre (Windsor ON) Chrysler Canada Inc. Automotive Research & Development Centre (Windsor ON) General Motors of Canada Ltd. GM Canadian Regional Engineering Centre (Oshawa ON) GM Cold Weather Development Centre (Kapuskasing ON) Honda R&D Americas Inc. (Canada) Environmental testing laboratory (Dartmouth NS) Toyota Canada Inc. Toyota Canada Cold Weather Research Centre (Timmins ON)

37 37 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Generous R&D Tax Credits/Programs Scientific Research & Experimental Design SR&ED is a generous federal tax credit which encourages businesses in all sectors to conduct R&D in Canada SR&ED is worth $3 billion/year for the manufacturing sector Industrial Research Assistance Program IRAP helps support innovative R&D and commercialization of new products and services by small- and medium-sized firms Automotive Partnership Canada APC is a five-year, $145 million program that supports collaborative university-industry in four areas: environmental performance, the cognitive car, next-generation manufacturing, and social sciences Automotive Innovation Fund AIF is a 10-year, $500 million program designed to lever large ($75M or more) investments in vehicle assembly, powertrain and R&D operations that focus on innovation and environmental technologies

38 38 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. World-class R&D Institutes/Universities National Research Council - Automotive Network of 20 research institutes, many specializing in automotive- related disciplines such as light materials, aerodynamics, alternative propulsion, sensors and telematics CanmetMATRIALS National laboratory (Hamilton and Calgary) run by Natural Resources Canada for metals, materials and processing research in support of manufacturing innovation AUTO21 National network of centres of excellence for automotive R&D, regroups 200 researchers from 46 universities to conduct applied R&D in partnership with private companies Magna-NRC Composites Centre of Excellence Research centre to develop coEmposite technology for the Canadian and global automotive industries

39 39 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. World-class R&D Institutes/Universities Fraunhofer Project Western Research centre and industrial-scale test facility focused on composite technologies for weight reduction at Western University (London ON) MacAUTO McMaster University Institute for Automotive Research and Technology (Hamilton ON): The Universitys numerous automotive-related research institutes and centres work with industry, government and academic partners in developing and commercializing new technologies and materials that will ensure the global competitiveness of Canadas auto industry. UOIT-ACE Automotive Centre of Excellence at the University of Ontario Institute of Technology (Oshawa ON) WatCAR University of Waterloo Centre for Automotive Research (Waterloo ON) University of Windsor Automotive engineering specialization and research partnerships, such as AUTO21 and Chryslers ARDC

40 40 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Government Supported R&D Centres Located throughout Ontario

41 41 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Ontarios R&D Cost Advantage R&D Cost Advantage (%) After-Tax Cost of $100 R&D Expenditure, Small and Medium Sized Manufacturers, 2012 R&D expenditure (general) R&D expenditure (at eligible Ontario research institutes) Gross expenditure$ Actual after-tax expenditure $51.57$40.11 Note: data as of April 13, Sources: Ontario Ministry of Finance and Canada Revenue Agency Ontario has a 9.1% cost advantage relative to the US Source: MEDI analysis, prepared using CompetitiveAlternatives.com Cost Model, 2012 version, accessed on March 30, 2012.

42 42 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Benefits of Collaboration Mitigates the risk of innovation Allows the inclusion of expertise outside a companies historic strengths Widens the reach of expertise Provides access to a wider scope of funding Takes advantage of embedded relationships and contacts Expands the scope of available facilities and equipment Both sides benefit from new ideas

43 43 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. NEXT GENERATION VEHICLES

44 44 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Position to Take a Leading Role in the Development of the Next Generation of Vehicles Automakers are developing a broad spectrum of alternative, environmentally friendly vehicles, especially electric vehicles (EV), among other technologies i.e. advanced hybrids, CNG, fuel cells etc. The government has partnered with a number of firms in order to position the province to take a leading role in vehicle electrification and lightweighting, including: $16.7 million for Electrovaya of Mississauga (Ontario) to develop and manufacture lithium-ion batteries $48.4 million for Magna International and Magna E-Car to develop advanced lightweighting technology, electrification of vehicle components and battery development. $2 million for Dana Canada to develop Thermal Management Systems for hybrids and electric vehicles $70.8 million to Toyota Motor Manufacturing of Canada on a spectrum of initiatives, including production of the RAV4 EV

45 45 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. At The Forefront Of Next Generation Vehicle Technologies Research Researchers in Ontarios network of universities and specialized institutions are conducting leading research in advanced manufacturing and alternative energy: McMaster Automotive Resource Centre (MARC) is leading hub of advanced automotive research and development. Ali Emadi, director of MacAUTO is the holder of the $10- million Canada Excellence Research Chair in Hybrid Powertrain and is one of the worlds foremost developers of electric and hybrid powertrain technologies AUTO21 partners with the public and private sectors and supports more than 300 researchers across Canada in a variety of auto-related research projects WatCAR, an automotive research centre at the University of Waterloo, is focused on leading-edge studies to enhance automotive innovation and competitiveness University of Ontario Institute of Technologys General Motors of Canada Automotive Centre of Excellence is a state-of-the-art research facility (including a climatic wind tunnel) created to further R&D in the Canadian automotive industry Magna-NRC Composite Centers of Excellence, supports the Canadian automotive industry in developing next-generation vehicles with lighter, more durable parts, that are safe, affordable, environmentally friendly, and fuel efficient

46 46 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Government Actively Supports the Auto Industry Ontario has made important investments to support the auto sector and to improve the overall business environment in the province, including: Strategic Investments: In 2011 Ontario invested $121.2 million in innovative automotive initiatives with Dana, Magna International, Magna E-Car and Toyota Ontario Automotive Investment Strategy (OAIS): A $500 million, 5-year fund leveraged about $7.8B in total investment in the sector Restructuring of GM and Chrysler: Ontario committed $4.8 billion to the restructuring of GM and Chrysler Next Generation of Jobs Fund: Provided support to a number of automotive firms, such as Ford, Electrovaya, Mitchell Plastics and Alcohol Counter Measures

47 47 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Commitment to fight climate change and improve air quality The Ontario government aims to have one out of every 20 vehicles driven in Ontario to be electrically powered by 2020, this would support the greenhouse gas emissions target for 2020 set out in our Go Green Action plan. Contribution may be up to 0.6 MT (600,000 tonnes) of GHG savings by 2020 Reducing the environmental impact of the Ontario governments operations Commitment to purchase 500 electric vehicles for the Ontario Public Service (OPS) passenger fleet by 2020 Contributes to the OPS goal of an annual 5% reduction in fuel consumption Supporting alignment and direction of Ontarios auto sector Greener, more sustainable and more competitive with a strong focus on high value- added development and production of innovative auto parts and technologies Supporting the governments research and innovation agenda Programs applicable to the research, development and commercialization of electric vehicles and their components parts Government Commitments

48 48 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. The Government of Ontario has been active in encouraging consumer adoption of Electric Vehicles (EVs). Developments include: Consumer Incentives: Rebates of $5,000 - $8,500 offered to consumers to purchase electric vehicles EV Infrastructure Fund: On May 4 th 2012, Ontario released a Request for Information (RFI) on electric vehicle infrastructure, including home and public charging. The RFI closed on June 4 th The RFI results are currently being analyzed Access to High Occupancy Vehicle (HOV) Lanes: EVs are provided green license plates for EVs to drive in commuter lanes (HOV) with one occupant Ontario is establishing a series of charging locations at GO commuter train stations in the Greater Toronto Area (Aurora, Lincolnville, Whitby in 2011 and Ajax, Erindale, Oakville, Burlington in 2012) Commitment to Getting Electric Vehicles (EVs) on the Road

49 49 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. OUTLOOK, CHALLENGES AND OPPORTUNITIES

50 50 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Light Vehicle Sales Canada and NAFTA, : mil. unit NAFTA market for new light vehicle sales; 8% of NAFTA LV sales : Canada outperformed NAFTA as overall sales collapsed; 11% of NAFTA light vehicle demand : Recovery and organic growth (Mexico and Canada) Unit Sales (Mil) Canada % of NAFTA Source – Wards/AMIP/AutomotiveCompass

51 51 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Light Vehicle Production Canada and NAFTA, Unit Production (Mil) Canada % of NAFTA Source – Wards/AMIP/AutomotiveCompass

52 52 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. NAFTA LV Production by Jurisdiction Ontario, Michigan, Mexico Volume Trends (Mil), Mexico B-car/CUV growth from Ford, GM, Nissan, Honda, Toyota, Mazda; C-car and CUV from Volkswagen Michigan B/C/D/E/F/S, CUV and SUV growth from GM, Ford, Chrysler Mexico (2008+) and Michigan (2014+) auto output (new investment driven) growing sharply as Ontario declines Unit Production (Mil) Source – Wards/AMIP/AutomotiveCompass

53 53 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Top 10 Auto Supplier Trends 6. Supply-Chain Transformation 1. Customer Facing Focus 1. Customer Facing Focus Increasing the Value of the Business 10. Core Competencies 10. Core Competencies 9. Systems & Modules 8. Globalization 8. Globalization 7. Resource Pressure 2. Growth 3. Cost Reduction 4. Technology 5. Brand Management

54 54 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Sources of Automotive Growth Products Key Sources of Growth RecoveryGeography New/Replacement Products New/Replacement Processes Vertical Integration M&A JVs Marketing Global Crises

55 55 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Megatrends New NAFTA Environmental Regulations Smaller, lighter vehicles, with upgraded fuel-efficient powertrains Will people want to drive much smaller vehicles? Will vehicle profit be high enough to justify investment? standards require a 65% improvement in fuel economy over current levels. Higher consumer ownership and operating cost. Will consumers accept paying more … possibly much more … for transportation? How do we as suppliers support global platforms and still look after local business opportunities?

56 56 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. NAFTA Auto Outlook Key drivers, enablers and constraints –Employment/Income Growth –Driving Age Population Growth –Age of Fleet –Ownership and Operating Cost –Affluence/Financial Stability –Technology –Fuel Economy Regs –Supply Chain Constraints Source: AutomotiveCompass

57 57 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Challenges for Canada High Exchange Rate Low investment in new production facilities Fiscally conservative governments at all levels High infrastructure costs – energy, environment A Southern production migration Adaptation of global platforms A conservative attitude Lack of overall confidence

58 58 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Canadian Advantages Health care costs Stable, business-oriented environment Productivity Quality Resources Infrastructure Tax structure Highly skilled labour/well-educated workforce; positive work ethic Strong product and technology mix Strong supply-base Modern and flexible manufacturing facilities

59 59 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Bridging the Innovation Gap Innovation is the key to long term success Applies to products, processes, tooling, systems It implies a commitment to product excellence OEM pulling technology rather than suppliers pushing Key Organizations that make it happen (private, associations & government) A commitment that the Automotive Industry is an essential and critical industry that always receives primary attention

60 60 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Collaboration with Academia Unprecedented amount of technical change in the next years Industry cannot get there on its own Collaboration is the only alternative Must have access to advanced research capabilities It will create an unprecedented demand for HQP (highly qualified personnel) and Technological Capability Opportunities for new manufacturing processes and procedures are abundant Manufacturing shapes our future!!!

61 61 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Challenges for Industry Protecting Intellectual Property Protecting manufacturing and product secret sauce The publish or perish imperative Adhering to automotive industry timing requirements Adhering to cost containment issues Location of facilities in proximity to manufacturing or engineering sites

62 62 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Episode IV – A New Hope Innovation must be our priority Encouraging progress that supports this initiative MARC Engineering Center CANMET Hamilton WatCAR Engineering Center UOIT Wind Tunnel and Facilities Embrace a new model that encourages public private partnerships (P 3 ) that will drive innovation Be open to learning from around the world Be great partners – the commitment to excellence A unique Canadian Identity

63 63 © 2013 Jerry Suyavong – ConfidentialDisclosure or duplication without consent is prohibited. Connected Vehicle CUTA Canadian Urban Transit Association ITS Canada Intelligent Transportation Systems APMA Automotive Parts Manufacturers Academia University Researchers Government Federal & Provincial CTA – OTA Canadian & Ontario Trucking Associations EMC Electric Mobility Canada First Responders Police/ Fire/ Ambulance The Connected Vehicle - Canadian Stakeholders

64 64 THANK YOU ! JERRY SUYAVONG Skype: jerry.suyavong Mobile: +1 (647)


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