1. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive The Effects of Globalization on the Aluminum Extrusion Industry The Effects of Globalization on the Aluminum Extrusion Industry Bruno G. Rüttimann, Alcan Singen GmbH Bruno G. Rüttimann, Alcan Singen GmbH 8th International Aluminum Extrusion Technology Seminar ET‘04 May 18-21, 2004 Orlando, Florida Part 1: Theoretical Considerations Part 1: Theoretical Considerations

2. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive  The Phenomenon of Globalization  Deriving Typologies of Globalization  The Characteristics of Extrusion Business  Quantitative Modelling  Outlook Part 2: Implications  The Phenomenon of Globalization  Deriving Typologies of Globalization  The Characteristics of Extrusion Business  Quantitative Modelling  Outlook Part 2: Implications CONTENT Part 1 (Technical Session): Theoretical considerations..

3. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Saturationin existing endmarkets Saturationin existing endmarkets World-wide communication network World-wide communication network Searching for optimization potential Searching for optimization potential Searching for geographical expansion Searching for geographical expansion Searching for diversification opportunities Searching for diversification opportunities M&A Opening ofa globalmarket with new competitive environment and new world market price Opening ofa globalmarket with new competitive environment and new world market price + Price/ margin pressure Price/ Change of competitive system Change of competitive system Shake-outShake-out Concentration process The Phenomenon of Globalization Main drivers

4. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Framework and determinants Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business type Business type Type of globalization

5. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization The characteristics of extrusion business Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business type Business type Type of globalization Product characteristics: In general: determined by the value and uniqueness of product competitive intensity given by the differentiation degree For extrusions: customer-designed semi-finished product virtually sold is the capacity the transaction object is a service

6. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business type Business type Type of globalization Market structure: In general: sets the competitive nature of the business given by concentration curve of supply and demand For extrusions: fragmented (polypolistic) competition structure relative low entry barriers reproducible know-how limited geographic scope of action (soft alloys) The characteristics of extrusion business

7. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business type Business type Type of globalization Operating configuration: In general: depends on product characteristics (value, customization, durability) determined by product-value/transport-cost ratio For extrusions: multiplant configuration with strategy of adding geographical market share - typical for a fragmented business The characteristics of extrusion business

8. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics

9. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Basic classification of business types Product characteristics Product characteristics Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization

10. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics PRODUCT CHARACTERISTICS non differentiated differentiated

11. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics PRODUCT CHARACTERISTICS non differentiated differentiated polypolistic oligopolistic MARKET STRUCTURE Commodity Speciality Standards Convenience

12. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization 2 main types polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type I Type 1: material G. (physical) Type 2: immaterial G. (financial)

13. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization 2 main types polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type 1: material G. (physical) Type 2: immaterial G. (financial)

14. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Quantitative Modelling Price discrepancy within different economies and corresponding propensity for globalization Volume Price FD I CH B G A E pApA pKpK Price span of similar economies Demand Z Supply Z Z pZpZ Transaction cost c ZK Globalization propensity (p K -p Z -c ZK )

15. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Deriving Typologies of Globalization... An additional subtype is emerging polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type Ic Type 1: material G. (physical) Type 2: immaterial G. (financial)

16. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Quantitative Modelling Propensity function and corresponding elasticity for globalization 0 100 200 300 400 500 V ZK Globalization volume (kton) 00,511,52 Propensity (Euro/kg) 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 Elasticity Propensity functionElasticity for globalization 0 p L K

17. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Theoretical Considerations Price drop and shake-out in economy K due to globalization Volume Price Demand K Supply K pKpK VKVK initial equilibrium Supply Z pZpZ VZVZ price drop of domestic supplies volume increase p dom V K‘ Supply K‘ final equilibrium shake out remaining domestic supplies V dom import supplies V ZK

18. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive What does that mean? Analyzing the impact on the extrusion industry  Will a world market price establish?  Do we have to expect structural changes?  Is a new business paradigm crystallizing?  What is the extent of globalization in extrusions?  How can we respond to this challenge?  Will a world market price establish?  Do we have to expect structural changes?  Is a new business paradigm crystallizing?  What is the extent of globalization in extrusions?  How can we respond to this challenge? Outlook part 2: Implications

19. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive Thank you for your attention and see you tomorrow in the General Session for: Part 2: The Implications Thank you for your attention and see you tomorrow in the General Session for: Part 2: The Implications

20. ET ‘04 May 18-21, 2004 Orlando, Florida B. Ruettimann, Alcan Automotive