Ron Harbour President, 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 Expertise Harbour Performance Manufacturing Assessments Lean Manufacturing Implementation/Transformation Strategic Planning Product and Process Design Product Launch Support Harbour Benchmarking Total Cost and Investment Modeling Cooperative Benchmarking Studies Cost and Investment Benchmarking Product Teardowns State of the Industry Harbour Report Global North 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

© 2005 Harbour Consulting. All Rights Reserved Recent Clients

© 2005 Harbour Consulting. All Rights Reserved North American Automotive Manufacturing Vehicle Assembly Stamping Engine Transmission Total185 Harbour 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) Millions of Vehicles U.S. 73.1% 10.8 M Japan 23.8% Korea 0.9% Europe 3.6% U.S. 71.6% 11.8 M Japan 21.5% Korea 1% Europe 3.3% U.S. 65.2% 12.9 M Japan 25.3% Korea 2.7% Europe 6.9% U.S. 56.9% 11.1 M Japan 32.2% Korea 4.3% Europe 6.5% Domestic brands still have 69% of assembly plants

© 2005 Harbour Consulting. All Rights Reserved North American Vehicle Assembly Plant Openings and Closings ( ) DaimlerChrysler Ford General Motors Toyota Honda Nissan Total - 6 New Plants Closed Plants Net Change

© 2005 Harbour Consulting. All Rights Reserved Chrysler Group North American Vehicle Assembly Capacity Millions of Vehicles Change from 1992 to 2005 NA Capacity rose 14% (11 to 13 plants)

© 2005 Harbour Consulting. All Rights Reserved Ford North American Vehicle Assembly Capacity* Millions of vehicles * 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 Millions of vehicles General Motors North American Vehicle Assembly Capacity Change from 1992 to 2005 NA capacity fell 31% (38 to 25 plants)

© 2005 Harbour Consulting. All Rights Reserved Honda North American Vehicle Assembly Capacity Number of Vehicles Change from 1992 to 2005 NA Capacity rose 129% (4 to 7 plants)

© 2005 Harbour Consulting. All Rights Reserved Nissan North America Vehicle Assembly Capacity Number of vehicles Change from 1992 to 2005 NA Capacity rose 192% (3 to 4 plants)

© 2005 Harbour Consulting. All Rights Reserved Toyota North American Vehicle Assembly Capacity* Number of Vehicles * Includes Toyota production from NUMMI Change from 1992 to 2005 NA Capacity rose 216% (5 to 7 plants)

© 2005 Harbour Consulting. All Rights Reserved North American Vehicle Assembly Capacity Millions of vehicles GM Ford DCX Toyota Honda Nissan Honda Ford Honda Nissan Others

© 2005 Harbour Consulting. All Rights Reserved North American Stamping (Domestics) GM No. of Stamping Plants No. of Stamping Plants Ford No. of Stamping Plants dcx 92 LINES 66 LINES 33O Lines 241 Lines 162 Lines109 Lines More stamping facilities, but most are smaller plants with fewer, better and more productive presses

© 2005 Harbour Consulting. All Rights Reserved North American Stamping (New Domestics) Number of Stamping plants Toyota 14 lines 22 lines Number of Stamping plants Nissan 11 lines 14 lines Number of Stamping plants Honda 6 lines 4 lines Japanese assembly plants always include a small on-site Stamping plant

© 2005 Harbour Consulting. All Rights Reserved North American Engine Capacity (Domestics) Millions of engines GM Millions of engines Ford DCX Millions of engines Domestic 7.5% less capacity 9.8% less production 15% fewer plants How will shrinking assembly capacity impact powertrain capacity?

© 2005 Harbour Consulting. All Rights Reserved North American Engine Capacity (New Domestic) Toyota Number of Engines Number of Engines Nissan Honda Number of Engines New Domestics 125% more capacity 113% More production Grew from 4 to 9 engine plants Stronger yen has driven the shift in powertrain capacity

© 2005 Harbour Consulting. All Rights Reserved 2005 North American Vehicle Capacity Utilization

© 2005 Harbour Consulting. All Rights Reserved Flexibility Drives Capacity Utilization No. of No. of No. of 2005 capacity lines platforms body styles utilization Honda East Liberty % Honda Alliston # % Nissan Smyrna % Toyota Cambridge % Ford Chicago % GM Oshawa % DCX Brampton* % * Operated on 3 shifts for most of 2005

© 2005 Harbour Consulting. All Rights Reserved 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 0% 23% 4% 2004 vs 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%

© 2005 Harbour Consulting. All Rights Reserved J.D. Power Initial Quality Survey Problems per 100 Vehicles

© 2005 Harbour Consulting. All Rights Reserved Translating Perception to Reality

© 2005 Harbour Consulting. All Rights Reserved Translating Perception to Reality