GLOBAL AUTOMOTIVE ANTI COUNTERFEITING ALLIANCE Alexander Theil AASA China Aftermarket Forum Meeting Shanghai, June 7, 2007

Counterfeit auto parts are a public SAFETY hazard!!! Everybody is a potential victim!!! WomenChildren Senior Citizens DriversPassengersPedestrians

BACKGROUND Counterfeit Automotive parts are a growing global phenomena. Current Anti-Counterfeiting programs unable to deliver satisfactory results Considerable Frustration, even Resignation within Industry due to limited progress

BENCHMARK Automotive Industry is not sufficiently organized to effectively compete with other Industries such as –Motion Picture Industry (MPA) –Phonographic Industry (IFPI) –Software Industry (BSA) –Pharmaceutical Industry (PHARMA) Despite the fact that auto parts are a public health and safety concern, enforcement authorities spend more efforts for these industries than for the automotive industry.

WHY NOW In most countries in Asia, the above Copyright Industry Associations dominate –the public dialogue regarding counterfeiting –law enforcement agenda They have now also started to dominate the agenda setting with the Chinese government. Enforcement results for the Auto Industry in China are going to get considerably worse - unless we act !!!

CURRENT SYSTEM Each company running own enforcement program with ad hoc cooperation between brand owners Investigations and enforcement usually outsourced Most cases involve many brand owners, usually service providers coordinate enforcement actions

CURRENT LIMITATIONS Governments do not wish to be seen to support just one company, one country or one region. –However, they are willing to listen to a global industry perspective, in particular if this also extends to the local industry Criminal law enforcement agencies in many countries will not take cases unless ALL brand owners involved commit to support the case. –These agencies will focus on industries which have organized themselves and will ignore those which have failed to do so.

SOLUTION Global Automotive Brand Owners Anti-Counterfeiting Alliance (“Automotive Alliance”) To be effective the Alliance has to be Global in nature, i.e. it has to be perceived as representing the industry as a whole, without any national or regional limitations.

Representation of Industry as a Whole Being global in nature will allow the Alliance to advance its agenda independent from wider geo political developments The Alliance will provide a competent and reliable point of contact for governments, law enforcement, media, etc. –In every key country, there will be dedicated resources, contact points, or hotline

Coordination of Local / Regional / International Cases Alliance coordinates all Investigations and Enforcement actions involving more than one Brand. Oversee service providers on behalf of the individual companies –Ensure quality of investigative work –Ensures that fees charged are appropriate. Every case will be analyzed from an International perspective to identify the global networks the counterfeiters are operating Disaster regions, i.e. regions in which counterfeiting is of particular eminence will be identified. –Specific programs will be established to address the particular situation in each disaster region. –These all encompassing programs will be tailor made to address the specific problems in each region. –They will include investigations, as well as aspects of enforcement, education, public policy, public relations, government lobbying, etc

Supervision of Enforcement Actions Alliance officials/employees will Attend raid actions whenever possible Conduct post raid follow up

Lobbying and Government Representation Lobbying on case related details, –Higher level enforcement –Ministerial level enforcement officials, –Local governments –Regional governments –National governments Lobbying on public policy debates to influence changes in policy –Intellectual Property laws –Law enforcement implementation rules and guidelines

Customs Training and Alerts Main Goal is to Focus Government resources onto the Automotive Industry instead of other industries. One Alliance official could be responsible for –Training, –Customs response –Product inspection services –Lobbying –Etc. The health and safety aspect of the automotive industry should provide us with a natural ranking on top of the priority list

BENEFITS Substantial Cost Savings Dramatically Better Results –Quantitatively numbers of seizures, prosecutions, and compensation will increase dramatically. –Qualitatively the information obtained in the course of the cases will allow us to strategically address the global networks and the organizers behind the scene. This in turn will eventually create a deterrent effect and will result in discouraging counterfeiters from the automotive industry as a whole. Increased Policy Influence

Supervisory Board Chairman Asia MD Korea MD China MD ASEAN MD India STRUCTURE TOP-DOWN APPROACH (Asia Wide) Enforcement Manager Enforcement Manager Enforcement Manager Fulltime Alliance Employee Member Employee

Supervisory Board Chairman Vice Chairman Vice Chairman Vice Chairman Vice Chairman Enforcement Manager Enforcement Manager Enforcement Manager Enforcement Manager STRUCTURE BOTTOM-UP APPROACH (China Only) Fulltime Alliance Employee Member Employee

BACK UP 1: STRUCTURE BOTTOM-UP APPROACH (China Only) SUPERVISORY BOARD: Consisting of representatives of all Alliance member companies CHAIRMAN: –Manages the Alliance on behalf of the Supervisory board. –Represents the Alliance towards government, public, etc. (In the long term this position should be a full time Alliance employee, but for the start up stage the function shall be performed by a representative elected from within Supervisory board members) VICE CHAIRMEN (x numbers) : –Assist the Chairman in representing the Alliance toward governments, public, etc. (lobbying, marketing) (This function shall be performed by a number of representatives elected from within the Supervisory board) ENFORCEMENT MANAGER(S): –Coordinating all Alliance investigations –Supervising Alliance raid actions and conducting post raid follow-up (particular the second element will result in drastic cost reductions). –Contact point for customs seizures and responsible for customs training Full time position(s) reporting to the Alliance Chairman.

BACK-UP 2: “Typical” Case: FENGHUA YLJ Raid Action in Zhejiang Province in December 2006 resulted in seizure of US$1,2 million worth of products (based on dealer price) CUSTOMERS: Identified over 100 companies in 35 countries including Asia, Middle East, Europe, Africa, South America SOURCES: Identified over 100 manufacturers of various auto parts, all located in China. Follow-up investigations already led to seizures in Dubai, Germany, Poland, Romania, Hungary. Value of additional products, labels, packaging seized, and sales information discovered worth US$38.4 million (retail value of case so far ca US$80 Million) Further investigations in other countries around the world ongoing

Counterfeit auto parts are a public SAFETY hazard!!! Everybody is a potential victim!!! WomenChildren Senior Citizens DriversPassengersPedestrians