1. Preparing the Automotive Supply Chain for the next disruptive event
joseph bione| Whitehall group,llc.| September 28,2017

2. Joseph Bione
Joseph Bione is President and founder of the Whitehall Group with over 35+ years of experience in Transition Planning, manufacturing and restructuring. Mr. Bione’s expertise includes the areas of operations, finance, reengineering, enterprise lean, continuous improvement and supply chain management. The Whitehall Group provides services to companies in transition or trouble. In industry, Mr. Bione has served as Interim CEO/President for many clients during transition and return to profitability, including CMI Holdings, Venture Industries, Talon Automotive Group, Como Plastics, Detroit Plastic Molding and Kuhlman Automotive Group. He is currently serving as Interim President/CEO for American Special Vehicle Cars, (ASC) where he has won the 2016 Manufacturing Leadership Award (ML100) for Visionary Leadership. He was recently engaged as EVP of Operations at Constar, Inc. a $500MM manufacturing company, working with a team on restructuring the company, where he won the 2012 Manufacturing Leadership 100 (ML 100) Award for Turnarounds. Mr. Bione is on the Governors’ list of potential Emergency Managers and Whitehall has been approved by the State of Michigan as an approved “Turnaround and Restructuring” resource. (Contract # 271B ) Mr. Bione started his manufacturing career in “Erie, PA” at the Jacob Haller Company, AMSCO and then Johnson Controls, where he served as VP & General Manager for both the Automotive Group and Beverage Bottle Division and at the American Sterilizer Company, as Director of Operations for the Medical Products Division. Mr. Bione was also a Partner at Deloitte Consulting in the Automotive, Supply Chain and Restructuring Practices with Global Account Responsibility for DaimlerChrysler and co-leadership of the Global Automotive Practice. Mr. Bione is a frequent speaker at industry events, including the MICPA Management and Information Business Show, the Automotive News APD Motor Vehicle Metal Resins Conference and the OESA “Best Practices” Regional Meetings. He also contributed two guest columns in both the TMA newsletter and at the OESA Annual Outlook Conference. He participated in Powerplex as a guest speaker, the Automotive Supplier Finance Summit, and Eastern Michigan’s College of Business’ Ethos Week. Besides speaking, Mr. Bione has authored a series of four (4) articles in addressing the “Business Transition Issues” that companies are facing today featured in Business Management Magazine. Mr. Bione was an Advisory Board Member of Gannon University’s Business & Engineering Programs, University of Detroit Mercy’s Turnaround Management M.B.A. program, Eastern Michigan University’s Supply Chain Management program. He is currently a member of the Erie Chamber of Commerce and sits on an advisory board at the Children’s Hospital of Michigan Foundation. Mr. Bione earned his B.S. in Business Management with a minor in Engineering, an M.B.A. in Organizational Behavior, and the “Distinguished Alumni Award” from Gannon University in Erie, PA. His certifications include the CPM (Purchasing), CPIM (Production Control & Inventory), and is a longtime member of the Turnaround Management Association. (TMA)

3. The Whitehall Group, LLC.
Management firm providing services to privately held middle market companies in transition
Serve clients through variety of channels
Guided by needs and best interests of the client
Serve primarily privately held, middle market companies
Utilize enterprise-wide methodologies for operational & financial improvement
Rapidly improve bottom-line performance
Right combination of experience, expertise, and client side perspective
Drive change and deliver value
Areas of expertise include:
Financial reporting, analysis and controls
Commercial marketing, selling and distribution
Organization cultural changes, metrics and communication
Operational evaluating, implementing and improving
Strategic analysis planning and execution
Supply Chain procurement, logistics and distribution
Key differentiator is ability to actively assume operating roles and support
WE ARE EXPERIENCED
BUSINESS PEOPLE
WHO UNDERSTAND
THE ISSUES

4. Questions Suppliers need to ask
The Auto Industry is in the midst of its 5th record year but,…..
Is it business as usual or should suppliers be concerned?
Is there uncertainty once again in the supply chain?
Is a disruptive event coming?
Are you prepared for a disruption?
What should you so to get prepared?
What are the key elements that you can control?
No one knows where we are heading and you can only control what’s inside your four walls

5. History- Large Suppliers
Industry collapse 2009
GM/Chrysler Bankrupt- Ford on the edge with the Global Automotive Industry all in decline
Consolidation and downsizing at extreme
(Examples: # of OEM’s then to today and # of brands eliminated)
Large Suppliers weathered the storm
Leveraged strong balance sheet
Lean operations
Cutbacks and downsizing
Came out of the situation more lean and profitable while growing top/bottom line
Large investments are being made in new technology
New non automotive giants are entering the game
New partnerships are being formed
The industry is leaner and profitable but, uncertainty is everywhere

6. History –Tier 1, Tier 2 & Tier 3 Suppliers
Industry collapse 2009
GM/Chrysler Bankrupt- Ford on the edge with the Global Automotive Industry all in decline
Consolidation and downsizing at extreme
(Examples: # of OEM’s then to today and # of brands eliminated)
Smaller Suppliers mortgaged the farm to stay alive- used balance sheet and stressed it
Made significant cuts- “brain drains”- shelved unused equipment and diminished capacity
Those that survived (not sold/merged/closed) started accepting any new business “top line growth”
At what cost? Margins eroded as suppliers could not afford to say “no”
Balance sheets slowly started to improve as suppliers are trying to get back to “business as usual”
With “business dynamics” changing, new technology develops new partnerships
New players are entering the market
Is it business as usual or are we approaching another DISRUPTIVE event?

7. What is a Disruptive event?
Define a disruptive event:
WHEN A NEW PRODUCT OR SERVICE HELPS
create a new market
AND
significantly weakens, transforms, or
destroys an existing product, market category / industry
Are we headed for our next disruptive event in the auto industry?
Credit: Clean Disruption by Tony Seba March 17, 2016

8. 1900 the car? Where is 5th AVE NYC
: Fifth Ave NYC on Easter Morning 1900
Credit: Clean Disruption by Tony Seba March 17, 2016
US National Archives

9. 1913 the horse? Where is 5th AVE NYC George Grantham Bain Collection
Photo: Easter 1913, New York. Fifth Avenue looking north.
Credit: Clean Disruption by Tony Seba March 17, 2016

10. iPhone vs Technology
The iPhone is only 10 years old, can you remember life prior to smartphones?

11. Why do we fail to anticipate disruptions?
Why do smart people at smart organizations consistently fail to anticipate or lead market disruptions? It’s usually the ‘experts’ and ‘insiders’ who dismiss Disruptive Opportunities Example: ‘Expert’ Disruption Forecasts In the mid-1980s AT&T hired McKinsey & Co to forecast cell phone adoption by the year 2000
They were off
by a factor of: 120X *
What about Kodak, Garmin, pagers, day planners and all of the products that don’t exist today?
Credit: Clean Disruption by Tony Seba March 17, 2016

12. Amazon the “GREAT” Disruption to Retail
* Does not include
Whole Foods
….and it’s still growing
Did anyone see this disruption coming?

13. What happens when you fail to anticipate disruptions?
None of these companies anticipated or prepared for Amazon’s impact on sales Retail Store Closings (so far) in 2017
These companies didn’t see the disruption Amazon is creating – with more to come

14. Disruption in the Auto Industry is here
The technologies, skills, and organizations of the industrial revolution have run out of steam
They are being replaced by the technologies, skills, and organizations of the information technology revolution
Energy Storage
Electric Vehicles
Self-Driving Cars
Solar PV
Image: © Copyright Tony Seba
We will see more changes in energy & transportation over the next 5-10 years than we have seen in a century
Credit: Clean Disruption by Tony Seba March 17, 2016

15. Disruption 1 in the Auto Industry- The Electric Vehicle
Every OEM has electric vehicles and is developing more today at an accelerated pace
Credit: Clean Disruption by Tony Seba March 17, 2016

16. Global Annual EV Sales 2011-2016
However, is the market ready for them- skeptics say no, yet global projections are high

17. Disruption 2 in the Auto Industry- The Autonomous Vehicle
Most cars today have nearly all of the built in capabilities to be self driving today
Credit: Clean Disruption by Tony Seba March 17, 2016

18. Global EV & Autonomous predicted Sales to 2025
Again is the market place ready for a self driving car and what will the impact be on the supply base

19. Suppliers on Track for Record Acquisitions
The auto industry's rush to develop self-driving vehicles, connected cars and electric vehicles has goaded suppliers into a feeding frenzy of acquisitions, completing a record 203 acquisitions valued at $57 billion which is nearly double the value of deals in 2016, according to a study by PricewaterhouseCoopers.
Deal makers were motivated by self-driving vehicles, connected cars and fuel economy.
Chinese buyers initiated 17 percent of the deals, a sign they are globalizing their operations.
The big money is in electronics, which generated 36 percent of aggregate deal value.
Consumer electronics giants such as Intel Corp. and Samsung are making major acquisitions in a bid to establish an automotive presence.
North American suppliers were the likeliest buyers.
While the fundamental technology trends — connected cars, self-driving vehicles and improved fuel economy — are clear, the timing of acquisition activity can be tricky. A number of automakers have announced plans to introduce electric cars and plug-in hybrids, but sales forecasts are a crapshoot.
Suppliers are trying to find out what it means for them and to what degree they need to change. Nobody is getting rich right now by focusing on electric vehicles, but some suppliers see the handwriting on the wall. If you manufacture engine blocks, it doesn’t take a brain surgeon to figure out that 50 years from now, we’re not going to need as many engine blocks.
*Credit: Automotive News article by David Sedgwick 8/28/2017

20. When is the next Disruption coming
It is here, its happening now!
It is not clearly understood
It is hard to describe
It could be a big disruption or it could be small
It might directly effect your company or indirectly but, it will effect ALL
No one knows exactly but, investment in disruptive technology is exponential with new players entering the race daily
What can a Tier 1-2 Supplier do to prepare for a disruptive event?

21. Who will affected the most
Companies that are committed/stuck in old technology or soon to be obsolete products
Companies who are not profitable or have the balance sheet to react or play in the new market
Companies who are not aware of changes around them both at customer and supply chain level
Companies that do not have any new or innovative technologies to distinguish themselves from their competitors
Companies with a “this is the way it has always been done” mentality or an “it’s not going to change and effect me” attitude
Any company that is not prepared for change and can not react quickly will be affected

22. What can you do to prepare your business
Listen/learn- Stay aware of the situation and what’s happening at each level
Your ultimate customers OEM
Tier 1 Giants
New Technology entrants
Your competitors
Your Supply Chain
Control what you can inside your four walls
Be ready and open for change- mindset of both Owners and Employees
Be agile- Prepared to react and make decisions intellectually/quickly
Knowing where your company is daily will provide you with the information needed to react quickly when needed

23. How to prepare your business
Keep financials in order – manage cash
Manage the business with data
Know if you’ve met financial / operational objectives
Understand your customers and their contribution
Manage and challenge the entire supply chain
Manage the business in a War Room environment
Change culture, accountability and agility 23 23

24. These are the elements you need to manage on a daily basis
1. Keep Financials In Order
Manage Operating Results
Obtain & evaluate results of operations over time; annual totals can be misleading
Common size to determine fixed and variable costs and drivers of variable cost and resultant cash needs
Budget and actual comparison
Identify drivers of abnormal results and normalize, including seasonality
Accounts Receivable, Accounts Payable and Cash Receipts
Know your customers and vendors payment terms
Utilize database & due date records to forecast cash receipts and needs by week
You cannot carry your customers and your vendors cannot carry you
Liquidation Analysis
What your asset base can support in borrowing
Utilize in negotiations with lenders and trade creditors
Know what your creditors and suppliers see
These are the elements you need to manage on a daily basis 24 24

25. What is my cash availability today? What about the next 26 weeks?
1. Keep Financials In Order
A rolling (13-26) week Cash Flow Analysis is an important tool for understanding financial viability and the ability to meet contractual agreements
need monthly thereafter for six (6) months
IT monitors changes in key working capital accounts
cash
inventory
revolving credit
accounts receivable
accounts payable
The results form an actual week cash flow of planned receipts and disbursements by line item with corresponding balance sheet impact
Highlights potential out of formula and amount of financial resource shortfall
Focuses on cash drivers
What is my cash availability today? What about the next 26 weeks? 25 25

26. How did we perform today?
2. Manage the Business with Data
Critical observation of businesses in transition is the inability to understand both operational and financial performance on a daily basis
Management must identify the key performance metrics which may be aimed at optimizing operations while satisfying customer requirements
Characteristics of key performance metrics
Measure the entire enterprise
Cross-functional
Owned by functional managers
Represent critical cost drivers that can be translated directly to financial results
Are applicable at both the administrative and operating floor level
Visible to the organization
Supported by data, and tracked on a daily, weekly, monthly basis
Allows management to evaluate the effectiveness of initiatives or corrective actions
This provides significant value in objectively communicating with your management customers and lenders; helps you understand and manage your business
How did we perform today? 26 26

27. EXAMPLE OF KEY PERFORMANCE INDICATORS (KPI’S) FOR BUSINESS
2. Manage the Business with Data
EXAMPLE OF KEY PERFORMANCE INDICATORS (KPI’S) FOR BUSINESS 27 27

28. 3. Know if you’ve met Financial / Operational Objectives
In general, operations personnel tend to think in terms of units, minutes, %’s, etc.
In many cases, operations personnel are not aware whether they are running profitably or the impact
of their decisions
In general, financial personnel tend to think in terms of $$$ and struggle as to which operating initiatives can improve profitability
It is imperative all staff members in the organization have a good understanding of the cause and effect relationship between functional performance and financial performance
Key performance indicators need to be identified and translated into a daily or weekly determination of profitability versus end of the month results (surprises)
Did we make money today? 28 28

29. 3. Know if you’ve met Financial / Operational Objectives
Daily Key Performance Indicators
Critical for all staff to understand the link between
performance in their area to profitability
MTD Daily
Operations performance needs to be translated into financial performance 29 29

30. 4. Understand your Customers and their Contribution
Increased sales, more customers, or more products don’t necessarily translate into improved financial or operational performance
Complexity drives variation, variation drives cost and potential for waste
A critical evaluation of your customer base is needed to understand contribution and complexity
The “80 / 20” rule often occurs
80% of sales is accounted for by only 20% of your customers
Although profit margins may be excellent for low volume products or customers, the true cost of their complexity is often unknown or hidden
dedicated or excess processes
tooling storage / maintenance
cost of inventory (raw, WIP, finish)
proliferation of documentation &
communications
maintenance of idle processes
tool or die movement & changes
floor space utilization
administrative workload impact on Sales, Purchasing, Financial, Logistics
Do you understand the “true cost” of doing business with your customers? 30

31. 5. Manage and Challenge the Entire Supply Chain
Seven key questions need to be addressed for the overall optimization of the business supply chain:
How is the supply chain performing? Where can I maximize value? Where am I at risk? 31

32. 6. Manage the Business in a War Room Environment
Performance needs to be managed on a daily basis, in an organized environment
A standardized agenda is determined which defines what information is reviewed
Information is visible, with results posted on functional charts
All key staff members participate and are responsible and accountable for the results in their area
HR, Sales, Material, Finance, Production, Quality, Maintenance, etc.
Purpose of meeting:
Manage performance as a management team
Identify opportunities; cause and effect relationships
Identify and track specific corrective actions or continuous improvement initiatives
Maintain regiment in focusing on financial and operational performance
Action and accountability
Does “everyone” understand the individual performance required to meet the business objectives? 32

33. 6. Manage the Business in a War Room Environment
Visual Display of Performance
War Room Process
Make results visible
Review performance as a management team
Identify opportunities; cause and effect relationships
Identify and track specific corrective actions or improvement initiatives
Maintain regiment on financial and operational performance
Action and accountability
Demonstrate understanding to stakeholders
Do all employees understand what impact their performance has on the company performance? 33 33

34. Business Operating Metrics
7. Change Culture, Accountability and Agility
Business Operating Metrics
Clearly defined processes for reporting and communicating the proper metrics and targets at all levels (plant, division, corporation) and links to insure alignment across the entire organization.
Metrics, Knowledge, Accountability, Action and Agility drive a companies ability to react to any disruptive event 34

35. 2017 THIS DISRUPTION IS NOT IN THE FUTURE.
THE FUTURE IS NOW AND IT IS HAPPENING NOW!
ARE YOU PREPARED?
US National Archives
Credit: Clean Disruption by Tony Seba March 17, 2016

36. For more information or a consultation:
Joseph Bione
801 W. Big Beaver
Troy, MI 48084
Office:
Cell:
Visit our website: 36 36