Replacing Cast Aluminum Wheels with Hayes Lemmerz Flex Steel Wheels Technical and Marketing Challenges

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1 Replacing Cast Aluminum Wheels with Hayes Lemmerz Flex Steel Wheels Technical and Marketing Challenges Presented by Tom Heck Hayes Lemmerz International, Inc.

2 Agenda Wheel Market Overview Consumer Preferences Flex Wheel Solution Market Success Conclusions and Questions

3 North American Passenger Car and Light Truck Wheel Market

4 North American Wheel Market Significant Wheel Market Changes Aluminum Wheel Penetration Erosion of Steel Wheel Usage

5 North American Wheel Market Vehicle Build Total Aluminum Penetration Vehicle Build (000s) % 55.1% 57.4% 57.3% 61.1% 65.0% (30 Points Total Since 1994) 100% 75% 50% 25% 0% Copyright 2005 by Ward s Communications - 1/24/05 % Factory-Installed Equipment Steel Wheels Have Lost 10 Points of Market Share Since 1999

6 North American Wheel Market Result Closure of Seven Steel Wheel Plants in North America

7 North American Wheel Market Contributing Factors to Aluminum Increases Marketed as Higher Value (Alloy Wheels) Option Package Inclusion Niche Market Vehicles / Vehicle Personalization Low Cost Off-Shore Aluminum Wheel Supply

8 Consumer Wheel Preference Factors

9 Consumer Preferences 2001 Burke Group Market Study (AISI) Objective: Consumer Acceptance of Wheel Type (Steel vs Aluminum) in Option Packages Wide Consumer Demographics Age Mean Income = $47K In the Market for a Vehicle Mid-size Sedan Pick-up Truck Mini-Van

10 Consumer Preferences Introduction Total Respondents ALUMINUM Projected Penetration ALUMINUM Projected Revenue STEEL Projected Penetration STEEL Projected Revenue Cost Savings 100% 90% $100,000 $90,000 Weight Savings Styling at Parity With Aluminum Conclusion Projected Penetration 80% 70% 60% 50% 40% 30% 20% $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 Projected Package Revenue Per 300 Study Households 10% $10,000 0% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% $0 Price of Upgrade Package (expressed as percent above MSRP of vehicle) Effects of Wheel Type on Value in Option Packages

11 Consumer Preferences Introduction Cost Savings Weight Savings Styling at Parity With Aluminum Conclusion

12 Consumer Preferences Introduction Cost Savings Weight Savings Styling at Parity With Aluminum Conclusion Key Conclusions Replacing aluminum wheels with styled steel wheels in upgrade packages will maintain option package demand and revenue Appearance, not Material, is the key attribute Cost savings go straight to bottom line

13 Hayes Lemmerz Flex Wheel Solution

14 Flex Wheel Solution Aluminum Replacement by Steel Not Driven Solely by Cost Need to Maintain Value in Option Packages Customer Acceptance of Appearance

15 Flex Wheel Solution Additional Market Challenges Avoid Replacing Existing Steel Wheels Add Value not Cost

16 Flex Wheel Solution The Hayes Lemmerz Solution: Offer a Steel Wheel and Trim System With Competitive Appearance to a Cast Aluminum Wheel.

17 Flex Wheel Solution The final result is an attractive wheel with easy to change appearance by changing the trim. No revalidation of the wheel is necessary.

18 Flex Wheel Solution Conventional Steel Wheel + Cover FLEX Wheel System + Trim System Competitive Appearance to Cast Aluminum

19 Flex Wheel Solution THE TECHNICAL CHALLENGES: Fatigue Strength Open Channel Spokes vs Toroidal Geometry Large Windows Formability Deep Channel Draw Deep Hub Draw Thinning in Critical Stress Locations Complex Window Pierce

20 Flex Wheel Solution Channel Section Toroidal Radius Conventional Wheel Disc Section Flex Wheel Disc Section

21 Flex Wheel Solution Benefits to the OEM Significant Margin Improvement per Vehicle Differentiation through Wheel Trim Multiple Styles / Vehicle Use on a Single Wheel Restyle at Lower Tooling Cost (Trim Only) Restyle Returned Lease Vehicles Reduced Wheel Validation Costs Lower Wheel Replacement Costs / Warranty

22 Flex Wheel Solution Styling Flexibility Injection Molded Trim Allows: Deeper Spoke Appearance at No Mass Penalty Lower Spoke Drafts (Near Zero Draft Angle) Euro-Flange Appearance with Standard Balance Weights

23 Flex Wheel Solution Finish Flexibility Bright Paints Chrome Shadow Chrome Plated Vapor Deposition

24 Market Introductions and Success

25 Market Introductions and Success 2006 Malibu / Malibu Maxx Success Story 16x6.5 Flex Wheel Introduction Replacing Three Cast Aluminum Wheels (N.A.) Significant Revenue Enhancement Painted Finish Standard on LT Model Optional Chrome Plated Finish Same Wheel Used on Opel Vectra Significant Revenue Enhancement

26 Market Introductions and Success Malibu/Opel 16x6.5J Flex Steel Wheel Flex Wheel with Malibu Painted Trim Flex Wheel with Malibu Chrome Trim Flex Wheel with Opel Painted Trim

27 Market Introductions and Success 2005 Model Year Wheels Entry Level (LS) 15 Base Wheel + Cover Standard Wheel LS Package 15 Painted Aluminum Standard Wheel LT and Maxx LT 16 Machined Face Standard Wheel Maxx LS Package 16 Painted Aluminum Fascia Spoke Wheels 2006 Model Year Wheels Entry Level (LS) 15 Base Wheel + Cover Standard 16 Wheel LT and Maxx LT Painted Trim Optional 16 Wheel LT and Maxx LT Chrome Trim

28 Market Introductions and Success Ref: Additional Revenue Enhancement by Reserving 17 /18 Aluminum Wheels for Sport Packages (LTZ / SS)

29 Market Introductions and Success 2006 Model Year Introductions North America Chevrolet Malibu LT / Maxx LT Ford Mustang V6 Convertible Europe Opel Vectra Exclusiv Opel Zafira / Meriva

30 Market Introductions and Success 2006 Malibu LT/ Malibu Maxx LT

31 Market Introductions and Success 2006 Ford Mustang V6 Standard Convertible

32 Market Introductions and Success 2006 Opel Exclusiv / Zafira / Meriva

33 Conclusions and Questions

34 Conclusions and Questions Conclusions Steel can Replace Aluminum in Wheels By Providing Significant Cost Saving By Providing Equivalent Appearance Value Validated by the 2006 Introductions of the Hayes Lemmerz Flex Wheels Questions