GABELLI & COMPANY AUTOMOTIVE AFTERMARKET SYMPOSIUM

Transcription

1 GABELLI & COMPANY AUTOMOTIVE AFTERMARKET SYMPOSIUM JACQUES ESCULIER Chairman & Chief Executive Officer November 4, WABCO Holdings Inc. All rights reserved.

2 TECHNOLOGY LEADERSHIP WABCO is THE TECHNOLOGY LEADER in our industry. WABCO has brought to market the OVERWHELMING MAJORITY of the key innovations and technology breakthroughs in braking and control systems for the global commercial vehicle industry. For more than 30 years, WABCO has achieved the most number of INDUSTRY FIRSTS for trucks, buses and trailer systems. 2

3 INNOVATION TRACK RECORD WABCO COMPETITION Industry First (1) Innovation (2) Industry First (1) Innovation (2) 2009 ESCsmart Trailer OptiTurn, Trailer OptiLoad, EcoSmart 2008 OnGuardMax AEB High-output compressor, OptiDrive Modular AMT, New Generation IVTM Blind-spot detection? 2007 OnGuard CMS RSSPlus (US) Roll Mitigation, WW Modular Compressor 2006 Two-stage compressor 2004 Hydraulic Transmission Automation New Generation ADB, Air System Protector, Trailer SmartBoard 2003 Electronic Air Processing Unit IVTM 2001 ESC Adaptive Cruise Control 2000 RSS for trailers Mechatronic Gearbox controllers 1998 Trailer EBS 1996 EBS CAN data bus for inter-system communication All-wheel disc brake for heavy duty trucks 1995 All-wheel disc brake for medium duty trucks First mechatronic device, TCS trailer ABS for US 1993 Trailer Compact Lift axle valve 1990 ECAS for Cars, SUVs, Light CVs 1985 Pneumatic AMT, ECAS, ASR 1982 Electronic Climate Control, Electronic Door Control for buses 1981 ABS 1973 Dual-line air braking system (1) Industry First: technology which is introduced in the industry for the first time and is set up for mass production and broad market adoption (2) Innovation: significant technology advancement which is not new to the industry WABCO is the Technology Leader in Our Industry 3

4 PRODUCT PORTFOLIO Air Compressors 11% Anti-Lock Braking Systems 12% Air Processing 8% Car Products 4% Conventional Brake Controls 12% Transmission Automation, Clutch Control 13% Actuators 9% Electronic Braking and Stability Control Systems 11% Foundation Brakes 6% Others 7% Suspension Control 7% % 2008 Sales 4

5 TRUCK & BUS REGIONAL ATTRIBUTES Estimated applicable $ content per vehicle $K Typical heavy truck price in market NORTH AMERICA <$1,000 $80K Less advanced technology vs.western Europe Large OEMs: Daimler, Volvo, PACCAR, ITE Large fleets, able to influence OEM design SOUTH AMERICA <$1,500 $65K Less advanced technology mostly from Brazil Main OEMs: Daimler, VW, Volvo, Scania WESTERN EUROPE >$3,000 $130K Advanced technology, high electronics penetration 6 OEMs: Daimler, Volvo, MAN, Iveco, PACCAR, Scania Few large, pan European fleets JAPAN & KOREA <$1,000 $80K Technology moving towards Western Europe Main OEMs: Hyundai, Hino, Isuzu, ND Targeting global market EASTERN EUROPE <$500 $70K Fast growing production Improving quality and safety Global and local OEMs: KamAZ, MAZ, RusBus, Tatra, Roman CHINA <$300 $30K Basic technology; advanced technology penetration under 10% of total market 3 large OEMs: FAW, DFM, CNHTC; many small 5

6 COMPETITIVE OVERVIEW KNORR HALDEX LCC COMPETITORS Technical capabilities similar to WABCO No position in transmission automation or cars Strong position in North America following BENDIX acquisition Trailing in emerging markets Challenger position Lower electronics capabilities compared to WABCO and KNORR Strong automatic slack adjuster business Entering into special products for diesel engines Strong low cost / low tech solutions Mainly mechanical capabilities Targeting specific markets with specific product ranges Low price strategy in Aftermarket WABCO KNORR HALDEX LCC competitors (2008 Estimated Commercial Vehicle Sales) ($2.6B ) (~$2.9B ) (~$0.5B) (All Under ~$0.2B) Anti-lock Braking Systems Electronic Braking Systems Conventional Products Transmission Automation Air Compressors Air Processing Actuators Suspension Control Foundation Brakes Complete Offering Partial Offering Niche Offering sources: KNORR-BREMSE website, HALDEX Annual Report

7 WABCO VISION & CORE STRATEGY Innovation/technology leadership Bring value as technology development/systems integration partner Global capability Connect with customers in every region Excellence in execution Differentiate WABCO through service and quality excellence additional value as a solutions partner maximum operational efficiency (backbone is Six Sigma Lean) Also Sustains Our Success in Adverse Markets 7

8 ADVANCED SAFETY & DRIVER EFFECTIVENESS Mission Provide advanced and integrated safety solutions Crash Driving Situations Normal Driving Critical Situation Pre Crash Phase After Crash Integrated Active Safety Concept Passive Safety Advanced Driver Assistance Systems Braking Chassis Systems Suspension Telematics Innovations - Extract - EBSNG NG22MAX i-range Actuators ECASNG CALMNG Event Recording Future Path - Extract - EMH EPH EMB Data Logging Our Path to Realize Zero Accidents 8

9 VEHICLE EFFICIENCY ROADMAP EcoSmart Clutch Compressor Transmission automation TPMS Tire pressure monitoring 2-stage Compressor Fuel Efficiency Energy Recovery Weight Reduction Smart Air Supply E-APU E-comp - electrical driven compressor Emission & retarder controls New light weight heavy truck brake NG22MAX High Output Compressor Alu-Crankcase Driven to Continuously Improve Vehicle Efficiency (TCO) 9

10 GLOBALIZATION Local Market Connectivity Local Manufacturing Local Supply Chain Product Development All Regions managed 2 factories in China, Local strategic 2nd Product by local teams No expats in key leadership positions 9 Nationalities from 4 continents in Leadership team Took over JV in India #1 Position in all Asia countries, especially in China and India #1 Position at Kamaz - Benchmark Lean Processes 2 new factories in China to be opened Q factories in India - Multiple Award Winning 1 Factory in Brazil - Lean Transformation under way sourcing teams connected to global commodities Strong supply base covering core commodities Local supplier management Leveraging BCC capabilities for global manufacturing sites Development Pillar in India to address emerging countries specificity and conventional product design (150 engineers) Software development center in Chennai (85 engineers) Test & design center in Poland to support Hanover (100 engineers) Powerfully Positioned Across Emerging Markets 10

11 GLOBALIZATION: MANUFACTURING STRATEGY Global Manufacturing Strategy Supporting Local Markets from Local Factories Leveraging Manufacturing Capabilities in China and India to Lower Costs Share of Workforce By: High Cost Country 10% 22% 39% Best Cost Country 46% 55% 58% Focusing Western European Factories on More Complex Technologies 90% 78% 61% 54% 45% 42% Starting to Move from High Cost Countries to Best Cost Countries F Accelerating 6 Sigma Lean Deployment in all Facilities 11

12 GLOBALIZATION: SOURCING STRATEGY Global Sourcing Strategy Share of Sourcing By: Focusing Purchasing Strategy on 3 Main Regional Clusters - Western Europe, Central/Eastern Europe and Asia Consolidating Supply Base High Cost Country 10% 22% 30% Best Cost Country 35% 40% 47% Driving Quality Improvement and 6 Sigma Lean Implementation at Key Suppliers Leveraging Broad Internal and External Capabilities in India and China Performing Continuous Supplier Risk Management Analysis 90% 78% 70% 65% 60% 53% F 12

13 GLOBALIZATION: ENGINEERING STRATEGY Global Engineering Strategy Engineering Workforce by: WESTERN EUROPE Advanced products and Systems Connectivity to European OEM development Technology, Process, Data and Systems CENTRAL EUROPE Conventional Products Design Support Standards, material and Requalification Test Center High Cost Country 100 Growth in Resources (Indexed to 2002) % % Best Cost Country 27% % AMERICAS ASIA 96% 86% 83% 73% 69% Connectivity to US and South American OEMs Regional Variant Development Application Development Customize Products for the Region Software Development Design and Calculation Support F 13

14 GLOBALIZATION: CHINA Leading market position WABCO as brand of reference Outstanding local sales support and network Strong connectivity to all vehicle manufacturers Strong sales growth (2005 to 2008; CAGR 70%) Constantly outperforming market growth Efficiently competing against local suppliers Broad core product range from conventional to ABS and AMT, manufactured locally Successfully introducing new technologies in the market (ABS, Compressors, OptiDrive AMT) JV with FUWA, world largest manufacturer for trailer axles to produce WABCO air disc brakes Picture ABS Successfully Established WABCO as Brand of Reference 14

15 WABCO in INDIA June 4, 2009 WABCO increased stake to 75% in WABCO TVS India a 50 year old minority JV Strong market position in India World class manufacturing; 2 sites supporting local needs and 1 for WABCO global needs Outstanding PD capabilities 150 mechanical and software development engineers Excellent platform for leveraging Emerging Market Technologies across WABCO operations in markets such as SA; APAC; Russia; etc... Strategic Step in Solidifying Our Path to Globalization

16 WABCO OPERATING SYSTEM Pillar Vision Organizational Development Extend Value Stream Mgmt to all facilities Enhance People Development Processes Expand global footprint for key support functions (IT, engineering) Increase VSM maturity across all facilities Optimize supplier development structure Support integration of WABCO-TVS Accountability and alignment across the value chain 6 Sigma Lean Launch Lean in Hanover and Campinas Initiate Kaizen program for other facilities Launch Lean Expert program Start Lean Logistics Deployment Drive roll-out in Hanover and Campinas Focus on Lean Expert Certification Enhance Lean Logistics maturity Broaden Lean supplier base Integrated supply chain supported by Lean processes from suppliers to customers Common Development Process Design for manufacturing and assembly (DFMA) applied to all key projects Improve Scheduling & Planning Increase focus on Gate Reviews DFMA integrated in design to value process Drive Design for Six Sigma (DFSS) with customers DFSS for Engineering alignment projects Processes based on Design For Six Sigma driving speed and reliability Customer Partnership Deploy in all other major OE Key Accounts Business Unit leverage to drive CP standardization Collaboration focus with all major OE Key Accounts for deeper connectivity Establish partnerships as competitive differentiator Total Employee Involvement Implement White Belt training for target areas Launch Yellow Belt Concept for Root Cause Corrective Action (RCCA) Enhance White Belt deployment globally Drive RCCA rigor though Yellow Belt certification Hoshin-like management system in place 16

17 LEAN TRANSFORMATION WABCO Qingdao Initial Lean Focus in 04: Lean Tools Implementation - Kaizen of Existing Processes Current Expanded Lean Focus: Lean Design of New Processes - Expansion beyond WRCQ Single digit PPM on stable level On site assessment in 2008 by 2 global OEM s with positive results WABCO Wroclaw Brown Field approach starts in 05 Mixed model lines concept established (50% of revenues covered) Significant improvements and waste elimination in cycle time (-24%), FPY and machine utilization (+ 16%) WABCO Campinas Start of lean transformation in Q3/08 Benchmark learning from other WABCO sites Actuator line transformation completed with significant results: Fill Rate up by 24% Inventory down by 21% 0 Km PPM improvement by 72% WABCO Hanover Start in Q2/09 first focus on electronic production centre Targets: Q improvement by 30% Lead time reduction by 67% WIP down by 90% Impact Proven at Pilots - Scope Expanded to 75% of WABCO 17

18 POWER FOR GROWTH ABOVE MARKET SALES GROWTH THROUGH 2013* CAGR 4-6% Cars Aftermarket Expansion OE Truck, Bus and Trailer OE TRUCK, BUS AND TRAILER INCREASING VALUE PER VEHICLE Air Disc Brakes Transmission Automation Controls Electronic Stability Control Driver Assistance Systems GLOBALIZATION China Eastern Europe / Russia India AFTERMARKET EXPANSION Enhanced Penetration New Product Ranges New Services (e.g. Diagnostics, Training) East Europe, North America and Asia AUTOMOTIVE PENETRATION Electronic Air Suspension Vacuum Pumps *Assumes commercial vehicle production flat at 2008 levels 18

19 FINANCIAL PERFORMANCE Q (In $ Millions except per share data) Performance Q3 Q3 vs Reported (1) Performance (1),(2) In Local Curr. Performance Drivers Sales $382.0 $382.0 (38.4%) Gross Profit (41.2%) 22.7% 25.7% (122 bps) OPEX & Other (89.8) (81.1) 18.3% (23.5%) (21.2%) (527 bps) Operating (Loss)/Income (3.0) 17.0 (0.8%) 4.5% (649 bps) Equity Income EBIT $34.3 $ % 4.3% Taxes Net Income $33.8 $12.5 EPS $0.52 $ % versus Q2 09 (+10% excl India) Order Book at $644, Down 37% YoY Price: ($8.6) or (2.1%) Volume & Mix: ($52.0) Productivity: Materials: $11.6 Conversion $4.2 OH Absorption & Other: ($22.5) Labor Inflation: ($2.9) FX Transactional: ($4.1) or 102 bps Unfavorable OPEX Savings: $20.9 Meritor WABCO JV Up $0.9M Versus Last Year & Last Quarter Streamlining ($18.6) vs. ($4.2) in 08 Separation $35.9 vs. ($4.7) in 08 Versus 08 Reported of $0.97 and Performance of $0.94 (1) Adjusted for streamlining, separation items, one-time impact from the Indian joint venture transactions and discrete and one-time tax items (2) Adjusted for currency translation Outstanding Results Amid Continued Severe Industry Slump 19

20 DRIVING PROFIT IN A DEPRESSED MARKET Sales Outperforming Market Dynamics Benefitting from well-anchored positions in emerging markets Two of five largest customers are Asian Continuous Focus on Aftermarket Maintained full sales presence through market downturn Adapted product availability to accommodate shorter order lead times Leveraging our geographic expansion Costs Executing on Productivity & Cost Containment Results from productivity initiatives Record level of materials productivity: Q3 7.2%, YTD 5.9% Conversion productivity: Q3 5.3%, YTD 5.6% Brought direct labor costs down in line with volume Reduced fixed costs in factories by $10M Continuous improvement on operating expense savings Q3 $21M, YTD $74M Mitigated impact of sales decline on operating income Decremental margins: Q3 21%, YTD 24% While Continuing to Improve Product Quality & Workplace Safety 20

21 OPERATING FRAMEWORK 2009 YTD Actual & Full Year* YTD 2009 Actuals (1 Euro = 1.37 USD) Q (1 Euro = 1.36 USD) High End - Low End Updated (1 Euro = 1.39 USD) High End - Low End Sales (1) vs. 08 (46%) (35%) (40%) (37%) (39%) Performance Operating Margin (2) 1.4% Positive Above 2% Free Cash Flow (3) $116.6 Strongly Positive Above $90M 2010 Preliminary Market Outlook* End market demand in Western Europe flattish from 2009 levels Western European new truck inventory reduced to normal levels by early 2010 Alignment of production with demand could lead to an increase of Western European T&B production of around 25% versus 2009 Double digit improvement in production in North America and Japan Emerging markets should continue to grow * 2009 framework and 2010 market outlook as announced on October 28, Inclusion of this information in this presentation is not an update or reaffirmation of that 2009 framework and 2010 market outlook. (1) Adjusted for currency translation (2) Adjusted for streamlining, separation costs and one-time impact from the Indian joint venture transactions (3) Net cash provided by operating activities less purchases of PP&E, tooling and computer software, excluding streamlining & separation payments Improved Prospects 21

22 WABCO SUMMARY Industry leader, well PREPARED and sufficiently FLEXIBLE to successfully manage the global downturn in commercial vehicle industry in 2009, without compromising commitment to long term GROWTH STRATEGY Power to remain TECHNOLOGY LEADER adding breakthroughs to portfolio of technologies and products for full connectivity to all markets WABCO Operating System, one of our industry s most advanced management environments, delivers continuous OPERATIONAL improvements Connecting with and adapting to CUSTOMERS everywhere in the world and continuing to anticipate and satisfy their needs 22

23 PASSION