Automotive Division Tryggve Sthen President, Automotive Division Capital Market Day 2009
Presentation outline Key achievements Automotive Division overview Financial update Improving our efficiency Opportunities from new environmental trends Key business messages The way ahead
Key achievements 2008 + Q1 2009 Record sales and profits Q1 - Q3 2008 New factories in Mexico, Korea, China and Indonesia ramped up Dramatic steel price increases off-set by different activities Quality and Six Sigma developed well SKF Bridge of Manufacturing Excellence launched Acquisitions GLO and ABC finalized Extremely dramatic volume drop in Q4 Restructuring initiated and on plan Production volumes adjusted, inventory levels reduced, costs reduced
Automotive Division overview
Customer segments served Cars Trucks Two-wheelers Vehicle service market Home appliances & Power tools
Working with the world s top car industry
Helping automakers and suppliers Reduce fuel consumption and emissions Reducing friction and weight Compact design Calculation of energy reduction Magnetic sensoring for Stop-Start functions Reduce time to market Virtual test rigs Pre-assembled parts Improve safety and functionality Integrated electronics Sensor-equipped hub units Tesla Roadster
Calculating CO 2 savings SKF Vehicle Environmental Performance simulation software calculates CO 2 savings Complements other SKF software programmes Factors in driver behavior under various conditions Assesses fuel saving potential Optimizes designs prior to prototyping x
Car driveline energy saving potential areas
Car driveline reducing CO 2 emissons Up to 8 grams of CO 2 saved per kilometer 0.5 1.2 grams 2-3 grams 3-4 grams SKF Energy Efficient Tapered Roller Bearing Driveline angular contact ball bearing Ball pinion unit SKF Hybrid Pinion Unit Low friction pinion unit Manual transmission Power-take off unit Final drive Note: CO 2 reduction estimates based on the normal European driving cycle (NEDC)
Stop-Start function for micro & mild hybrids SKF Rotor Positioning Bearing enables Stop-Start function Cuts CO 2 up to 25% in dense urban traffic Enabling Valeo's StARS (Starter Alternator Reversible System) Citroën C2/C3, Smart, Mercedes A/B
Opel Insignia SKF applications Tailgate Engine Wheel end, rear and front Gas spring seal Valve stem seal Engine, 2,0l diesel Suspension Hub bearing unit, X-Tracker Idler pulley MacPherson suspension bearing unit
Working with the world s top truck industry
Helping truck manufacturers and suppliers Improve fuel economy Reduce friction with energy efficient bearings and valve steam seals Reduce weight using light-weight materials Reduce size using integrated hub units Improve safety and service life Unitized hubs Wheel end monitoring device Reduce time to market Virtual test rigs Pre-assembled parts
New business - Trucks New contract from FUWA including both seals and bearings Guangdong Fuwa Engineering Manufacturing Co Ltd is the largest trailer axle manufacturer in the world, headquartered in Shunde city, Guangdong Province, China Bearing contract value USD 4.5 million annually Scotseal Pro Tapered roller bearing Trailer axle
Working with the world s top two-wheeler industry
Helping manufacturers and suppliers Reduce weight and simplify assembly Hub unit expertise, lightweight materials Boost service life, cut maintenance Bearings/units that handle high contamination, poor lubrication, high temperatures Customize high-performance solutions Integrated functions with sensors and tachometers Improve engine management systems Upgrade performance with end-user kits
New business Two-wheelers Awarded new contract with Hero Honda in Uttarakhand state, northern India Build a factory to supply ball bearings to Hero Honda and other automotive customers in the region
Working with the vehicle aftermarket
Driving aftermarket success Broad range More than 10 000 kits for wheel end, driveline and engine repairs A complete repair with one kit Right system utilization Online and CD catalogues TecCom, EDI, TecDoc, VMI support On demand delivery Best in class logistics Right knowledge support Training programmes - print and face to face Mounting guides and videos Technical bulletins
New business VSM NORTH AMERICA New contract CHINA Strong focus on distributor growth 2007 12 Distributor/Dealers 2008 + 8 2009 + 6 2009 = 26 (end of year) EUROPE Strong distributor network Q1 slower business Q2 recovering business
Working with electrical industry
Helping develop effective electrical solutions Integrated functions Load sensor bearing units for washing machines Units for front and top loading washing machines Analogical and digital tachometers for washing machines Wobble bearings for drills and hammers Low weight units Alternative materials Vibration reduction for hand tools Auto balancing units for angle-grinders
Financial update
Operating Income 2008 + Q1 2009 600 OI 6,2% YTD Sept 2008 400 200-200 -400-600 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 OI operational 381 418 326-250 -286 OI restructuring* -255-155 * Incl. other one-time items
Market situation - Net sales Q1 2009 vs Q1 2008 in local currencies Cars Seals Trucks Electrical & Two wheelers Vehicle Service Market
Capacity reduction Q4 2008 Q1 2009 2,000 people in lay-off and early retirement programs 1,100 contract workers and consultants discontinued 8,900 people on reduced work measures Production stops on a daily/weekly basis (CIGO, Kurzarbeit, ERE, etc.) More than 2/3 of the Automotive Division employees affected
Q1 2009 Summary Sales significantly lower during the quarter in almost all markets and segments (-34%) Two wheeler industry in Asia relatively unchanged Aftermarket less affected than OEM Fast reduction of production volumes and costs
Improving our efficiency
Cost reduction Restructuring Internal improvements Plant restructuring in Europe & North America Shift of production to best cost countries Lower cost
Plant restructuring over the last few years North America Plant closures/restructuring Aiken Springfield Franklin Glasgow Elgin mfg Europe Restructuring France capacity reduction continued Germany TRB restructuring, production relocation to BCC moved 4 channels to India, Mexico and Brazil Moving rollers to Lutsk BCC = Best Cost Countries
Stronger manufacturing footprint in best cost countries Latin America Mexico Seals production relocation from US Bearings production relocation from US Brazil Increased capacity relocation from Germany East Europe Ukraine Increased capacity SKF branded products Transfer in TRB rollers Bulgaria Competitive source for bearings, forgings and seals increased capacity for DGBB and Seals Asia expansion China Aquired 100% of j/v plant in China for DGBB New HBU plant ATC Korea 2 new plants inaugurated Indonesia New plant for two wheeler market India New plant in Haridwar initiated
Cost reduction Restructuring Internal improvements Internal benchmarking Six Sigma Manufacturing Excellence Lower cost
Internal benchmarking 8 parameters based on the SKF strategy Followed-up on a monthly basis Aurelio Nervo Director, BU Cars Amadeo Comin Factory Manager Cajamar
Reduced energy consumption at SKF Cassino Situation: Air compressors with very high energy consumption Solution: New air blow part for air dryer Results (2009 vs 2008): Energy cost reduction of more than SEK 1 million per year CO 2 reduction of more than 50 tons per year Replication on-going in Jakarta, Sopot and Shanghai factories.
Manufacturing Excellence Training - SKF Bridge of Manufacturing Excellence Knowledge and awareness First steps - 5S and Zero Defect Environment, Health, Safety Get commitment from all Results Increased customer satisfaction Scrap reduction Safer and cleaner work place 5S Discard, Organize, Clean, Standardize, Discipline Factory workers at Cajamar, Mexico
Opportunities from new environmental trends
Global warming Environmental mega trend Transports represents 13-30% of man-made CO 2 emission Drives legislative initiatives Consumer awareness and preferences
Technology challenges for cars Vehicle weight reduction Engine down-sizing and boosting Transmission efficiency improvement and technology Engine management and control Hybridization Stop-Start and Micro hybrids Mild hybrids Full hybrid Electrical vehicle Kinetic Energy Recovery Systems (KERS) Tesla Roadster
SKF business opportunities Customers urgent need for solutions Emission mile stones! New solutions required Solutions being developed by SKF with partners and suppliers SKF s competitive advantage A knowledge engineering company - system/application knowledge Providing proof = quantifiable customer value
Key business message - The way ahead
Key business message Manage the Business cycle. Adapt to new volumes quickly and reduce costs. Clear focus on cash flow. Manufacturing footprint consolidate and shift to best cost countries. Grow the aftermarket business and integrate GLO. Continue activities for profitable growth and prepare for upturn in Asia. Exploit new opportunities from value added solutions, especially for energy efficiency; CO 2 and fuel reduction The way ahead