Federal-Mogul LLC Company Overview
Company Highlights Global scale with extensive, cost competitive manufacturing, engineering and distribution footprint Diversified revenues by end-market, geography, customers and platforms Advanced technology expertise and leading product development capabilities Leading market positions and brands Diversified customer base with no customer accounting for more than 15% of net sales Favorable industry dynamics Experienced management team Two customer-focused divisions $7.4B Net Sales 2016 Revenue RoW 15% EMEA 41% NA 44% 120 Manufacturing Sites, 33 Distribution Centers/Warehouses, 29 Countries 53k+ Employees RoW 26% EMEA 39% NA 35% 2
Customer-Focused Divisions Advanced technologies and precision components for demanding powertrain applications and environments. Leading products and globally recognized brands designed, manufactured and distributed for ease of installation and repair. Customers: OE light, medium and heavy-duty vehicle and industrial engine customers with co-development, long-lead time programs and long-term supply contracts Business: Specially engineered products integrated into complex powertrains with single-digit micron tolerances Highly engineered steel, cast iron, aluminum and other metallic combinations with sophisticated casting, machining, finishing, coating processes utilizing capital intensive manufacturing and testing equipment Few qualified competitors in each product segment with high barriers to entry Customers: Large retail and independent warehouse distributors with contracts for a range of Federal-Mogul products, coupled with merchandising, promotion and service support OE/OES for braking on light, medium and heavy-duty vehicles Business: Expertise in branding, merchandising and distribution with more than 570 SKUs offered through multi-tier channels Widely recognized premium branded products packaged and distributed globally with timely delivery and commercial programs to facilitate customer inventory management Opportunities to enhance brand preference among repair decisionmakers and through control of brand presence in wholesale and retail channels 3
Powertrain At A Glance Locations: 90+ Manufacturing Sites Research: 14 Globally-Networked Technology Centers located on 3 continents End Markets: Automotive, Aerospace, Energy, Heavy-duty, Industrial, Marine, Power Generation, Railway $4.4B Revenue RoW 19% 2016 EMEA 46% NA 35% 37k+ Employees RoW 28% EMEA 40% NA 32% Main Products: Pistons, Rings, Liners, Valves, Valve Seats, Valve Guides, Bearings, Spark Plugs, Sealing and Systems Protection 90+ Global Locations 20 Countries Powertrain Expertise 4
Powertrain Expertise Federal-Mogul Powertrain is expert at creating highly engineered solutions to manage: Combustion thermal and mechanical loads Tribological (metal-on-metal) interaction, wear and friction Critical sealing of hot and cold joined components and rotating shafts Ignition of various fuel types Thermal, mechanical and EMI protection for wiring and tubing In very difficult and aggressive vehicle powertrain environments with high precision components featuring tolerances of a few microns, 100x thinner than a strand of hair. 5
Diverse End Market and Customer Base Powertrain supplies products to a diverse customer base, including all major OE manufacturers in the automotive, light, medium and heavyduty commercial vehicles, off-road, agricultural, marine, rail, aerospace, power generation and industrial equipment segments Region and market diversification with 90+ global manufacturing plants in 20 countries, and 14 technical centers for a strong presence near all major customers No single customer represents more than 11% of Powertrain s global revenue Less than 5% of Powertrain revenue sold to Motorparts Top Powertrain Customers 6
F-M Powertrain Market Share Leadership Leading market positions in all product lines Pistons Piston Rings Valve Seats & Guides Bearings #2 Overall/ # 1 Diesel Pistons #1 Overall #1 Overall #1 Overall Ignition Global Valvetrain Systems Protection Sealing #3 Overall / # 1 Industrial #2 Overall/ # 1 Hollow Valves #1 Overall #3 Overall/ #1 Bonded Transmission Pistons 7
Award-Winning Performance Automotive News PACE Award winning products and manufacturing processes 2006 Monosteel Piston 2007 GDC Rings, HTA Gaskets 2010 HPEEM Pin Bores, DuraBowl Pistons 2011 LKZ-Ring, EcoTough Piston Coating 2012 2-D Ultrasonic Testing for Pistons 2013 IROX, Hydraulic Transmission Pistons 2014 High Performance Lead-Free Bearings 2015 MicroTorq, DuroGlide 2016 Hybrid Induction Welding 2017 DuraForm G91 PACE Award Finalist 8
Federal-Mogul Powertrain Key Messages Solid vehicle market production growth through 2018 Fuel economy and emissions content driving better than market sales growth Combustion engine technologies still #1 for foreseeable future Regulations increasing demand for further improvement through 2025 Engine downsizing creates higher content product mix Strong customer, product line and regional market revenue distribution Leading technologies with #1 or #2 position in all major product categories Extensive technology and intellectual property with focus on core product lines Continue to drive operational excellence 9
Market Driver: Vehicle Production Increasing Through 2020 Region Light and Commercial Vehicle Production Outlook LV millions 2015 2020 CAGR CV thousands LV millions CV thousands LV% CV% N.A. 17.5 566 19.3 604 2% 1% EMEA 22.8 540 27.0 739 3% 6% Asia-Pac 45.3 1403 55.0 1946 4% 7% China 23.7 740 30.8 1099 5% 8% India 3.7 298 5.9 378 10% 5% Rest of AP 17.9 365 18.3 469 1% 5% S.A. 3.1 85 3.6 187 3% 17% Global 88.7 2593 104.9 3477 3% 6% Source: LMC Automotive Forecast February 2016 10
Market Driver: Higher Content to Meet Future Regulations Continuous period of step change stringent emissions regulations driving increased demand for fuel efficiency and emissions reduction in all major automotive markets Significant regulatory convergence driving higher feature content in mature and BRIC markets Converging emissions regulations drive per cylinder content revenue opportunities simultaneously in mature and BRIC markets * NEDC = New European Driving Cycle 11
The Sum of Our Parts Federal-Mogul Motorparts sells and distributes a broad portfolio of products through more than 20 of the world s most recognized brands in the global vehicle aftermarket, while also serving original equipment vehicle manufacturers with products including braking, wipers and a range of chassis components. 12
Motorparts At A Glance Locations: 32 Manufacturing Sites 35 Distribution Centers 13 Technical Support Centers Research: 9 Globally-Networked R&D Centers located on 2 continents End Markets: light, medium and heavyduty automotive aftermarket and automotive OE/OES $3.2B Revenues EMEA 37% 2015 RoW 7% NA 56% % of Revenues 2015 15k+ Employees RoW 11% EMEA 37% NA 52% Main Products: brake friction and braking components; chassis, engine, ignition and sealing components and wiper blades OE/OES 27% Aftermarket 73% * 109 total global locations includes 36 sales and administration offices By Market Segment 20+ Leading Global Brands 13
Leading Global Parts Supplier $4.5 Global Parts Suppliers Automotive Aftermarket Sales ($B) $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $- Source: 2015 AASA Top 100 Automotive Aftermarket Suppliers ZF does not include TRW Automotive acquisition M+H does not include Affinia auto filter acquisition 14
Strong Diversified Market Position Product Portfolio BRAKING Global #1 CHASSIS NA #1 EU #3 ENGINE Global #1 IGNITION Global #2 SEALING Global #1 WIPERS NA #3 EU #3 *Market positions are estimates *Ignition market position is combined F-M Motorparts & F-M Powertrain 15
Aftermarket Customer Base 16
OE/OES Customer Base *representative sample of our customers 17
Strong OE/OES Player for Select Products Braking Steering Wipers Sealing Suspension 18
Federal-Mogul Motorparts Strategic Initiatives Optimizing Supply Chain Capability Develop capabilities and infrastructure to enhance delivery performance, provide best-in-class service, and reduce total supply chain costs, while improving customers inventory availability Enhanced Digital Focus Create robust, online presence, order and inventory management system, state-of-the-art ecatalog; global brand websites; customer connectivity Culture of Product Innovation Reinvest in product development, brand extensions and relevant new technologies to expand offerings and extend vehicle coverage Investment in Brand Value Create high quality, differentiated products and build premium brand value; complementary, cost-competitive, private label offerings Industry-Leading Technical Training & Field Support Provide field support and onsite, online & on-demand training and tools; supports our brands, channel partners, and consumers 19
Vehicles in Operation Growth 12.0% VIO CAGR 2015-2020 10.7% 10.0% 8.0% 6.7% 6.0% 4.0% 3.5% 2.0% 2.1% 1.4% 0.0% N. America Europe China Asia World Source: IHS VIO: Vehicles in Operation CAGR: Compounded Average Growth Rate 20
Aftermarket Growth Projected Aftermarket Revenue Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% Small Medium Large INDIA BRAZIL RUSSIA CHINA US / CANADA EUROPE 0 50 100 150 200 250 300 350 VIO (Million) High Growth Medium Growth Low Growth 21
Vehicle Technology Evolution GPS GSM Internet Electronics Begin Controlling Engine Functions Telematics Vehicle Value 5% Electronic Content 1970s-80s Mid 90s 90s- 00s Today Vehicle Value 40% Electronic Content OBD-II Standards Autonomous Driving Diagnostics Monitor Systems Control Engine 22
Key Market Driver For Changes in Brake Friction Materials Light Vehicle Global Regulation Timeline 2011 2012 2013 2014-2020 2021 2022 2023 2024 2025 2026 2027 US Conventional Low Copper (Less than 5%) Zero Copper (Less than (0.5%) Commercial Vehicle Global Regulation Timeline 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 US Conventional Reduced Stopping Distance (30% reduction in total required stopping distance) Current regulations being led by US government for both Light and Commercial vehicle markets California and Washington State mandating low- and zero-copper requirements for future implementation US federal guidelines are expected to spread globally as the brake friction supply chain will need to meet these state specifications for global customers 23