The U.S. Market Post Bankruptcy Where Do We Go From Here? Rebecca A Lindland Director, The Americas

The U.S. Market Post Bankruptcy Where Do We Go From Here? Rebecca A Lindland Director, The Americas

U.S. Economic Overview

Economic and Auto Market Overview The Economy Good News: We are at the bottom of the recession; the Bad News: The hole is deep and it will take a long time to dig out Cash for Clunkers helped, but the market really needs the economy to return to health before we see sustained growth Auto credit conditions have become better, but subprime auto lending is still dead Leasing is showing some signs of life, GM has returned to the arena Inventories are now in balance if not even too low in some cases GM and Chrysler must now survive post-bankruptcy, post C4C and pre-recovery The auto recovery will be still be anemic, intensifying competitive pressures

U.S. Economy Some Positive Signs (Percent unless otherwise noted / September 2009) 2008 2009 2010 2011 Real GDP Growth 0.4-2.5 2.0 2.9 Employment Growth -0.4-3.7-0.5 1.8 CPI Inflation 3.8-0.5 1.3 1.6 Oil Prices (WTI, U.S.$/bbl) 99.8 60.3 66.5 77.2 Housing Starts mm 0.90 0.58 0.88 1.30 Federal Funds Rate 1.9 0.2 0.2 1.7 Dollar (Major Trading 2005=1) 0.89 0.94 0.91 0.88

Economic Growth Only Returns to Normal in 2011 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0 (Percent change) 2009 is horrendous. The economy recovers in 2010, but the recovery is very weak 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Real GDP Pessimistic (20%) Optimistic (20%)

The Housing and Consumer Situation

Home Prices Will Decline Through 2010 20 15 (Year-over-year percent change) 10 5 0-5 -10-15 -20 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 FHFA Index Median Existing Home Price, NAR

Home Sales Probably Near Bottom 1.45 1.30 1.15 1.00 0.85 0.70 0.55 0.40 0.25 (Millions of units) (Millions of units) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 New Home Sales (Left scale) Existing Home Sales (Right scale)

Housing Starts Will Hit Bottom in 2009 2.4 (Millions of units) 2.0 1.6 1.2 0.8 0.4 0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Single-Family Multi-Family

Mostly Bad News For Consumer Finances Negative Forces Job Losses Declining Housing Wealth Stock Market Losses Tight Credit High Debt Burdens Low Saving Rate Positive Forces Low Energy Prices Fiscal Stimulus Stock Price Rally

Consumer Sentiment and Spending 9 (Annual percent change) (Michigan Index, 1966=100) 100 6 90 3 80 0 70-3 60-6 50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Real Consumption Growth Consumer Sentiment

Auto Market Overview

Cash for Clunkers (CARS) Economic Impact C4C was far more successful than many expected 690,000 new vehicles were sold under the program in a one month period About two thirds of these sales were pulled ahead from future months But about a third were incremental sales to people who normally buy used cars Show room traffic was at levels not seen in years But it wasn t all good news: The Government s inability to keep up with the program caused many dealers to face cash flow problems Some consumers were forced to wait weeks for their new vehicles after turning in their clunkers Other consumers were disappointed to find that their clunker was disqualified on a technicality Dealers are still waiting for payments from the government Unfortunately, C4C is not likely to prove to be the catalyst necessary to jump start vehicle sales the underlying economics and consumer confidence are still too weak

New Vehicle Buyers Average Credit Score Avg. Score 770 760 750 740 730 720 710 700 690 680 670 660 650 Auto lending is beginning to loosen up Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 FICO SCORE % UNDER 670 Percent 18% 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% Source: CNW Marketing

United States Car and Truck Sales, SAAR 13 (Units in millions) 12 11 10 9 8 7 6 5 4 Cars got a big boost from C4C sales but typically have been running about 50/50 each month Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 CARS LT. TRUCKS

Lease Share Plummeting truck residuals and tight credit crippled leasing, but GM and Chrysler are coming back into the market with help from GMAC 30 (Percent) 28 26 24 22 20 18 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: CNW Marketing Months

U.S. Sales Major Manufacturers Market Share 30% 25% 20% 15% 10% 5% 0% 1999 2001 2003 2005 2007 2009 2011 2013 2015 GM FORD CHRYSLER TOYOTA HONDA NISSAN

U.S. Sales Asian Manufacturers Market Share 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1999 2001 2003 2005 2007 2009 2011 2013 2015 HYUNDAI KIA SUBARU MAZDA MITSUBISHI SUZUKI

U.S. Sales European Manufacturers Market Share 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1999 2001 2003 2005 2007 2009 2011 2013 2015 BMW MINI MB/SMART AUDI VW ALFA PORSCHE

3.0 (Millions) Growth In Driving Age Population Ages 16 to 85 Baby boomers started coming into the market in 1962, adding well over 2.5 million drivers per year Gen Y started coming into the market in 1994, adding nearly the same 2.5 million drivers per year 1.20 2.5 1.00 2.0 0.80 1.5 0.60 1.0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 0.40 Year - to- Year Change Veh Per Driver

U.S. Light Vehicle Sales: Relative to Driving-Age Population 11% (Percent) 10% 9% 8% 7% 6% 5% 4% 3% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Ages 16 to 85

U.S. Light Vehicles Scrappage 17000 16000 15000 14000 13000 12000 11000 10000 9000 (Units/ Thousands) 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Total Vehicles Scrapped - L % of PARC - R 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Source: R. L. Polk and IHS Global Insight

U.S. Light Vehicle Sales Market is not back on track until 2012, a year after the economy recovers (Units in millions) 19.0 18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 1998 2000 2002 2004 2006 2008 2010 2012 2014 Current Base Pessimistic (20%) Optimistic (20%) 19.0 18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 Current Outlook 2009: 10.26M units 2010: 11.12M units 2011: 13.75M units 2012: 15.57M units 2013: 16.55M units 2014: 17.02M units 2015: 17.38M units

Generational Trends in the Marketplace

Evolution Of Consumers Since 1960, eight generations of American consumers have been present in the marketplace: Centennial Generation born 1870 1884 Doughboy Generation born 1885 1899 Flapper Generation born 1900 1914 Depression Generation born 1915 1934 Quiet Generation born 1935 1945 Baby Boom Generation born 1946 1964 Generation X born 1965 1977 Generation Y born 1978 1994 Generation Z born since 1995

300 (In millions) The Mix of Generations in the Market is Constantly Changing Since 2000, the industry has seen the rapid retreat of the Depression Generation from the market by 2014, they will be all out The same time period has seen the arrival of Generation Y into the automotive market as well as Generation X moving into their peak earning years 250 200 Generation Y Generation Z 150 Generation X Baby Boom Generation 100 Quiet Generation 50 Depression Generation 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

2000 2015 Consumer Profile Gen Y 2000 11% Depress Gen Y 19% 20% Gen X 20% Baby Boomers 36% Quiets 14% 2005 Gen X 20% Depress 12% Quiets 14% Baby Boomers 34% Gen Y 29% Depress 5% 2010 2015 Quiets 13% 57% of market will be 50 or younger Gen Z 12% Quiets 12% Gen X 19% Baby Boomers 34% Gen Y 27% Gen X 18% Baby Boomers 31%

Path For Import-Branded Products To prevent a decline in market share, OEMs must capture BOTH Gen X and Gen Y and be working towards Gen Z! Gen X is moving into its peak earning years The leading edge of Gen Y is moving into the life stage where many buy new vehicles But the non-domestics (import brands) already have an advantage: Gen X and Y currently purchase import branded products at a higher rate than any other generation And Gen Y continues to be under influence from their Baby Boomer parents who have very high purchasing rates 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 47% 55% 60% 64% 66% Depression Quiets Boomers Gen X Gen Y Take Rates of Import-Branded Products by Generation Source: Strategic Vision

So What Will Be The Likely Impact Of Generations X and Y? OEMs will likely lose share as Gen X and Gen Y begin to dominate the market unless they can find a way to connect strongly with both Gen X and Gen Y Brands like Volkswagen, Honda and Nissan could enjoy significant share increases since they appeal to both Generations X and Y Premium brands like BMW and Audi could be propelled upward by Gen X and by more affluent Gen Y s who can t wait for premium Longer term, as more Gen Y s enter the premium market, some unexpected brands like Cadillac could see a significant sales increase Cadillac is new for this generation and their parents don t drive them Gen Y reveres their grandparents and their grandparents style as they find their adult look

Thank You! Rebecca A. Lindland Director, The Americas rebecca.lindland@ihsglobalinsight.com