US Light Vehicle Outlook. George Magliano Senior Principal Auto Economist Americas, HIS May 31, 2012

US Light Vehicle Outlook George Magliano Senior Principal Auto Economist Americas, HIS May 31, 2012

External Shocks to The Global Auto Industry - A Critical Timeline Sub-Prime Crisis Bear Sterns Oil Hits $147 Lehman Bros Confidence Slumps Liquidity Freeze Event or Shock Global Great Recession Banking System is Stabilized Greek Debt Crisis kicks off Economies Rebound (inventory) Inflation Surges in Emerging Markets Mature Economies Growth Fades Libya, Arab Spring, Oil Surges Japan Disasters US Debt Ceiling Debacle Downgraded Markets Drag Italy Into PIIGS Class Is Greece Confidence Europe's Slumps Lehman Bros? Successive EU Summits -no silver bullet Iran embargo RECOVERY Re-ignites Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Policy Response World Auto Sales Track Interest Rates Slashed, QEI TARP China Stimulates Banks Recapitalised, Nationalised, Guaranteed Fiscal Pump Priming Auto Bail Outs, Financing and Restructuring Consumer De-leveraging Copyright 2012 IHS Inc. All Rights Reserved. Auto Incentives Europe, China, Brazil, Japan, US India Private Sector Debt => Sovereign Debt Auto Incentives Phasing out QEII Cooling Measures In EM Auto Incentives Ending Japan Supply Chain Crisis Fiscal Tightening Accelerated ECB (LTRO) Consumer De-leveraging Still There ESM Spluttering Along Greece Exits Spain & Italy Defaults, Eurozone Breaks Apart Global Financial Crisis II (Early Vortex)?

U.S. Economy -Probability of a Recession is now 20% (Percent unless otherwise noted / May 2012) 2010 2011 2012 2013 Real GDP Growth 3.0 1.7 2.2 2.4 Employment Growth -0.7 1.2 1.6 1.7 CPI Inflation 1.6 3.1 2.2 1.7 Oil Prices (WTI, US$/bbl) 79.4 95.1 103.9 114.8 Housing Starts - mm 0.59 0.61 0.74 1.01 Federal Funds Rate 0.2 0.1 0.1 0.1 Dollar (Major Trading 2005=1) 0.90 0.85 0.87 0.88 Copyright 2012 IHS Inc. All Rights Reserved. 3

Real Gross Domestic Product (GDP) Growth 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0 (Percent Change) 1990 1995 2000 2005 2010 2015 2020 Current Old History & Forecast Pessimistic - 20% Optimistic - 15% Copyright 2012 IHS Inc. All Rights Reserved. 4

The Federal Reserve Will Keep Short Term Interest Rates Low Through 2014 12 (Percent) 10 8 6 4 2 0 1990 1995 2000 2005 2010 2015 2020 Federal Funds 10-Year Treasury 30-Year Mortgage Rate Copyright 2012 IHS Inc. All Rights Reserved. 5

Long Term a Massive Fiscal Adjustment is Needed 500 (Billions of dollars, fiscal years) (Percent of GDP) 3 0 0-500 -3-1,000-6 -1,500-9 -2,000 1980 1985 1990 1995 2000 2005 2010 2015 2020-12 Unified Budget Deficit Deficit as % of GDP Copyright 2012 IHS Inc. All Rights Reserved. 6

Housing Starts Will Not Rebound Until 2014 (Millions of units) 2.4 2.0 1.6 1.2 0.8 0.4 0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Single-Family Multi-Family Copyright 2012 IHS Inc. All Rights Reserved. 7

Payroll Employment 150 (Millions) (Percent Change) 4 3 140 2 130 1 0 120 110 ` -1-2 -3-4 100 1990 1995 2000 2005 2010 2015 2020-5 Total Emloyment - L Percent Change - R Copyright 2012 IHS Inc. All Rights Reserved. 8

Rising Unemployment Puts Pressure on Consumers Balance Sheet 5.5 (Percent) (Percent) 11 5.0 10 4.5 9 4.0 8 3.5 7 3.0 6 2.5 5 2.0 4 1.5 1980 1985 1990 1995 2000 2005 2010 2015 2020 3 Bank Card Delinquency Rate (Left) Unemployment Rate (Right) Copyright 2012 IHS Inc. All Rights Reserved. 9

Real Consumer Spending and Income Growth 6 5 4 3 2 1 0-1 -2-3 New long term trend for consumption is 2% not 3% (Percent change) 1990 1995 2000 2005 2010 2015 2020 Real Consumer Spending Real Disposable Income Copyright 2012 IHS Inc. All Rights Reserved. 10

US - Auto Market Overview Pent Up demand is driving the auto recovery The recent sales numbers have exceeded expectations, the first quarter (the high point for the year) was outstanding but unsustainable Retail, rather than fleet, remains the main driver, although February saw more fleet volume Sales have improved, as Japanese cars return to the showrooms, but there are still some issues of availability High gasoline prices actually helped sales (trade-in gas guzzlers) Incentive spending has risen modestly, as inventories rebuild, but there is more pricing discipline today Auto credit availability is improving Supply constraints are becoming a concern The used car and truck market remains very strong Cost pressures will return but industry profits are good Bottom Line A weak economy will hurt the release of pent up demand, slowing not derailing, the auto market recovery Copyright 2012 IHS Inc. All Rights Reserved. 11

Pure Raw Material Cost in a Car Debt Crisis Lowers Input Costs Steel Aluminium Plastic Resins Rubber Glass Iron US Vehicle @ 3500 Lbs In $ Latest Data Point March 2012 European Car @ 2700 Lbs in Euro (Excludes Fuel, Processing and Transportation costs) Copyright 2012 IHS Inc. All Rights Reserved.

New Auto Loans Delinquency Rates 4.0 (% - Accounts past due 30 days or more) 3.5 3.0 2.5 2.0 1.5 1.0 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 Direct (Bank) Loans Months Indirect (Dealer) Loans Source: American Bankers Association Copyright 2012 IHS Inc. All Rights Reserved. 13

New Vehicle Buyers Average Credit Score Avg. Score 780 770 760 750 740 730 720 710 700 690 680 670 660 650 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 18% 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% Source: CNW Marketing FICO SCORE % UNDER 670 Copyright 2012 IHS Inc. All Rights Reserved. 14

New Auto Loan Application Approvals 85% 80% 75% 70% 65% 60% 55% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Source: CNW Marketing Unweighted Average of Prime, Near and Subprime Months Copyright 2012 IHS Inc. All Rights Reserved. 15

Median Age New Vehicle Buyer 53 (Years) 51 49 47 45 43 41 39 37 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 CNW Marketing Months Copyright 2012 IHS Inc. All Rights Reserved. 16

New Auto Loan Rates Commercial Banks 10.0 (Percent) 9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Quarters Federal Reserve Board Copyright 2012 IHS Inc. All Rights Reserved. 17

Incentives to MSRP 26 (Percent) 24 22 20 18 16 14 12 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Months CNW Marketing Copyright 2012 IHS Inc. All Rights Reserved.

Residual Value Index 100% (Index = Lease contract residual value versus CNW estimate of residual at end of lease term) 90% 80% 70% 60% 50% 40% 30% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 GM Ford Chrysler Industry Toyota Honda Nissan Source: CNW Marketing Months Copyright 2012 IHS Inc. All Rights Reserved. 19

U.S. Light Vehicle Sales Lease Penetration 29% (Share) 28% 27% 26% 25% 24% 23% 22% 21% 20% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CNW Marketing Leases by Month Copyright 2012 IHS Inc. All Rights Reserved. 20

U.S. Light Vehicle Inventory Units 4,500 (Units in thousands) 4,000 3,500 3,000 2,500 2,000 1,500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Months Seasonally Adjusted Copyright 2012 IHS Inc. All Rights Reserved. 21

U.S. Light Vehicle Inventory Days Supply 120 (Days Supply) 110 100 90 Light Trucks 80 70 60 50 40 Cars 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Months Seasonally Adjusted Copyright 2012 IHS Inc. All Rights Reserved. 22

United States Car & Truck Sales, SAAR 22 (Units in millions) 20 18 16 14 12 10 8 Jan- 00 Jan- 01 Jan- 02 Jan- 03 Jan- 04 Jan- 05 Jan- 06 Jan- 07 Jan- 08 Jan- 09 Jan- 10 Jan- 11 Jan- 12 Jan- 13 Actual Forecast Months Copyright 2012 IHS Inc. All Rights Reserved. 23

U.S. Light Vehicle Sales 2008: 13.2M units 2009: 10.4M units 2010: 11.6M units 2011: 12.7M units 2012: 14.3M units 2013: 14.9M units 2014: 15.7M units 2015: 16.2M units 18 17 16 15 14 13 12 11 10 9 (Units in millions) 18 16 14 12 10 8 1990 1994 1998 2002 2006 2010 2014 2018 8 May 2012 Forecast July 2011 Forecast Copyright 2012 IHS Inc. All Rights Reserved. 24

U.S. Sales Major Manufacturers Market Share 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 GM FORD CHRYSLER/FIAT TOYOTA HONDA NISSAN HYUNDAI/KIA Copyright 2012 IHS Inc. All Rights Reserved. 25

4.5% U.S. Sales European Manufacturers Market Share 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 2017 2019 BMW DAIMLER AG VW GROUP PORSCHE Copyright 2012 IHS Inc. All Rights Reserved. 26

U.S. Sales By Car Segment (52.7%) 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% (Light Vehicle Share) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Compact Full-Size Micro + Mini Mid-Size Sports Subcompact Copyright 2012 IHS Inc. All Rights Reserved. 27

U.S. Sales By Light Truck (47.3%) 30% (Light Vehicle Share) 25% 20% 15% 10% 5% 0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 CUV MPV PUP SUV VAN Copyright 2012 IHS Inc. All Rights Reserved. 28

North American Light Vehicle Production Production in Millions 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 17.2 15.5 16.4 15.9 15.8 15.8 15.3 15.1 12.6 8.6 11.9 13.1 14.6 15.3 16.3 17.2 17.5 17.5 17.5 17.5 17.6 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Lost volume due to Japan & Thailand disasters tempered growth in 2011, made up in 2012 Demand strengthening Inventory rebuilding Production localization efforts bearing fruit, more NAFTA sourcing NA becoming an export hub, greater use of global platforms allows for more export ready product BMW, Hyundai, VW, Toyota & Honda drive additional capacity expansion Ford tweaks sourcing on GM s heels; Chrysler/Fiat potential, yet hurdles remain Copyright 2012 IHS Inc. All Rights Reserved. 29

Light Vehicle Production - Americas Millions 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Canada Mexico Copyright 2012 IHS Inc. All Rights Reserved.

Autos - The Bottom Line The auto industry is in its best shape to withstand economic adversity Auto credit quality is outstanding, availability will improve this year Industry pricing power will continue to improve Leasing is on the way back Small cars will gain market share but crossovers will remain very popular Higher fuel economy standards are the next big challenge (opportunity) The industry has done a great job reducing capacity and cost, but we can t rest on our laurels Initially replacement demand drives volume, longer term demographics sustain sales Eventually the economy will support volume levels that are more normal for the auto industry The industry has become more profitable and once volume returns, it will become even more so Copyright 2012 IHS Inc. All Rights Reserved. 31

Thank You for Your Participation! George Magliano Senior Principal Automotive Economist, Americas 212-884 -9509 george.magliano@ihs.com June 2012