OESA News 2019 Fourth Quarter Edition 2

NEWS Original Equipment Suppliers Association

2019 Fourth Quarter │ Edition 2

2019 AUTOMOTIVE SUPPLIER CONFERENCE Featuring Jim Collins, Author, "Good to Great” and “Built to Last”

Wednesday, November 13, 2019 • Suburban Collection Showplace • Novi, MI

IN THIS ISSUE...

2 4 5 7

The Suppliers' Voice MEMA News Technology Update Economic Update

9 11 13 15

Guest Column: Baker Tilly OESA Events Welcome New Members OESA Councils

17 Guest Column: Plex 19 Guest Column: Conway MacKenzie 22 Upcoming Events

This edition is sponsored by:

The mobility industry...recalculating.

With disruption all around us, standing still is not an option.

The automotive industry is experiencing disruption as technology and user behavior is transforming traditional vehicle manufacturing. Significant model disruption in the mobility sector will continue as new players enter the industry and others adapt and embrace the changes. Success happens when we push forward. With more than 34,000 colleagues in 746 offices worldwide, we are here to serve you.

Now, for tomorrow.

advisory. tax. assurance. | bakertilly.com

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Voice

SUPPLIERS' VOICE

The Suppliers’

Industry Trends Shaping the Future

I recently celebrated my six-year anniversary at OESA, and it amazes me how much the industry has evolved in such a short period of time.

The global automotive industry continues to undergo dramatic changes across the entire value chain.

The three trends substantially driving the future of the industry are: A Shift From Transportation to Mobility While most consumers are not familiar with the term “mobility,” they have shifted their thinking from the need to have their own transportation to deciding how they would like to be transported. Mobility expands the boundaries between public and private transportation; vehicle sharing and ownership; and who, if anyone, is behind the wheel.

A New Global Landscape The recent changes in the global political environment are challenging the automotive sector to adapt to new trade and tariff policies. OEMs and suppliers are reassessing their business models to better navigate new and modified trade policies and tariffs. The political landscape is reshaping the industry now more than ever.

Advances in Automotive Technology Rapid-fire advances in vehicle innovation are due, in part, to suppliers bringing them to their OEM customers. Suppliers are working closer with their customers to design safer and cleaner vehicles.

Externally, recent supplier mergers and acquisitions are enabling companies to access the talent and resources to produce new technologies.

While there are differing opinions on how fast and how much these trends (and many others) will impact automotive suppliers, OESA works continuously on behalf of suppliers to understand emerging issues, explore opportunities and address these challenges. Additionally, OESA strives to foster intelligent collaboration throughout the supply chain and advocate on behalf of the supplier community.

It remains an honor to champion the business interests of the automotive supplier community and I am excited about the future of OESA. Thank you for your support and for trusting OESA to represent your voice.

As always, please feel free to contact me at 248.430.5963 or jfream@oesa.org.

Julie A. Fream President and CEO OESA

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LEGISLATIVE UPDATE

It is Critical to Pass the USMCA Without Delay Ann Wilson Senior Vice President, Government Affairs, MEMA 202.312.9246 │ awilson@mema.org

One of the first actions the Trump administration took in 2017 was to trigger the renegotiation of the North American Free Trade Agreement (NAFTA).

At almost a quarter of a century old, it was time.

The agreement predated the internet, and does not adequately address digital trade, services liberalization, state enterprise restrictions, or emerging labor and environmental issues.

The three countries got together to create a new North American trade deal, now called the United States-Mexico-Canada Agreement (USMCA).

MEMA participated in the entire process advocating for suppliers.

USMCA was signed in November 2018, but it must be ratified by all three countries before it can take effect. Mexico ratified the agreement earlier this year.

The U.S. and Canada have not, as of yet, voted to ratify it.

The motor vehicle parts manufacturing industry has flourished for a generation under NAFTA, and now it is the largest sector of manufacturing jobs in the United States. Together, parts makers are bigger than the auto makers themselves. As an industry, it represents almost three percent of the U.S. GDP and a total of 4.26 million jobs. This strength is only possible if a reliable trade agreement with Mexico and Canada is in place. They are the U.S.'s largest trade partners. Our neighbors to the north and the south purchase 20 percent of the total value of U.S. manufacturing output – more than the next 11 countries combined – and this supports about 2 million American manufacturing jobs and 43,000 small- and medium-sized businesses in the U.S., according to the National Association of Manufacturers.

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Every other major manufacturing hub around the world, such as Asia and Europe, has a similar trade agreement with its neighbors. Eliminating a North American trade agreement would simply put U.S. companies at a significant disadvantage to their competitors abroad.

The stability of an approved USMCA would provide stability for U.S. investment. Putting a North American trade deal at risk puts investments at risk.

Without a reliable agreement, companies could become wary of building or expanding production facilities here in the U.S., and may move them to where they feel more secure. If that were to occur, the technologies and advancements that have propelled the automotive industry could also leave the U.S. Of course, there are many other factors at work creating today’s international trade environment. But there is no doubt that the first step the U.S. needs to take is to stabilize trade in North America. It is critical. For this reason, MEMA/OESA continues to encourage Congress to pass the USMCA without delay. With USMCA, trade between the U.S., Mexico, and Canada will be modernized to remain competitive with other manufacturing centers across the world, foster economic growth and confidence, and maintain stability in the supply chain.

LEGISLATIVE UPDATE MEMA continues to hold roundtable events, inviting legislators to connect with motor vehicle parts manufacturers in their state to learn more about key issues affecting the industry, including USMCA. MEMA also joined more than 400 organizations and businesses in signing a letter to Congress requesting USMCA to be ratified during the

autumn season. MEMA, OESA and representatives from member companies met with Vice President Mike Pence recently to emphasize support for the USMCA. Members are urged to visit the MEMA Action Center to send messages to Capitol Hill and encourage the passage of the proposed trade agreement.

Official White House Photo- Tia Dufour This photograph is provided by THE WHITE HOUSE as a courtesy and may be printed by the subject(s) in the photograph for personal use only. The photograph may not be manipulated in any way and may not otherwise be reproduced, disseminated or broadcast, without the written permission of the White House Photo Office. This photograph may not be used in any commercial or political materials, advertisements, emails, products, promotions that in any way suggests approval or endorsement of the President, the Vice President, the First Family, the Second Lady, or the White House.

Standing: (L-R) Peter Butterfield, Chairman and CEO, Omega Holdings; Jens Schuler, President Global Sales & Marketing Automotive Aftermarket, Schaeffler Group USA, INC.; Julie A. Fream, President and CEO, OESA; Vice President Mike Pence; Ramzi Hermiz, President and CEO, Shiloh Industries, Inc.; Mike Mansuetti, President, Robert Bosch LLC, Eric Sills, President and CEO, Standard Motor Products, Inc.; Ann Wilson, Senior Vice President, Government Affairs, MEMA Sitting: (L-R) James Tobin, Chief Marketing Officer and President, Magna Asia, Magna International, Inc.; Bill Long, President and CEO, MEMA; Charles Johnson, CEO, OptiCat; Françoise Colpron, President North America, Valeo North America To stay abreast of the latest trade updates, visit http://www.mema.org/trade.

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TECHNOLOGY UPDATE

Future U.S. Fuel Economy Standards are Becoming More Complicated and Uncertain Brian Daugherty Chief Technology Officer, MEMA 248.430.5966 │ bdaugherty@mema.org

The National Highway Traffic Safety Administration (NHTSA) recently announced that 13 out of the 18 major OEMs selling vehicles in the U.S. fell short of the 2017 model year fuel economy standards before credits were applied. 2017 is the last year for which official data is available. The U.S. fleet was 1.5 mpg below the required fuel economy standard – which represents a significantly greater shortfall than the 0.5 mpg shortfall in 2016. Most OEMs used banked credits to fill the gap, but FCA is expected to pay a $79M fine for 2017 – even after applying credits purchased from Tesla and others. As fuel economy standards continue to tighten further over the next two years, the gap is expected to widen, and OEMs will need to continue using banked credits to make up for the shortfall.

NHTSA also stated that more automakers were failing to comply with fuel economy standards in MY2018 and MY2019 and that penalties would continue to increase.

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The U.S. is nearing the release of Corporate Average Fuel Economy (CAFE) and Green House Gas (GHG) regulations rulemaking to cover MY2021 – MY2026. The Notice of Proposed Rulemaking (NPRM) issued by NHTSA and the Environmental Protection Agency (EPA) on August 2, 2018, had a wide range of possible options, so content of the final rulemaking is the subject of much speculation.

After initially signaling that the favored approach was to “flatline” the standards after MY2020. The U.S. government is now indicating that a gradual increase will be proposed – probably in the range of 0.5 percent to 1.5 percent per year. This is good news for suppliers of the advanced engine technologies that will allow OEMs to meet these stricter targets.

Meanwhile, California and 22 other states sued the Federal government on September 20, 2019, after the U.S. revoked California’s exemption allowing it to set state fuel economy regulations separate from those established by the EPA and NHTSA. The exemption also allowed other states to adopt California’s stricter standards. The prospect of a lengthy legal battle adds further uncertainty to the fuel economy requirements.

The revised requirements are urgently needed to support upcoming vehicle planning. OEMs and suppliers face the prospect of having multiple fuel economy standards along with the potential for sudden changes in those standards based on court decisions. MEMA and OESA continue to advocate for one national fuel economy program.

TECHNOLOGY UPDATE

In addition, California and four OEMs announced on July 25, 2019, that they had reached a voluntary agreement to further improve fuel economy. Under this agreement, OEMs gain a lower rate of fuel economy increases than those proposed by the Obama administration for MY2021 – MY2025 for California and the 13 follow-on states that have adopted California’s CO2 emission and fuel economy standards, but higher than those expected to be proposed by the U.S. It also allows each Battery Electric Vehicle (BEV) to be counted twice in state OEM fleet fuel economy calculations and Plug-In Hybrid Electric Vehicles (PHEV) to be counted 1.6x.

The existing U.S. fuel economy standards currently have similar BEV and PHEV multipliers, but the multipliers are scheduled to phase out over the next several years. While multipliers can incentivize the use of a particular technology such as BEVs, they inflate the count of high mpg vehicles in the fuel economy averages. This falsely increases the fleet average and does not help the environment as much as adding additional fuel saving technologies to the rest of the internal combustion engine (ICE) vehicles being produced.

Automotive OEMs and suppliers have produced many fuel economy innovations over the last several decades including downsized and turbocharged engines, advanced transmissions, continuously variable valve timing, electrification of pumps and valves, higher pressure fuel rails and injectors, and selective cylinder deactivation. These innovations and the development of new technologies, such as high thermal efficiency Homogeneous Charge Compression Ignition (HCCI), will continue as ICE efficiency improvements are required.

U.S. Highway Fatalities Decreased in 2018 NHTSA announced that U.S. highway fatalities dropped 2.4 percent to 36,560 in 2018.

This is the second year in a row of reduced fatalities and NHTSA credited advanced safety technology as a primary factor. Unfortunately, both pedestrian and cyclist fatalities increased – up 3.4% and 6.3% respectively – and most of these occurred after dark. As Advanced Driver Assistance System (ADAS) technology continues to improve and application rates increase – especially with Automatic Emergency Braking (AEB), we will hopefully continue to see significant additional decreases in fatality rates.

Contact Brian Daughtery to learn more about new vehicle technology trends and its impact on the industry.

He can also share information about the quarterly Mobility Supplier Forums held in Silicon Valley and the OESA Advanced Technology Council. Both are designed to keep industry stakeholders informed of new vehicle technology.

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ECONOMIC UPDATE

Light Vehicle Sales Environment Offers Risks and Rewards Mike Jackson Executive Director, Strategy and Research 248.430.5954 │ mjackson@oesa.org

Today’s global automotive planning environment encompasses a dynamic time in our industry. A tremendous number of opportunities exist as the industry looks to deploy a broader range of advanced technologies of safety and convenience, while boosting fuel efficiency and reducing emissions. Since the Great Recession, global vehicle sales and production have consistently marched toward new industry highs, fueled

by China’s ascendancy to the largest vehicle market in the world.

In 2018, the global economy grew by 3.6%, benefitting from strong growth in core markets including the U.S. (2.9%), China (6.6%) and India (7.4%). A range of headwinds have surfaced in 2019, pulling global GDP down to 3.0%. The slowing global economy has contributed to sharply lower new global vehicle demand in 2019.

After slipping 1% in 2018, global light vehicle sales are set to fall 4% in 2019 to 90.5 million units, a decline of nearly 4.0 million units. The magnitude of the sales collapse is compounded by the speed of the sales

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reversal, due to sharply lower sales in China, set to plunge 7% in 2019. Though China’s impact dominates the global sales decline, the global vehicle demand environment is broadly negative. In 2019, every region is set to post a material sales decline, aside from Western Europe, which only manages to achieve flat sales, maintaining its no-growth pace from 2018.

Closer to home, the U.S. light vehicle sales outlook continues to benefit from a protracted economic expansion that has now stretched beyond 10 years.

Looking back at 2018, though late in the cycle, the vehicle sales environment reflected surprising strength as U.S. sales posted a modest increase (+0.6%) to 17.3 million units. The economy grew by 2.9% in 2018, helped in part due to the passage of tax reform, which supported a meaningful increase in fleet sales due to an accelerated depreciation provision. Through mid2019, fleet volume posted a 6% increase from year ago levels to 1.63 million units. While positive, even more encouraging is the balanced growth of 6% between commercial and rental fleet volume, which offset weaker governmental fleet volume, which slumped 2%.

ECONOMIC UPDATE

For 2019, the U.S. economy remains healthy, yet the pace of growth has slowed to 2.2% for the year.

Through September, U.S. light vehicle sales slipped 1.4% to 12.8 million units, for a decline of nearly 180,000 units. Despite lower aggregate sales to date, the trend favoring light trucks continues, with Truck sales (Pickups + LCV Vans) up 3% to 2.96 million units (+94K units), while SUV sales grew 2% to 6.1 million units (+143K units). The passenger car market remains sizable, holding 28.9% of U.S. light vehicle sales, yet remains in decline. Facing profitability pressures, the category continues to erode with year-to-date sales down 10% to 3.69 million units. Looking ahead, U.S. sales in 2019 are forecast to maintain the current 1.4% rate of decline, slipping to 17.1 million units, down nearly 250,000 units from 2018. Heading into 2020, U.S. auto sales are forecast to fall by an additional 400,000 units, to 16.7 million units, according to the latest OESA Affiliate Forecast Matrix.

The rapid shift towards light trucks and SUVs has ushered in a significant change in the industry but also a tremendous opportunity. Industry transaction

prices reflect that both passenger cars and sport utilities have achieved a nearly $2,000 increase in average transaction price between 2010 and 2018.

More importantly, SUVs have established and continue to maintain a tremendous advantage in pricing power over passenger cars, holding a nearly $7,000 premium in average transaction price over the past nine years.

As of 2018, light trucks, including SUVs, accounted for more than 70% of U.S. light vehicle sales, opening a door to an expanded revenue stream of more profitable content and program opportunities.

Though consumer adoption of vehicle electrification strategies has grown more slowly than many had anticipated, regulations are expected to accelerate such efforts, especially within the light truck category.

Suppliers can benefit by capitalizing on their deep expertise within light truck segments to offer a broader range of products and solutions. Higher margin trucks and SUVs offer unique product attributes, for a growing customer demographic that is willing and able to pay a considerable premium due to inherent functionality, duty cycle and prestige.

Contact Mike Jackson to learn more about economic and industry trends. He can also share information on the quarterly Automotive Supplier Barometer and the OESA CFO and CPO Councils.

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GUEST COLUMN

RACING FOR MANUFACTURING TALENT

The automotive manufacturing industry is facing increasing labor challenges from record low unemployment, competition over skilled technical talent and demographic shifts. A 2018 study by the Manufacturing Institute found that over the next decade, 2.4M of the 4.6M manufacturing job openings will go unfilled. While factory workers’ qualifications used to focus on manual dexterity and showing up to work on time, today’s smart factory workforce requires a skillset in technology and the ability to adapt to rapid changes. Technology is also transforming traditional HR functions - such as hiring, training and benefits administration. Companies need to strategically redefine how they approach recruitment, training, retention and compensation models. Leveraging automation and artificial intelligence (AI) may be the pivotal point enabling HR to focus on the human side of the talent pipeline, rather than daily data record keeping.

A 2019 survey at Baker Tilly asked 400 professionals to identify the top business challenges facing their clients – 56% mentioned “talent” in their responses, more than double any other challenge mentioned. The “talent” problem manifests itself in many different ways: – Acquisition, development, retention, and succession – Acute labor shortages in specific industries, such as construction, manufacturing and local government – Generational differences among employees – Use of automation and robotics to improve talent management and drive efficiencies The talent problem is affecting nearly all industries.

According to the National Association of Manufacturers outlook survey for the second quarter of 2019, 69% of manufacturers say the inability to attract and retain a quality workforce is their biggest concern.

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ABOUT BAKER TILLY Baker Tilly Virchow Krause, LLP (Baker Tilly) is a leading advisory, tax and assurance firm with a management consulting practice that offers comprehensive enterprise systems implementation, business integration, industrial analytics and tailored optimized solutions in alignment with Industry 4.0 for the mobility and transportation industries around the globe. Headquartered in Chicago, Baker Tilly is one of the top 15 accounting and advisory firms in the country and is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 180 territories, with more than 36,000 professionals.

To thrive in the mobility and transportation industry of tomorrow, strategic human capital alignment is required today.

CANDIDATE-CENTRIC RECRUITING Historically, manufacturing organizations have taken a job-centric approach to hiring: when a position is open, candidates apply and the one who best fits the role gets the job offer. In fact, 77% of respondents to a Baker Tilly poll reported their organizations take a jobcentric approach for their hiring pipeline. This antiquated approach is not nearly as sophisticated or functional as a candidate-centric approach. A candidate-centric journey creates the opportunity to increase the quality of the pool of candidates.

Here’s why: Quality candidates who know their value will quickly move on from a clunky recruiting and interview experience to prospective employers that provide an

GUEST COLUMN engaging, consumer-based experience, leaving only lower quality candidates to slog through the inferior experience.

Developing this candidate-centric journey takes a different mindset in organizing how candidate profiles are stored and the talent needs of the organization.

Modern levels of automation that incorporate AI – specifically machine learning and chat bot technologies – are the driving forces behind candidate-centric recruiting. Candidates receive personalized updates, become engaged in an organization’s community, receive guidance, as well as get answers to their questions in real-time. HR departments can use automation to find and screen candidates, schedule interviews and do background checks, and reduce manual data entry among other tasks.

RETENTION To attract and retain employees, organizations must consider what is important to them beyond a salary and health benefits. Things that keep millennials motivated are not necessarily the same as what keeps older workers motivated. Younger employees are more open to change jobs every two to three years. The current employment marketplace shows that larger employers attract job applicants more than middle-market employers do, and a younger generation of workers are looking for more engaging things to work on. Larger organizations also generally have more opportunities for employees looking for new challenges.

The attitude of millennials towards job tenure and new opportunities affects all generations in the workplace.

Older generations are exposed to different opportunities and work-life integration because of the influence of millennials.

Companies with a strong knowledge center and learning development program are often better positioned to develop their workforce.

One problem for employers is replacing short-tenured employees. It can be expensive. According to the Society for Human Resources Management (SHRM), on average it costs an organization six to nine months of an employee’s salary to replace them. This means that for an employee making $60,000 per year, the replacement cost equals $30,000 to $45,000 in recruiting and training costs.

The skillset of empowered employees is what runs organizations on a day to day basis. As industries,

Checklist for retaining employees ⃣

Know what employees want for a fulfilling career; it’s not just money. ⃣

Examine what types of alternative benefits can be added to appeal to existing or new employees. ⃣

Understand that if employees cannot move around within an organization, they will look to move around in a different organization. ⃣

Change mindset from “investing” in new hires to “developing” new hires. ⃣

Include Emotional Intelligence (EQ) training as part of employee development.

technology and consumer preferences evolve, how companies conduct business will change, and the roles and skills required of employees must change too.

Reskilling employees requires understanding how a new process will work, and identifying who in the organization is best to perform it. Organizations need employees with a mix of business, science, interpersonal and technical skills at every level. Companies with a strong knowledge center and learning development program are often better positioned to develop their workforce as they have documented what is being done now. Retaining and reskilling employees go hand in hand as it helps employees understand how they can excel in their current role and envision opportunities to move up or within the organization.

CONCLUSION Automotive manufacturing organizations should look at the talent challenge as an opportunity to reposition the organization, enhance technology capabilities and provide more meaningful engagement with employees. To thrive in the mobility and transportation industry of tomorrow, strategic human capital alignment is required today.

Learn more about Baker Tilly’s Automotive and Mobility service offerings. For further inquires contact Ryan Holzhueter.

Authored By: Erich Bergen Director, Baker Tilly erich.bergen@bakertilly.com +1 (248) 368 8741

Edward Mulford Consultant, Baker Tilly edward.mulford@bakertilly.com +1 (248) 368 8938

Contributor: Paul Clark Content Strategist, Baker Tilly returnofmfg@bakertilly.com +1 (215) 972 2376

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. © 2019 Baker Tilly Virchow Krause, LLP

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OESA EVENTS

Mobility Supplier Forum / Nov. 21 OESA will host the fourth quarter 2019 “Mobility Supplier Forum” on Nov. 21, 2019, at Flex Automotive in Milpitas, Calif. The event will feature Steve Gawronski, vice president of global supply chain, Rivian, who will share an update on the Rivian Research and Development Center in the Silicon Valley and Sponsors: how suppliers can work with them.

In addition, Henry Bzeih, CTO & senior vice president, Flex Automotive, will share insights on the challenges ahead as the industry advances autonomous vehicle technology, and Jennifer Dukarski, shareholder, Butzel Long, will discuss how to avoid recalls when introducing new technologies.

Automotive suppliers looking for insight into the latest in automotive technology and tech companies exploring entrance into the automotive industry are encouraged to attend.

Ford Purchasing and Engineering Town Hall Meeting / Dec. 4 OESA members are invited to attend the 14th Annual OESA Ford Purchasing and Engineering Town Hall on Dec. 4, 2019, at the The Henry, Autograph Collection in Dearborn, Mich. Hau Thai-Tang, chief product development & purchasing officer, Ford Motor Company, will provide a Ford purchasing and engineering update and participate in an interactive Q&A session.

Ford executives joining Thai-Tang include Matt Godlewski, director, government relations, who will provide a government relations update, and Ted Cannis, global director, electric vehicle, who will provide an update on Ford’s electrification strategy. Lisa Drake, vice president, global powertrain and purchasing operations, and Dave Filipe, vice president, powertrain engineering, will join the team for the Q&A session.

Current and prospective Ford Motor Company suppliers and those interested in learning more about Ford's future strategic plans are encouraged to attend this annual event.

Executive Industry Sponsor:

Supporting Sponsors:

Executive Sponsors:

OESA members and industry guests may register for events at www.oesa.org.

For registration assistance, contact OESA at 248.952.6401 or info@oesa.org.

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OESA EVENTS

2019 Industry Disruptors Series: Karma Group / Dec. 11 OESA is pleased to host the 2019 Industry Disruptors Series with thought leaders defining the new mobility landscape. The next Disruptors event will feature Lewis Liu, vice president of business development and strategy, Karma Automotive, on Dec. 11, 2019, at The Dearborn Inn, Dearborn, Mich.

Southern California-based Karma Group, best known as a creator of luxury electric vehicles, has emerged as a high-tech incubator to help innovators prove their emerging technologies.

Featured at the meeting will be the Revero GT - a luxury electric vehicle powered by dual electric motors that embodies Karma’s goals of offering leading automotive design, technology, customization and an outstanding customer experience.

Presenting Sponsor:

Karma Automotive is looking for suppliers, innovators, engineers and designers that want to work with a different kind of car company.

Strategic Insights Executive Briefing Series IV / Dec. 12

Series Sponsors:

OESA invites supplier industry executives, analysts and strategy professionals to gain expert insights at the next OESA Strategic Insights Executive Briefing, for an Automotive Outlook and Industry Risk Assessment on Dec. 12, 2019, at the MSU Management Education Center in Troy, Mich. Attendees will gain actionable intelligence to inform strategic planning frameworks.

Jeff Schuster, president, Americas operation and global vehicle forecasting, LMC Automotive, will share a detailed automotive sector outlook and provide a strategic assessment of North America, including a discussion on electrification strategies.

Jason Coffman, U.S. automotive consulting leader, Deloitte Consulting, LLP, will share compelling takeaways from Deloitte’s detailed market and consumer research. Then Neal Ganguli, U.S. automotive supplier practice leader, Deloitte Consulting, LLP, and Ryan Robinson, automotive research leader, Deloitte LLP, will address the impact of disruptive forces shaping the industry and sophisticated global supply chains.

OESA 2020 Consumer Electronics Show Supplier Briefing / Jan. 6, 2020 OESA announces the OESA 2020 Consumer Electronics Show (CES) Supplier Briefing on Jan. 6, 2020, at the MGM Grand in Las Vegas, NV. Senior industry experts from KPMG and IHS Markit will discuss megatrends and provide attendees with a panel-style expert preview of what to look for and be aware of at the 2020 CES. Gary Silberg, partner and the Americas head of automotive, KPMG LLP, will discuss the foundational layer for many of today’s major megatrends. IHS Markit experts will share insights on automotive electronics, connectivity, mobility futures, software trends, ADAS and more.

Exclusive Sponsors:

Note: Separate registration is required to attend the CES. OESA members and industry guests may register for events at www.oesa.org.

For registration assistance, contact OESA at 248.952.6401 or info@oesa.org.

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WELCOME NEW MEMBERS Arco Design / Build

Automotive Insight LLC

Member Representative: Henri Brickey, Director of Business Development

Member Representative: Claire Wang, CEO Alternate Representative: Liming He, Office Manager

Founded in 1995, ARCO Design/Build, Inc. is a national designbuild contractor with locations in Atlanta, Charlotte, Houston and Indianapolis. Despite its tremendous growth over more than two decades, the way it does business remains unchanged. Its philosophy of “we succeed when our clients succeed” has helped it become the industry leader it is today.

Automotive Insight is a certified Minority Business Enterprise (MBE) and Women’s Business Enterprise (WBE) that provides clients with business solutions across product strategy, engineering domains, sales & marketing and supply chain management.

380 Interstate North Parkway SE Suite 210 Atlanta, GA 30339 (770) 845-3931 www.arcodb.com

Giarmarco, Mullins and Horton 101 W. Big Beaver Rd. 10th Floor Troy, MI 48084 (248) 457-7000 www.gmhlaw.com

Member Representative: Rosemary Gilchrist, Chief Operating Officer Alternate Representative: Jeanmarie Smith, Director, Accounting Founded 40 years ago, Giarmarco, Mullins & Horton, P.C. ranks as the 12th largest law firm in Michigan. With more than 60 attorneys, GMH is a full-service law firm offering clients a diverse range of capabilities and specialties.

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575 E Big Beaver Rd. Suite 110 Troy, MI 48083 (248) 928-6082 www.automotiveinsight.net

With knowledge, skills and disciplines in automotive, it identifies the right partners, products and technologies to deliver top-tier results.

INVISTA

175 Townpark Dr. Kennesaw, GA 30144 (423) 598-3596 nylonpolymer.invista.com Member Representative: Isaac Iverson, Business Development Manager Alternate Representative: Anne Burley, Business Development Manager INVISTA is a global leader in the production of nylon intermediates and polymer resins. For more than 45 years, it has made nylon polymers that serve as the foundation for many different goods across the automotive, industrial, apparel and consumer electronics industries, to name just a few.

WELCOME NEW MEMBERS Mize, Inc.

Ricardo Strategic Consulting

Member Representative: Michael Blumberg, Chief Marketing Officer Alternate Representative: Alan Horne, Director, Global Business Development

Member Representative: Scott St. Clair, RSC / NA Vice President Alternate Representative: Mark Kuhn, RSC / NA Vice President

12802 Tampa Oaks Blvd.

Temple Terrace, FL 33637 (813) 971-2666 www.m-ize.com

Mize optimizes all post-sale service interactions from product registration to trade-in to deliver a seamless experience during the entire customer lifecycle. Clients can replace disparate applications and data silos with a unified platform for managing their Install Base, Warranty, Service Contracts, Product Support, Field Service and Service Parts. Mize focuses on delivering bestin-class solutions exclusively for Discrete Manufacturers and their service value chain partners.

40000 Ricardo Dr. Van Buren Twp., MI 48111 (734) 397-6666 rsc.ricardo.com/about-us

Ricardo Strategic Consulting (RSC) is one of the world's leading management consultancies dedicated to serving the automotive, transportation and mobility industries.

RSC offers a comprehensive portfolio of services, advising global leaders on high-impact strategic issues and resolving operational challenges. With its global reach, industry knowledge, business acumen, and deep technical expertise, RSC's value proposition is based on providing professionals who intersect the space between traditional engineering specialists and pure-play strategy consultants to assist as trusted advisors on their most difficult challenges.

Zhongli

1511 East 14 Mile Rd. Troy, MI 48083 (248) 933-3435 www.zlcglobal.com Member Representative: Jason Thomas, Chief Financial Officer Alternate Representative: Tiffany Bolin, Director of Purchasing Founded in 1998, Zhongli Corporation, integrated with design, R&D, manufacturing and marketing capacities, is focused on vehicle parts & components and assemblies. It has established manufacturing sites and technical centers in China, U.S. and Europe. The products from Zhongli Corp. include engine mounts, chassis shock absorbers, chassis modules, plastic interior/exterior products and MCU products.

Join OESA Today!

Become a member and let OESA champion your business interests throughout the supply chain and in Washington, D.C. Â

For membership information, contact: Brenna McCann Senior Manager, Membership and Sales 248.430.5970 bmccann@oesa.org OESA News - 2019 Fourth Quarter

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OESA COUNCILS

PEER GROUP COUNCIL NETWORK The OESA Peer Group Council Network continues to be a significant benefit of OESA membership. Supplier executives attend to network, address issues of common concern and learn best practices with peers. Interested supplier executives are welcome to attend a council meeting to understand the importance of these forums.

Advanced Technology Council (ATC) Advanced Technology Council meetings focus on a wide range of topics related to Cyber Security, CAFE (Regulations, Materials & Light weighting, Powertrains), Vehicle connectivity (V2X, Telematics, OTA, Infotainment), as well as Autonomous and ADAS technologies.

Automotive Public Relation Council (APRC) The APRC is a network of automotive public relations professionals. It discusses industry best practices and OEM public relations. Industry media frequently attend council meetings.

Chief Executive Officer (CEO) Council Supplier CEOs discuss their unique concerns and hear from leading industry executives on a wide variety of relevant topics. Recent discussions include the impact of trade negotiations; finding, hiring, and retaining qualified employees; and technology trends.

Chief Financial Officer (CFO) Council The CFO Council addresses financial management issues with the c-suite financial officers in the supplier industry. Members explore strategic risk and compliance issues. Recent dialogue focused on vehicle production, capacity, benefits strategies, tooling audits and material markets.

Chief Purchasing Officer (CPO) Council Make/buy decisions, material market forecasts and inventory hedging strategies are just a few examples of the topics discussed at CPO Council meetings.

Members recently reviewed the impact on tariff changes and commodity indices.

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Communication Executives Council (CEC) Communications executives meet to address common issues, such as measuring marketing initiatives, improving global communications, social media best practices and media relations. As a member perk, members receive industry press passes to the NAIAS and are regularly invited to comment on industry topics in the media.

Enterprise Leadership Council (ELC) ELC meetings address the unique challenges faced by suppliers with less than $150 million in annual revenue. Subject matter experts and roundtable discussions cover a wide range of strategic and tactical issues. Recent topics include global expansion, capital markets, raw material and energy markets, and product development processes.

Environmental, Health, Safety & Sustainability (EHS&S) Council Members of the Council discuss relevant topics, such as health and safety standards implementation and audits, workplace performance improvement, and sustainability initiatives. Agendas revolve around peer sharing and subject matter expert presentations from industry and government officials. Membership is available to the environment, health, safety and/or sustainability executives of supplier member companies.

Human Resources Council (HRC) The HR Council draws on the specialized expertise of human resources executives. Subject matter experts discuss and share best practices on an array of topics, such as attracting and retaining specialized talent, developing benefits packages, implementing policies and expatriate assignments. This council is known for candid roundtable discussions.

OESA COUNCILS

Legal Issues Council (LIC) In-house counsel from supplier member companies discuss business-critical legal issues, such as product liability, industry terms and conditions, directed buys and intellectual property protection. Members of the council weigh in on the ongoing analysis of OEM terms and conditions, and discuss topics from other councils from a legal perspective.

Warranty Management Council (WMC) The WMC is a unique automotive-centric forum for warranty professionals to network and discuss topics such as warranty management data systems. OEM speakers address the group at almost every meeting.

The council champions the comparative analysis of OEM warranty programs and supports the warranty audit process certification with AIAG.

Sales Executive Council (SEC) Discussions at SEC meetings cover a broad range of business development and sales topics. Sales leaders from OE suppliers have the opportunity to query OEM representatives, receive sales training and tips, and network with industry peers. The SEC is the largest OESA council.

Young Leadership Council (YLC) The YLC helps members develop and retain highpotential employees on a management track or considered to be a future leader. During the two year program, young leaders hear from subject matter experts on leadership, personal development and industry topics and trends. Graduates leave the program better equipped for the next step in their career with their company.

Tooling Council (TC) The Tooling Council provides tool maker CEOs the opportunity to discuss best practices and address issues impacting their business. Members work together to address industry issues and use the OESA/HRI Tooling Barometer to better understand the unique operational issues of the tooling community.

For more information about the OESA Peer Group Council Network visit www.oesa.org or call 248.952.6401.

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GUEST COLUMN

Take Control of the Automotive Supply Chain By: Richard Murray, Chief Product Officer, Plex Systems As we prepare to enter the year 2020, it’s clear that much has changed for automotive suppliers in just the last decade, including new vehicle technology, product categories, and emissions regulations, just to name a few. Consider the shift from internal combustion engines to EV powertrains alone: Traditional engines require thousands of parts.

Batteries require a few hundred. The implications to the supply chain are enormous.

But despite these industry evolutions, and the transformations it will require of the automotive supply chain, one core focus of today’s modern manufacturers will remain the same: The need to separate themselves from the competition for the long-term health and viability of the business.

Manufacturers may seek to accomplish this by pulling any number of levers, from pricing to product, design to operations to sales. But what if manufacturers sought to tap into one of the greatest unexplored resources – the supply chain?

Why Now? Limited IT integration, as well as a lack of consistency in core processes, have historically been two main obstacles that arise when manufacturers and OEMs seek to further enmesh their own supply chains; even if it’s as simple as ensuring consistent labeling standards.

But consider this: In the last decade, cloud computing has become more ubiquitous due to its reliability and security. Data storage has become cheaper. And analytic tools are becoming more robust, able to handle the vast amounts of information coming from a manufacturer’s shop floor at any given moment.

All of this means that digital manufacturing is in reach of more manufacturers than ever before, not only leveling the playing field, but opening up the door for manufacturers to reap the benefits of deeper and broader supply chain integration.

PLEX.COM | 855.534.8012

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Achieving a Unified, Integrated Approach to Manufacturing Manufacturing in the cloud has clear, proven benefits.

At the highest levels, a single source of truth delivered through a unified ERP and MES gives businesses greater access to manufacturing data in real-time, consistent application of supply chain principles and objectives across the enterprise, a tighter relationship with suppliers for more effective sourcing and procurement, and the ability to scale supply chain processes globally.

Because automotive OEMs are increasingly putting the burden of process documentation—and the associated compliance risk—on suppliers, increased data accuracy is a must-have in an increasingly complex global supply chain. Manufacturing in the cloud allows company leaders and OEMs to access information anywhere, anytime from a single source of truth. Similar to traditional supplier portals, everything done in tandem between the OEM and their supplier can be tracked (by both of them) to ensure maximum visibility and accountability where it is needed.

A manufacturing cloud-based system can more easily ensure common automotive manufacturing principles like lean manufacturing, just-in-time (JIT), Kanban and poka-yoke are applied consistently across the enterprise. This is vital to driving quality, innovation, and continuous improvement, all the while providing an integrated supplier portal where project management happens.

A digitized approach to manufacturing has enabled companies like Kamco Industries to win American Honda’s on-time delivery award for close to a decade. Kamco, a subsidiary of Kumi Kasei, provides full-service product design and manufacturing of injection, sheet molded, and formed fiber felt products. By leveraging cloud ERP, Kamco has gained visibility into orders, inventory,

GUEST COLUMN

overall equipment effectiveness (OEE) and tools to communicate efficiently with Honda. Other improvements include streamlined scheduling from two hours to just minutes, year-end inventory from two weeks to two days, and audit reporting from nearly 40 people on overtime for days to simply printing off a report.

Meeting OEM Requirements As software solutions that support manufacturing in the cloud are becoming more affordable, more accessible to global enterprises, and easier to integrate, OEMs are similarly working to communicate standards to both vendors and suppliers that take advantage of industrial automation and operational digitization.

As a result, leading software solution providers today deliver out-of-the-box functionality that supports global automotive OEMs. This eliminates the need for complicated piecemeal integrations and systems that butt heads, while ensuring everything is captured in a single, easy-to-access system. And, importantly, a cloud solution can support full digital document management for paperless tracking of key quality documents and attachments in one place, helping companies also achieve competency requirements in IATF 16949, for instance.

Delivering Benefits Throughout the Supplier Network Manufacturers with a digital system of record can easily support automotive needs like FMEAs to drive quality and prevent potential failures, which will reduce or eliminate waste. That same digitization supports the APQP PPAP processes, giving the supplier a collaborative, clear way to work with their respective suppliers and the OEMs to approve the design and process of parts that meet tight specifications.

Many suppliers understand the value of tracking production data at the manufacturing moment. It is the key to gaining visibility into what is happening both on the shop floor and through the supply chain.

Those who do not will be left behind. By digitizing operations, manufacturers can track materials that enter the shop floor, as well as inventory that moves through the production process. You can reduce inventory levels and the associated carrying costs. On top of that, having a digital “paper trail” of your inventory lowers the risk of recalls and satisfies stringent customer requirements – allowing companies to optimize their supplier chain.

Bottom line: When suppliers have visibility into their supply chain – from raw materials to the finished product – they can minimize inventory, support JIT manufacturing, and deliver parts on time.

And, at the end of the day, isn’t that what a great manufacturing leader strives to do more than anything?

Richard Murray is Chief Product Officer of Plex Systems, Inc.®, which delivers industry-leading ERP, MES, and Industrial IoT solutions to manufacturers across process and discrete industries.

Plex pioneered cloud solutions for the production line, connecting suppliers, machines, people, systems, data, and customers with capabilities that are easy to configure, deliver continuous innovation, and reduce IT costs. Learn more at www.plex.com

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GUEST COLUMN

The Crystal Ball is Cloudy Co-Authored by: Fred Hubacker Managing Director FHubacker@ConwayMacKenzie.com 401 S. Old Woodward Avenue Suite 340 Birmingham, Michigan 48009 1.248.433.3100

Walter Popiel Managing Director WPopiel@ConwayMacKenzie.com 401 S. Old Woodward Avenue Suite 340 Birmingham, Michigan 48009 1.248.433.3100

As we wind move into the early stages of 4th quarter, automotive industry uncertainties continue to mount at an unprecedented pace. As decision makers and investors assess the risks and opportunities, we take stock in a few of the driving themes of 2019 and beyond: 

TRADE POLICY — While the intent of pursuing equitable trade policies, practices and rules with major US trading partners is a positive, the tariff wars that have erupted have far reaching implications across the economy, most notably the global auto industry. In an industry where investment and sourcing decisions are made well in advance of new vehicle launches, incoherent trade policy applies unforeseen risk to the execution of carefully considered business plans. While the projected SAAR can be carefully analyzed, leaders remain flummoxed in an era where a threat communicated on a social media platform can drive share prices. Even USCMA, which replaces and modernizes NAFTA, appears to be at a political standstill with no early resolution in sight.



ELECTRIC VEHICLES — There is certainly no doubt that electric vehicles, from various hybrid configurations to full battery, are coming in the very near term. The adoption rate, however, remains in question. Many parts of the world are moving much faster to an electric future, as the EU and China for example, have significantly more aggressive timetables than the USA. OEM’s have responded with literally billions of dollars of investment in electric vehicle platforms and body styles. Among the many issues, however are: affordability, consumer acceptance, infrastructure, range and the future of the ICE powertrain. Many of the major supply chain players are capably funded and staffed to support a world where both electric and ICE exist. Unfortunately, many are incapable of either and so deciding where to place your bet, and your investments, can be a murky choice at best.



AUTONOMOUS VEHICLES — While the hopes and hype may have cooled just a bit regarding the timing and availability of fully autonomous vehicles, it’s another example of technology that is long on capital requirements, but unproven in the marketplace. Indeed, many important and significant driver assistance and safety advances have been developed and implemented into the vehicles we drive today. Suppliers have been key to those advances, but a fully autonomous vehicle may still be in the distant future. Patient owners and

- 2019 Fourth Quarter 19 │ OESA News

GUEST COLUMN

shareholders may reap the rewards, but few auto companies live in a patient environment.

The crystal ball is very far from clear on this technology.



WALL STREET — Nothing is less predictable than the swings in the financial markets and the overall mood of Wall Street when it comes to the automotive sector. In the past several years we have witnessed a very robust US auto industry supported enthusiastically by the banking industry, private equity firms, and venture capital money managers. However, the market has been fickle in how those rewards have been doled out. While some OEMs have enjoyed Silicon Valley like rises to glory despite significant uncertainty, others making similar investments in a more disciplined manner have at times been punished. Despite record low unemployment, low interest rates, low gasoline prices and a steady increase in job creation the industry equity performance has been pedestrian as we remain in the shadow of the late 2000’s. Europe’s outlook is weak, China has failed to meet even the most draconian estimates, and tariffs threaten to undermine a global supply network established over decades. All of these concerns are here and they are all real. Could this mean consolidations are inevitable? Wall Street rewards enterprise value creation through synergistic opportunities and risk diversification. Who will be acquiring whom in the near future remains to be seen.



LABOR SHORTAGES / UNREST — With unemployment at record lows, the ability to locate and retain a quality workforce has proven to be a major and a persistent problem. This situation, unfortunately, exists at all levels in organizations from the factory floor to senior executives.

Whether it’s a stamping press operator, program manager, manufacturing process engineer or a software engineer the problem is the same; a severe shortage of qualified men and women in the auto industry to hold these positions. Compounding this issue is the fact that labor is

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GUEST COLUMN uneasy about their membership being compensated fairly for their contributions to the economic success of their companies. Whether a worker walkout is the only way to settle these issues is debatable, but it adds considerable uncertainty to the management of your business. A typical balance sheet doesn’t list our most significant asset – our workforce – but without it the company wouldn’t exist.

So dust off your crystal ball, shake it a few times and perhaps the dust will settle for a clearer view into the future on these issues. This industry is resilient enough and smart enough to solve everything that it has faced in the past decades through a combination of leadership and savvy; in the boardroom, on the factory floor and in the halls of our legislators. It will do so again.

ABOUT THE AUTHORS: Fred Hubacker has, for more than 40 years, held executive leadership, advisory and business development positions in the automotive industry. He served as a senior financial and operating executive at Chrysler Corporation and as President and CEO of several major Tier 1 automotive suppliers including Textron Automotive, and New Venture Gear. Hubacher was also Vice Chair at Venture Companies Worldwide. He has served on numerous automotive supplier boards and as a senior executive consultant for two private equity firms. He is currently a Managing Director at Conway MacKenzie as a leading expert in their automotive advisory practice.

Walter Popiel is a Managing Director at Conway MacKenzie who has served both performing and underperforming clients for over 20 years, primarily in the automotive, heavy truck, aerospace and oil and gas industries. His experience includes customer and creditor negotiations, financial due diligence, preparation of integrated financial projections, cost validation, treasury management, viability assessment and transaction advisory services. In addition to other activities critical in crisis situations, he has been actively involved in numerous buy and sell-side transactions, out-of-court restructurings and orderly wind-downs.

ABOUT CONWAY MACKENZIE'S AUTOMOTIVE LEADERSHIP: Conway MacKenzie has established itself as a leader in the automotive industry, primarily through the extensive experience of our professionals, many of whom have worked in the automotive industry as owners and executive and/or consultants for their entire careers. By leveraging years of collective experience gained while executing hundreds of automotive transactions and restructurings, we are able to maximize value for our clients. Our team is experienced at recognizing and creating value in all areas of the capital structure of an automotive company, and skilled at executing restructuring and M&A transactions. Our focus in all transactions is to perform critical analyses of the company and its current situation, develop plans to improve its financial and operational performance, and implement those plans while working closely with relevant stakeholders. To find out more about Conway MacKenzie and its automotive advisory services, please visit www.ConwayMacKenzie.com/Industry/Automotive/.

www.ConwayMacKenzie.com

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OESA EVENTS Upcoming OESA Events

Nov. 13

Automotive Supplier Conference

Nov. 21

2019 4Q Mobility Supplier Forum

Dec. 4 Dec. 11 Dec. 12

Suburban Collection Showplace, Novi, MI Flex Automotive, Milpitas, CA

Ford Purchasing and Engineering Town Hall The Henry Hotel, Dearborn, MI

Industry Disruptors Series: Karma Group The Dearborn Inn, Dearborn, MI

Strategic Insights Executive Briefing Series IV

MSU Management Education Center, Troy, MI

Upcoming Council Meetings

Nov. 5

Environment, Health, Safety and Sustainability Council

Nov. 7

Chief Purchasing Officers Council

Nov. 19

Advanced Technology Council

Dec. 5

Sales Executive Council

Dec. 5

Warranty Management Council

Dec. 10

Chief Financial Officers Council

Dec. 11

Chief Executive Officers Council

Dec. 12

Enterprise Leadership Council

OESA Conference Center, Southfield, MI OESA Conference Center, Southfield, MI OESA Conference Center, Southfield, MI

Suburban Collection Showplace, Novi, MI OESA Conference Center, Southfield, MI OESA Conference Center, Southfield, MI The Dearborn Inn, Dearborn, MI

OESA Conference Center, Southfield, MI

Upcoming 2020 OESA Town Hall Meetings Mark your calendar for upcoming Members-Only OEM Town Hall Meetings

Feb. 5, 2020 May 5, 2020

Aug. 20, 2020

GM Town Hall VW Town Hall FCA Town Hall

Suburban Collection Showplace, Novi, MI

OESA members and industry guests may register for events at www.oesa.org.

For registration assistance, contact OESA at 248.952.6401 or info@oesa.org.

OESA News - 2019 Fourth Quarter

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2019 Automotive Supplier Conference November 13, 2019 • Suburban Collection Showplace • Novi, MI

Featuring Jim Collins, Author of "Good to Great” and “Built to Last” Additional speakers: Mitch Bainwol, Chief Government Relations Officer, Ford Motor Company Elaine Buckberg, Chief Economist, General Motors Jacqui Dedo, Co-founder, Aware Mobility LLC Bill Foy, Senior Vice President, Engineering, DENSO Jeff Jorge, Principal, Baker Tilly John McElroy, Host, Autoline Jeff Schuster, President, Americas Operation and Global Vehicle Forecasting, LMC Deb Schroeder, Vice President – Purchasing, Direct Parts, Toyota North America Scott Thiele, Chief Purchasing Officer, FCA Dustin P. Walsh, Senior Reporter, Crain’s Detroit Business Ann Wilson, Senior Vice President, Government Affairs, MEMA ...and more!

Limited sponsorship opportunities are available.

Contact Drew Rhodes at drhodes@oesa.org.

Register to attend at OESA.org.

23 │ OESA News - 2019 Fourth Quarter

Original Equipment Suppliers Association 25925 Telegraph Rd., Ste. 350 │Southfield, MI 48033-2553 248.952.6401 │oesa.org │info@oesa.org Connect with us on OESA News is provided by members of the OESA Communications Team.

April Buford Senior Director, Communications

Jeff Laskowski Senior Manager, Communications

Abby Napier Communications Specialist

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