OESA News 2020 - Second Quarter - Edition 2

NEWS Original Equipment Suppliers Association

2020 Second Quarter │ Edition 2

SAVE THE DATE! Automotive Insiders Series | June 8 - 12, 2020 Details coming soon

IN THIS ISSUE...

1 2 3

The Suppliers' Voice OESA Communications MEMA Update

4 6 8

OESA Supplier Pulse Technology Update OESA Events

10 OESA Council Highlight 11 OESA New Members 12 OESA Event Calendar

Voice

The Suppliers’

Bold Decisions Now Are Necessary for the Future

I am grateful to work in such a resilient and innovative industry. The strong willpower of the supply base is evident in every touchpoint I have with OESA members. As we near the two-month mark of when the coronavirus pandemic changed the U.S. economy – and life – I find myself reflecting on the long-term changes required in the automotive supplier industry.

For many supplier leaders, it seems a bit like “Groundhog Day.” Each day requires difficult, business-sustaining decisions. And, hardest of all, is the direct impact many of these decisions have on your company’s dedicated employees.

While the member companies of OESA vary greatly in size and scope – one thing that unites us is the pride we take in the people of this industry. When one person struggles, we strive to support them. As the industry struggles, leaders must dig deep and define a new, uncharted path to guide their companies. Over the past several weeks, I have spoken with many of you about the uncertainty your companies and the industry are facing. Your individual and collective resolve to make the difficult decisions and to do the right thing is exemplary. It is during times like this that the hard work of leadership takes its toll on each of your and your teams.

I remind each of you, we are in a marathon – not a sprint. The world must learn to live, work and prosper, in an environment where the coronavirus exists. And OESA member companies must do the same.

So, while you are managing the short-term issues caused by the pandemic, also be mindful of the longer-term changes and innovations you will be asked to lead in the coming months. As your company begins to move forward, be sure to pause and remember this extraordinarily difficult dayto-day environment. Use it as a touchstone to enable you to make the bold decisions that will be necessary to drive your company’s future. And never forget the true strength of this industry – the people.

I am honored to champion the business interests of the supply base in this challenging enviroment.

It is during difficult times in the industry that the true strength of OESA and the supplier industry is showcased.

In gratitude,

Julie A. Fream President and CEO OESA

P.S. As always, please feel free to contact me at 248.631.9449 or jfream@oesa.org.

OESA News - 2020 Second Quarter

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OESA COMMUNICATIONS

OESA Launches "Automotive Insiders" Podcast To help the automotive supplier industry stay abreast of the many issues that are redefining the industry, OESA is pleased to present the “Automotive Insiders” podcast.

Industry experts share their perspectives on supplier hot topics and the fast-changing mobility landscape.

From post-pandemic manufacturing restart planning and worker safety measures, to legal issues and supply chain disruptions, "Automotive Insiders" is the industry’s new resource for timely insight and relevant content.

Recent episodes feature OESA President and CEO Julie A. Fream, attorney James Deline, a senior member of Kerr Russell, and chair of Kerr Russell's automotive industry practice group, Bill Newman, senior industry advisor, SAP and Mike Latkovic, vice president, Capgemini.

New shows are posted regularly on the VoiceAmerica Business Channel, hosted by Bonnie D. Graham, who has been producing and hosting live talk radio since 1998.

Tune in for the latest in supplier industry news and learn how some companies are thriving in the new mobility landscape on Automotive Insiders, presented by OESA. Interested in being a guest on the show? Contact Adam Slaman, Manager, Sponsorship Sales and Membership Development at aslaman@oesa.org.

OESA Re-launches its Mobile App Stay up-to-date on the latest OESA events, council meetings and industry information with the OESA mobile app. The app, which was in beta for several months, will now allow members to access their membership benefits through their mobile devices year-round. It gives members access to register for OESA events and council meetings, and receive updates on the coronavirus pandemic and other important industry information. Members can also collaborate with each other through direct messaging.

The OESA app is available in the App Store & Google Play Store. Members can use their OESA username and password to login to the app.

CLICK HERE for more details.

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MEMA UPDATE

MEMA Submits Comments to Preserve V2X Spectrum On April 27, MEMA sent follow-up comments to the Federal Communications Commission (FCC) on its proposed rule to reallocate a majority of the 5.9 GHz band, currently used for vehicle-to-everything (V2X) communications to unlicensed devices. These are reply comments to the docket, reinforcing MEMA’s previous positions submitted in March.

MEMA urged the FCC to preserve the full spectrum – not move it away from critical connected vehicle safety technologies. Preservation of the spectrum is overwhelmingly supported by the public record developed in the docket by a wide variety of stakeholders from industry and government.

It is undisputed that the Commission’s proposals would cause the life-saving technologies and applications currently deployed or being developed by members of MEMA divisions and many others to suffer harmful interference from unlicensed use in adjacent bands – to the point of being unusable.

In related news, MEMA issued a statement supporting the automakers’ announcement for a buildout plan of 5 million devices in five years. This plan, however, is predicated on the FCC retaining the spectrum "as is."

Additional information on the preservation of the V2X spectrum is coming soon. In the meantime, please direct any questions or concerns to Leigh Merino, vice president regulatory affairs, MEMA at lmerino@mema.org.

OESA News - 2020 Second Quarter

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OESA SUPPLIER PULSE

The Impact of This Crisis is Extraordinary Mike Jackson Executive Director, Strategy and Research 248.430.5954 │ mjackson@oesa.org

The automotive supply base and its OEM customers are preparing to restart operations in a way that ensures the health, safety and livelihood of their employees, while serving customers and stakeholders alike.

The U.S. economy is confronting a severe recession, based on the extraordinary measures required to battle the coronavirus pandemic. Since mid-March, over 30 million workers have filed initial unemployment claims, or nearly 18% of the pre-shutdown workforce.

The impact of this crisis is extraordinary, swiftly undermining what were sound economic fundamentals as of the end of February. The resulting impact on current year U.S. auto sales will be severe. At the end of 2019, the National Automotive Dealer Association (NADA) forecast for U.S. light vehicle demand was 16.8 million units. The latest industry forecast from Wells Fargo calls for U.S. light vehicle sales of 12.1 million units in 2020, with demand plunging 4.7 million units or 28% lower.

The outlook calls for a dramatic rebound, with U.S. auto sales surging 34% to 16.2 million units in 2021.

Confidential

Return to Production Challenges What are your biggest challenges heading into the restart of operations?

Wtd. Avg. Accuracy of customer start-up times

1.85

Comments:

Accuracy of customer release volumes

1.95

•

Shelter in place mandates interfering with restart

3.39

Many hourly deferred to stay home to collect unemployment based on new stimulus proposal rather than coming to work....

Availability of PPE

3.44

•

Using paid volunteers for now.

Threat of contamination disrupting or causing supply outages

3.46

•

Implementation of / operating under new health and safety protocols

3.52

Hourly employees unwilling to return to work

3.78

Threat of internal facility contamination

3.87

We have procedures in place to operate safely according to guidelines. To date no supplier has indicated an issue to supply us.

Major disruption is the customers release schedules. Other concerns are disruptions due to unknowns

Logistics Challenges

4.23

Financially Distressed suppliers

4.31

0% 1=Most Challenging

2

3

25% 4

5

50% 6

75%

100%

7=Least Challenging

The information contained in this report is considered proprietary and its use is solely intended for OESA members

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OESA SUPPLIER PULSE Automakers and suppliers are working diligently to ensure their complex supply chains can restart, initially at lower levels of utilization, while applying proper health and safety protocols. The mantra of crawl, walk, run is especially relevant, ensuring all aspects of restart activities achieve a baseline level of performance while trouble shooting gaps that could emerge within sub-tier or raw material supplies, external vendors or logistics constraints.

The latest OESA COVID-19 pandemic survey shows the top challenges facing members focus on accuracy of OEM customer start dates as well as accuracy of production releases.

In the near term, negative sales impacts will be felt unevenly across the country; this will be tied to job losses which vary widely. Understandably, the leisure and hospitality sector has been especially hard hit, encompassing airlines and transportation, hotels and restaurants. At the start of 2020, leisure and hospitality employed 16.8 million people, or more than 11% of U.S. employment. The impact is disproportionate in Florida, where 940,000 initial unemployment claims were filed in the past two weeks, also signaling the collapse of fleet volume, leaving rental car demand battered as leisure and business travel ground to a halt.

Cumulative U.S. initial jobless claims equate to 17% of the February 2020 workforce. Moreover, this same measure of cumulative initial claims in eight of the hardest hit states, surpasses 24% of February employment levels. Kentucky, Georgia and Michigan are included in this cohort of hardest hit states, with a meaningful presence in the automotive sector.

Despite considerable hard work ahead for the automotive sector, the supply base and the industry continue to demonstrate their resolve and resilience in the face of unparalleled challenges. The outlook offers reason for optimism, as demand is forecast to rebound 34% in 2021 offering further upside as the potential for a scrappage scheme takes shape.

Contact Mike Jackson to learn more about automotive supplier sentiment. He can also provide information on economic and industry trends, as well as the CFO and CPO Councils.

OESA News - 2020 Second Quarter

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TECHNOLOGY UPDATE

U.S. Fuel Economy Standards, ADAS, and the Pandemic’s Impact on EVs and AVs Brian Daugherty Chief Technology Officer, MEMA 248.430.5966 │ bdaugherty@mema.org

The U.S. Releases New Fuel Economy Standards for MY2021 – MY2026 Light Vehicles On March 31, 2020, the U.S. Department of Transportation’s National Highway Traffic and Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA) released the Corporate Average Fuel Economy (CAFE) and Green House Gas (GHG) regulations final rulemaking to cover MY2021 – MY2026 light vehicle fuel economy and CO2 emissions.

The rulemaking is formally known as the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule. As discussed in the OESA Q4 2019 newsletter, the original Notice of Proposed Rulemaking (NPRM) issued by NHTSA and the EPA on August 2, 2018, covered a wide range of possible options including the primary proposal to “flatline” the standards after MY2020. The proposed options were lower than the previous 2012 plan’s 5 percent annual increases over the same time period.

The final SAFE rule takes a middle path with a 1.5 percent year-over-year increase in light vehicle mpg requirements and a corresponding decrease in CO2 emissions over the MY2021 – MY2026 timeframe.

Almost all OEMs selling vehicles in the U.S are falling short of the current fleet fuel economy standards and are making up the shortfall by using credits that have been banked in previous years or by purchasing credits from other OEMs like Tesla. The resulting need for additional technology to continually improve fuel economy is good for automotive suppliers who will continue to drive the industry forward with new research and development. The standards will continue to be footprintbased and therefore vary depending on vehicle size. The EPA multiplier credits for Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Fuel Cell Vehicles (FCVs) will still phase out after MY2021, but the EPA is establishing a multiplier of 2.0 for natural gas vehicles, both dedicated and dual-fueled, for MY2022 – MY2026.

The phase out of the BEV, PHEV, and FCV multipliers – which do not actually reduce emissions – will require the use of even more fuel-efficient technology across OEM fleets. In addition, the EPA’s zero grams of CO2 per mile incentive for BEV and PHEV electric operation will be extended through MY2026. This pushes into the future the complex task of figuring out how much CO2 is actually generated per mile by grid-charged, electrically driven vehicles. Off-cycle credits for additional fuel saving technologies and credits for low environmental impact air conditioning refrigerants will also continue through the SAFE rule timeframe.

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TECHNOLOGY UPDATE The Highway Loss Data Institute ADAS Report The Highway Loss Data Institute (HLDI) recently released a comprehensive study on the effects of Advanced Driver Assistance Systems (ADAS) on insurance losses for MY2013 – MY2017 BMWs. It documents a statistically-significant reduction in the loss frequency for both vehicle damage liability and bodily injury liability claims for collision avoidance system equipped vehicles and also shows increasing benefits for higher capability systems. These types of results have been somewhat elusive for ADAS as improvements in safety have been overshadowed by complaints about the high costs of repairing collision damaged ADAS systems.

The HLDI researchers likely chose BMWs as a target population due to the high application rate of ADAS starting many years ago which results in a larger sample size for analysis. The study looks at BMW’s ADAS technology both as integrated option packages and by individual feature. Loss frequencies for vehicle damage liability decreased by as much as 27% and loss frequencies for bodily injury liability claims decreased by as much as 37% for certain ADAS packages. Reductions were generally seen for almost all of the ADAS features covered in the study.

The Impact of the Pandemic on Vehicle Electrification and Automation Efforts OEMs and suppliers have invested hundreds of billions of dollars developing full battery electric vehicles (BEVs) over the past several years. However, the question of how rapidly the consumer market will develop for BEVs has been the subject of intense speculation and concern – even before the pandemic. Currently, the market is facing multiple headwinds with extremely low crude oil prices, high global unemployment, reduced consumer spending, a steep drop in vehicle sales, and the resulting cost-cutting measures by vehicle OEMs. These factors point to a difficult market for electric vehicles that cost more than their internal combustion engine (ICE) counterparts due to high battery prices. Expect significant changes and delays for BEV platforms in the short term as OEMs focus on program profitability. Since hybrid electric powertrains are typically designed to be used interchangeably on ICE vehicle platforms, hybrids will continue to be the lower risk method for many OEMs to meet increasingly stringent global fuel economy standards as they modify their production plans.

The overall spending on automated vehicles (AVs) is probably at least a full order of magnitude lower than the current design and production investment going into BEVs since AVs are still in the R&D phase. The market will continue to grow for ADAS – especially automatic emergency braking (AEB) and the related adaptive cruise control (ACC) – along with SAE Level 1 and 2 “driver assist” automation. But many of the same headwinds apply to higher automation level development (i.e. L4 robo-taxis) along with continued technical challenges and additional COVID-19 uncertainties relating to ride sharing and the cleaning of shared vehicles. As a result, OEMs are starting to announce significant delays in their previously announced robo-taxi test fleet rollout dates.

Contact Brian Daugherty 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.

OESA News - 2020 Second Quarter

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OESA EVENTS

Restart and Future-Proof Your Supply Chain Webinar May 5 | 11:00 a.m. - 12:00 p.m.

In response to the global coronavirus pandemic, OESA is partnering with experts throughout the supply chain to offer insights for suppliers and help them make informed decisions during this challenging time.

On Tuesday, May 5, 2020, OESA and Advanced Purchasing Dynamics (APD) will present the webinar “Restart and Future-Proof Your Supply Chain.”

Supply chain restarts will be tricky. Manufacturers must be prepared for immediate, staggered and rolling start/stop supply chain movement from the time of restart until COVID-19 is no longer a concern. Individual countries and states will have on-going staggered accessibility. Some suppliers will be in crisis mode, operations may be down, production, quality and financial issues may occur, and new suppliers may need to be sourced. Organizations across the supply chain will need a strategy to be prepared for what is to come.

In this webinar, Jeoff Burris, founder and managing partner, Advanced Purchasing Dynamics, will outline seven critical steps to ensure a smooth restart and identify opportunities to future-proof supply chains. This includes ensuring that the short-term restart strategy does not interfere with achieving strategic goals of cost reduction, near shoring, quality and other existing purchasing KPI’s. In addition, Burris will discuss preparation and resources required to manage production, quality and financial issues that may be encountered in the next 12 months.

Exclusive Sponsor:

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OESA EVENTS

Mexico Manufacturing Webinar May 7 | 11:00 a.m. - 12:00 p.m.

OESA members and industry guests are invited to join OESA and Entrada Group on May 7, 2020, for the webinar, “Mexico Manufacturing: Key to a Global Diversification Strategy.”

The automotive industry has experienced a quantum shift in the last 40 years. Once predominantly a localized affair, production now occurs in all corners of the globe, with OEMs and manufacturers of all sizes producing regionally to be closer to customers and mitigate risk.

During this hour-long webinar, John Paul McDaris, director, business development, Entrada Group, will examine key factors companies should consider when seeking to diversify production and mitigate risks. They include challenges that can impact production (tariff and trade wars, geopolitical factors, supply chain disruptions) while lowering operating costs. He will also share insight on leading production hubs manufacturers are relying on for diversification, including Mexico, and evaluate Mexico’s strengths for export markets around the world.

There will also be an opportunity for webinar participants to ask questions.

Exclusive Content Provider:

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

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

A Call for Timely, Relevant Webinar Topics OESA is diligently working to provide supplier members with timely and relevant information for all matters of their business. OESA is requesting topic submissions from both Affiliate and Supplier members companies that supplier executives would find insightful and actionable.

If your organization would like to submit potential presentation topics, CLICK HERE to fill out the topic submission form. OESA will review all submissions and make decisions on topics based on supplier feedback. This is an excellent opportunity to further establish your organization as a thought leader in the industry and among OESA membership.

Please direct all submissions and questions to Drew Rhodes at drhodes@oesa.org.

OESA News - 2020 Second Quarter

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COUNCIL HIGHLIGHT

OESA’s CEO Council – A Forum for Supplier Leaders OESA’s Peer Group Councils continue to be one of the highest ranked benefits of membership. Designed for supplier executives in similar functional roles, councils are designed to address issues of common concern, foster collaboration, and share best practices. The CEO Council – facilitated by Julie A. Fream, president and CEO, OESA – discusses the unique concerns of supplier leaders. Members of the council hear from leading industry thought leaders and executives on a wide variety of relevant topics, including macro/micro economic trends and government actions that impact the supply base, and customer and market diversification strategies.

As the curve of the global coronavirus pandemic continues to flatten, recent discussions have centered around the short- and long-term impact stay-at-home orders will have on the industry, and health and protocols for ramping up production.

Council membership is available to the supplier CEO or highest level executive in North America responsible for automotive OE business from OESA supplier member companies. Council meetings are moving to a virtual format and are scheduled for June 3, September 2, and December 9, 2020.

The CEO Council is represented by the following supplier companies: A. Raymond Tinnerman Manufacturing ABC Technologies Acument Global Technologies, Inc. ADAC Automotive Aludyne ArcelorMittal Tailored Blanks Asahi Kasei Plastics North America, Inc. AutoForm Engineering USA, Inc. AVL North America, Inc. Behr Hella Thermocontrol, Inc. (BHTC) Brembo North America Bridgestone Americas Tire Operations, LLC Brose North America, Inc. Busche Performance Group Cadillac Products Automotive Company Contemporary Amperex Technology USA, INC. DENSO International America Eldor Automotive Powertrain USA, LLC Faurecia North America Ficosa North America Corporation Freudenberg North America GHSP Gil-Mar Manufacturing Company GST AutoLeather, Inc. Hella Corporate Center USA, Inc. Henniges Automotive

HFI LLC HIROTEC AMERICA, Inc. Hutchinson Sealing Systems IEE Sensing, Inc. INOAC USA, Inc. Inteva Products Kamax KOSTAL Kontakt Systeme, Inc. KOSTAL of America, Inc. LG Electronics U.S.A., Inc. Link Engineering Company MAHLE Industries Incorporated MANN+HUMMEL USA, Inc. MARELLI Martinrea International, Inc. Means Industries, Inc. Methode Electronics, Inc. Montaplast of North America, Inc. Mubea NA Inc. Neapco Holdings, LLC NMB Technologies. a MinebeaMitsumi Group Company North American Stamping Group, LLC Plastic Omnium Auto Exterior Plastic Omnium Auto Inergy Division Principal Manufacturing PTM Corporation Robert Bosch LLC Roechling Automotive NA LLC SEG Automotive North America LLC

Sensata Technologies, Inc. Seraph Shape Corporation Shiloh Industries, Inc. SKF Stoneridge Sumitomo Corporation of America THB International TWB Co., LLC umlaut Unique Fabricating, Inc. Valeo North America, Inc Varroc Lighting Systems Vector North America, Inc. Viking Plastics Webasto Woco Tech USA Inc. Yazaki North America, Inc. ZF

Contact David Johnson at djohnson@oesa.org to learn more about the CEO Council.

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WELCOME NEW OESA MEMBERS Arconic Corporation

Arthur J Gallagher & Company

Member Representative: Michael Belwood, VP Government Affairs Alternate Representative: Lori Boucher,Executive Assistant

Member Representative: Nancy Snell, Senior Area Vice President Alternate Representative: Kelly Bacalja, Event Marketing Specialist

Bain & Co.

Berylls Strategy Advisors Corp

Member Representative: Tom F. Wendt, Partner

Member Representative: Martin French, Managing Director

Capgemini

Detroit Manufacturing Systems

Member Representative: Dan Chamberlain, Marketing Leader

Member Representative: Matthew Langton, Executive Vice President Alternate Representative: Scott Cieslak, CFO

Draexlmaier Automotive of America

MS Plastic Welders

201 Isabella St. Pittsburgh, PA 15212 www.arconic.com

2 Palo Alto Sq. Palo Alto, CA 94306 www.bain.com

500 Woodward Ave., Ste 1620 Detroit, MI 48226 www.capgemini.com

1751 East Main St. P.O. Box 1345 Duncan, SC 29334 www.draexlmaier.us

Member Representative: Ralph Schwarz, Head of Corporate Communications Alternate Representative: Kerry Curvey, CEO Americas

SAP America

1 Towne Sq. Ste 1550 Southfield, MI 48067 www.sap.com Member Representative: William Newman, Sr. Industry Advisor

30150 Telegraph Rd. Ste. 408 Bingham Farms, MI 48025 www.ajg.com

301 West Fourth St. Royal Oak, MI 48067 www.Berylls.com

12701 Southfield Rd. Detroit, MI 48223 www.dmsna.com

1101 Highview Dr. Webberville, MI 48892 www.ms-ultrasonic.com

Member Representative: Christine Greck, Manager, Legal, Treasury, HR Alternate Representative: Rouven Muell, CFO For membership information, contact: Steve Horaney Vice President, Membership and Sales 248.430.5969 | shoraney@oesa.org Erin Schrieber Manager, Membership Recruitment and Development 248.430.5970 | eschrieber@oesa.org Adam Slaman Manager, Sponsorship Sales and Membership Development 248.430.5958 | aslaman@oesa.org OESA News - 2020 Second Quarter

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OESA EVENTS Upcoming OESA Webinars May 5

Restart and Future-Proof Your Supply Chain

May 7

Mexico Manufacturing Webinar

May 8

Integrated Back-to-Work Framework

Upcoming Council Meetings (via Webinar): May 12

Enviroment, Health, Safety, and Sustainability Council

May 28

Tooling Council

June 4

Sales Executive Council

July 9

Young Leadership Council 8

July 14

Young Leadership Council 7

Upcoming 2020 OESA Town Hall Meetings Mark your calendar for the Members-Only OEM Town Hall Meetings via virtual format.

June 10

VW Town Hall Current registrations will be transferred to the new date

July 28

Toyota Town Hall - Save the Date

Aug. 19

FCA Town Hall - Save the Date

Sept. 9

Honda Town Hall - Save the Date

Nov. 19

Nissan Town Hall - Save the Date

Dec. 3

Ford Town Hall - Save the Date

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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 the OESA Communications Team.

April Buford Senior Director, Communications

Jeff Laskowski Senior Manager, Communications

Abby Napier Communications Specialist

248.430.5964 abuford@oesa.org

248.430.5951 jlaskowski@oesa.org

248.430.5957 anapier@oesa.org