OESA News 2020 - Second Quarter - Edition 3

NEWS Original Equipment Suppliers Association

2020 Second Quarter │ Edition 3

2 02 0 AU TO M OT IVE I NS I D ERS S ERI ES

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IN D US T RY D I S R U PT E JOIN. ENGAGE. ADVANCE.

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IN THIS ISSUE...

1 2 4 5 6

The Suppliers' Voice Automotive Insiders Series OESA Communications MEMA Update OESA Board Update

7 8 10 12

Guest Column: LyfeCycle OESA Supplier Pulse RSM Barometer Commentary Technology Update

14 11 12 19

OESA Events OESA Council Highlight OESA New Members OESA Event Calendar

Voice

The Suppliers’ New Crisis, New Focus

The uncertainty of the short- and long-term impact from the coronavirus pandemic looms on the global automotive landscape as companies continue to ramp up production.

Over the past few months, many of you have reached out to share your concerns and discuss challenges during this crisis. As always, I am proud to work in an industry that has such remarkable resiliency and tenacity in its leadership. And while this time is often compared to the economic downturn of 2008/09, for suppliers, this is not an accurate comparison. As the industry emerged from the 2008/09 crisis, business resumed in a manner similar to the pre-crisis time. Companies ran leaner, focused on the “basics,” and retooled to meet lower volumes. Many companies have sustained these changes over time and were relatively well positioned at the start of 2020.

Conversely, the resulting economic crisis from the pandemic, combined with increasing social polarization, has created a downturn unlike anything the industry has ever encountered. First, the industry was already in the middle of a technology upheaval – BEVs, automated vehicles, car-sharing, and CASE technologies highlight some of the changes suppliers were dealing with pre-coronavirus. Second, many of the efficiencies the industry put in place are now challenging the ability to effectively manage for the future. Global supply chains and safety protocols are just a couple of the main areas that will require the most post-pandemic adaptation. Finally, as social changes sweep the U.S. and the world, the auto industry must react in an inclusive and thoughtful way to ensure everyone is respected and listened to during this difficult time. These factors are taking an exhausting mental and emotional toll on everyone.

The auto industry is known for efficiency and solid business acumen, and I have no doubt that each of you can and will financially and operationally manage your businesses in the coming months. My goal is for you to focus on strengthening your organization’s character and spirit. Unlike in previous economic downturns, it will be the companies with commitment to inclusion and intolerance for discrimination of any kind that will exit this crisis as leaders in the automotive industry.

During this crisis, the industry’s leaders must step forward on a social platform and create a new vision their companies.

What does that look like for your company? Are people at the center of this vision? Start with revisiting your company’s values. Are they the right values for the today’s environment? Do you and the other leaders in your organization consistently demonstrate commitment to these values?

As always, OESA is honored to champion the business interests of our members. Throughout the rest of 2020 and beyond, OESA will be there to support the new norm with relevant content and advocacy for today’s new crises, challenges and opportunities.

And thank you for the incredible support you have given to OESA team these past few months. Please take care – of yourself, your family, and your organization.

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

Julie A. Fream President and CEO OESA

OESA News - 2020 Second Quarter

│1

OESA EVENTS

The impact of the coronavirus pandemic on the automotive industry is far-reaching and has caused disruption throughout the global supply chain. As companies continue to ramp up production, many are tasked with making mission-critical decisions and establishing new business practices to survive in the industry’s new norm.

To help members better understand and plan for the automotive industry’s uncertain landscape, OESA is pleased to launch the “Automotive Insiders Series: An Industry Disrupted” webinar series. The 5-day event that will run from June 8-12, 2020, Each day will feature an industry insider’s perspective on the impact of the pandemic from various viewpoints.

Monday, June 8: A New Outlook Automotive forecasters and economists will provide a view of the industry’s future from a postpandemic perspective.

A Not So Rare Event…

Gary Silberg, Partner, Americas’ Head of Automotive, KPMG LLP Market Outlook: Restarting Positive Momentum Jeff Schuster, President Americas Operation and Global Vehicle Forecasting, LMC Automotive Navigating the Inflection Point to Prepare for Progress Tom Wendt, Partner, Bain & Co. Presenter Question and Answer Session Tuesday, June 9: The Pandemic’s Impact on Advanced Vehicle Technology Gain insight from industry technology experts on the impact the coronavirus will have on tomorrow’s vehicle ADAS and electrification technologies.

Vehicle Electrification and Battery Electric Vehicle Plans Akshay Singh, Partner, Automotive Practice, Strategy&/PwC Evan Hirsch, Partner (ret.), Automotive Practice, Strategy&/PwC Advanced Driver Assistance Systems and Automated Vehicles Jeremy Carlson, Principal Analyst and Manager, Autonomous Driving, IHS Markit Wednesday, June 10: Volkswagen Town Hall The new North American purchasing leader and his team will provide an update on VW’s purchasing operations, and address supplier questions. The meeting also includes virtual one-on-one networking opportunities with commodity executives.

See page 14 for the agenda.

2 │ OESA News - 2020 Second Quarter

OESA EVENTS Thursday, June 11: The Government Angle Some of the government’s most influential representatives will discuss the role and actions of government in the automotive industry.

A Conversation with NHTSA James C. Owens, Deputy Administrator, National Highway Traffic Safety Administration Ann Wilson, Senior Vice President of Government Affairs, MEMA A Message from Debbie Dingell United States Congresswoman, Michigan’s 12th District A Message from Fred Upton United States Congressman, Michigan’s 6th District Government Affairs in a New Age Chris Hess, Vice President, Public Affairs, Eaton Ana Meuwissen, Director, Federal Government Affairs, Robert Bosch LLC Friday, June 12: Leading Through Change The final day of the series will feature leaders from various industries on how suppliers can thrive in the post-pandemic automotive industry.

Supply Chains New World Order Brian Higgins, Principal – Supply Chain and Operations Lead, KPMG John Jullens, Principal – Strategy, KPMG Brett Weaver, Value Chain Leader and International Tax Partner KPMG Industry Executive Panel Shilpan Amin, Vice President, Global Purchasing and Supply Chain, General Motors Jon Husby, President and CEO, North America, SEG Automotive North America LLC Ray Scott, President and CEO, Lear Corporation Gary Silberg, Partner, National Automotive Industry Leader, KPMG LLP This is a members-only event that has relevant content for all employees. The agenda for each day will begin at 10 a.m. ET and includes interactive Q&A sessions. Pricing packages are available for individual participants and teams of up to 10 employees.

To learn more and view the agenda for each day, click here.

Series Sponosors

Session Sponsors

Networking Sponsor

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 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, allows members to access their membership benefits through their mobile devices yearround. 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.

4 │ OESA News - 2020 Second Quarter

MEMA UPDATE

MEMA Joins Coalition Aimed to Shape the Future of Automated Vehicles Through Education The Motor & Equipment Manufacturers Association has joined Partners for Automated Vehicle Education (PAVE), a coalition of industry, nonprofit, and academic institutions working to inform and educate the public and policymakers on the facts regarding automated vehicles so that they can fully participate in shaping the future of our roads and highways.

PAVE’s goal is purely educational: the coalition does not advocate for a particular technology or for specific public policies. Its members believe that, in order to fully realize the benefits of driverless technology, policymakers and the public need factual information about the present and future state of technology and its potential benefits.

PAVE helps enhance public understanding of driverless technology through: An educational website and social media channels “Hands-on” demonstrations allowing the public to see and experience driverless technology Educational toolkits for auto dealers to help dealer personnel — often the key interface between vehicle designers and vehicle customers — educate their customers about driverless technology • Policy-maker workshops designed to provide officials at local, state, and national levels understand driverless technology so they can make the best decisions for their constituents • • •

This goal fits perfectly with MEMA and OESA's longtime effort to help shape the future of vehicle technology by educating policymakers about innovations that can improve and save lives. OESA members are at the core of developing and implementing these automated vehicle technologies.

Advancing them through solid, fact-based education is essential.

For more information, Ann Wilson, Senior Vice President of Government Affairs, MEMA at awilson@mema.org.

OESA News - 2020 Second Quarter

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OESA BOARD UPDATE

OESA Board Elects Françoise Colpron as Board Chairman; Ramzi Hermiz Elected as Board’s Industry Advisor The Original Equipment Suppliers Association (OESA) is pleased to welcome Françoise Colpron, group president, Valeo North America, as chair of the OESA Board of Directors. Prior to this week’s election, Colpron served as vice chair since November 2019; she has served on the OESA board since 2015.

“We are honored to have Françoise at the helm of our board of directors,” said Julie A Fream, president and CEO, OESA. “We appreciate her strategic leadership and commitment to champion the mission of OESA. OESA also announced the re-election of Ramzi Hermiz to the board as an industry advisor. Hermiz served as chairman of the board from 2018-2020; he has been a member of the board since 2015.

Françoise Colpron Group President Valeo North America

“It is with much appreciation that I announce the election of Ramzi to the OESA board as an industry advisor,” said Fream. “He has been a champion to the supplier industry for many years and we are delighted to have his continued support.”

OESA NEW EVENT

OESA and SAA 2020 Purchasing Summit OESA, in partnership the Society of Automotive Analysts (SAA) will host the “OESA / SAA 2020 Purchasing Summit” on June 25, 2020. The event will feature results of the latest North American Automotive OEM-Supplier Working Relations Index® (WRI®) Study and comments from leading OEM purchasing executives.

The North American Automotive OEM-Supplier Working Relations Index® (WRI®) Study is a comprehensive annual survey that examines the working relations between Tier 1 suppliers and their North American-based OEM customers from the suppliers’ perspective. The Study, in its 20th year, collects and analyzes the opinions of 840 North American supplier executives and their colleagues.

The responses represent 80 of the top 100 North American suppliers as well as the smallest of the direct, first tier suppliers.

Attendees will gain a better understanding of: • • • • •

Which OEMs are improving relations with suppliers and which are falling behind How communication, assistance, friction, and financial practices drive relationships How suppliers should utilize the WRI® data in creating OEM commercial strategies How relationship dynamics vary across purchasing groups, specifically new EV activities How customer-supplier relations provide opportunities in uniqindustry-wide crises

Following a report out of the 2020 WRI®, a panel representing FCA, Ford, GM, Honda, Nissan and Toyota will discuss their key takaways from the study, supplier relations activities Sponsor: within their companies and respond to questions from the attendees.

Following the panel, a virtual networking session will take place with representatives from each OEM. 6 │ OESA News - 2020 Second Quarter

GUEST COLUMN

COVID Operational Readiness How crisis will affect EH&S Adapting to the “New Norm” As we take the global journey to recover from this challenging and unexpected crisis, organizations will be intensely zeroed in on the operational challenges COVID presents. This includes ongoing health surveillance and practice, control reportability, and business continuity management. Considering the general practices built within a well-rounded EHS program and now supporting Operational Readiness as a result of COVID, the LyfeCycle solution is helping companies navigate the health, safety and operational issues that go hand and hand with employees returning to the job.

LyfeCycle assists organizations in maintaining operational continuity as we collectively discover the new road that lies before us. Public health professionals currently estimate that this could take between one to three years. During this period, companies will need to continuously monitor for infection while maintaining a robust set of controls and procedures for assessing and mitigating COVID risks.

Best Practices Tracking - COVID testing tracking, PPE assignment/fit testing, Quarantine and monitoring, Quarantine and return to work accommodations, Employee self-assessments.

Job Hazard Analysis- PPE and work practices hazards and controls assessment, Hazard reporting and PPE gap analysis Compliance Management- Company and gov.

COVID policy compliance, tracking and tasking.

Health & Safety Audit- Work area and practice inspections, Hygiene/cleaning inspections, Post-infection inspections, Remote or offsite work practice inspections, Internal audit compliance.

Event Management– Infection event reporting/ investigation, Potentially exposed employee identification and management, Policy violation events and investigations, Shutdown or isolation events and management Metrics- Site risk and exposure assessments, PPE availability assessments, Testing/infection/ monitoring metrics, Supplier & critical supply assessments

“By design functions created for EHS compliance in the modern world, yet flexible enough to adapt to the COVID crisis at hand. We are guiding organizations toward better EH&S practice, as well as supporting what operational readiness will mean to each organization, uniquely.” -Steve Taylor, LyfeCycle

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OESA SUPPLIER PULSE

Q2 2020 OESA Automotive Supplier Barometer COVID-19 Pandemic Pushes Supplier Sentiment to Historic Low Mike Jackson Executive Director, Strategy and Research 248.430.5954 │ mjackson@oesa.org

According to the Q2 2020 OESA Automotive Supplier Barometer Index (SBI) – a gauge to measure the sentiments of North American automotive supplier executives – supplier pessimism was driven to unprecedented levels by the COVID-19 pandemic. Results posted a negative reading of 15 for the period, the lowest level in the series history, and 35 points below a neutral reading of 50.

The overwhelmingly pessimistic outlook is shared between organizations of all sizes as they struggle to restart following the announced OEM shutdowns and stay-at-home mandates. Concerns of how the pandemic will ultimately impact the economy and vehicle sales are the leading cause of the extraordinarily high levels of pessimism.

The 2Q 2020 OESA Automotive Supplier BarometerTM, sponsored by RSM US LLP, focused on Supply Chain and Globalization. The results indicate: • The pandemic has delayed R&D investments by just over four months on average, with connected manufacturing technologies and autonomous driving technologies being delayed the most.

• Suppliers expect consolidation within the industry and look to gain market share through conquest initiatives, M&A, and leveraging new technology development while the competition delays.

• Sub-tier supplier distress is the top supply chain concern, with responses denoting a significant increase in supplier distress surging +600% within the past three months compared to levels over the past year.

OESA Supplier Barometer: Q2 2020 Results Describe the general twelve-month outlook for your business. Over the past three months, has your opinion become…?

Current Supplier Outlook (Share of Respondents) Q1 2020

60%

80

US Tax Reform

70

40%

60 50

20%

Lehman Collapse

40

15

Jan-2020

Jan-2019

Jan-2018

US Trade War Escalates

Jan-2017

Jan-2016

US Fiscal Cliff

Jan-2015

Jan-2014

Jan-2013

Japan Tsunami/ Grexit Crisis

Jan-2012

10

Jan-2011

20

Jan-2010

Euro Crisis Begins

Jan-2009

Significantly more pessimistic

Somewhat more pessimistic

Unchanged

Somewhat more optimistic

30

Significantly more optimistic

0%

Supplier Barometer Index: (SBI and 6m Average) 90

Q2 2020

220 responses

The rapid onset and impact of the COVID-19 pandemic caused the Supplier Barometer Index to fall 32 points from the first quarter to its lowest level ever of 15.

Q2 2020 OESA AUTOMOTIVE SUPPLIER BAROMETER

8 │ OESA News - 2020 Second Quarter

OESA SUPPLIER PULSE • Weaker financial metrics and quality concerns have prompted heightened vigilance as respondents increased the number of sub-tier suppliers on internal ’watch lists’ to mitigate risks of supply chain disruptions.

• 20% of materials needed for production are procured from countries outside of the U.S., down from 30% in 3Q 2019, as suppliers are becoming increasingly localized to comply with USMCA and avoid exposure to unstable trade regions.

"Despite massive challenges brought on by the pandemic, the supplier industry continues to demonstrate extraordinary responsiveness in addressing the diverse needs of employees, customers and stakeholders in the communities where they operate, ” said Mike Jackson, executive director, strategy and research, OESA. “Supply chain risks have spiked on a number of fronts, fueled by workforce constraints, input shortages and liquidity issues, due to slashing production volumes and future forecasts.”

The crisis is exacerbated by huge capital investments made to support the transition toward higher levels of electrification and advanced safety features, which are expected to face of range of delays.

Difficulties remain, yet leading suppliers continue to display remarkable resilience, recognizing opportunities to conquest business, explore partnering or assess M&A prospects while enhancing product technology offerings for a post-impact recovery.

The Q2 SBI chart and a full copy of the Supplier Barometer results are available on the OESA website at: https://www.oesa.org/resource/oesa-automotive-barometer-studies.

Read the RSM US LLP commentary on Q2 2020 OESA Automotive Supplier Barometer results on page 8.

OESA Supplier Barometer: Industry Threats What are the greatest threats to the industry over the next 12 months?

0%

20%

40%

60%

80%

100%

Average Rating May

Feb.

Continued issues related to the COVID-19 pandemic

2.1

N/A

Weakness in the U.S. Economy

2.5

5.0

Poor sales of vehicles in programs supplied

3.0

4.2

Changes in government trade policy

5.6

4.9

Implementation of new government regulations

6.2

6.0

Inability to address internal labor constraints

6.8

6.4

Terrorism or some type of international event

7.7

5.8

Inability to fulfill customer volumes

7.7

7.1

7.8

6.4

Likelihood of higher interest rates 1= Greatest Threat

2

3

4

5

6

7

8

9

10=Smallest Threat

The pandemic is unsurprisingly the greatest threat to the industry, but its effect on the U.S. economy and ultimately the sales of vehicles to which our members supply is also profound.

Q2 2020 OESA AUTOMOTIVE SUPPLIER BAROMETER

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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GUEST COLUMN

AUTO SUPPLIERS WILL NEED BETTER SUPPLY CHAIN VISIBILITY IN ORDER TO BUILD RESILIENCE

Middle market auto suppliers in the United States were already facing margin pressures and declining U.S. and global auto sales before the coronavirus pandemic hit. Now they must contend with even more daunting supply chain challenges in the economic crisis triggered by the pandemic.

Along with the lingering impacts from the yearslong tariff conflict between the United States and China, middle market auto suppliers currently have to navigate survival while also determining what their role will be in the future of automobiles (especially related to the electrification of drivetrain components). Companies will need to continue innovating even while dealing with tighter margins and lower profits.

Organizations need to embrace technology and focus on building resilience through alternative sourcing plans. More than ever, it is crucial for companies to understand all the players in their supply network and be prepared to adapt their supply tiers as needed.

Digital agility Middle market auto suppliers tend to be behind the curve when it comes to investing in technology. Now, dealing with the fallout of COVID-19, companies are being forced to implement—in a matter of months—innovative processes and procedures that typically would have taken years.

Suppliers no longer have the option of sitting back and waiting for this storm to pass.

Rather, the pandemic has made it even more apparent that organizations must have an agile strategy and be proactive about implementing and evolving that strategy.

It is important to find ways to build additional resiliency into global supply and value chains, and management will need to be quick to adapt to new technologies.

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Along with technological solutions, business leaders now need to think about just-in-case inventory in a way they did not need to before, as a way to minimize shocks in their supply chain.

•

Key takeaway: The pandemic has elevated the importance and compressed the timeline for focusing on advanced industrial technologies and digital transformation strategies.

•

Alternative sourcing to minimize risk Because the industry was already headed for a downturn before the pandemic, many suppliers that are not financially stable and don’t have the necessary liquidity face even more risk in the current situation. In the next three to five years,

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10 │ OESA News - 2020 Second Quarter

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auto suppliers can expect to see major shifts in the industry, including consolidations, bankruptcies and general signs of continued distress in the auto supply chain. Second- and thirdtier suppliers may be especially vulnerable in the next few years.

Original equipment manufacturers need to quickly start planning for the future by assessing their dependence on various parts of their supply chains and setting up alternative sourcing plans to manage and minimize risk on a global basis.

Here are some key reasons for developing alternative sourcing backup plans:

• Maintaining access to essential supplies to avoid •

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potential disruption Creating synergies to make the overall cost structure more efficient Assessing risks in a supply chain where there is a reliance on specific suppliers Potentially accessing alternative technologies relating to business intelligence and other innovative technology

In planning for the next two to three years, companies need to evaluate where they will need to source outside of their normal supply chain. For instance, OEMs and first-tier suppliers are already looking for suppliers that can evolve with them in the future on new technologies especially in the electric vehicle space.

Key takeaway: In the past, alternative sourcing plans may have been backburner projects for some companies. These days, finding alternative sources needs to be a priority.

Once suppliers have that data, it is important to use it to make better informed decisions; organizations are now seeing the need to move toward using advanced analytics to forecast demand more accurately. While that may seem obvious, collecting and getting the most out of such data can be a challenge for middle market companies because many use legacy systems that do not allow for much interconnectedness. As a result, many organizations will need to increase their investments in this area, as improving business processes, finding operational efficiencies and transforming business models all rely on effective data collection.

Key takeaway: OEMs and suppliers need to have greater visibility across their entire supply chains and proactively implement technologies to increase supply chain transparency.

The bottom line Auto suppliers must find ways to build additional resiliency into their global supply and value chains. Any previous notions that organizations could hold off on these efforts are no longer relevant in the current economic climate as the pandemic forces organizations to move and innovate at a much faster pace.

Jason Alexander Principal Industrials Senior Analyst, RSM US LLP jason.alexander@rsmus.com

Supply chain visibility OEMs are generally focused on first-tier suppliers, which can result in a lack of transparency into what is occurring at the second- and third-tier levels. Getting greater visibility into the overall supply chain related to supplier disruptions that affect delivery schedules and quality will be crucial for OEMs as they look to the future. Greater visibility into every part of the supply chain is vital for identifying any areas of disruption as early as possible in order to meet consumer demand and preferences.

Lawrence Keyler Partner Global Automotive Sector Leader, RSM US LLP lawrence.keyler@rsmus.com

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 improve fuel economy is good for automotive suppliers who continue to drive the industry forward with new research and development. The standards will be footprint-based 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 the complex task of figuring out how much CO2 is actually generated per mile by grid-charged, electrically driven vehicles in to the future. 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.

12 │ OESA News - 2020 Second Quarter

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 loss frequency for both vehicle damage liability and bodily injury liability claims for collision avoidance system equipped vehicles, and 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 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

│ 13

OESA EVENTS

Members-Only Volkswagen Town Hall June 10 | 10:00 - 11:45 a.m.

Day Three of OESA’s Automotive Insiders Series will be the 11th annual Volkswagen Group of America Town Hall on June 10, 2020. Members will hear directly from VW purchasing executives on plans and needs in the near and long term.

VW’s new head of purchasing will provide a 2020 VW business update. Tom Golden, purchasing director, new vehicle projects & supplier readiness, will share an update on new projects and sourcing opportunities. Marty Ross, senior manager North America purchasing - central functions, will give VW’s perspective on USMCA and supply base expectations during the quoting process. All presenters will participate in an interactive Q&A session following the formal presentations.

VW commodity executives will be available for virtual one-on-one meetings following the program to allow OESA members to spend a few minutes with purchasing managers.

Commodities represented include: • Electric / Connectivity • Interior • Exterior • Metal / Body / Chassis • Powertrain • Indirect Purchasing / eMobility / Connected Car • Commodity Purchasing • Accessories / Service Parts / Systems • Diversity Supporting Sponsors

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.

14 │ OESA News - 2020 Second Quarter

OESA EVENTS

Master Class Workshop: Applying the Entrepreneurial Spirit Webinar June 19 | 8:00 - 11:00 a.m.

The OESA Master Class Workshops offer customer-facing supplier professionals an in-depth exploration of relevant professional development topics in a hands-on setting. The June 19, 2020, workshop will focus on “Applying the Entrepreneurial Spirit," and feature insight from Ted Serbinski, manager director, TechStars, and Daron Gifford, partner, leader of strategy and automotive industry consulting, Plante Moran PLLC, who will share how to leverage entrepreneurial tools and thinking both personally and professionally. Key Takeaways Include: • Insight on 3 key aspects of the entrepreneurial spirit • Execution • Communication • Mentorship • Understanding of the logic and structured approach to commercializing and executing on your ideas • Exercise to work through an idea / concept in order to pitch it This workshop features real-time interaction and engagement with the presenters and other participants in a virtual setting and breakout rooms. Industry executives with responsibilities related to Mexican or foreign production will benefit from participating in this webinar.

Working After COVID-19 Webinar June 23 | 10:00 - 11:00 a.m.

The COVID-19 pandemic has impacted the American (and global) workforce in ways not yet fully realized. As businesses begin to fully re-open, they have to reinvent and reimagine the way they work with employees. To help employers prepare to open their businesses, OESA is pleased to host the webinar “Working After COVID-19” on June 23, 2020, at 10 a.m. ET. Catherine F. Burgett, member, Frost Brown Todd, will share insight on how the workplace has changed due to COVID-19, what changes are likely to stick around, and best practices that have emerged as the American workforce went back to work.

Webinar attendees can expect to gain insight on a post-COVID world including: • Identifying policies and procedures such as attendance, travel, visitors, hygiene, and more, that may need to be changed and how.

• Pitfalls for employers that could lead to litigation, labor strife and decreased morale.

• Lessons of COVID to better prepare for future disruptions and the impact on employees.

OESA News - 2020 Second Quarter

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OESA EVENTS

Packaging Requirements for Standard Containers June 30 | 2:00 - 3:00 p.m.

Logistics in the automotive supply chain are critical to plant up time and assembly efficiencies. Part or packaging damage can cause costly delays, shortages and drain resources. A properly designed packaging system helps minimize potential safety issues for team members and customers. To help suppliers gain a better understanding of package distribution testing and typical hazards involved, OESA has partnered with Smithers to host the webinar “Packaging Requirements for Standard Containers� on June 30, 2020.

GM recently began requiring evidence from suppliers showing that all expendable and standard containers with expendable dunnage have successfully undergone ASTM D4169 or ISTA 3E package testing in order ship product into GM facilities. Other OEMs recommend similar testing and validation processes for their tier suppliers.

The team at Smithers is very familiar with ASTM D4169 and ISTA 3E and have years of experience with automotive packaging and distribution testing. Tim Rice, commercial lead engineer, Smithers, will share insight on the testing standards, what is involved, as well Exclusive Sponsor: as how testing can possibly drive better packaging and logistics decisions for tier suppliers.

An interactive Q&A session will follow the formal presentation.

How Prepared Is Your Organization for Recovery?

As governments finalize plans and begin to reopen economies, it's more important than ever for organizations to start thinking about recovery planning. The Baker Tilly COVID-19 Recovery Assessment Tool can help you and your management team assess current state, discover potential risks and prepare to adapt operations.

16 │ OESA News - 2020 Second Quarter

COUNCIL HIGHLIGHT

Calling All Human Resource Leaders and Executives Are you working on how your organization will adjust your policies for remote work moving forward? Are you looking at how autonomy and its associated technology will impact your workforce? Are you looking for peer feedback on another topic?

These are all upcoming topics of discussion for the OESA Human Resources (HR) Council. This council is known for its lively and engaging roundtable conversations and member comradery.

This summer meeting, scheduled for July 30th will be adjusted to a virtual environment. The ½ day format has been shifted into two segments for easier participation for our members. We have created extra time in Segment 2 for an extended roundtable which enables more peer sharing, 3rd Quarter Topics Include: ● Segment 1: July 30th ○ Impact of Autonomy and Associated Tech on the Workforce with PwC ○ Roundtable time: ● Segment 2: August TBD ○ Legal thoughts from Legal Counsel ○ Extended Roundtable time If you are already a member, we look forward to your participation If you are not yet a member, we welcome you to be our guest. Please reach out to Karen Bohannon (kbohannon@oesa.org or 248.430.5965) to register for the meeting before July 29th .

Special Bonus HR "Catch-Up and Connect" Zoom Meeting: OESA has scheduled a bonus conversation time for HR Council members only. on July 18, 2020. The purpose of this bonus meeting is to provide further connection space for our members.

Our First Topic: Work from Home Policies We will provide additional time for members to share their topics of interest.

If you are not currently a member of the HR Council, and would like to join the council and this meeting, please reach out to us before June 11th.

To learn more about the HR council or join CLICK HERE. We look forward to seeing you at one of our summer meetings.

Ginger Juncker Executive Director Councils and Member Services gjuncker@oesa.org or 248.430.5953

Council membership is available to the senior human resources executive of OESA supplier member companies.

Cost of membership is $1,000 per year.

Membership fee is prorated to cover remaining meetings.

2020 HRC Remaining Meeting Dates July 30th August TBD October 29th November TBD

OESA Executive Peer Group Councils are rated as one of the most valuable member benefits for automotive suppliers. OESA's councils are designed to bring together supplier executives with similar job functions and industry challenges. Quarterly council meetings provide a forum to address issues of common concern, share best practices, and hear from industry thought leaders and OESA News - 2020 Second Quarter │ 17 subject matter experts.

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

Citibank NA

Member Representative: Dan Chamberlain, Marketing Leader

Member Representative: John McGuire – Senior VP - National Automotive Practice Group Leader Alternate Representative: Jessica Humphreys – Executive

Detroit Manufacturing Systems

Draexlmaier Automotive of America

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

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

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

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

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

227 W. Monroe St. Ste 2500 Chicago, IL 60606-5004 www.citigroup.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

MS Plastic Welders 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

SAP America

Erin Schrieber Manager, Membership Recruitment and Development 248.430.5970 | eschrieber@oesa.org

Member Representative: William Newman, Sr. Industry Advisor

Adam Slaman Manager, Sponsorship Sales and Membership Development 248.430.5958 | aslaman@oesa.org

1 Towne Sq. Ste 1550 Southfield, MI 48067 www.sap.com

18 │ OESA News - 2020 Second Quarter

OESA EVENTS Upcoming OESA Webinars June 8 June 12

Automotive Insiders Series: An Industry Disrupted

June 19

Master Class Workshop: Applying the Entreperneurial Spirit

June 23

Working After COVID-19

June 25

OESA/SAA 2020 Purchasing Summit

June 30

Packaging Requirements for Standard Containers

Upcoming Council Meetings (via Webinar): June 3

Chief Executive Officer and Enterprise Leadership Joint Council

June 4

Sales Executive Council

June 24

Chief Financial Officers Council

June 25

Warranty Management Council

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

OESA News - 2020 Second Quarter

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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