executivesummary

Slide1 : Aluminum Content for Light Non Commercial Vehicles to be Assembled in North America, Japan and the European Union in 2006 Client: The Auto & Light Truck Group of the North American Aluminum Association Final Report This material is to be utilized in conjunction with an oral presentation; it is not intended to be a complete record of the findings or the discussion. Date: December 14, 2005


Slide2 : INTRODUCTION AND METHODOLOGY


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Background Ducker Research has collected data on the growth and development of aluminum content in automotive light vehicle applications on an annual basis since 1991. Ducker started its systematic efforts in North America in 1991 and expanded into Europe and Japan in 2000. The data have been collected on a “bottom-up” basis, meaning the market has been tracked on an OEM, platform-by-platform and product-by-product basis. With metallurgists, engineers, and component specialists on staff, Ducker has become a leading subject-matter-expert for the global automotive industry on aluminum content and aluminum applications across all vehicle systems.


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Study Methodology Ducker conducts direct interviews with the purchasing and engineering personnel at the OEM, tier suppliers and aluminum companies that are directly involved in making decisions to utilize aluminum for each component. Over the past 15 years, Ducker has developed an extensive industry network and is well positioned to gather any data point related to aluminum and automotive. Ducker has conducted several studies on aluminum content in North American light vehicles for the Auto and Light Truck Group (ALTG) of the North American Aluminum Association. This study is the first time the ALTG of the Aluminum Association has requested data for Europe and Japan as well as North America. Ducker has been independently studying these other regions since the year 2000, but not for the ALTG. This project is the culmination of research we have been conducting in all three regions for the past five years. Ducker uses primary research to gather data on the topic. Ducker always begins with material supplier interviews. The next step is component supplier interviews, and the final step is OEM interviews to confirm our findings. Secondary research from published sources only plays a minor role in our work.


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Study Methodology The nearly 100 components, 20 countries and 40 OEMs studied for this project are shown on the next four pages. The aluminum penetration for every component can be different for every supplier in every region. The principal objective of the study was to determine the average pounds of aluminum for each of the components and systems shown on pages 6 and 7 for each of the three regions under study, and to use these system average weights to determine the average aluminum content for the vehicles forecast for production in each region in 2006. An example of our database for aluminum engine blocks and cylinder heads in North America is given in Appendix II. Finally, the average aluminum content in each region was to be separated into the various aluminum product forms ie: high pressure die castings, low pressure permanent mold and other castings, rolled products, extruded products, forgings and impacts. The two most important data points for project success are the penetration of aluminum by component by region and the average aluminum weight for these components. We believe we have been successful in obtaining these data points for all the critical components under study, and we believe the results of this effort provide the most reliable and accurate estimates of auto aluminum use that we have ever developed.


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Engine Cylinder Blocks Cylinder Heads Oil Pans Intake Manifolds Pistons Water Pump Housings Alternator Cases Fuel Rails Front Covers Bed Plates Mounts Timing Chain Covers FEAD Brackets Oil Filter Adapters Rocker/Cam Covers Thermostat Housings Water Outlet Tubes 2006 Light Vehicle Components with Aluminum Content Included in the Study Transmission and Driveline Automatic Cases Manual Cases Extension Covers Transfer Cases Transmission Brackets Pistons Stators Valves Valve Bodies Transfer Plates Differential Covers/Cases Drive Shafts/Prop Shafts Yokes Heat Exchangers and Heat Transfer Radiators Heater Cores Transmission Coolers Condensers Evaporators Compressor Housings Compressor Scrolls Connection Hardware Compressor Pistons Oil Coolers Receiver Dryers Heat Shields Heat Sinks


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Wheels and Brakes Wheels Calipers Master Cylinders Brake Pistons ABS Housings Drums & Rotors Steering Knuckles/Hubs/Yokes Column Housings Rack and Pinion Housings Wheels Power Steering Fluid Tubes Chassis and Suspension Control Arms Lateral Links Subframes Crossmembers Cradles 2006 Light Vehicle Components with Aluminum Content Included in the Study Body and Closures Front End Structures Radiator Supports Body in White (BIW) Instrument Panel/ Cross Car Beams Bumper Beams Crash Boxes Door Intrusion Beams Door Sills Pillars & Windshield Frames Doors Hoods/Bonnets Fenders/Wings Deck Lids/Boots Liftgates Tailgates Roofs Truck Bed Rails Motor Housings Wiper Motors Starter Motors Window, Seat and Sun Roof Motors Other Components Seats Pans and Frames Seat Tracks Seat Belt Spools and Retractors Air Bag Canisters Computer Housings Sun Roofs and Sport Racks Windshield Wiper Arms DVD and other Overhead Rails Interior Trim Exterior Trim Running Boards Shock Towers


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY These 20 countries will assemble 42 to 43 million light vehicles (cars, vans, SUVs and pickups) for non commercial use in 2006. OEMs by region are shown on the next page For this project we determined we needed to study an expanded list of countries in Europe to provide the most accurate comparisons with Japan and particularly North America This expanded look at Europe makes comparisons with our prior work in Europe difficult because all prior data collected was limited to only passenger cars in the eleven countries in Western Europe Countries Included in the Study Austria Belgium Canada Czech Republic Finland France Germany Hungary Italy Japan Mexico Netherlands Poland Portugal Slovakia Slovenia Spain Sweden United Kingdom United States


INTRODUCTION AND METHODOLOGY : INTRODUCTION AND METHODOLOGY Forecast of 2006 Light Vehicle Production by Region and OEM 18.5 Million Vehicles North America European Union Japan 15.75 Million Vehicles 8.67 Million Vehicles Daimler Chrysler PSA BMW Renault Fiat TPCA Czech VW Porsche, Mitsubishi, MG, Rover, Magna Steyr, Sevel Suzuki and Others DCX Honda Nissan GM Toyota Fuji Nissan Toyota Mitsubishi Honda Mazda Ford Ford GM Toyota Nissan Honda VW Hyundai, Mitsubishi, Subaru, BMW Suzuki and Others


Slide10 : EXECUTIVE SUMMARY


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Historical growth in the North America was driven by wheels, cylinder heads, heat exchangers and transmissions Engine blocks, cylinder heads, driveline components, suspension components, brake components and steering components account for nearly 85% of the growth so far this decade The remaining growth so far this decade has been from closure panels, bumper beams, heat shields and a small increase in wheels Historical growth in Europe was driven by cylinder heads, at close to 100 percent penetration and to a lesser extent by transmissions, wheels, heat exchangers and suspension components Closure panels, bumper beams, body structures, instrument panel supports and other sheet and extrusion uses have accounted for a larger share of the recent growth in Europe compared to North America Historical growth in Japan was driven by cylinder heads, transmissions, wheels and recently heat exchangers and engine blocks In this decade, suspension and chassis components, closure panels, steering knuckles and brake components have been the biggest contributors to growth North America Europe Japan Light Vehicle Aluminum Content History and Forecast 1990 - 2006 Six Year 3.7% CAGR 5% CAGR 3% CAGR


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Weighted Average Light Vehicle Aluminum Content for North America, Europe and Japan 5% CAGR 3.6% CAGR lbs. lbs. lbs.


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content 11.994 Billion Pounds Permanent Mold Castings Total 2006 Aluminum Content All Regions - Segmented by Product Form - High Pressure Die & Squeeze Castings Brazing Sheet Extruded Shapes Other Castings Forgings & Impacts Fin Stock Drawn & Extruded Tube HT Sheet Rod & Bar NHT Sheet & Plate Industry statistics often mistakenly record the extruded rod used to make forged parts as a rod shipment and also as a forging shipment


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content - Total Content Segmented by Region and Product Form - 5.020 Billion Pounds For 15.75 Million Vehicles 318.70 lbs. per vehicle 57% Secondary Aluminum North America European Union Japan Forgings and Impacts Rolled Products Castings Extruded Products 4.796 Billion Pounds For 18.5 Million Vehicles 259.28 lbs. per vehicle 50% Secondary Aluminum 2.178 Billion Pounds For 8.67 Million Vehicles 251.33 lbs. per vehicle 63% Secondary Aluminum Forgings and Impacts Rolled Products Castings Extruded Products Forgings and Imports Rolled Products Castings Extruded Products


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content 11.994 Billion Pounds Total Aluminum Content All Regions - Segmented by Metal Source - Secondary Based 6.444 B lbs. Primary Based 5.550 B lbs. While nearly all of the aluminum contained in today’s vehicle will be recovered and reused at the end of the vehicle’s useful life, only 55% of the metal contained in the nearly 43 million light vehicles to be assembled in North America, Europe and Japan in 2006 will come from scrap Most high pressure die castings as well as the metal for cast low pressure permanent mold parts such as cylinder heads, pistons and intake manifolds is secondary based. Sand and lost foam castings also use secondary aluminum, but a few companies like GM use primary for these processes for commercial reasons Products such as fin stock and the sheet for heat shields can be made from scrap, but most of the current suppliers use primary. The same is true for some of the non structural extruded shapes. There is some closed loop recycling of auto body sheet, particularly in Europe


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content North America European Union Japan Secondary 2.835 Billion Pounds Secondary Primary Secondary 2.377 Billion Pounds Secondary 1.365 Billion Pounds Secondary Primary Secondary Primary HP Die Cast Other Castings Mill Products HP Die Cast Other Castings Mill Products HP Die Cast Other Castings Mill Products 5.020 Billion Total Pounds 4.796 Billion Total Pounds 2.179 Billion Total Pounds


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY As a percent of curb weight, aluminum content in the three regions is between seven percent and eight percent. Vehicles and vehicle parts weigh more in North America and that adds to the aluminum weight per vehicle 2006 Light Vehicle Aluminum Content 7.97% Aluminum 318.7 lbs./v 7.74% Aluminum 259.28 lb./v 7.18% Aluminum 251.33 lbs./v 50% SUVs and Pickup Trucks 5% SUVs and Pickup Trucks 20% SUVs and Pickup Trucks


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Large gasoline engines, automatic transmissions and 4-wheel drive pickup trucks and SUVs add 70 additional pounds to the average aluminum content in North America compared to the average aluminum content per light vehicle in the EEU 61% of the aluminum content in North America is in the powertrain and driveline Higher aluminum block penetration and more automatic transmissions add 25 additional pounds to the aluminum content in Japan when compared to the EEU These prowertrain and driveline differences make aluminum use in North America and Japan more casting intense than the EEU 2006 Light Vehicle Aluminum Content - Powertrain and Driveline Regional Comparison – Region 61% 59.4% 48.1% Powertrain and Driveline Aluminum Content


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY The EEU uses more aluminum per light vehicle for non-powertrain and driveline application than any other region Except for wheels, steering components, heat shields and heat exchangers, the EEU has a higher aluminum content than either North America or Japan for brakes, closures, bumpers, crash boxes, intrusion beams, subframes, body structures, IP beams and suspension components As a result, the EEU uses more sheet, extrusions and forgings per vehicle than North America and a lot more of these product forms per vehicle than Japan 2006 Light Vehicle Aluminum Content - Non-Powertrain and Driveline Regional Comparison – Region 40.6% 39.0% 51.9% Non Powertrain and Driveline Aluminum Content


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content 2002 Versus 2006 Content by Region for All Components other than Powertrain, Driveline, Wheels and Heat Exchangers This comparison highlights why Europe is the worldwide leader in the use of aluminum for new innovative applications of aluminum in light vehicles.


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content Millions of Aluminum Units All Three Regions 42.9 Automatic Manual CVT Millions of Units (V style block engines have two heads)


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content Millions of Additional Aluminum Units 2002 Versus 2006 6.42 11.70 6.41 6.60 19.40 17.80 4.04 Additional Units In Millions


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Closure Content - Number of Programs and Parts -


EXECUTIVE SUMMARY : Aluminum Closure Content Per Light Vehicle Pounds Per Vehicle EXECUTIVE SUMMARY North America and Europe were close to the same in the year 2000, but Europe has nearly twice the content of North America today. Japan could be close to North America by the end of the decade


EXECUTIVE SUMMARY : Aluminum Closure Sheet Shipments EXECUTIVE SUMMARY Europe will continue to be the leading geographic region for aluminum closure sheet use with over a fourfold increase in this decade


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content - 2006 Body and Closure Aluminum Sheet Content by OEM- This 375 million pounds of aluminum sheet content for body structures, IP structures and closures equates to at least 575 million pounds of worldwide aluminum shipments of “auto body sheet” in 2006.


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content Key Aluminum Component Comparisons 2002 Versus 2006 (Millions of Units)


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Light Vehicle Aluminum Content Per Vehicle - 2002 Versus 2006 -


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content Increased Aluminum Content Per Vehicle Compared to 2002 - Segmented by Region and Component - 43.92 Pounds Per Vehicle North America European Union Japan 41.50 Pounds Per Vehicle* 22.33 Pounds Per Vehicle *47 pounds for passenger car only Engines 21.18 lbs. Under Carriage 8.42 lbs. Wheels 2.74 lbs. Net All Other 0.24 lbs. Driveline 7.4 lbs. Brakes 2.27 lbs. Closures 1.20 lbs. Bumpers 0.47 lbs. Engines 8.16 lbs. Under Carriage 9.56 lbs. Wheels 7.73 lbs. Net All Other 3.12 lbs. Body 2.31 lbs. Brakes 2.22 lbs. Closures 3.62 lbs. Bumpers 2.94 lbs. Engines 2.92 lbs. Under Carriage 1.73 lbs. Wheels 2.44 lbs. Net All Other 1.09 lbs. Driveline 2.8 lbs. Brakes 3.81 lbs. Closures 2.87 lbs. Heat Shields 1.08 lbs. Driveline 1.84 lbs. Heat Exchanger 3.59 lbs.


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY 2006 Light Vehicle Aluminum Content - Partial List of High Aluminum Content Vehicles by Region - Certain engine, transmission and wheel combinations for some of these vehicles may contain less aluminum than indicated


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Key Findings of the Study: 2006 aluminum content will be nearly 12 billion pounds with shipments of 14 billion pounds in the three regions under study. This amount of aluminum will replace nearly 30 billion pounds of iron, steel and other materials Average light vehicle aluminum content in the three regions will increase by 54 pounds to 279 pounds in 2006 versus an average of 225 pounds in 2000, a CAGR of 3.6%. The CAGR over the next five years should be in the range of 3% to 3.5% Average aluminum content in North America will be up 16% to 319 pounds, the European Union will be up 19% to 259 pounds and Japan will be up 10% to 251 pounds over 2002 For innovative applications beyond the powertrain, driveline, wheels and heat exchangers, aluminum content in Europe will be 69 pounds, innovative North American content will be 52 pounds (54 pounds including drive shafts) and Japan will be 30 pounds. In our opinion, this will make Europe the worldwide leader in the innovative use of aluminum for light vehicles in 2006 The aluminum industry will ship at least 570 million pounds of sheet for auto body, IP structures and closure applications in 2006 versus only 280 million pounds in 2002. Two thirds of the 2006 aluminum use for auto body and closures will be in Europe. 11.8% of the worldwide aluminum content is rolled products


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Key Findings of the Study: Although the spread in pounds per vehicle is from 251 pounds to 319 pounds by region, the spread in content as a percent of the average curb weight by region is less dramatic at from 7.18% to 7.97%. In a macro sense, the regions are more alike than different There are over 200 individual aluminum closure programs in the three regions under study. Europe has nearly 140 programs and North America and Japan each have about 40 programs. 54% of the programs are for hoods, 17.5% are deck lid, tailgate and liftgate programs, 12.4% are door programs and the remainder are fender and roof programs. Nearly 50 vehicles and two million units of production in 2006 will be high aluminum content vehicles containing over 500 pounds of aluminum per vehicle. Only 100,000 of these vehicles will have complete aluminum body structures A few vehicles like the Acura RL contain nearly 800 pounds of aluminum as part of vehicle with a high strength steel body structure. Honda is the world leader in the use of high strength steel. Honda is a model for using the right materials in the right applications. Honda converted their engines to aluminum long before any other manufacturer, but they have been slow to use aluminum for stampings because of the cost penalty


EXECUTIVE SUMMARY : EXECUTIVE SUMMARY Key Findings of the Study: The use of primary aluminum rather than secondary aluminum for light vehicle components is increasing. In 2006, 57% of the aluminum content in North America and 63% of the aluminum content in Japan will be sourced from recycled metal. However, in Europe only 50% of the aluminum content will be sourced from recycled metal. High pressure die castings, which are the principal user of recycled metal, are a smaller share of the aluminum content in Europe. The average for the three regions is 55%. The “practical limit” for recycled aluminum in light vehicles, based on the 2006 product mix, is between 58% and 63% The growth in aluminum over the last four years exceeded our forecasts. We found more engine blocks, suspension arms, steering knuckles, closures, bumper beams and body and chassis components than we expected. While Europe shows the highest numbers for most of these components, there are also many aluminum success stories in North America and Japan. This study has confirmed that aluminum continues to make great progress and the 2,000,000 vehicles with an aluminum content over 500 pounds, and the anticipated 2006 shipments of 14 billion pounds is testimony that the acceptance of aluminum continues to grow at an astounding rate