Investor Day Strategy to double sales in China and Group update Shanghai November 11, 2014 Investor Day Shanghai November 11, 2014 China Market Faurecia China Jingcheng Li November 11, 2014 China believes that a strong central government will lead to a powerful Nation based on its 5,000 year history People’s Republic of China: 100 Years Development Foundation of the Republic of China 1911 The 3rd Plenary Session of the 18th Central Committee of the CPC for “Deepening Reform” Foundation of the People’s Republic of China 1921 Foundation of CPC 1949 1978 2013 The 3rd Plenary Session of the 11th Central Committee of the CPC for “Reform and Opening “ Communist Party of China: 100 Years Development The 100th Anniversary of the People’s Republic of China 2021 The 100th Anniversary of CPC 2049 In 35 years: • • • • 2nd World Eco Power GDP +142 times Urban revenue +71 times Rural revenue +59 times China is now going for the Chinese Dream: 1921 – 2021: 100 years of CPC foundation, China will reach a comfortable level at the whole nation 1949 – 2049: 100 years of PRC foundation, China will reach the same level as that of the developed countries By the end of 21st century: China rejuvenation will be realized step by step and China re-becomes the world first powerful country Chinese Dream realization will improve people living conditions and boost consumption Investor Day – Shanghai – November 11, 2014 4 2014 China dilemma: Stimulus or Reform China government has chosen to deepen the reforms Export China GDP Drivers “Global weak demand" Investment "Debubble! – post 4 trillion Plan" Consumption “Limited social protection" Super-imposed effect in 2014 Speed shift of GDP growth Pain of structure reform Digestion of post 4tr. Plan 30 “Golden Years” now limited by Natural resources Environment impact Labor force and cost GDP drivers shift becomes must Public debt control & reduction Consumption and wage policy Core technologies & Innovation China is committed to conduct further reforms aiming at the new development model Investor Day – Shanghai – November 11, 2014 5 "The Rule of Law": main theme of 4th plenary session of 18th Central Committee of CPC, historical milestone Direction & Consequences What does it mean? What does it include? How to understand? China history and culture deeply marked by Confucianism Confucianism privileges moralisim rather than laws In ancient China, "Law" means punishment, different from Western "Law" has no link to human rights and powers’ separation notion Legislation: reinforcement of the role of People’s Congress Administration: the rule of the law for government Judicial organ: more independent and justice Respect of Law: population with law mindset in daily life Under the leadership of CPC and socialist market economy Better balance between the rule of law and individual perfection Restriction of government power, thus reduce corruption source New reforms need to be conducted on the basis of laws China will provide a more healthy business environment Investor Day – Shanghai – November 11, 2014 6 2014 China automotive industry is marked by top level government exchange between Europe and China Anti trust fine On OEM and Auto parts Child seats In cars Anti Trust Investigation Incentives for new energy cars Euro V from 1/1/2015 Scrap of Yellow Label vehicles German PM Merkel China visit Car air Purifier standard Jan Mar May July Sept DF / Renault JV XI Jinping Europe visit DF / PSA Daimler BMW VW Volvo Yanfeng JCI Interior merger FVW new sites In Qingdao & Tianjin DF Infiniti new JV DF PSA Chengdu new site Oct Capital increase of VW in its JV with FAW: 49% vs. 40% Main market trends PV growth High H1 and Low H2 Local brands losing some share Global OEMs capacity expansion Regulation: anti-trust, environment, safety China automotive industry continues to grow, with more regulation and new norms Investor Day – Shanghai – November 11, 2014 7 China market is maturing in terms of regulation and norms Air cleaning becomes a priority for government Environment Emission Gasoline Diesel 2010 2018 2013 China IV (EU IV) China V (EU V) China IV China V 2015 2018 Recall policy Air quality (PV) 2013, enlarge vehicle scope, defects definition, clarify responsible party, increase fine for OEMs who refuse recall 2015, Air quality standards inside vehicles (PV), set mandatory standards for volatile organic compounds & specified pollutants' limits China VI (TBD) China Three Guarantees Fuel consumption limits (PV) 2015 2020 2025 6.9 L / 100 km 5.0 L / 100 km 4.0 L / 100 km 2013, Guarantee for repair, replacement, & return within 3 years cf car lifetime, provide more protection to consumer NEV subsidy plan Child seat 2010 2013 • Pilot in 25 cities • Subsidy by battery energy • Focus on Beijing, Yangtze & Pearl river delta regions • Subsidy by battery endurance distance 2012, Restraint system of vehicles for children (ECER44), enhance the protection of children safety Implications Health Safety Constant innovation required in emission technology to meet environment requirements Lightweight solutions contribute to reach fuel consumption targets Investor Day – Shanghai – November 11, 2014 Implications Product quality improvement is a priority International standards move 8 Implications Request continuous attention and development on new material Potential cost-up pressure Car selling price comparison between China and Europe Margin on Premium and SUV under pressure Global Brand EU CAR PRICE (€) 9,000-14,000 CN JV CAR PRICE (€) Chinese Brand Segment CAR MODEL A00 Not produced VW UP 12,000-18,000 A 13,000-22,000 8,000-14,000 Geely EC7 B 22,000-39,000 11,000-23,000 Geely EC8 C 38,000-90,000 Audi A6 71,000-134,000 5,000-7,000 Geely SC6 VW Passat 36,000-56,000 4,000-7,000 A0 10,000-15,000 VW Golf 24,000-42,000 CAR PRICE (€) Geely Panda VW Polo 19,000-26,000 CAR MODEL D/E 89,000-350,000 Not present Not present BMW 7 Series 24,000-31,000 SUV 22,000-42,000 VW Tiguan Note: EU car price incl. sales tax, exchange rate: EURO/RMB=1/8.2 Investor Day – Shanghai – November 11, 2014 10,000-13,000 Geely GX7 Source: www.cars-of-europe.com, www.bitauto.com 9 Six automakers share over 80% of the market European U.S Japanese & Korean PV brands Others Chinese OEM groups 59% 24% 12% Chinese Market Volume Brand Share ['000] SAIC 26% 3,013 FAW 16% 1,857 DongFeng 17% 1,977 Chang'an 10% 1,121 BAIC 8% 961 GAC 6% 750 GreatWall 3% 357 Geely-Volvo 2% 241 BYD 2% 261 Brilliance 3% 317 Chery 2% 257 Others 5% 606 Market share 20% 4% 2% 1% 0% 10% 4% 5% 5% 5% 10% 3% 32% Volume ['000] 2,369 472 197 89 42 1,116 524 591 612 563 1,116 299 3,729 Global OEMs enjoys 2014 market growth with continuous capacity expansion Investor Day – Shanghai – November 11, 2014 JV 10 Source: Auto 2000 Aug, Faurecia internal analysis 2015 auto growth continues despite some pressure from macro economy and will be key for new China auto industry policy Forecasts Domestic Economic Growth Automotive industry Development Potential Impacts GDP between 7.0% to 7.3% Population at 1.37 billion Urbanization rate at 55.4% High pressure on CO2 control PV volume growth around +9.9% Euro V nationally implemented New industrial policy release 13th Five Year Plan direction Unemployment rate to increase Big consumer market to stimulate Public debt control and financing innovation Pillar industries support to maintain growth 2015 PV production volume at 18.7m units Yellow Label vehicles scrap plan results China local brands development Emission control, light weight, safety 2015 main focus: 3rd Edition of China Automotive Industry Policy Source: China State Information Center Investor Day – Shanghai – November 11, 2014 11 China automotive industry faces some strategic topics to be clarified in 2015 with long term impact 3rd Edition of China Automotive Industry Policy st 1 Edition in 1994: 2nd Edition in 2004: 3rd Edition in 2015: Main Target Market against Technology Consolidation by SOE OEMs Powerful automotive country "Perceived" Results Market open mainly to global OEMs Own Brands development difficulties Mastering core technology / innovation 13th Five Year Plan Direction CO2 focus: China CO2 peak forecasted between 2025 and 2030, light weight and emission controls China Local Brand Support Policy Each Chinese OEM will find out its own way to develop further the local brands Anti-Trust Scrutiny Evolution China moves toward the international practices OEM 50/50 JV Evolution OEM Joint Venture Agreements extension, the latest is FVW for 25 years Chinese and global OEMs relationship will be closer via different forms: cross participation, M&A etc. New China Automotive Industry Policy may focus on new energy cars and local brands Investor Day – Shanghai – November 11, 2014 12 China economy will live with deep changes to maintain a steady growth in the coming 10 years 13th Five Year Plan (2016 - 2020) Domestic Economic Growth Automotive industry Development 14th Five Year Plan (2021 - 2025) GDP around 7.3%, 2020 below 7.0% Population at 1.41 billion Urbanization rate at 60% Urban family number: 270m in 2020 PV volume growth 9.4%, 2020 at 26.4m Euro VI introduction, 5l per 100km Own brands turnaround New energy significant growth GDP around 6.3%, 2025 below 6.0% Population at 1.44 billion Urbanization rate at 64% Urban family number: 340m in 2025 PV volume growth at 4.4%, 2025 at 31.7m Further weight reduction China becomes global player China powerful automotive country China market still offers important potential for the coming years Source: China State Information Center Investor Day – Shanghai – November 11, 2014 13 China vehicle production hits 22 m units in 2013, and will exceed 30 m units by 2017 China vehicle production volume 2009 – 2020 E [m units] CAGR = ~6% 31 3 CAGR = 7% 18 19 3 3 4 3 11 12 2010 19 2 22 3 6 ‘10-'13 33 3 6 CVE LCV 2012 1) 1% 2) 8% '13-'20 3% 6% Total Production Volume [m units] 16 W. Europe 4 11 213 235 24 PV 3) 17% 6% Total car parc [m units] 60 Car owner ship [units/1,000 people] 2017 E 2020 E 740 490 63 Market consensus on China automotive volume turn-point: 40m units Source: IHS 2014 Aug, Faurecia China internal analysis 1) CVE refers to truck/bus above 3.5 tons 2) LCV refers to commercial vehicles up to 3.5 tons 3) PV refers to cars, incl. MPV and SUV 4) incl. Pickup Investor Day – Shanghai – November 11, 2014 8 85 16 2013 4) 11 4) 22 2011 CAGR 4 13 Key figures of PV Market - 2013 14 470 SUVs are increasingly favored by Chinese OEMs, premium and entry segments are also gradually gaining share Share of body-type [m units] Share of brand tier [m units] 16 22 24 Sedan 12% 11% 11% A/B 47% 16% 40% 39% 16 5% C 15% 15% D/E 6% 6% MPV 28% 29% SUV 2017 E 2020 E 66% 4% 20% 2013 China PV market is still dominated by C segment, accounting for ~40% M/S SUVs are increasingly favored by Chinese customers, esp. for 2nd-time purchase, due to their roominess 22 8% 63% 24 10% 61% 29% 29% 29% 2013 2017 E 2020 E Share of brand origin [m units] Premium MID Entry As premium brands are pushing forward their localization in China, their share is expected to increase Entry brands are now recovering and expected to achieve ~30% M/S 16 10% 22 9% 24 8% 14% 14% 14% U.S. 20% 19% 19% Japan 26% 27% 27% Europe 30% 31% 32% China 2013 2017 E Source: IHS 2014 Aug 15 2020 E In general, the market is relatively stable, with Chinese brands increasing thanks to government support Japanese OEM performance to be impacted by bilateral relationship Growth and mix trend still support profitability improvement Investor Day – Shanghai – November 11, 2014 Korea Chinese OEMs will become more and more global via partnership reinforcement and cross-border M&A operations In the past Full value chain including auto parts Specific car development for China More active Chinese partner More confident to drive decisions Global market and own brands Chinese OEMs focus export / go global SOEs / POEs / Global OEMs All kinds of cooperation New energy, hybrid, EV Vehicle, mainly PV Localizing foreign cars Passive Chinese partner In learning curve Chinese market Global car makers in China 6 SOEs / Global OEMs Captive and capitalistic Internal combustion engine Value chain coverage Market focus Market players Technology direction Impact on suppliers Core technology Brands Funds, market, HR Technology, brands Missing to China Work split In the future M&A - Partnership Local brands support JV with OEM as key strength Differentiation and innovation Customer intimacy to focus Address decision makers China full service capabilities Global footprint Business model challenge Capability and competitiveness Regulation Light weighting China has spent US$15bn for OEM and Auto Part acquisition outside China Starting from Oct. 2014, 98% cross border M&A need no more approval from Beijing Investor Day – Shanghai – November 11, 2014 16 China auto part market competition is well structured Technology, engineering localization rate and platform capabilities remain key success drivers OEM CAPTIVE PLAYERS GLOBAL PLAYERS LOCAL PLAYERS China Top OEM have auto part integration strategy Global ambition to be realized via M&A operations Market is getting more and more open Technology and innovation driven suppliers Market mix requiring higher technology and quality performance Capable of managing global platforms Cost driven competition and customer intimacy focus Lack of global presence and access to technology Faurecia is well armed to face the competition in China with a strong team Investor Day – Shanghai – November 11, 2014 17 Key takeaway for China market 1 China new government team has defined the development objectives, strategy and roadmap for the coming 10 years, positive impact on automotive industry is expected 2 China‘s PV market will continue to grow with 1.5 million units more per year till 2020 with a mix moving up and tightened regulation toward the international standards 3 China government support focuses on local brand and new energy solution development 4 Chinese partners will increase their decision power in the JV with global OEMs and 50/50 business model can be in further evolution in 5 to 10 years period 5 China market environment is positive for Faurecia who has already a solid presence and will accelerate the deployment of its strategy Investor Day – Shanghai – November 11, 2014 18 Faurecia China development strategy definition takes fully into account market and Group’s expectations Key Assumptions Market components Impact on Strategy Design Political stability Geopolitical and social tension Neutral China Macro Economy GDP ≈7% per year Inflation ≈4% Positive China Automotive Industrial Policy Local Brand support New energy car support Positive Neutral China Regulation Environment focus Safety and health focus Positive Footprint strategy Increasing decision power Positive Challenging China Auto Parts International standard move M&A development Positive Challenging China Competition Technology and Innovation Differentiation focus Challenging 15% to 20% of Group sales Profitable and cash generating Positive China Political Environment China Global & Local OEMs Faurecia Group Expectation 2018 plan > € 4.0 bn 2016 plan > € 3.0 bn Faurecia China Strategy 2014 Forecast ≈ € 2.3 bn + 17% vs. 2013 Faurecia has solid presence and clear strategy roadmap in China Investor Day – Shanghai – November 11, 2014 19 Investor Day Shanghai November 11, 2014 China Strategy Faurecia China Jean-Michel Vallin November 11, 2014 Faurecia celebrates in 2014 its 20 years’ localization in China, providing a solid base for business acceleration >€2bn >€1bn 1994 2002 2005 Manufacturing Raw material, components, process, equipment Quality system, lean production system WAVE 1 Investor Day – Shanghai – November 11, 2014 2010 2011 Industrialization Engineering and validation Program management WAVE 2 22 2013 2014 2015 R&D and Innovation Tech Center fully autonomous Advanced development for China market needs Local innovation WAVE 3 & 4 A consistent strategy focused on 6 dimensions to sustain profitable long term growth 1 2 Organic growth with core and emerging clients 3 Partnership as OEM intimacy leverage Global program acquisition Customer portfolio diversification Product portfolio diversification OEM connection Regional presence Business development booster 5 4 Program development to drive profitability and cash KPI constant improvement ECRs efficient management VA/VE portfolio enhancement Investor Day – Shanghai – November 11, 2014 Manufacturing operational excellence at benchmark level Quality & HSE best in class Flawless new launches Operation and cost optimization 6 World class R&D providing value to customers Fully-owned, worldwide network Deep expertise localization Innovation and industrial style 23 Strong leadership team to drive the growth plan A strong Chinese mgmt. team Training and development plan Organization and resources Faurecia has 23% CAGR for the past years and forecasts €2.3 Bn sales in 2014, a new faster-than-market growth year 2014 Forecast Total Sales € bn ≈ €2.3 Bn Sales* 1.0 CAGR = 23% 1.2 2.0 ~2.3 1.5 38 Plants 2010 R&D 4 centers 750 engineers 2011 2012 2013 2014 35 36 38 2012 2013 2014 Total Plants 25 30 ≈ 12,800 employees Present in 21 cities 2010 * Including €0.2bn non consolidated sales Investor Day – Shanghai – November 11, 2014 24 2011 Faurecia has now deployed its 4 Business Groups in China FECT and FAS Metal in market leading position First operation 1994: Wuhan First operation 2002: Changchun (Structures) 2003: Wuhan (Complete seat) 2004: Wuxi (Mechanism) First operation 2005: Changchun First operation 2011: Changchun 2014 Forecast 16 plants Total sales: ≈ € 1,150m 1) ≈ 4,400 employees 27% Market Share 2014 Forecast 10 plants Total Sales: ≈ € 830m 1) ≈ 4,900 employees 15% Market Share Metal 5% M/S Complete Seat 2014 Forecast 11 plants Total Sales: ≈ € 260m 2) ≈ 2,800 employees 4% Market Share 2014 Forecast 1 plant Total Sales: ≈ € 80m 3) ≈ 550 employees 2% Market Share 1) Consolidated sales 2) Consolidated and non-consolidated sales ; 3) mainly non-consolidated Investor Day – Shanghai – November 11, 2014 25 A manufacturing footprint of 38 plants in 2014, covering the 6 main auto regions North North-East Region 2004 2007 2012 Yantai Qingdao Beijing 1996 2002 2005 2010 2011 2011 2012 Central Region 1994 2003 2006 2010 2012 2013 2014 Wuhan Wuhan Wuhan Wuhan Xiangyang Nanchang Changsha 6 East Region 3 2000 2004 2005 West Region 2003 2007 2010 2011 2012 2012 Chongqing Chongqing Chengdu Chengdu Chongqing Chengdu South Region 2010 2010 2012 2012 2012 2013 Guangzhou Foshan Foshan Foshan Shenzhen Shenzhen Investor Day – Shanghai – November 11, 2014 Changchun Changchun Changchun Changchun Changchun Shenyang Changchun 6 7 10 2008 2012 2012 2012 2012 2013 2014 6 ★ China Headquarter 26 Seats ★ Interior Exterior Shanghai Wuxi Shanghai Shanghai Shanghai Nanjing Shanghai Cixi Yancheng Nanjing Cixi Beilun Exhaust R&D centers R&D Strategy focused on competence and expertize full localization under 100% Faurecia control R&D Strategy FECT Tech Center Opened in April 2011 3 fully owned R&D centers integrated in the global network with 750 engineers Application centers in six regions Continuous reinforcement of local team and competences More innovation focus Design and style as differentiation factor R&D and Program headcount evolution China HQ & New Tech Center Opened in March 2013 1,200 750 2014 900 2015 Investor Day – Shanghai – November 11, 2014 2017 27 Manufacturing strategy focused on best in class operations through full FES deployment and margin enhancement Among best performing plants Customer PPM [2014] Dated on Sep. 2014 8 #1 Anting FAS #1 Wuxi FAS #4 Nanjing FIS #5 Wuhan FECT #8 Guangzhou FAS #9 Yantai FECT #9 Chengdu FAS #9 Wuhan FIS 6 GM “2013 GM Supplier Quality Excellence Award” 4 1 FAS FIS FECT FAE DPCA “2013 GM Special Award” New Plant Launching Model FAW-VW “Top 10 Excellent Quality Award” 8 Chinese Plants in Group Top 10 22 Chinese Plants audited 82%@A Rank; Average 64% (All plant managers are Chinese) Investor Day – Shanghai – November 11, 2014 Recognized by Customers KM&I “2013 Best Supplier Award” 28 Faurecia China targets to double its size in the coming years thanks to OEM volume growth and portfolio expansion Sales forecast Comments > € 4bn Faurecia to grow twice as fast as the market (15% CAGR) Strengthening relationships with Chinese automakers: ChangAn for FIS, to extend Geely for FIS, FECT JMC for FECT Other opportunities > € 3bn ≈ € 2.3bn 2014 Investor Day – Shanghai – November 11, 2014 2016 2018 29 Faurecia‘s partnership with China ChangAn Group progresses smoothly in line with the strategic plan Partnerships objectives ChangAn Affiliated OEMs 50/50 JV established in 2013 Interior business as first step scope Potential extension to other Faurecia product lines Significant businesses award since creation Chang'an PV Volume Growth Interior Systems sales evolution 2014 YTD 1.7m +26% JV footprint €M ~ 210 ~150 ~20 2016 2018 2020 Faurecia will continute to deploy this strategy with other Chinese OEMs Investor Day – Shanghai – November 11, 2014 30 Footprint strategy focused on business support and capex optimization through volume massification Key Strategy Core technology / standard product / techno plants: densification of volume JIT to follow customers Cross BG building solution Capex optimization Vertical integration to catch added value New footprint focus regions – OEM new entry points Changchun Beijing Nanjing Chengdu Wuhan Chongqing Plant Number 2014: 38 2018: 55 5 YR Investment: € 400 M Investor Day – Shanghai – November 11, 2014 Shenyang Shanghai Hangzhou Changsha Guangzhou 31 Human Resources strategy focused on supporting growth through leadership and competence build up DEVELOP A STRONG LEADERSHIP TEAM Multi-cultural Highly motivated Result oriented REINFORCE HR FOUNDATIONS Group key values in team’s daily behavior Full deployment of all Group HR tools C&B in line with Group guidelines and market PROVIDE RIGHT RESOURCES FOR GROWTH Reservoir and retention Career path anticipation Training in China and abroad Investor Day – Shanghai – November 11, 2014 Balance of nationality, seniority and competence Chinese people in key Division Management Positions 100% Plant Managers are Chinese Regular staffing reviews New employees induction and training plans Regular benchmarking to be competitive HR KPI close monitoring University campus campaigns for new graduates Clear career path for management evolution FES China School to prepare Faurecia mindset 32 Key takeaways Faurecia China Market environment remains positive High confidence to respect commitment to Group Investor Day – Shanghai – November 11, 2014 A solid presence and good financial results A clear vision and target A clear strategic roadmap A motivated team Market providing significant growth potential toward international standards Customer and product portfolio diversification focus Competition close follow-up and constant benchmarking Deliver budget year by year Raise contribution to Group earnings in mid-term plan HR and management development 33 Investor Day Shanghai November 11, 2014 Human Resources Faurecia China Kathy Sun November 11, 2014 Property of Faurecia - Duplication prohibited China demography overview Source: Desktop research Investor Day – Shanghai – November 11, 2014 36 The most populous country: 1.37 billion, 20% of total worldwide population; of which the 770 million workforce (56% of total Chinese population) Dense population in East & Central China and sparse in West; 240 million migrant workers Birth rate decreases because of the family planning policy from last century Unemployment rate is about 4.3% in recent 5-year average Manufacturing takes a larger proportion of GDP (40%) & fiscal revenue (50%) Total Faurecia workforce in China reaches approx. 12,800 people in 2014 and will reach ~16,900 in 2017 Distribution of Faurecia’s workforce in China (2014) Evolution of Faurecia’s workforce Total workforce in 2014: ≈12,800 CAGR = +11% 16 900 13 900 CAGR = +28% 10 985 NORTHERN REGION Changchun Total: 3,020 Shenyang Beijing CENTRAL REGION Total: 2,750 5 271 Nanchang Yancheng Wuhan Nanjing Wuxi Chongqing Anting Shanghai Cixi Xiangyang Chengdu Ningbo Xiangtan SOUTH WESTERN REGION Total: 2,350 Property of Faurecia - Duplication prohibited Qingdao Yantai Guangzhou Foshan Shenzhen 2 080 3 200 1 003 2010 SHANGHAI OFFICE SH Office: 1,400 EASTERN REGION Total: 3,280 2013 M&P* 37 2015 2017 China all With CAGR at 28% in the past, the increase in the coming years is still significant, but at a moderate rate. * Managers and professionals Investor Day – Shanghai – November 11, 2014 2 870 Faurecia China has developed a local management team with limited expatriate support The expatriate structure analysis Expat vs total M&P Expat category Expat in mgt team Expatriate 1% Technical expert Management Expatriate 15% 48% 52% Local 99% 85% Property of Faurecia - Duplication prohibited Total M&P All Plant Managers are Chinese. With 27 expatriates dedicated to China, 14 are for Technical/Expert positions The strategy is to promote Chinese people for the management functions and to have technical expatriates to transfer the know how Source: Desktop research Investor Day – Shanghai – November 11, 2014 38 HR Mission Provide talented and committed people on time through systematic anticipation to enrich talent pipeline and develop Faurecia Culture HR STRATEGY Work on Employer Branding to boost company attractiveness Anticipate key resources growth to meet future business needs Develop strong leadership team and ensure key technical competence on board KEY ACTIVITIES Retain talents with Faurecia Values Property of Faurecia - Duplication prohibited HR foundation: make sure country alignment while managing diversity Investor Day – Shanghai – November 11, 2014 39 Promote in media communication channel Deploy CSR program in China Extend cooperation with target universities Golden Triangle and localization deployment Strategic recruitment for next generation leaders Young Talents program to stabilize talent foundation Promote Management & Technical parallel career path Prepare new leaders through Leadership & Management program and Individual Development Plan Focus on talent identification and internal mobility Individual Career path designed in advance Provide competitive package for talents Ensure legal compliance and group alignment Respect regional guidelines HR Information System fully on board Faurecia golden triangle plan has been developed to ensure that new plants launch at Faurecia standards Mother plant New plant Plant mgr 1st level: Plant Management Team Golden Triangle: 1+2 1 plant manager 2 of 6 key functions filled internally 6 key functions = HR, ME, Quality, UAP, FES, PC&L 28 82 people moved & promoted 2nd level: Engineer & Professional Local hiring in advance and train in mother plant For tech. plant, internal transfer experience 1 key funct. Mgr Property of Faurecia - Duplication prohibited Below level: Junior Professional & operator JP: "Young Talents Program" Operator: train in mother plant and involve from PMS phase 2 Investor Day – Shanghai – November 11, 2014 40 54 1 key funct. Mgr Faurecia university in Asia is also aimed at developing the Faurecia culture/value and strengthening the competency management Faurecia University in Asia Property of Faurecia - Duplication prohibited Induction Program Investor Day – Shanghai – November 11, 2014 41 Management Skill FES Knowledge Functional Knowledge Leadership No. of trainees covered: 2014 – 1,000; 2015 – 1,200 Faurecia China talent acquisition strategy … Acquire Talents for Future 2013 Executive 2012 Sr. Manager 2014 50 planned 30 hired 25 hired Strategic Recruitment 1st Line Manager 83% Retained Till 2013 Professional Experienced Property of Faurecia - Duplication prohibited 2013 Junior Professional Investor Day – Shanghai – November 11, 2014 2012 Young Talents 113 hired Program 42 177 hired 2014 140 planned Culture transformation in line with new values fully underway in China In 2014 the Group launched a cultural transformation project called Being Faurecia based on three key managerial values Entrepreneurship Autonomy Accountability Exemplarity: Tracy LI (Chengdu FAS Plant Manager, Value: Entrepreneurship) In China this has been received with enthusiasm as it is in line with the way that we manage our business through taking initiatives, focus on performance and results and celebrating success Property of Faurecia - Duplication prohibited Wuxi Model Line Value: Autonomy Accountability Investor Day – Shanghai – November 11, 2014 43 Property of Faurecia - Duplication prohibited Key take-away for Faurecia China HR 1 China headcount will increase from 12,800 today to 16,900 in 2017 2 China Government trend is to support the workers with more protection through regulations and salary increase in order to maintain social harmony. Productivity is becoming a key objective. 3 Faurecia HR KPIs are globally outperforming the market, which is well highlighted by the company's internal Employee Engagement Survey of 2013 4 Internal promotion, talent attraction, retention and management development remain the key challenges, as the market will grow even more competitive, especially at the manager level 5 Faurecia China organization has been reinforced with creation of Divisions supported by corporate functions, keeping Faurecia culture and value as a priority Investor Day – Shanghai – November 11, 2014 44 Investor Day Shanghai November 11, 2014 Automotive Seating Faurecia China Sam Xia November 11, 2014 FAS China growth at 18% CAGR in the past 4 years 2014 Forecast Total Sales Business Awards €M €M CAGR = 18% > 2,400 ≈ 830 712 ≈ € 830m Total Sales 1,920 583 423 1,560 466 10 Plants 2010 R&D 2 centers 300 engineers 2011 2012 2013 2014e Plant Number 8 10 9 10 5 Property of Faurecia - Duplication prohibited ≈ 4,900 employees 2010 Investor Day – Shanghai – November 11, 2014 2011 2012 2013 47 2014 2009+2010 2011+2012 2013+2014e 2014: 10 Plants Complete Seat (3 Plants) Front Seat Frame (5 Plants) Mechanisms - Recliners (1 Plant) Mechanisms -Tracks (1 Plant) Property of Faurecia - Duplication prohibited FAS China is composed of 4 product families Complete Seat Frames Mechanisms Comfort &Trim First operation 2003: Wuhan First operation 2002: Changchun First operation 2004: Wuxi First operation 2013: Wuhan 2014 operation scale 650k carsets /year 2014 operation scale 2,700k carsets /year 2014 operation scale 15M recliners /year 15M tracks/year 2014 operation scale 350k carsets /year 2014 Market Share 5% 2014 Market Share 13% 2014 Market Share 16% Investor Day – Shanghai – November 11, 2014 48 FAS China business development strategy 3 priorities to secure the sales growth 1 "Partnership for Top Line Initiatives Complete Seat" "Global Platform 2 for Frames" Property of Faurecia - Duplication prohibited 3 "New Customers" Investor Day – Shanghai – November 11, 2014 Leverage the existing Faurecia JV Develop new partnership projects Other opportunities Secured the business awards of Global Generic Platforms with VW, PSA, Nissan, BMW, GM and Ford Benefit from the new generation of Mechanisms Product 100% localization strategy for cost competitiveness Further develop new emerging customers in China e.g. Renault, Fiat-Chrysler Confirm 2013 business breakthrough with Ford Opportunities with Japanese/Korean OEMs following global approach, e.g. Hyundai 49 Property of Faurecia - Duplication prohibited Bottom Line Initiatives FAS China profitability enhancement strategy 6 Priorities to sustain profitability 1 "Customer mix" Focus on Premium brands: BMW, Audi, Cadillac … Focus on product innovation & generic system solutions 2 Vertical integration for Complete Seat (Foams, Covers & Accessories) Stamping & painting for Frames 3 “Product mix" Maintain leadership in highly profitable mechanisms business Value-creating innovation in mechanisms and frames 4 "Footprint optimization" Maximum loading of current metal plants (fixed cost optimization) Low CAPEX JIT Plants Purchasing (supplier panel, mandatory supplier management) Focus on value analysis / value engineering (VA/VE) & 6 sigma Engineering Change Request (ECR) managements in serial life phase Constantly improve operating income / Upfront costs / IRR / Max Cash Out during each program phase Reduce D&D, development core team cost Control the total upfront / CAPEX optimization "Vertical integration" 5 "Cost improvement" "Business Development 6 & Program Management" Investor Day – Shanghai – November 11, 2014 50 FAS China is balancing its customer portfolio Key accounts remain global OEMs € 1.7bn € 1.2bn VW remains 1st key account 2018 Sales split European Japan/Korean American Chinese € 830m Property of Faurecia - Duplication prohibited 2014 Investor Day – Shanghai – November 11, 2014 2016 2018 51 65% 19% 11% 5% 4 customers above € 200m Sales FAS China will have 17 plants in 2018: 6 new JIT plants and 1 new metal plant are in preparation JIT Frame Mechanisms 3 plants 5 plants 2 plants 2014 10 plants • Northeast 1 • Central 2 2018 +7 plants • • • • Northeast 1 Central 2 East 1 South 1 "JIT Module" "Footprint Centralization" "Base Area" + 6 plants + 1 plant + 0 plant Number of plants every year Property of Faurecia - Duplication prohibited • East 2 JIT plants: Plan 6 new footprints Year ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Plan number 10 10 14 15 16 17 Investor Day – Shanghai – November 11, 2014 Metal plants: Densify the production by main automotive regions to benefit from volume effect Mechanisms plants: Fully load the current ones 52 FAS China R&D strategy Global network and local presence with customer proximity R&D Strategy China HQ & New Tech Center Opened in March 2013 2 (Shanghai and Wuxi) fully owned R&D centers, 1 D&D plateau in Wuhan, 1 JV R&D in Changchun, integrated in the global R&D network, Test facilities certified by global OEMs Continuous reinforcement of local team and competences Industrial style as differentiation factor “East Works” for advanced innovation Headcount Evolution CAGR 28% Validation Recognized by OEM VW 300 Ford 244 196 GM 146 PSA Property of Faurecia - Duplication prohibited R-N 2011 2012 Investor Day – Shanghai – November 11, 2014 2013 Local OEM 2014 53 100% 85% 100% 100% 90% 100% FAS China product plan on Complete Seats Global & Customization – Next generation OEM Focus We Focus Customization - Integrated Intelligence Luxury trend for brand Self Adjustment Connected with smart accessories Offboard Wellness Assessment Audio & comfort End User Focus Shape adjustment for comfort Health Tactile Seat Display Smart Fit “Magic” flexibility Heat & Vent We Focus Personalized trend Foot massage module 2nd social row Global Concern Removable cover We Focus Property of Faurecia - Duplication prohibited Environment trend Bamboo Investor Day – Shanghai – November 11, 2014 54 Air Cleaner Safety Cover Carving FAS China product plan on Front Seat Structure Generic & Modular – Next generations with weight & cost reduction 2006 2009 2011 2012 2013 11.9 Kg 2014 2015 2016 SOP 12.0 Kg Customer A 1-1 2015-2023 CHINA 2013-2022 CHINA 2013-2022 CHINA 2014-2021 CHINA 15.59 Kg Customer B 2-1 2-2 11.5 Kg 10.5 Kg Customer C 3-1 3-2 11.5 Kg 13.7 Kg 8.5 Kg Customer D 4-1 4-3 4-2 ~15.0 Kg 11.5 Kg Customer E Property of Faurecia - Duplication prohibited 2013-2018 CHINA 1-2 17.07 Kg 5-1 5-2 Next generation Investor Day – Shanghai – November 11, 2014 Developed in China 55 FAS China product plan on Mechanisms Global & Standard – Next generations with size, weight & cost reduction 2003 2006 2008 2010 2011 2012 2013 2014 2015 -19% vs. Recliner I -35% vs. Recliner III Recliner III Recliner IV Recliners Recliner I Recliner II -16% vs. Track II Tracks Track I Track II Track III -10% vs. E-pump1 Property of Faurecia - Duplication prohibited E-Pumps Only 1 worldwide production facility in China Investor Day – Shanghai – November 11, 2014 E-Pump I 56 2016 SOP E-Pump II Property of Faurecia - Duplication prohibited Key takeaways 1 FAS China achieved 18% CAGR in the past 4 years, reaching €830m by 2014. It has developed leading market shares in Frames (#2 at 13%) and Mechanisms (#1 at 16%) 2 FAS China targets to maintain sales at 20% CAGR in the next 4 years which will lead to 3% to 6% market share increase per product line, sales of €1.7b in 2018 3 FAS China has formulated clear customer, product, manufacturing strategies to ensure growth and profitability, including customer mix, footprint optimization, vertical integration, and program cost improvements 4 FAS China benefits from solid HR foundation on which it will further develop the organization strength and competitiveness, with 7,700 people in 2018 Investor Day – Shanghai – November 11, 2014 57 Investor Day Shanghai November 11, 2014 Emissions Control Technologies Faurecia China Thierry Aubry November 11, 2014 FECT is the market leader of emission control in China 2014 Forecast Total Sales Business Awards €m €m CAGR = 23% 990 ≈ € 1.1bn Total Sales ≈ € 660m Product Sales 15 Plants Property of Faurecia - Duplication prohibited R&D 1 center 288 engineers 499 2010 607 2011 ≈ 1,100 2,440 778 ~2,300 1,680 2012 2013 2009+2010 2014e 2011+2012 2013+2014e Total Plants 11 9 12 14 15 2013 2014 > 4,400 employees 2010 Investor Day – Shanghai – November 11, 2014 2011 60 2012 Property of Faurecia - Duplication prohibited FECT China is composed of 4 product families Manifolds Catalytic Converters Mufflers Complete Lines First operation 2008: Qingdao First operation 1998: Changchun First operation 1994: Wuhan First Operation 1994: Wuhan 2014 operation scale > 2 Mio parts / year 2014 operation scale > 4 Mio parts / year 2014 operation scale > 3 Mio parts / year 2014 operation scale > 1 Mio parts / year Investor Day – Shanghai – November 11, 2014 61 3 priorities have been strategically planned for the next 5 years by FECT FECT China strategy China Innovation Commercial Vehicles Property of Faurecia - Duplication prohibited OEM Alliance Reinforce market driven innovation Drive the growth of commercial vehicle emission business Build customer alliance throughout China Investor Day – Shanghai – November 11, 2014 Marketing driven innovation focus on China requirements Speed up innovation to market Build up innovation experts and specialists team locally in China Strengthen China CVE product portfolio to meet the demand of stricter China emission standards Alliance market approach with Cummins Emission System Leverage LVE footprint, experience and size to support CVE Strengthen customer partnerships through JV activities Reinforce customer relationship to improve business opportunity Achieve win-win for both OEM and FECT 62 FECT in superior position through technology and global organization Competition landscape in China Market share in 2013 27% Others Total of around 20 Competitors Faurecia FECT is clear market leader with 27% market share Diversified competition Technology is FECT strength Global program management is key competitive advantage Tenneco Calsonic Kansei Property of Faurecia - Duplication prohibited Lihe Sejong Sango Source: FECT China Investor Day – Shanghai – November 11, 2014 63 FECT China with very balanced customer portfolio € 1.6bn € 1.4bn CVE € 1.1bn LVE Property of Faurecia - Duplication prohibited 2014 Investor Day – Shanghai – November 11, 2014 2016 64 2018 FECT China will reach 30% market share in CVE in 2018 CVE Business development FECT is targeting to reach 30% market share in the next 5 years Market volume evolution on road (M Units) 3.6 3.8 4.1 4.4 4.5 3.6 2014 2015 2016 Non emissionized 2017 2018 2020 After treatment system Property of Faurecia - Duplication prohibited After treatment systems shall reach 3.6 M Units in 2018 Driving CVE business growth by the alliance with CES (Cummins Emission System) and partnership with local players Develop technology co-operation with Chinese CV OEMs Investor Day – Shanghai – November 11, 2014 65 FECT China Footprint Techno plants JIT plants CVE 8 plants 6 plants 1 plant 2014 15 plants • • • • 2018 +3 plants Northeast:1 Central 2 East: 4 West: 1 • Central 2 • East 3 • South 1 "JIT Sequence delivery" + 3 plants "Technology capacity" + 0 plant Property of Faurecia - Duplication prohibited Year ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Plan number 14 15 16 17 18 18 + 0 plant JIT plants: Plan 3 new footprints Techno plants: Complete exhaust system production capacity, key components manufacturing CVE: Fully loading the current one and use LVE actual footprints Number of plants every year Investor Day – Shanghai – November 11, 2014 • Central 66 Our focus in the next 5 years will be reinforcing product strategy and promoting innovation Product & Technology roadmap 2013 2013 2015 2015 Fabricated T Manifold Mono and Airgap Emissions reduction Property of Faurecia - Duplication prohibited Acoustic Performance Brazed cold end Energy recovery EHRM (4) 2. Ammonia Storage and Delivery System Investor Day – Shanghai – November 11, 2014 Modular NVH solution Ultra light-weight cold end Compact EHRS (5) 3. Exhaust Dynamic Sound Technologies 67 2020 2020 ASDS (2) Closed couple SCR : U shape – C-mixer EVO valve/Electric valve Weight reduction 1. Gasoline Particulate Filter 2017 2017 EDST (3) GPF (1) Noise dampers LW hot end Direct oil gear box heating Rankine 4. Exhaust Heat Recovery Manifold 5. Exhaust Heat Recovery System Property of Faurecia - Duplication prohibited Key takeaways 1 FECT has a clear market leader position on China market with over 25% market share 2 With 10% CAGR over the 2014-2018 period, FECT will increase market share in China 3 Innovation and technology, strong growth in CVE market and alliance strategy with OEMs as main pillars of FECT China strategy plan 4 FECT China has proven operational excellence including program management, footprint optimization and talent management and retention Investor Day – Shanghai – November 11, 2014 68 Investor Day Shanghai November 11, 2014 Interior Systems Faurecia China Richard Zhang November 11,2014 FIS China Growth at 24% CAGR in the past 4 years 2014 Forecast Total Sales Business Awards €m €m CAGR = 24% ~270 >1,000 ≈ € 270m Total Sales 116 477 136 257 13 Plants 2010 R&D 1 center 300 engineers 2012 2014e 2009+2010 13 2014: 13 Plants Plant Number 8 5 Property of Faurecia - Duplication prohibited ≈ 2,800 employees 2010 Investor Day – Shanghai – November 11, 2014 2011+2012 2013+2014e 2012 2014 71 12 Technology Plants 1 JIT Plant Property of Faurecia - Duplication prohibited FIS China is Composed of 4 product families Cockpit Instrument Panel Door Panel Acoustic Modules First operation 2006: Chongqing First operation 2005: Changchun First operation 2005: Changchun First operation 2010: Changchun 2013 operation scale > 300k units / year 2013 operation scale 1 Mio parts / year 2013 operation scale 2.2 Mio parts / year 2013 operation scale 0.7 Mio parts / year Investor Day – Shanghai – November 11, 2014 72 Current merging of the market leaders open great opportunities for Faurecia Interior Systems Market share in 2014 Market consolidation underway Yanfeng Yanfeng Others Number of player 42 (mainly Chinese) Property of Faurecia - Duplication prohibited Yanfeng and Visteon had long-standing joint venture covering all automotive regions and OEMs Yanfeng purchased all shares of joint venture in 2013 Yanfeng Interior China estimated sales € 2.1 bn in 2012 Yanfeng is now in the process of absorbing JCI Interiors (excluding electronics) JCI Interiors has JVs with FAW, BAIC and GAC groups JCI China Interior sales (excluding electronics) € 1.04 bn JCI 4% Calsonic Kansei Mobis Faurecia Current merging of both leaders combined with an "over-splitting" of the market by local players is creating a very favorable business and partnership momentum for Faurecia Interior System Investor Day – Shanghai – November 11, 2014 73 Our sustainable business model is based on 4 key drivers Toward 10% Market Share through a sustainable business model Property of Faurecia - Duplication prohibited Entrepreneur and committed People Investor Day – Shanghai – November 11, 2014 Strategic Partnership Programs & Operations efficiency 74 Product & Innovation Partnership and customer strategy Strategic partnership will be a key success factor Our customer strategy is based on 4 main pillars 1 2 Reinforced customer intimacy, to better address: Strategic Partnerships Enhance Market Share Chang An (Ford , DS and CA own brand) Other opportunities Expected turnover 3 Standalone approach Select Relevant and Sustainable Business SVW FVW Geely Property of Faurecia - Duplication prohibited € 270m 2016 Investor Day – Shanghai – November 11, 2014 Diversification Diversify customer portfolio Guangdong Auto Group-CFA Others Ford remains our Number one customer 2018 Sales split European 38% Japan/Korean 18% American 32% Chinese 12% CAGR around 30% ~ € 750m ~ € 400m 2014 4 2018 75 Industrial Strategy Priority is to saturate our existing "Technology" footprint Techno JIT 12 plants 1 plant 2014 13 plants • • • • Northeast East South Central 2018 +7 plants 1 3 2 2 • Central 1 "Fast response" + 6 plants "Ensure capacity" + 1 plant Techno plants: To saturate our existing footprint which covers the main automotive basins. Property of Faurecia - Duplication prohibited Number of plants every year Year ‘14 ‘15 ‘16 ‘17 ‘18 Plan number 13 14 15 18 20 Investor Day – Shanghai – November 11, 2014 JIT plants: To set up 6 new JITs supplied by our technoplant an ensuring quick response to customer needs while limiting investments. 76 Product & innovation strategy Addressing upgrading, personalization and environment trend Upgrading Premium Quality Slush Lite IMP Decostitich LOCOP Cut & Sew Piping Matching with growing perceived quality expectations of Chinese market Personalized trend Aluminum Sliding Dock Ambient Lighting Wi-charging Property of Faurecia - Duplication prohibited Addressing enrichment and technology trends of Chinese market Environment trend NAFI Air Purification Introducing global green technologies as well as specific technologies for China Investor Day – Shanghai – November 11, 2014 77 Property of Faurecia - Duplication prohibited Key Takeaways 1 FIS China has engaged a successful growth and profitability allowing to target more than € 750m total sales by 2018 2 Strategic partnership with OEM is a key driver to address this ambitious plan. Our recent but successful CCAG JV is demonstrating the relevance of this approach 3 Operations and programs optimization are a must to be able to propose a competitive and profitable business model in China Interior market 4 People are at the center of this strategy. Priority is to develop and reinforce our team, enhancing entrepreneurship, continuous improvement and execution mindset Investor Day – Shanghai – November 11, 2014 78 Investor Day Shanghai November 11, 2014 Investor Day Strategy update Yann Delabrière November 11, 2014 2014 - 2016: Selective growth strategy confirmed Benefit from selective resource allocation strategy Accelerate in Asia Leverage global platforms Develop value-added technologies Investor Day – Shanghai – November 11, 2014 81 Faurecia Automotive Seating On track to meet its 2016 targets Key drivers Update on priorities 2016 Targets Mechanisms leadership and Generic frames China and Asian customer growth Customer diversification in particular growth with Nissan and Ford Value creating innovations based on fuel economy (weight reduction) and smart comfort Mechanisms and frames on track to reach over 8% operating margin in 2016 Back to growth in North America, with significant launches in H2 2014 and operational turnaround confirmed Single European division successfully created, profitability improving Renault-Nissan on track to become second largest client China opportunities confirmed Total sales > € 7.1bn Operating margin > 5.0% ROCE* > 20% Investor Day – Shanghai – November 11, 2014 82 Faurecia Emissions Control Technologies Ahead of its roadmap, 2016 targets upgraded Key drivers Update on priorities 2016 new Targets Capture the growth of the Commercial Vehicle markets especially in China Increase value-added through innovations: environmental performance (NOx and particulates); fuel economy (weight reduction, energy recovery); acoustic performance (sound design) Europe recovery is well engaged, further optimization to come North America turnaround ahead of plan Product and process standardization well underway CVE growth rate of around 20% CAGR confirmed, driven by partnership with Cummins and regulation introduction especially in China moving to Euro 5 Business awards for energy recovery systems and SCR and interest in sound design demonstrate relevance of technology strategy Total sales > € 7.4bn (value-added sales > € 4.0bn) Operating margin close to 5.0%, (up from > 4.0%) now above 8.0% on value-added sales ROCE* > 25% (up from around 25%) Investor Day – Shanghai – November 11, 2014 83 *: Pre-tax and including goodwill Faurecia Interior Systems Improving in evolving environment, 2016 targets adjusted Key drivers Update 2016 Targets Selective growth strategy with focus on cash model Profitability increased through operational improvement Benefit from trend towards consolidation in the market Accelerate in Asia Expand higher profitability product lines (decoration, HMI) Consolidation underway should improve competitive environment Strong operational improvement in Europe, North America is progressing China growth acceleration confirmed Breakthrough in bio materials with clear roadmap towards 30% weight reduction Total sales > € 4.5bn Operating margin > 4.0% (from > 4.5%) ROCE* around 15% (from around 20%) Investor Day – Shanghai – November 11, 2014 84 *: Pre-tax and including goodwill Faurecia Automotive Exteriors On track to meet its 2016 targets Key drivers Priorities update 2016 Targets Remain market leader in Europe Front End Modules (FEM) strategic review South America turnaround Develop long term potential for Composite Technologies Awarded first composite tailgate business and composite floors co-development with OEMs Margin improvement actions in North Europe (ex. Plastal) to accelerate South America capacity utilization rate close to 100% in 2016 and operational cost management underway Total sales > € 2.0bn (or > € 1.5bn excl. FEM) Operating margin 4.5% - 5.0% ROCE* > 20% Investor Day – Shanghai – November 11, 2014 85 *: Pre-tax and including goodwill Management transformation and reinforcement to support deployment of strategy Being Faurecia: Major initiative launched in 2014 to transform corporate culture with two main axes New values of entrepreneurship, autonomy and accountability to drive focus on performance and value creation Strengthened people management and people development in order to better develop talent internally Executive Committee will be strengthened and diversified with three new appointments effective in the first quarter 2015. All these appointments are internal promotions. This management reinforcement at all levels will facilitate our ability to implement our strategic plan Investor Day – Shanghai – November 11, 2014 86 2016 Targets are fully confirmed Sales above 21 billion euros Operating margin 4.5 – 5.0% Net cash flow around 300 million euros ROCE* > 20% Investor Day – Shanghai – November 11, 2014 87 *: Pre-tax and including goodwill Investor Day Shanghai November 11, 2014 Investor Day Group financial strategy and targets Michel Favre November 11, 2014 Reminder of financial targets ROCE to increase by 50% from 14% in 2013 to over 20% in 2016 ROCE * > 20% 13% Property of Faurecia - Duplication prohibited 2012 Increasing operating margin from 3.0% in 2013 to 4.5% - 5.0% in 2016 Capex + capitalized R&D around € 800m Asset turn to improve by 20bp to close to 5x 14% 2013 2014 2015 2016 * Pre-tax and including goodwill Investor Day – Shanghai – November 11, 2014 90 Reminder of the financial targets Net Free Cash Flow generation around € 300m in 2016 Net Free Cash Flow in €m Increasing EBITDA margin (>150bps gain or > € 300m contribution) Improved Capital Employed Additional factoring of receivables in 2014 Reduced financial expenses (€ 150m objective in 2016 vs € 200m in 2013) Around 300 144 Property of Faurecia - Duplication prohibited 2013 Positive 2014 Investor Day – Shanghai – November 11, 2014 2016 91 Reminder of the financial targets Optimize resource allocation Property of Faurecia - Duplication prohibited 4 key priorities Priority to strategic OEMs Priority to the two Business Groups (Emissions Control Technologies and Automotive Seating) which require lower Capex and capitalized R&D Priority to new footprint expansion mainly in Asia Negotiate better financing terms with OEMs for development cost Investor Day – Shanghai – November 11, 2014 92 Property of Faurecia - Duplication prohibited Financial priorities and resource allocation € 100m per year dedicated to research and innovation expenses (within the R&D budget) € 50m per year from 2015 onwards for restructuring expenses to continue to optimize the industrial footprint and increase the average size of our plants € 100m of Capex for process standardization Around € 100m capital allocation over 2015-2016 to buy-back minorities Investor Day – Shanghai – November 11, 2014 93 Main profitability drivers by region Asia >8% and N. America and Europe >4% operating margin Property of Faurecia - Duplication prohibited Main drivers Growth (volume & mix) Asia is our top priority and it is where growth prospects are the best North America is restarting a cycle of secular growth Commercial margin (Project management & re-pricing) North America is where better project and commercial management should help the most In South America, re-pricing to take into account high inflation, lower volumes and currency swing is key to a margin recovery Footprint optimization Footprint optimization is an ongoing process and will lead to sizeable margin expansion Standardization North America and Europe is where standardization is expected to yield savings Operational performance North America and to a certain degree South America will benefit from operational improvements Geographical mix With Asia being the fastest growing region and also the most profitable region, it is helping overall margin expansion Operating margin improvement (2014-2016) 100 – 150bp Investor Day – Shanghai – November 11, 2014 94 Financial targets by region (updated vs initial) FAURECIA 2016 initial 2016 updated Comment > 21.0 > 21.0 (> 20.5 excl. FEM) Depending on strategic review outcome 4.5% to 5.0% 4.5% to 5.0% Europe > 10.7 > 10.7 (> 10.2 excl. FEM) North America > 5.4 > 5.4 Asia > 3.8 Close to 4.0 Upgraded South America & rest of world > 1.1 Close to 1.0 Adjusted 4.0% - 5.0% 4.5% - 5.0% Upgraded 5.0% > 4.0% Adjusted > 7.0% > 8.0% Upgraded Breakthrough in profitability and focus on cash generation Breakthrough in profitability and focus on cash generation Group total sales (in €bn) Operating margin as % of total sales Total sales (in €bn) Depending on strategic review outcome Operating margin (% of total sales) Europe Property of Faurecia - Duplication prohibited North America Asia South America & rest of world Investor Day – Shanghai – November 11, 2014 95 Regional perspective Better balanced portfolio Product sales by region 2014 2016 South America & rest of world South America & rest of world Asia 14% 4% 5% Asia 56% 52% Europe 25% 26% North America Property of Faurecia - Duplication prohibited North America Investor Day – Shanghai – November 11, 2014 18% 96 Europe Main profitability drivers by Business Group All Business Groups above 4% operating margin Property of Faurecia - Duplication prohibited Main drivers Growth (volume & mix) Automotive Seating & Emissions Control Technologies are the fastest growing Business Groups Commercial margin (Project management & re-pricing) Interior Systems will benefit the most from improved project management and also re-pricing Footprint optimization Automotive Seating, Emissions Control Technologies and Interior Systems will benefit the most from continuous footprint optimization Standardization Automotive Seating with generic frames and Emissions Control Technologies with industrial standardization will generate sizeable savings Operational performance Interior Systems is where improved operational performance especially in North America will yield significant margin expansion Geographical mix Interior Systems will grow very fast in Asia where margins are higher and therefore will benefit from a favorable mix improvement. Operating margin improvement (2014-2016) 100 – 150bp Investor Day – Shanghai – November 11, 2014 97 Financial targets by Business Group (updated vs initial) FAURECIA 2016 initial 2016 updated Comment > 21.0 > 21.0 (> 20.5 excl. FEM) Depending on strategic review outcome 4.5% to 5.0% 4.5% to 5.0% > 20% around 300 > 20% around 300 > 7.1 > 7.4 > 4.5 > 2.0 > 7.1 > 7.4 > 4.5 > 2.0 (>1.5 excl. FEM) Operating margin (% of total sales) Automotive Seating Emissions Control Technologies Interior Systems Automotive Exteriors > 5.0% > 4.0% > 4.5% 4.5% - 5.0% > 5.0% close to 5.0% > 4.0% 4.5% - 5.0% Upgraded (> 8.0% on value-added sales) Adapted ROCE ** Automotive Seating Emissions Control Technologies Interior Systems Automotive Exteriors > 20% around 25% around 20% > 20% > 20% > 25% around 15% > 20% Upgraded Adapted Group total sales (in €bn) Operating margin as % of total sales ROCE * Net cash flow (in €m) Property of Faurecia - Duplication prohibited Total sales (in €bn) Automotive Seating Emissions Control Technologies Interior Systems Automotive Exteriors Investor Day – Shanghai – November 11, 2014 98 Depending on strategic review outcome * pre-tax and including goodwill Generate strong cash flow in 2016 Tight WCR control € 5m additional for 1% sales change Capex and capitalized R&D around at € 800m Significant profitability increase from 3.0% to 4.5% - 5.0% OM Free cash flow before interest and tax of around 80% of operating income Property of Faurecia - Duplication prohibited Optimize financial expenses and taxes (around 32% tax rate) Net cash flow around € 300m Investor Day – Shanghai – November 11, 2014 99 Cash Flow generation Main drivers Driver EBITDA Higher operating income (> 150bp margin improvement between 2013 and 2016) and higher D&A Change in WCR Improvement partially offsetting sales growth Capex + capitalized R&D Strong discipline and selective capital allocation according to new footprint opportunities Restructuring Continuous footprint optimization Finance expenses Tax & Other Property of Faurecia - Duplication prohibited Net cash flow Investor Day – Shanghai – November 11, 2014 Refinancing will generate sizeable savings (Objective € 150m in 2016 vs € 200m in 2013) Higher taxes from higher PBT to be partially offset by recovery of tax losses carry forward Objective of around € 300m by 2016 100 WCR optimization Zoom on main drivers Property of Faurecia - Duplication prohibited Driver Reduction of customer overdues & alignment of customer terms Receivables Factoring programs extension with additional lines in new countries and general business growth Inventories Reduction of minimum 1 day (out of 11 days) Payables Gain of 1 day through alignment and reverse factoring Other Geographical mix & contingencies will weigh on WCR Investor Day – Shanghai – November 11, 2014 101 Debt & financing Property of Faurecia - Duplication prohibited Financing strategy Objective to be 100% financed by capital markets (factoring customer receivables and issuing bonds) Ensure liquidity and independence through a 5 year syndicated credit facility (€1.2bn) with our core international partner banks Go back to the bond market to refinance our existing and expensive bonds through a new bond Investor Day – Shanghai – November 11, 2014 102 Debt & financing Reduce net debt & financial expenses Status Conversion of the 2015 Oceane in December 2013 √ Debt reduction from net cash flow generation in 2013 and 2014 √ Rating improvement (Fitch at BB-) √ Increase factoring (cheapest way to be financed) √ Property of Faurecia - Duplication prohibited Net debt / EBITDA ratio of around or below 1.0x by 2016 Investor Day – Shanghai – November 11, 2014 103 Update on refinancing Status Renewal of the € 1.2bn, 5 year syndicated facility at better conditions √ Refinancing of the 2019 HY bond (€ 250m) at better conditions Call option in June 2015 Refinancing of the 2016 HY bond (€ 490m) at better conditions Maturity in December 2016 Option to force conversion in early January 2016 if share price above € 25 Conversion of the 2018 convertible bond (€ 250m) Property of Faurecia - Duplication prohibited Net debt / EBITDA ratio of around or below 1.0x by 2016 Investor Day – Shanghai – November 11, 2014 104 Conclusion Faurecia is well on track to achieve its 2016 targets Large opportunities with refinancing Property of Faurecia - Duplication prohibited First phase is accomplished Investor Day – Shanghai – November 11, 2014 105 Contact & Share data Investor Relations Share Data Eric-Alain Michelis Bloomberg Ticker: Reuters Ticker: Datastream: ISIN Code: 2, rue Hennape 92735 Nanterre France Property of Faurecia - Duplication prohibited Tel: +33 1 72 36 75 70 Cell: +33 6 64 64 61 29 Fax: +33 1 72 36 70 30 E-mail: [email protected] Web site: www.faurecia.com EO:FP EPED.PA F:BERT FR0000121147 ADR Data Ticker: Ratio: Agent: FURCY 2 ADRs for 1 share Citi Group Bonds ISIN Codes 2016 bonds : XS0704870392 2013 Results & 2014 Objectives – February 12, 2014 2018 convertible : FR0011321363 Investor Day – Shanghai – November 11, 2014 2019 bonds : XS0778917814 106 Safe Habor Statement This report contains statements that are not historical facts but rather forward-looking statements. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions identify these forward-looking statements. All such statements are based upon our current expectations and various assumptions, and apply only as of the date of this report. Our expectations and beliefs are expressed in good faith and we believe there is a reasonable basis for them. Property of Faurecia - Duplication prohibited However, there can be no assurance that forward-looking statements will materialize or prove to be correct. Because such statements involve risks and uncertainties such as automotive vehicle production levels, mix and schedules, financial distress of key customers, energy prices, raw material prices, the strength of the European or other economies, currency exchange rates, cancellation of or changes to commercial contracts, liquidity, the ability to execute on restructuring actions according to anticipated timelines and costs, the outcome could differ materially from those set out in the statements. Except for our ongoing obligation to disclose information under law, we undertake no obligation to update publicity any forward-looking statements whether as a result of new information or future events. Investor Day – Shanghai – November 11, 2014 107 Investor Day Shanghai November 11, 2014
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