Emerging Market Growth: Successes and Failures

1. Emerging Market Growth: Successes and Failures Tomas Hult, Eli Broad Professor & CIBER Director Jason Luo, President & CEO, Key Safety Systems Blaire Miller, CFO, URV USA Cliff Owens, Sr. Manager, AAM-North America

2. The world is exceedingly interconnected Source: New Scientist, April 2009

3. And cross-border business continuesto grow exponentially Source: The World Bank World Development Indicators

4. Meanwhile the U.S. is losing groundboth in business dominance Percentage share of the world production Source: The World Bank World Development Indicators

5. And global competence Source: Modern Language Association (MLA) Survey

6. Yet, it’s of utmost importance • Survey of 180 Human Resource Managers on six continents: global competence is critical to the success of international managers and necessary for professional development. • Over 50% of international joint ventures fail within the first 5 years of operation. The principal reason cited for these failures is cultural differences and conflicts between partners.

7. Let’s see the world through alternate lenses

8. BOLDNESS BY DESIGNEnhance the student experience Enrich community, economic, and family life Expand international reach Increase research opportunities Strengthen stewardship Land-Grant to World-Grant • Under the leadership of its 20th president, Lou Anna K. Simon, MSU has made global awareness and engagement of our students, faculty, staff, and other constituencies an institutional priority. Just as MSU helped define “land grant” university in the 19th and 20th centuries, we are now working to define what it means to be a “world grant” university in the 21st century. • Thinking globally has always been a priority at Michigan State University. The university is recognized in the international community for its work in many areas, including basic human needs, education, international trade, sustainable agriculture, human and animal health and welfare, and the environment. • In 1956, MSU was the first major university in the United States with a dean of international programs. • Nearly 1,400 faculty members are currently involved in international research, teaching, and service projects and programs in 176 countries. The Broad School has 75 business professors who are experts in international business and trade who are natives of 22 different countries. • Since the 1950s, MSU has been the largest university recipient of U.S. Agency for International Development funding. • MSU has the top study abroad program in the nation, as ranked by the Institute of International Education, with 2,975 students participating in study abroad in 2006-07. • Some 470,000 alumni worldwide recall the MSU experience with gratitude and pride. Leaders throughout the world highly esteem MSU for the values it brings and the solutions it offers to regional, national, and global contexts.

9. Boldness by Design, Strategic Imperative 3:Expand International Reach Focus Areas • International recruitment and retention • Faculty, staff, and student development • Depth and breadth of global engagement Key Strategies • Sustain and enhance engagement strategies in Africa, enhance engagement strategies in China, and develop engagement strategies for the Middle East and South America • Increase the number of strategically selected countries in which the university has a formal, long-term presence • Develop a model for collaborative hiring with partner international institutions to share and exchange faculty resources • Develop dual degree programs and joint degree programs with partner universities in multiple countries • Recruit and retain more high-quality international students from more diverse backgrounds • Enhance international student participation in broader campus activities • Prepare graduate and undergraduate students for global/international leadership and participation • Explore feasibility of an international institutional review board for human subject research conducted outside the United States • Increase access to various models of high-quality language instruction

10. “CIBERs were created to increase and promote the nation’s capacity for international understanding and economic enterprise.”

12. The 33 CIBERs include 8 Big Ten universities, 2 Ivy League Universities, 4 ACC universities, 3 PAC 10 universities, 3 Big 12 universities, 2 Big East universities, and 2 SEC universities.

13. CIBERs engage in: Research Business Languages Business Outreach Faculty Development Academic Programs Study Abroad All 33 CIBERs and their activities can be found at CIBERweb.msu.edu

14. 70 Unique Projects • - Export Assistance • - Community Colleges • - Minority-Serving Institutions • - U.S. Department of Commerce • - International Trade Center of Mid-Michigan

15. One of thousands of CIBER activities each year… …but ranked #1 by Google in “international business resources” with 6 million page views per month!

16. BRIC Countries Stocks in the BRIC countries have soared 367% over the 2000s. A similar gauge of 23 developed countries gained only 17%.

17. Economic Powers…Globally

18. The Human Mind…Globally Aoccdrnig to rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is taht the frist and lsat ltteer be in the rghit pclace.

20. Colbert Report on AT&T (1:15 min)

21. Emerging Market Growth: Successes and Failures Tomas Hult, Eli Broad Professor & CIBER Director Jason Luo, President & CEO, Key Safety Systems Blaire Miller, CFO, URV USA Cliff Owens, Sr. Manager, AAM-North America

22. China Business Experience Jason Luo, CEO Key Safety Systems, Inc.

23. KSS Global Footprint & Reach Diss, England Raunheim, Germany Carlisle, England Lake Mills, WI Munich, Germany Seoul, South Korea Arad, Romania Tianjin, China Paris, France Brad, Romania Sterling Heights, MI (HQ) Yokohama, Japan Suzhou, China Knoxville, TN Tregnago, Italy Villastellone, Italy Hamamatsu, Japan Greenville, AL Juarez, MX Colleferro, Italy Huzhou, China Lakeland, FL Delhi, India Shanghai, China Valle Hermoso I, II, III, IV MX Brownsville, TX Matamoros, MX Bangkok, Thailand Global Technical Centers Sales Office Engineering Operations Warehouse Footprint Alignment with Customer and “Four Pillar” Strategy

24. Airbag Inflators Driver Airbag Steering Wheel Knee Airbag Curtain Airbag Electronics Inflatable Seatbelt Interior Trim Passenger Airbag Side Airbag Seatbelt KSS Product Overview

25. Corporate “Four Pillars” Business Strategy • Profitable Growth and Continued Diversification of Global Revenue Base • Maintain Leading Position in Quality and Technology • Optimize Global Manufacturing Footprint • Focus on Being Lowest Cost Supplier; Use our Competitive “Weapons” China Strategy is Aligned with Global Business Strategy

26. Revenue Diversification 2003 Revenue by Region 2010 Revenue by Region China Success Major Contributor to Achieving Strong Regional Balance

27. China Footprint KSS Facilities KAAC - Tianjin HAMLIN - Suzhou YFKSS - Shanghai ‘13 KSS - Shanghai KSS - Chongqing KHSS - Huzhou KSS - Nanjing

28. China Business Development Milestones 1998 - Entered the China Market Importing Airbags, Sensors & Steering Wheels 2002 - Established First Local Factory KAAC in Tianjin (Steering Wheels) 2006 - Global Technical Center Opens in Shanghai, 1st Safety Supplier to install Hyge Crash Sled in China – Full System Development Capability 2006 - Opened YFK Factory in Shanghai (Airbags, Seat belts, Steering Wheels) 2008 – YFK Expands & Installs Seat belt Manufacturing 2008– KSS hired over 50 engineers in shanghai to support EU/NA/Japan team 2008 – Hamlin Established Suzhou Operation (Sensors & Switches) 2009 - KHSS Starts Production of Airbag Inflators in China Selling & Trading Small Scale Production Development & Expansion Rapid Growth Progressive Investment Plan Building Upon Lessons Learned

29. China Growth & Investment KSS has Invested > $100 M & is Doubling China Business Every 3 Years

30. Enablers to KSS Accomplishments in China • China Strategy Aligned & Integral with Corporate Global Strategy • Positive Financial Strength & Cash Generation of “Core KSS” Fueled Investment • Taking Risk to Invest and be 1st with full Technical Center was rewarded • Corporate Executive Team must support China Strategy • Utilize local management whenever possible ** Hire the local talent • Understand the Culture, Market & Lessons Learned to Mitigate and Manage Risk China Success Integral Element & Reflection of Overall KSS Success

31. URV USA, LLCNorth American Growth StrategyBlaire H. Miller, CCMChief Financial Officer‘95 EMBA Alumna

32. URV Group: Introduction • URV is a Finnish foundry concern with foundries in Uusikaupunki, Finland and Kose, Estonia as well as a Swedish affiliate, HeavyCast that is located in Karlstad, Sweden • URV/HeavyCast is an established supplier to the wind industry currently supplying European wind turbine OEM’s: Acciona, Nordex, ScanWind (now GE) and Siemens (and a number of Tier II gear and bearing suppliers) • URV closely collaborates with affiliated Meehanite Worldwide, a 90 year old, global leader in metallurgical technology, that has cast iron and nodular iron technology licensing agreements with over 150 companies world-wide, 35 of which are located in North America

33. URV/HeavyCast: Our Products Wind Turbine Hubs Wind Turbine Bedplates Hubs typically weigh between 7 and 35 metric tons (Vestas hub pictured) Bedplates typically weigh between 7 and 35 metric tons (Acciona bedplate pictured)

34. End Product Example Siemens SWT 3.6 Power 3.6 MW (13 m/s) Rotor  107 m Hub height: 80-100 m Nacell wt: 220 t Tower wt: 250-350 t Hub 24000 kg Bedplate16000 kg

35. Global Market Analysis

36. Imports to U.S. By Country: 2008 3.1 million tons of castings imported 23% of demand up from 7% in 1998

37. US Market Analysis • Today, 95 % of the castings in USA are bought by GE. Price level significantly lower than in Europe. • Clipper has had technical problems and their financial position is weak. • Vestas committed to a nacelle factory in Colorado. • Siemens announced their nacelle factory investment to Huntington, Kansas in May 2009. The factory will start in late 2010; capacity 650 turbines p.a. • Suzlon has told us that they plan to import their nacelles to USA also in the future. This is in line with their vertical integration strategy. Nacelle production facilities in USA The US WTG market is roughly 40 % import, 60 % domestic – this will change more in favor of domestic production

38. The Opportunity • Shortage of casting capacity for very-large cast wind turbine components in North America • Domestic production of wind turbines in USA will grow rapidly in the next 5–10 years • Current supply mainly coming from out-of-date traditional foundries in Europe and Asia • New casting technologies will drive profitability and returns; return market share back to the US; and ensure sustained global competitive advantage Our vision: URV has a new, proprietary casting production technology that will revolutionize the production of high quality, competitively priced large iron castings: • Facts: • Investment costs :33 % lower compared to traditional foundries • Personnel costs :6-7 % of sales vs. >20 % in old foundries and 10-12 % in a new, traditional foundry • Lower variable costs coming mainly from less use of sand • Improved product quality level

39. URV USA: Next GenerationMaterials Center of Energy Excellence • URV, URV USA and Meehanite Worldwide, working with Oakridge National Laboratories and Michigan Technological University will develop new technologies to sustain our competitive advantage: • New “non-destructive” (X-Ray) testing technology to rapidly determine the quality of very-large (very-thick) castings • New “high strength and highly ductile” nodular-iron compositions that will enable the wind turbine OEM’s to optimally design (40%) lighter-weight, and more complex castings • New “casting-centric” suppliers (gear and bearing suppliers to start) to co-locate in Michigan, to form a Michigan Wind Cluster • New Michigan Wind Cluster to both co-develop and accelerate the commercialization of new technology, to “localize” the supply chain cost, and to simplify the supply chain integration

40. URV USA Launch Plan • Phase I: • Begin URV/HeavyCast manufacturing and exporting of “complete” castings to URV USA (4Q’2010) • Begin shipping rough castings to URV USA for “secondary operations” to be performed by URV USA, and additional Michigan suppliers as needed (1Q’2011) • Phase II: • Transfer Power Chill Technology and manufacturing to URV USA to launch our new 80,000 ton foundry (4Q’2011) • Accelerate Material Development Program with Oakridge National Laboratories and Michigan Technological University (ongoing) • Launch supply chain alliances/acquisition/integration (ongoing) • Review private and government (nuclear) market demand and dynamics to consider a second 80,000 ton foundry (ongoing) • Partner with wind turbine OEM’s to launch a Heavy Assembly Program to “populate” hubs and bedplates with necessary components to supply “sub-assemblies” to field locations

41. Benefits for MICHIGAN (USA) • Job Creation: These factories will “initially” employ 133 people: 100 in the Foundry, 30 in the Machining and Secondary Operations Center and management. Additionally, this operations will create another 100+ indirect jobs for the outsourced machining and logistics operations in Michigan. • Raw Materials: $12 million for scrap metal (based on current market rate of $350/ton), and $20 million for all raw materials including pig iron, sand and binders. All raw materials will be provided from Michigan sources resulting in a significant business proposition for state supplier partners. • Return Manufacturing to Michigan (USA): The first large foundry built in the USA in over 40 years, with “complementary” wind suppliers to follow. • World Leader in Casting Technology: Transfer of Power Chill Technology from URV-Finland to URV-USA, to create the most competitive foundry in the world! • Sustained Competitive Advantage: Collaboration with the Oakridge National Laboratory (TN) and Michigan Technological University (MI) to develop the next generation of iron compositions to make lighter, larger wind turbines.

42. URV USA Conclusion • URV USA’s high-speed casting process will revolutionize the wind turbine industry enabling the industry to purchase Michigan manufactured, high-quality, large machined castings for substantially lower cost than their current castings (supplied from China) • Most importantly, URV USA will underscore how Michigan manufacturers can produce globally the most technically advanced, the highest quality, and the most competitive wind turbine castings!

43. Thank You! For inquiries please contact: Ms. Blaire Miller, CCM, MBA Chief Financial Officer blaire.miller@urvusallc.com www.urvusallc.com Tel: US +1 248.996.0935

44. Emerging Market Growth: Successes and Failures Executive Discussion MBA Broadlink Group Presentation September 24, 2010 Clifford W. Owens Senior Manager, Global Program Management and Quality Assurance—Commercial Vehicle Business Unit

45. AAM Overview • Founded in 1994 • Leading supplier for light trucks, SUVs, passenger cars, crossover vehicles, and commercial vehicles • 32 locations in 13 countries • Outstanding quality, warranty, reliability, delivery, and launch performance • Highly engineered, advanced technology products, processes, and systems • Over 100 customers in 12 countries • Approximately 7,000 employees • Highly motivated, trained and experienced leadership team • 2010 Sales expected to range from $2.1 billion - $2.2 billion

46. AAM Product Portfolio Passenger Car / Crossover Light Truck / SUV Independent Front Drive Axles (IFDAs) • Transfer Cases • Driveshafts • Front Axles Metal Formed Products Commercial Vehicle Front Axles • Power Transfer Units (PTUs) • Rear Axles Rear Axles • Differential Gears • Ring / Pinion Gears • Axle / Output Shafts • Multi-Piece Driveshafts • Independent Rear Drive Axles (IRDAs) • Transmission Differentials • Torque Transfer Devices (TTDs) Bus Axles (Rear Engine) Tandem • Transmission Components

47. Global Footprint – 1994 vs. 2010 • AAM Key Facts - 1994: • 6 Locations in 1 Country • 7,500 Associates (approx.) • 5 Manufacturing Facilities • 1 Technical Support Center • 2 Customers – GM 98% • Ford 2% Tonawanda Forge North America Michigan New York Asia Buffalo Gear & Axle Three Rivers Detroit Gear & Axle / Detroit Forge South America • AAM Key Facts - Current: • 32 Locations in 13 Countries • 7,000 Associates (approx.) • 20 Manufacturing Facilities • 10 Business, Technical and • Engineering Centers • 2 Joint Venture Operations • 110 Customers – GM 75% • Chrysler 10% • Other 15% Europe 2010 Sales expected to range from $2.0 billion - $2.2 Billion

48. AAM Has Returned to ProfitabilityLast Twelve Months (LTM) Greatly Improved

49. Expanding Globally AAM is actively expanding its global presence, particularly within high growth developing automotive markets. Sales by Geography – 2009 Sales by Geography – Pro Forma 2009 India 1.1% Thailand 1.3% Brazil 2.3% Europe 3.1% China 7.9% Brazil 9.7% $1.0 Billion New Business Backlog U.S. 34.2% Europe 3.5% U.S. 44.1% Mexico 50.4% Mexico 42.1% * The Pro Forma 2009 sales is based on 2009 Actual Sales, adjusted for the estimated impact of AAM’s $1.0 Billion new and incremental business backlog (as of July 30, 2010). 49

50. AAM-Tokyo Business Office Yasuo Nose Country Manager AAM Tokyo Business Office 3-6-1 Minato, am bldg. 2F Chuo-ku, Tokyo 104-0043, Japan Tel. +81-33523-7290 Office Opened 1996—Liason Office Japanese Customers Include -GM-ISUZU -Nissan -Multiple other OEM’s TBD Account Manager Michael Shaw Manager Product Engineering Hiroshi Takubo Sr. Application Engineer