AutofactsFAPPresentation100901Excerpts

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,#,2001 PricewaterhouseCoopers LLP.All rights reserved.,Asia-Pacific Automotive Outlook,UpsideScenario,:,:,Economicgrowths continues,infrastructureimproves,anddemandfor newvehiclesincreases,.,.Successfulimplementationofregionaltradeblocsand stablegovernmentsallowforthe consolidationofoperationsacrossthe regionandthe rationalizationofduplicateand non-competitiveoperations,allowingefficiency to accompanygrowth,.,.,DownsideScenario:,Asiaseconomicstimulibackfireandthe regionfallsvictimtoanothereconomiccrisis,.,.Trade blocs break downreinforcingbarriers betweenmarkets.Politicalupheavalspossible,perpetuatingthevolatilityoftheregion.Worstcase scenario:Large-volumeassemblybecomesviableonlyinthelargestofmarkets,newforeigninvestment becomesunlikelydue to regional instability.Significantpartsof1990sauto investments prove unsustainableinthe longrun.,Asia-PacificBusinessEnvironment,Asia-Pacific,despiteits challenges,remainsundoubtedlythe largestgrowth potentialregioninthe world,Asia is witnessingstrong,butfragile,recoverydependent on theability to exportandmaintaineconomicand politicalstability,However,itremains vulnerabletoaftershocksfollowing the1997/98 economic crisissincerecoveryisbasedonunsupportedloans,Theweakening US economywilldirectlyaffectprofit levelsinAsia as theUSisa major destination forexports,Futuregrowth liesinemergingAsia-Pacific markets,China/Indiadomesticdemandcontinues to growspurredbya growingmiddle-class,Success of AFTAwillallowforincreased inter-regional business among ASEAN members,SouthKoreas growingdomesticdemand andincreasedexportsarekey to itsgrowth,Asia-Pacific,-,-RegioninFocus,Emergingfrom anearcripplingeconomiccrisis theproverbial tiger is donelickingitswounds andisreadytoroar,Significantmarketgrowth potential,Politicalinstability,Diverse inter-regional marketconditions,Economicuncertaintycontinuestolinger,Asia-PacificMarket Outlook,Asia is seeingstrong,butfragile,recovery:dependent on abilitytoexport andmaintaineconomicandpolitical stability,ExcessCapacity,Units,Units,Assembly,Capacity,PotentialGlobal RepercussionsofTerrorist Attacks,Europe,Direct,:,:exports to US critical to Germanautomakers,with weaker,$,$hurtingrepatriation evenatstable volumes,Indirect:overall weakerregionalmacroenvironmentduetolowerconsumerconfidenceandreducedexports to US,confirmingrecessionarypressures,Asia Pacific,Direct:exportstoUScriticaltoJapanese,&,&Koreanautomakers,withweaker,$,$hurting repatriationeven at stablevolumes,Indirect:overall weakerregionalmacroenvironmentduetoreducedoverall exportstoUS,exertingrecessionarypressures,SouthAmerica,Direct,:,:limited impact,Indirect:globaleconomicweaknesslikely to underminealready fragileregionalmacroenvironment,Direct,:,:automotive trade impact,Indirect:macroeconomic&otherimpacts,Asia-Pacificeconomicgrowth remainsdependent on exportsand hence on thecontinuedeconomicvitalityofNorthAmerica.Asignificantdownturn,especiallyinthe US,wouldhave adirect negative effectontheregion.,TerroristAttacksEffect on Asia,-,-PacificAutomotive Industry,Baselinescenario:Asiagrowthisflatfrom 2000to2001,due to previouslyexpectedcontinued declineinJapanand slightdecreaseinoutputfromSouthKorea,Overall regional growthreturns to aconservative 3,.,.5%in2002,Downsidescenario:if asignificantdeclineinUSmarketoccurs in 2002due to weakeningeconomicconditions,expectedAsia-Pacificgrowth in 2002coulddisappear duetoreduced US importdemandand asetbackinAsianeconomicrecoverytrends,Drop in value of thedollarmay removeKoreanand Japanese exchange rateadvantage,impactingprofitabilityforAsianautomakersandthreateningthe marketopportunities their price advantagehasgiventhem,However,Koreanmarket share in NA marketcouldincreaseifeconomicconditions getworseinnear term,(,(nextsix monthsandbeyond)aslowercost,high value offeringsfrom Hyundai,-,-Kia becomehigheronconsumersneed to buyversuswanttobuylist,Drivers of positive Asian marketgrowthretain someindependence frompotential US spillover,ChinaWTOentryinlate2001 willincreaseintra,-,-regionalexport growthopportunities to China beginningin2002-2003,although limitedbylikely ChinesegovernmentwillingnesstoincurWTOsanctions to protectlocalindustry,ASEANeconomicgrowthand fullimplementationofAFTAhold promisefor local automotiveindustries,Many manufacturerswillberolling outregionalmanufacturing plans to takeadvantage of reducedprotectivetariffs,Still,the improving,yet still shaky emerging marketeconomiesare verymuchatrisk if globaleconomy falters,Asia-PacificLightVehicleAssembly,Growthcoming fromeverythingbuttraditionalmainstayofJapan,.,.,.,.,as China takes an increasinglyimportant,andpotentiallydestabilizing,role.,Units,Asia-PacificUtilizationbyCountry,Rate of plant rationalizationinJapanmatched by paceofassemblytransfer,SouthKorea:Localdemand+export potentialnotsufficienttojustify capacity,Annualcapacityremainsthreetimeslocalmarketdemand,Hyundaisplansfor incremen