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Dow Jones Insight Media Analysis Report

This report was created using Dow Jones Insight’s media analysis platform and is designed to highlight the media considerations that the global automotive industry might have beyond the traditional print media. This report is in no way complete and is intended only as a sample of its nature. Client engagements are customized and reveal considerably more detail, depth and focus. Table of Contents

•Introduction…………………………………………………. 3

•Corporate Considerations ……………………………..…. 4

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•Potential Issues Affecting Share Price……………….….

•Looming Threats………………………………………..….

•US Carmaker Issues: Ford and GM…………………….

•European Carmaker Issues: Fiat and Renault-Nissan...

•Tata Motors………………………………………………….

•Carbon Emissions…………………………………………..

•Regulatory Considerations………………………………...

•European Carmaker Issues: Daimler and PSA………….

•Press Trends………………………………………………..

•Methodology…………………………………………………

•About Dow Jones Insight…………………………………..www.solutions.dowjones.com/insight

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Introduction

It’s no news that the global car industry is facing increased pressures that are accentuated by underlying turbulence in the global economic landscape. The credit crisis, led by the U.S. housing market slowdown and rising levels of consumer debt and rising gas prices are creating a backdrop of economic uncertainty. As consumer confidence trickles away, car companies are responding with a variety of tactical moves designed to stems revenue losses such as sales incentives which can cut inventories while raising consumer expectations that they’ll receive more for less money.

But the global economic translates into a number of strategic issues that car companies must manage, including:

Labor relations and soaring healthcare costsCO2 emissions charging and engine sizeSoaring raw material costsPrice battle for market shareFailing consumer confidenceProductivity and quality controlGrowth in emerging markets Danger emerging from low cost alternatives in China, India, Brazil and Russia

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Corporate Considerations: Company Vigilance is a Requirement

Share priceBrand value

Employee moraleSales/turnover/retained clients

Recruitment/retentionStrategic relationships

Regulatory relationshipsPersonal reputations

Weakness

Labor relations/soaring healthcare costsCO2 emissions charging and engine size

Soaring raw materials costsPrice battle for market shareFailing consumer confidenceProductivity/quality control

“My priority is to change the company’s culture…at the top of the list I’d put dealing with reality.”

strength weakness

threatopportunity

Alan Mullaly – CEO Ford since late last yearIn Scotland on Sunday (28/01/07)

Carlos Ghosn CEO Renault-Nissan in The Times (08/01/07)

“We must adapt or die”, describing the threat to western car companies from new low cost car makers in India and China.”

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Martin WinterkornVolkswagen

The focus for new CEOs is on new models, quality and improved productivityto boost US presence.” Handelsblatt:, 09/07/07

There is a huge mountain to climb in the US if the company is to return to profitability. In the JD Power Reliability Ratings for 2006, VW ranked third from bottom with 171 problems per 1,000 vehicles, which was far worse than the industry average.” Business Week, 12/03/07

Shares dropped sharpest in 4 years with BMW losing ground to rivals Mercedes. ‘A slip up would be welcome and then perhaps headcount can be sorted out.’Just Auto, 01/08/07

‘If you have increasing turnover the profit has to increase with it too. That’s the real issue. Q2 profit fell 23% despite a 7.3% rise in revenues.” Wall Street Journal,03/08/07

Norbert ReithoferBMW

Redirection May Also Be a Requirement

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Would you buy a new car that costs less than an Armani suit--or a set of high-performance tires for your BMW Five series? India's Tata Motors plans to introduce the One-Lakh Car (concept shown here) for about $2,500. It's a four-door sedan with a 600cc rear engine. Skeptics--and there are quite a few--believe that even India's low labor costs can't make this

miracle happen.

Race to the Bottom -- How Cheap Can A Car Get?October 03, 2007

http://blog.wired.com/cars/2007/10/race-to-the-bot.html

Issues with Potential to Affect Market Share and Price

The four Brazil-Russia-India-China (BRIC) areas are four of the biggest growth markets for automobile manufacturers.

China managed to chalk up a year-on-year growth of 25.9 percent in car sales for the first half of 2007,according to sources from the China Association of Automobile Manufacturers (CAAM). Xinhua Net, 07/07/07

US and European car companies depend on these markets to boost global market share.

What will happen when the new car that costs less than $10,000 dollars arrives in the market?Renault-Nissan’s CEO Carlos Ghosn is sanguine about the threat. “Adapt or die –Ghosn tells carmakers.” The Times, 08/01/07

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http://www.forbes.com/markets/feeds/afx/2007/09/10/afx4097668.html

http://www.bloomberg.com/apps/news?pid=20601100&sid=aa9.xsNyxbaQ&refer=germany

Looming Threats

Porsche sports cars can't meet EU's planned CO2 emissions limits - CEOAFX News, 10/09/07FRANKFURT Porsche AG chief executive Wendelin Wiedeking said the company's cars in their current form won't be able to meet carbon dioxide emissions limits that the EU is proposing to introduce from 2012. EU proposals requiring emissions to be cut to an average of 130 grams per kilometer for all new cars from 2012 are 'physically' not possible for the company's sports cars to adhere to, Wiedeking told Handelsblatt in an interview. 'Realistically, emissions requirements can only be graded by vehicle segment,' Wiedeking told the newspaper.

Merkel Supports Carbon-Dioxide Cut by Vehicle SegmentBy Jeremy van Loon and Claudia Rach, Bloomberg, 09/13/07German Chancellor Angela Merkel backed a proposal by carmakers to reduce carbon-dioxide emissions based on vehicle category, a system that waters down existing European Union plans. ``Any solution needs to be fair and the German industry should know that it has my support for a solution based on vehicle segments,'' Merkel said in a speech today opening the Frankfurt Motor Show.

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“Painful concessions are needed from the unions on healthcare as car makers have to be competitive in wages, benefits, work rules, flexible manufacturing and plant capacity.” Detroit News,04/01/07

The painful dialogue has begun –toll so far two lightening strikes – but agreement in principle at GM to set up independent fund to meet health & retirements costs reached – “days of selling cars at a loss could soon be over.” Times, 27/09/07

U.S. Carmakers Fixated on Labor and Healthcare Costs

U.S. automakers lost 8% market share in 2006 - Asian car makers gained 5% and European manufacturers picked up 3%.

U.S. automakers spent $12 billion on healthcare benefits for employees and former employees in 2005 while their Asian and EU counterparts spent less than 10% of that figure.

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Ford Motors

In 2007, Ford’s attention was almost exclusively on unions and healthcare costs.

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General Motors

In 2007, GM’s attention was also almost exclusively on unions and healthcare costs

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European Carmakers

EU competitors have a second big issue on their radar– the cheap car in emerging markets.

A third issue is also emerging aroundcarbon emissions.

Italy’s Fiat and France’sRenault-Nissan feel the Tata Motors cheapemerging markets caris an equally important story

European manufacturers were also working on meeting EU carbon emissions regulations

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Tata Motors and the low cost car

Fiat and Renault-Nissan

At Sergio Marchionne’s Fiat:Union negotiations and the $10,000 dollar car were grabbing high levels in terms of share of voice.Carbon emissions was growing strongly too.

At Carlos Ghosn’s Renault-Nissan:Union negotiations and the $10,000 dollar car are grabbing high levels in terms of share of voice.

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Is this cheap “emerging markets” car a threat?

Tata Motors

Renault’s Ghosn has the Logan in production and reports in the press suggest that demand is already outstripping supply. In early September, Ghosn signed an agreement to build a production plant for the car in Morocco. In 2007, Ford's sales in the US fell nearly 3% to 16.14 million vehicles, their lowest since 1998, down from 16.55m in 2006, but Ford saw sales in China rise by 30%.Dieter Zetsche has signed an alliance with Chery Motors of China to build another low cost model.

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Global interest in carbon emission stories is not going away.

The European Union has draft legislation ready to tighten car emission standards.Some European car makers are seeing tighter standards as an opportunity. French and Italian car makers are proposing a ‘single limit for all cars’ while the German makers want a ‘stepped emissions limit’ depending on the size of the car, making it an opportunity for some and a possible threat for others.PSA with Christian Streiff is targeting CO2 leadership with clean-diesel hybrids reducing emissions by at least 10g/km. Octane Week, 17/09/07Daimler’s Dieter Zetsche is less effusive: “Daimler chief rips up US CAFÉ standards’ and pushes diesel”, Dow Jones, 23/01/07

Carbon Emissions

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Regulatory Considerations

On emissions, car makers are under pressure:

California already has emissions laws on its books and more U.S. State legislators are starting to follow suit.

Twelve states have laws on the statute books while another six are ‘under consideration’.

This will technically lead to the enforcement of greenhouse gas requirements for cars sold within the ‘borders’

This will add additional cost as not everyone has a Toyota Prius hybrid ready to roll off the production line.

Once politicians get involved, there is an inevitable trend to make the laws a little tighter each time, forcing R&D costs and production costs even higher.

This has happened when German Chancellor Angela Merkel took a a very public stand at the Frankfurt Auto Show. “Merkel backs German carmakers CO2 stance”, Reuters, 13/09/07.

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Carbon emissions are a growing issue for both companies

Carbon Emissions

At Martin Winterkorn’s VW:Union negotiations and carbon emissions grab the headlines.The $10,000 car is on the radar too.

At Dr Norbert Reithofer’s BMW:Union negotiations and carbon emissions grab the headlines.The $10,000 car is on the radar too.

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France is not too ‘different’ andCarbon emissions is a strong issue

DaimlerChrysler has almost ‘single issue’focus: selling off Chrysler

At Dieter Zetsche’s Daimler:The company has just come through the painful transition of unloading Chrysler.It is understandable that its press coverage is dominated by a single labor issue.

European Carmaker Issues: Daimler and PSA

At Christian Streiff’s PSA:Union negotiations AND carbon emissions grab the headlines.The $10,000 car is nowhere to be seen.

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Press Trends

Press enthusiasm changes from moment to moment, but trends over time normally remain consistent and problems remain persistent.

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Report Methodology

OverviewThe findings in this complimentary report summarize the results of a Dow Jones Insight text-mining platform. Our system gathers relevant content from more than 10,000 global traditional media sources plus social media sources including Websites, blogs and message boards. The Dow Jones Insight Media Lab consultants then review the results to produce a report with summary charts and analysis. This study analyzed coverage from the Dow Jones Factiva global media set unless otherwise specified.

Media SetPress releases were excluded from this analysis by the exclusion of all “paid-for” wire services, except where stated otherwise. Datamonitor Profiles, News and Comment and Premium Research Reports were also excluded to ensure a high relevancy of the underlying data set. Routine General News and Republished News were also excluded.

Search constructionSearch strings used for investigating products, terms, market issues and individuals were constructed using Dow Jones Factiva’s predetermined codes unless otherwise noted.

Reporting Period Jan 1 2007 through Sept 30 2007

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