IHS Automotive. The Medium and Heavy Commercial Vehicle OEM Report. SupplierBusiness. Sectoral Report edition. supplierbusiness.

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1 IHS Automotive Sectoral Report SupplierBusiness supplierbusiness.com SA M PL 2014 edition E The Medium and Heavy Commercial Vehicle OEM Report

2 Contents Introduction... 7 Globalisation Global integration Regional specialisation Enabling technology Improving efficiency The connected vehicle Reshaping OEMs and suppliers Platform and module strategies...17 Fuel Efficiency Reduced Emissions Safety OEM perspectives Daimler Purchasing strategy and supply chain management Better Data Comparisons MAN TRUCK & BUS AG Doing business with MAN SCANIA Sales performance Modular production New market sectors Purchasing strategy and supply chain management AB VOLVO Volvo Trucks Mack Trucks Renault Trucks UD Trucks VECV Doing business with Volvo IVECO Doing business with Iveco NAVISTAR / INTERNATIONAL Doing business with Navistar Paccar Purchasing strategy and supply chain management Doing business with Paccar HINO Doing business with Hino ISUZU Doing business with Isuzu Tata IHS Automotive SupplierBusiness COPYRIGHT NOTICE AND LEGAL DISCLAIMER 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, IHS CARE (from North American locations), or +44 (0) (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners edition IHS

3 Purchasing strategy and supply chain management Doing business with Tata Ashok Leyland Doing business with Ashok Leyland China FAW Doing business with China FAW Dongfeng Motor Corporation Doing business with Dongfeng Company profiles Allison Transmission Manufacturing plants R&D addresses Map Bosch Manufacturing plants R&D addresses Map Commercial Vehicle Group Continental Manufacturing plants R&D addresses Map Cummins Delphi Manufacturing plants R&D addresses Map Denso Manufacturing plants R&D addresses Map Eaton Eberspächer Federal-Mogul GKN Manufacturing plants R&D addresses Map Haldex Knorr-Bremse Manufacturing plants R&D addresses Map Meritor Manufacturing plants R&D addresses Map Metalsa Manufacturing plants Map ThyssenKrupp Manufacturing plants R&D addresses edition IHS

4 Map TMD Friction Manufacturing plants Map TRW Automotive Manufacturing plants R&D addresses Map WABCO Manufacturing plants R&D addresses Map Webasto Manufacturing plants Map ZF Manufacturing plants R&D addresses Map Figures Figure 1: Medium and heavy vehicle production olumes 2013 by manufacturer and region... 8 Figure 2: Most important external forces impacting on the truck industry 2009 and Figure 3: Collision avoidance and mitigation intervention sequence Figure 4: Total operating costs for a 40 tonne tractor Figure 5: The worldwide transient vehicle cycle (WTVC) Figure 6: Estimated per-vehicle manufacturing cost to comply with Euro standard emissions levels for vehicles with different engine sizes Figure 7: Estimated per-vehicle manufacturing cost to comply with US standard emissions levels for vehicles with different engine sizes Figure 8: Global Emission Standards Figure 9: Bendix/ Knorr Bremse ABD22X air disc brake Figure 10: Truck safety systems evolution Figure 11: Flexibility across Daimler s global truck manufacturing footprint Figure 12: Daimler Trucks Global Excellence strategy Figure 13: Manufacturing flexibility at Daimler Figure 14: Daimler s top-line push strategy element Figure 15: Daimler s module strategy Figure 16: A graphic representation of Daimler s EBSC system Figure 17: Daimler s supplier pyramid Figure 18: A schematic showing new enhancements to Daimler s EBSC system Figure 19: MAN/VW/Scania cross shareholdings Figure 20: MAN Truck & Bus production network Figure 21: MAN Truck & Bus Interdisciplinary supplier assessment Figure 22: Scania global production locations Figure 23: Scania performance 2010 to 2013 by quarter Figure 24: Scania vehicles per employee Figure 25: Flexible production costs (chassis) Figure 26: Modular product specification at Scania Figure 27: Scania s outsourcing strategy Figure 28: Scania supplier categories Figure 29: Scania purchasing structure edition IHS

5 Figure 30: Volvo Group Truck Technology global presence Figure 31: Volvo Group brand strategy Figure 32: The current structure of CNH Industrial Figure 33: Iveco industrial revenues (EUR million) Figure 34: Iveco industrial trading profit (EUR million) Figure 35: Iveco platform strategy Figure 36: FGP shared information system Figure 37: Fiat Group Purchasing employees Figure 38: Fiat Group annual purchase value Figure 39: Paccar Revenue and net income Figure 40: Paccar revenue 2003 and Figure 41: Paccar financial services assets 2003 and Figure 42: Paccar supplier numbers Figure 43: Schematic of Paccar new supplier progress Figure 44: Global purchasing at Paccar Figure 45: Paccar supplier requirements Figure 46: Hino global sales percentage 2012 and Figure 47: Toyota purchasing schematic Figure 48: Hino module development and production Figure 49: Changing business model at Isuzu Figure 50: Isuzu s strategic change Figure 51: Isuzu s global three core business organisation Figure 52: Isuzu vehicle shipment volume FY2011 FY Figure 53: Isuzu engine production FY2011 FY Figure 54: Isuzu global performance FY2011 to FY Figure 55: Indian domestic market performance and CAGR Figure 56: Ashok Leyland domestic market performance and CAGR Figure 57: Dongfeng s Chinese manufacturing facilities Figure 58: Chinese medium and heavy truck development Tables Table 1: Variation in vehicle utilisation Table 2: Testing requirements for EU, Japan and US regulations Table 3: US emissions compliance costs Table 4: Daimler Truck unit sales to November 2013 vs Table 5: Daimler Medium and Heavy Commercial Vehicle Production Forecast Table 6: MAN SE revenues Table 7: MAN Medium and Heavy Commercial Vehicle Production Forecast Table 8: MAN Truck & Bus consolidated results 2011/ Table 9: Scania order and deliveries performance 2012 and Table 10: Scania Medium and Heavy Commercial Vehicle Production Forecast Table 11: Volvo Truck deliveries by brand and market Table 12: Volvo Medium and Heavy Commercial Vehicle Production Forecast Table 13: Volvo Group Truck Technology global presence Table 14: Volvo Truck net sales by market and size Table 15: Navistar Medium and Heavy Commercial Vehicle Production Forecast Table 16: Navistar supplier scorecard criteria Table 17: Paccar sales volumes 2011 and Table 18: PACCAR Medium and Heavy Commercial Vehicle Production Forecast Table 19: Paccar three major commodity groups Table 20: Hino Medium and Heavy Commercial Vehicle Production Forecast Table 21: Isuzu Medium and Heavy Commercial Vehicle Production Forecast edition IHS

6 Table 22: Tata Medium and Heavy Commercial Vehicle Production Forecast Table 23: Tata Code of Conduct (TCoC) Table 24: Ashok Leyland Medium and Heavy Commercial Vehicle Production Forecast Table 25: Ashok Leyland domestic market share Table 26: FAW Medium and Heavy Commercial Vehicle Production Forecast Table 27: Dongfeng Medium and Heavy Commercial Vehicle Production Forecast edition IHS

7 alternative fuels such as biogas, biodiesel and ethanol is important to many customers. Meanwhile Scania is working very actively to supply trucks for a growing number of market sectors. One example is mining. Scania has added performance steps in order to offer trucks as alternatives to dumpers, Sjötröm explains. We have a good product range that works all over the world for heavy-duty applications. At the same time, we are always open to improvements. For example in mining, where we want to become even better in terms of payload capacity and are continuing our efforts to further lower the costs of our customers transport tasks. Purchasing strategy and supply chain management Scania Global Purchasing is responsible for global purchasing of parts and components, both for new development and those running in production, as well as spare parts and non-automotive products and services The purchasing function is organised according to commodities and segments, with a Commodity Manager globally responsible within each commodity. Since Scania has a global product range, product development projects are global and can involve all commodities. Figure 27: Scania s outsourcing strategy Source: Scania Suppliers are chosen according to requirements where the prerequisites for becoming a supplier are carefully evaluated. The company places the same demands on suppliers as on its own production units. Each supplier is evaluated according to areas such as logistics, quality, research and development, after-sales and company profile. After evaluation, suppliers are classified in three levels; potential, accepted or qualified, with the aim of developing action plans to develop the suppliers to reach qualified levels. Scania has production in Europe and South America and purchasing offices on four different continents. Scania s modular product system which increases the volume per part number and common product range globally gives suppliers a good opportunity to work with Scania on a worldwide base. To ensure that products maintain a high, uniform quality, the company has standardised and documented its work process. This standardised and documented way of work forms the basis for a normal situation. By challenging the normal situation, the company aims to be able to identify waste and work with continuous improvements. A modular product programme and standardised working methods are two of the basic principles in the Scania Production System (SPS). This means that components are the same, regardless where production takes place, and the same is designed to apply to the overall philosophies, principles and priorities that govern working methods edition IHS

8 By continuously remedying deviations, the aims are to create a new and improved standardised working method. By discovering deviations, Scania learns to understand them and seek new solutions. Each deviation should lead to an improvement. Scania s production philosophy is based on a common way of thinking, usually called management by means. Our leadership focuses on working methods, and the result will come because of doing the right things right. Figure 28: Scania supplier categories High Degree of involvement in product development Source: Scania Low Low Catalogue Labour Mature Value added by the supplier Development Joint Venture The Third Dimension Excellence in Manufacturing SPS is based on never manufacturing more than the next production step requires. When the following production stage signals a need, the preceding ones begin to produce. This eliminates waste in the form of both over-production and waiting time. This customer order-controlled production system places strict demands on all links in the value chain, including both external and internal suppliers, to always deliver the right products with the right quality at the right time. Figure 29: Scania purchasing structure Latin America General Purchasing Sales and Services Executive Assistant Human Resources Purchasing Legal Counsel Business Control & Analysis Chassis and Cab Powertrain Quality, project and Strategy High Chassis & Metal Engine Quality Cab & Electronics Axles & Gearbox Strategy & Processes Project & Regions Source: Scania AB 2014 edition IHS

9 What makes Scania s SPS unique is that it is in operation throughout the company s global production organisation in eight different countries of Europe and Latin America and that it affects most of Scania s 28,000 employees. The company believes that SPS today puts it on the absolute cutting edge in terms of production methods and leadership. It is now introducing leadership that focuses on the working methods throughout the Scania organisation around the world, not just in the production network. In recent years, Scania has been working continuously to integrate key suppliers more closely into its operations. These suppliers are now joining the development and production process at an earlier stage and will participate in operations in the same way as Scania s own units, including SPS. Scania sees its suppliers as an integrated part of its manufacturing operation. That means that they have the same demands on their suppliers as on their own production units, which can be summarised as follows: Quality ISO/TS16949 and the PPAP procedure or equivalent system are mandatory. Fulfilment of demands. No changes whatsoever regarding production process or product without Scania approval. Deliveries 100% on right time. All changes from the delivery schedule have to be informed to Scania. Packaging according to agreement. Cost - Sustainable low cost through: Long term relations with continuous improvement. Profitable suppliers. Optimal number of suppliers per segment/ commodity You must be really good at your speciality to qualify as a suitable supplier to Scania. In many cases, it s a matter of attitude and willingness, says P O Svedlund, senior vice president, Global Purchasing. He confirms that today s suppliers maintain a high standard, largely due to close collaboration with Scania. Well before the introduction of Scania s new product range, a number of important tools and working methods were put in place. These new methods included quality teams (Q teams) and Purchasing On Line (POL). Q teams work at production units, immediately noting deviations discovered upon delivery or during assembly and giving the supplier in question direct feedback. If the problem is extensive or recurring, the matter is turned over to POL. Each day the POL team has a cross-functional meeting with purchasers, quality engineers and production and service representatives. Its decisions may include visiting a supplier, in which case someone from POL will always show up at the supplier s premises within 24 hours. Several such trips from Scania take place each week. Scania s suppliers are categorised depending on their need of supplier involvement and type of product. Scania groups its suppliers into all five categories, ranging from catalogue to partner supplier. A key plank of Scania sourcing strategy is to always have alternative supply routes, whether this is achieved by finding two or more competent suppliers, or, if this cannot be achieved, by setting up an internal manufacturing alternative edition IHS