10 - WABCO

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WABCO CORPORATE OVERVIEW 2010
© 2010 WABCO Holdings Inc. All rights reserved.
FORWARD LOOKING STATEMENTS
Comments in this document contain certain forward-looking statements, which are based on
management’s good faith expectations and beliefs concerning future developments. Actual
results may differ materially from these expectations as a result of many factors. These
factors include, but are not limited to, the risks and uncertainties described in the “Risk
Factors” section and the “Forward Looking Statements” section of WABCO’s Form 10-K, as
well as in the “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Information Concerning Forward Looking Statements” section of WABCO’s
Form 10-Q Quarterly Reports. WABCO does not undertake any obligation to update such
forward-looking statements. All market and industry data are based on Company estimates.
This presentation contains certain non-GAAP financial measures as that term is defined by
the SEC. EBIT and sales excluding the effects of foreign exchange are non-GAAP financial
measures. Additionally, gross profit, gross profit margin, operating income, operating income
margin, EBIT, EBIT margin, net income and net income per diluted share on a "performance
basis" are non-GAAP financial measures that exclude separation and streamlining costs,
one-time impact from the Indian joint venture transactions, discrete and other one-time tax
items, as well as a one-time transitional impact from a new accounting standard (ASC topic
805, formerly known as SFAS No. 141(R)) that WABCO adopted in 2009, as applicable.
Lastly, "free cash flow" presents our net cash provided by operating activities less purchases
of property, plant, equipment and computer software. These measures should be
considered in addition to, not as a substitute for, GAAP measures. Management believes
that presenting these non-GAAP measures is useful to shareholders because it enhances
their understanding of how management assesses the operating performance of the
Company's business. Certain non-GAAP measures may be used, in part, to determine
incentive compensation for current employees. Reconciliations of the non-GAAP financial
measures to the most comparable GAAP measures are available in WABCO’s quarterly
results presentations posted on the company’s website.
2010
2
ABOUT WABCO
GLOBAL TECHNOLOGY LEADER in commercial vehicle industry
Sales of
$1.5 BILLION in 2009
Sales of
Over 8,100
$2.6 BILLION in 2008
EMPLOYEES in 31 countries; 1,250 ENGINEERS
16 MANUFACTURING LOCATIONS in 10 countries
Listed on NYSE with the stock symbol
2010
WBC
3
MARKET FOCUS
AUDI
BMW
DAIMLER
Products, systems, services
and support for vehicle
manufacturers and
aftermarket customers
GENERAL
MOTORS
CIMC
PSA
PEUGEOT
CITROEN
GREAT DANE
TRAILERS
SSANGYOUNG
KÖGEL
among others
KRONE
TRUCK
SCHMITZ
CARGOBULL
CAR
WABASH
CNHTC
among others
DAIMLER
HINO Motors
MAN
PACCAR
SCANIA
TATA Motors
VOLVO
among others
2010
AFTERMARKET
TRAILER
BUS
EVOBUS
MAN
NISSAN
YUTONG
Supporting
fleet and truck
owners over
vehicle
lifetime
Distributors
Workshops
Fleets
among others
4
MANUFACTURING LOCATIONS
(2)
2010
5
TECHNOLOGY AND INNOVATION
LEADER
Traction
Control
System
Electronic
Stability
Control
Pneumatic
Transmission
Automation
System
Trailer
Electronic
Braking
System
Electronically
Controlled Air
Suspension
(ECAS)
Adaptive
Cruise Control
ECAS
for automotive
New Generation
Air Disc Brake
OnGuard™
Collision
Mitigation
System
Air System
Protector
Hydraulic
Transmission
Automation
System
RSSplus™
Roll Stability
Support
Trailer System
ESCsmart™
Trailer OptiTurn™
Trailer OptiLoad™
C-comp clutch
compressor
1981 1986 1996 1998 2000 2001 2003 2004 2006 2007 2008 2009 >
Trailer Telematics
Electronic
Braking
System
Anti-Lock
Braking
System
2010
Integrated
Vehicle Tire
Monitoring
Roll Stability
Support for
trailers
Two Stage
Compressor
Trailer EBS - E
Transmission
Automation System
OnGuardMaxTM
Autonomous
Emergency Braking
System
High Output
Compressor
6
COMMERCIAL VEHICLE AIR CYCLE
Generates and
pressurizes the air to be
used in the braking
system and other
air-based applications
AIR
COMPRESSION
Dries, cleans, stores
and distributes the
compressed air to enable
proper system operation
under all conditions
AIR
MANAGEMENT
MECHANICAL
Service brakes, Parking brakes
Actuators
Foundation brakes
AIR
APPLICATION
ELECTRONIC/
ELECTRO-MECHANICAL
Anti-lock Braking Systems
Electronic Braking Systems
Transmission Automation
Electronic Suspension Control
2010
7
PRODUCT PORTFOLIO
Air Compressors 13%
Anti-Lock Braking Systems 11%
Air Processing 11%
Car Products 4%
Conventional Brake Controls 13%
Transmission Automation,
Clutch Control 11%
Actuators 10%
Electronic Braking and Stability
Control Systems 9%
Foundation Brakes 6%
Others 6%
Suspension Control 6%
2010
% 2009 Sales
8
CUSTOMER VALUES
 WABCO is working on global TECHNOLOGY trends relevant to
our customers

We have a clear path to enhance VEHICLE EFFICIENCY
and ENVIRONMENTAL SUSTAINABILITY by 20%

Our vision is to improve ADVANCED SAFETY and
DRIVER EFFECTIVENESS, and reduce the number of
commercial vehicle accidents by 50% by 2020
 We are involved in developing PRODUCTS and
FUNCTIONALITIES to better meet these needs
2010
9
AFTERMARKET CAPABILITIES
Service
centers
Diagnostics
solutions
Sales,
promotion
and
marketing
WABCO
University
Global
distributor
network
SUPPORTING FLEET
AND TRUCK OWNERS
OVER VEHICLE
LIFETIME
Customer
partner
program
Extensive
range of
products and
systems
Regional
customer
teams
2010
Services,
customer
support
Universal
customer
hotline
10
CUSTOMER DYNAMICS
TRUCK AND BUS MANUFACTURERS
TRAILER MANUFACTURERS
LARGE VOLUMES, LONG CYCLES 30+ Customers
SMALL VOLUMES, SHORT CYCLES 2,000+ Customers



Few, large, consolidating, globalizing
Use technology to meet regulation, comfort,
safety and economics
Need for global suppliers and development
partners with system expertise



Very many, small, local or regional
Closely follow truck and bus technology
Dependent on suppliers for product and
technical support, services and knowledge
AFTERMARKET
CAR MANUFACTURERS
SMALL VOLUMES, SHORT CYCLES 3,000+ Customers
VERY LARGE VOLUMES, LONG CYCLES ~10 Customers



2010
Small, many, local/regional; dependent on
suppliers for product, services and knowledge
Multiple step distribution: distributors, repair
shops, and fleet operators
2 channels: independent aftermarket and
original equipment supply



Few, large, global, sophisticated
Many competitive suppliers for most
technologies
Very high expectations for quality, program
management and supplier support
11
GLOBAL TRUCK & BUS PRODUCTION
(over 6 tonnes Gross Vehicle Weight)
100% = 2,749K
100% = 2,734K
India
10%
9%
China
31%
32%
Japan/Korea
10%
10%
S. America
7%
8%
N. America
14%
12%
Europe
28%
29%
100% = 2,089K
10%
49%
9%
7%
10%
15%
'07
2010
'08
'09
12
GLOBALIZATION
Local Market
Connectivity
 All regions managed
by local teams
 No expats in key
leadership positions
 9 Nationalities from 4
continents in
leadership team
 Took over JV in India
 #1 Position in all Asia
countries, especially
in China and India
 #1 Position at Kamaz
2010
Local
Manufacturing
 4 factories in China
- Benchmark Lean
processes
- 2 new factories
opened in 2010
 3 factories in India
- Multiple Award
Winning
 1 Factory in Brazil
- Lean
transformation under
way
Local Supply
Chain
 Local strategic
sourcing teams
connected to global
commodities
 Strong supply base
covering core
commodities
 Local supplier
management
 Leveraging BCC
capabilities for
global
manufacturing sites
Product
Development
 2nd Product
Development
pillar in India to
address emerging
countries
specificity and
conventional
product design
(150 engineers)
 Software
development
center in Chennai
(85 engineers)
 Test & design
center in Poland
to support
Hanover
(100 engineers)
13
TRUCK & BUS REGIONAL
ATTRIBUTES
content per vehicle
Typical heavy truck
$ Estimated
based on total applicable market $K price in market
NORTH AMERICA



Less advanced technology vs.Western Europe
Large OEMs: Daimler, Volvo, PACCAR, ITE
Large fleets, able to influence OEM design
WESTERN EUROPE





2010
>$3,000 $130K
Advanced technology, high electronics penetration
6 OEMs: Daimler, Volvo, MAN, Iveco,
PACCAR, Scania
Few large, pan European fleets
EASTERN EUROPE

<$1,000 $80K
<$500 $70K
Expected to Return to Fast growing
production in the Future
Improving quality and safety
Global and local OEMs: KamAZ, MAZ,
SOUTH AMERICA


Less advanced technology – mostly from Brazil
Main OEMs: Daimler, VW, Volvo, Scania
JAPAN & KOREA



<$1,500 $65K
<$1,000 $80K
Technology moving towards Western Europe
Main OEMs: Hyundai, Hino, Isuzu, ND
Targeting global market
CHINA & INDIA
<$300 $30K

Basic technology; advanced technology penetration
under 10% of total market
 Large OEMs: FAW, DFM, CNHTC in China;
TATA Motors & Ashok Leyland in India
14
COMPETITIVE OVERVIEW
KNORR
 Technical capabilities similar



to WABCO
No position in transmission
automation or cars
Strong position in North America
following BENDIX acquisition
Trailing in emerging markets
HALDEX
 Challenger position
 Lower electronics capabilities


compared to WABCO and KNORR
Strong automatic slack
adjuster business
Entering into special products for
diesel engines
(2009 Estimated Commercial Vehicle Sales)
WABCO
($1.5B )
KNORR
(~$1.7B )
LCC COMPETITORS




Strong low cost / low tech solutions
Mainly mechanical capabilities
Targeting specific markets
with specific product ranges
Low price strategy in Aftermarket
HALDEX
(~$0.4B)
LCC competitors
(All Under ~$0.1B)
Anti-lock Braking Systems
Electronic Braking Systems
Conventional Products
Transmission Automation
Air Compressors
Air Processing
Actuators
Suspension Control
Foundation Brakes
Complete Offering
Partial Offering
Niche Offering
sources: KNORR-BREMSE website, HALDEX website
2010
15
SALES BY REGION AND CUSTOMER
TYPE
2009 SALES BY REGION
2009 SALES BY CUSTOMER TYPE
3%
South America 6%
Other
32% Aftermarket
Truck & Bus
North America
Asia
8%
65%
18%
55%
Europe
9%Trailer
4% Car
SALES 5-YEAR CAGR*
20%
Asia
Percentage
15%
10%
5%
South America
0%
-5%
* Compound annual growth rate in local currencies
from 2004 to 2009
North America
-10%
2010
Global
Europe
16
PERFORMANCE FROM GROWTH
ABOVE MARKET SALES GROWTH THROUGH 2014*
CAGR
4 - 6%
Cars
Aftermarket
Expansion
OE TRUCK, BUS AND TRAILER
INCREASING VALUE PER VEHICLE
 Air Disc Brakes
 Transmission Automation Controls
 Electronic Stability Control
 Driver Assistance Systems
GLOBALIZATION
 China
 Eastern Europe / Russia
 India
AFTERMARKET EXPANSION
OE Truck,
Bus and
Trailer
2009
2014





Enhanced Penetration
10% Year-of-year
New Product Ranges
New Services (e.g. Diagnostics, Training)
East Europe, North America and Asia
AUTOMOTIVE PENETRATION


Electronic Air Suspension
Vacuum Pumps
*Assumes commercial vehicle production flat at 2009 levels
2010
17
INNOVATION: AIR DISC BRAKES
SALES PROJECTIONS
Indexed (2009 Sales = 100)
CAGR
47%
688
NG22MAX
 New generation for heavy duty
427
trucks and buses
 Patented reinforced single-piston
technology delivers high
100
performance at lowest weight
 Increased reliability, longer brake
2009
2010
2012
2014
pad life, extended service intervals
18
INNOVATION:
ELECTRONIC STABILITY CONTROL
SALES PROJECTIONS
Indexed (2009 Sales = 100)
CAGR
37%
473
 Mandatory in EU in Nov. 2011
 Includes yaw control to keep vehicle on
steered course and avoid jack-knifing
292
 Roll Stability Support mitigates roll-over
situations for coaches, trucks and trailers
100
2009
2010
 ESCsmart™: Industry’s first technology
2012
2014
that uses computational simulation to
certify ESC. Breakthrough homologation
system approved in 27-country EU and in
20 other countries
19
INNOVATION: TRANSMISSION
AUTOMATION SYSTEMS
New OptiDriveTM Transmission
Automation system
SALES PROJECTIONS
Indexed (2009 Sales = 100)
CAGR
13%
182
 Provides fuel savings, reduced
145
clutch wear, improved serviceability,
reduced driver training
100
 Developed modular version to meet
requirements of new customers in
emerging markets
 Standardized components provide
2009
2012
2014
improved cost position and reduced
application engineering
2010
20
GLOBALIZATION: CHINA
SALES PROJECTIONS
Indexed (2009 Sales = 100)
CAGR
25%
300
 2005 to 2008 sales grew at 70% CAGR
 Signed long term agreement with CNHTC
190
through 2016 including sole supplier of
transmission automation systems
 Joint venture with Fuwa, world’s largest
100
maker of trailer axles, to produce air disc
brakes in China
2009
2011
2014
 Growing weight in WABCO’s global
manufacturing network and an internal
benchmark for Six Sigma Lean
2010
21
GLOBALIZATION: INDIA
SALES PROJECTIONS
Indexed (2009 Sales = 100)
CAGR
21%
214
 Strongly anchored market leader
155
 Preferred supplier for all OEMs
 Nationwide sales and service network
100
 Extensive product & software
development capabilities
2009
2011
2014
 Lean and TPM driven manufacturing
 High record of industry awards
2010
22
PERFORMANCE
THROUGH EXECUTION
2010
The WABCO Operating
System is our roadmap and
one of the most advanced
management environments in
our industry
We are globalizing constantly:
growing, leveraging and
optimizing our network of
capabilities in manufacturing,
sourcing and engineering
WABCO OPERATING
SYSTEM
GLOBALIZATION
23
WABCO OPERATING SYSTEM
Pillars
Vision
Organizational
Development
Accountability and
alignment across the
value chain
Six Sigma Lean
Integrated supply chain
supported by Lean
processes from
suppliers to customers
Common
Development
Process
Processes based on Design
For Six Sigma driving
speed and reliability
Customer
Partnership
Establish partnerships
as competitive differentiator
Total Employee
Involvement
Hoshin-like
management system
in place
©
2010 WABCO Holdings Inc. All rights reserved.
2010
24
GLOBALIZATION:
MANUFACTURING STRATEGY
Global Manufacturing Strategy
Share of Workforce By:
High Cost Country
Best Cost Country
10%
 Supporting Local Markets from Local
22%
39%
Factories
42%
53%
68%
 Leveraging Manufacturing Capabilities
in China and India to Lower Costs
90%
78%
 Accelerating Six Sigma Lean
61%
58%
47%
Deployment in all Facilities
32%
2000
2010
2002
2004
2006
2008
2010
25
GLOBALIZATION:
SOURCING STRATEGY
Global Sourcing Strategy
Share of Sourcing By:
High Cost Country
 Focusing Purchasing Strategy on 3 Main
Regional Clusters - Western Europe,
Central/Eastern Europe and Asia
Best Cost Country
10%
22%
30%
35%
 Consolidating Supply Base
40%
43%
 Driving Quality Improvement and Six Sigma
Lean Implementation at Key Suppliers
90%
78%
 Leveraging Broad Internal and External
70%
65%
60%
Capabilities in India and China
57%
 Performing Continuous Supplier Risk
Management Analysis
2010
2000
2002
2004
2006
2008
2010F
26
GLOBALIZATION:
ENGINEERING STRATEGY
Global Engineering Strategy
Engineering Workforce by:
High Cost Country
WESTERN EUROPE
 Advanced products and
Systems
 Connectivity to European
OEM development
 Technology, Process, Data
and Systems
CENTRAL EUROPE
AMERICAS
ASIA
 Connectivity to US and South
 Development of products
American OEMs
 Regional variant development
 Application development
2010
Growth in Resources
(Indexed to 2002)
 Conventional products
 Design Support
 Standards, material and
Requalification Test Center


for region specifics
Software development
Design and calculation
support
Best Cost Country
130
121
123
114
100
14%
96%
86%
2002
2004
17%
27%
31%
73%
69%
2008
2010F
83%
2006
27
FINANCIAL PERFORMANCE Q1 2010
(In $ Millions except per share data)
Sales
Q1
Reported
Q1
(2),(3)
Performance
Performance
vs. 2009
(1)
In Local Curr.
Performance Drivers
• +11% versus Q4 ’09
• Order Book at $721M, Up 28% YoY
• Price: ($5.7) or (1.2%)
$491.1
$491.1
36.2%
140.2
140.5
63.1%
28.5%
28.6%
+474 bps
(97.1)
(96.0)
(16.9%)
(19.8%)
(19.5%)
+327 bps
43.1
44.5
1,250.0%
8.8%
9.1%
801 bps
1.8
1.8
$38.7
$42.2
• Volume & Mix: $32.9
• Productivity:
–Materials: $10.9
–Conversion: $4.0
–OH Absorption & Other: $9.3
• OPEX & Other: ($12.9):
–Reinstate suspended costs: ($7.9)
–Labor inflation/India Opex: ($4.5)
–Bonus Accrual Above Target: ($3.2)
–Savings net of new investments: $2.7
• Meritor WABCO JV Up $1.6M
Versus Last Year
• Streamlining $0.1 vs. ($30.9) in ’09
7.9%
8.6%
• Separation ($3.6) vs. ($2.9) in ’09
7.6
8.2
Net Income
$30.7
$33.6
• ~20% Performance Tax Rate
EPS
$0.47
$0.51
• Versus ’09 Reported of ($0.57) and
Performance of ($0.08)
Gross Profit
OPEX & Other
Operating Income
Equity Income
EBIT
Taxes
(1)
Adjusted for currency translation, streamlining and separation costs
Adjusted for streamlining and separation costs
(3) Adjusted for streamlining and separation costs, and discrete and other one-time tax items
(2)
2010
© 2010 WABCO Holdings Inc. All rights reserved.
Strong Financial Performance Generates 31% Incremental Margin
28
FY 2010 GUIDANCE
Updated 2010 Guidance

($ Millions, except per share data)
Original
Revised
(1 EURO = 1.37 USD)
Low End – High End
Sales
(1)
Low End – High End
$1,835 - $1,910
15% - 20%
(1)
23% - 28%
Performance
(2)
Op Margin
Performance
(3)
EPS
Free Cash
Flow (4)
Conversion
5% – 7%

Structural
Incremental Margin
6.5% – 8.5%



$1.00 - $1.40
$1.40 - $1.80
80% - 90%
80% - 90%
(Excluding Stream. &
Separation)
(Excluding Stream. &
Separation)



Key Inputs
Price erosion level of 1.7% or
better
Maintaining strong levels of
productivity
Raw materials pricing expected
to degrade margins by ~90 bps
starting in Q2
2010
Additional investments of ~$3M
Incremental
Margin
in new business opportunities
Net interest expense at current
rates
Performance tax rate of ~20%
Streamlining & separation cash
payments: ~$50M
Impact from EC fine not included
Note: Guidance as announced on May 5, 2010. Inclusion of this information in this presentation is not an update or reaffirmation of those financial assumptions
(1) Adjusted for currency translation
(2) Adjusted for streamlining and separation costs
(3) Adjusted for streamlining and separation costs, and discrete and other one-time tax items
(4) Net cash provided by operating activities less net cash used for the purchases of PP&E and computerware as a percentage of net income
© 2010 WABCO Holdings Inc. All rights reserved.
2010
Raising Full Year 2010 Guidance
29
WABCO SUMMARY
 Industry leader, we continue to be well prepared and sufficiently FLEXIBLE
to take full advantage of increasing demand for new commercial vehicles in
2010, while maintaining our commitment to long term growth STRATEGY
 Power to remain THE TECHNOLOGY LEADER adding breakthroughs to
portfolio of technologies and products for full connectivity to all markets
 WABCO Operating System, one of our industry’s most advanced
management environments, delivers continuous OPERATIONAL
improvements
 We drive PERFORMANCE by connecting with and adapting to
CUSTOMERS everywhere in the world and continuing to anticipate and
satisfy their needs
2010
30
PASSION
© 2010 WABCO Holdings Inc. All rights reserved.
TRUCK AND
TRAILER PRODUCTS
TRUCK
1
2
3
4
5
6
7
8
9
10
11
12
13
14
10
1
15
6
7
11
16
17
4
18
29
30 26
31
20
27
28
22
24
23
15
25
8
13
16
17
18
14 12
9
19
21
2
19
20
5
Electronic Control Units
Adaptive Cruise Control
EBS Proportional Relay Valve
Pedal Unit with EBS Brake Signal Transmitter
ABS Modulator Valve
Automatic Temperature Control
Electronically Controlled Air Suspension
Shock Absorber
Front Air Disc Brake
Steering Angle Sensor
Transmission Automation
Clutch Control
Retarder Control
Air Compressor
Rear Air Disc Brake
(Electronic-) Air Processing Unit
Reservoir
EBS Trailer Control Valve
Electronic Stability Control Module
EBS Axle Modulator
3
TRUCK AND TRAILER
21
22
23
24
25
26
Brake Chamber
Tristop® Cylinder
Air Bellow
Integrated Vehicle Tire Monitoring ECU
IVTM Wheel Module
Double Diaphragm Spring Brake
TRAILER
EBS: Electronic Braking System
ABS: Anti-Lock Braking System
ECU: Electronic Control Unit
2010
27
28
29
30
31
Trailer Central Electronic
SmartBoard
Trailer Electronic Braking System
Electronically Controlled Air Suspension
Trailer Air Disc Brake
32
BUS PRODUCTS
1
2
3
4
5
6
7
8
9
24
26
10
27
25
11
12
11
14
13
13
16
14
9
15
8
15
5
23
21
6
4
20
3
12
17
18
10
22
2
19
1
16
17
18
7
19
20
21
22
23
24
25
26
27
EBS Brake Signal Transmitter
EBS Proportional Relay Valve
ABS Solenoid Modular Valve
Electronic Stability Control Unit
EBS Backup Valve
EBS Axle Modulator
Adaptive Cruise Control Module
Hand Brake Valve
IVTM Display
IVTM Wheel Module
IVTM Electronic Control Unit
Automatic Traction Control Water Valve
ATC Operating Console
ATC Substation
Electronic Control Units EBS, CVC
ECAS Electronic Control Unit
ECAS Solenoid valve
ECAS Level Sensor
Air Disc Brake
Brake Chamber
Tristop Cylinder
(Electronic) Air Processing Unit
Compressor
MTS Sensor
MTS Door Cylinder
MTS Electronic Control Unit
MTS Door Valve
EBS: Electronic Braking System
ABS: Anti-Lock Braking System
CVC: Central Vehicle Controller
IVTM: Integrated Vehicle Tire Monitoring
ECAS: Electronically Controlled Air Suspension
MTS: Door Control for Bus
2010
33
CAR PRODUCTS
1
1
2
3
2
7
4
5
6
7
3
5
Air Bellow
Electronic Control Unit for ECAS & ESAC
Vacuum Pump
Air Supply Unit
Height Sensor
Air Reservoir
Solenoid Valve Block
6
ECAS: Electronically Controlled Air Suspension
4
2010
ESAC: Electronic Shock Absorber Control
34
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