Car Wars 2013-2016 The automotive product pipeline for the U.S. market

0

DateJohn Murphy, CFA +1 646 855 2025Research AnalystMLPF&[email protected]

BofA Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Refer to important disclosures on page 24-30. Price Objective Basis/Risk on page 22. Analyst Certification on page 23. 11167828

16 May 2012

Car Wars 2013-2016The automotive product pipeline for the U.S. market

1

16 May 2012 Agenda

Car Wars Background & Thesis

Industry & Manufacturer Trends

Company Analysis

Expected market share shifts

Implications for Suppliers & Dealers

Conclusions

2

16 May 2012 Car Wars Background & Thesis

It is an annual, proprietary study● Based on numerous primary and secondary sources

Quantifies industry product trends● Count # new all new or next-generation models

● Forecast annual unit volume of new models

Measures the competitiveness of OEM product plans several ways● Replacement rate (% of OEM’s volume replaced annually)

● Average showroom age (years on the market)

● Mix of new model volume by segment

● Key is to measure performance relative to competitors, industry average

Provides historical perspective● First published in 1991

● Datasets extend at back to 1987

● Time series for replacement rate, showroom age, and model mix

3

16 May 2012 Car Wars Background & Thesis

Replacement rate▼

Showroom age▼

Market share▼

Profitability▼

Stock Price

Source: BofA Merrill Lynch Global Research[1] Volume weighted average age variance[2] Market share is based on calendar years 2001-2011

Replacement Rate, Showroom Age (Vol Weighted), Market Share (2002-2012)

Avg. Replacement Rate

Avg. Showroom Age O/(U)

US Market Share [1]

GM 13% 0.4 -8.7%Chrysler 13% (0.2) 0.0%Ford 14% 1.3 -5.1%European 15% (0.1) 2.7%Industry Avg. 16% 0.0 0.0%Nissan 17% (0.6) 8.3%Honda 19% (0.8) -2.6%Toyota 19% (0.6) 2.7%Korean 20% (1.0) 5.6%

4

16 May 2012

35 38 36

21

48

21

3935 38 41 39

3241 40 40 43

56

42

3035 35 38 37

5550

34

-

10

20

30

40

50

6019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

13E

2014

E20

15E

2016

E

Average = 38, 1992-2012

Industry Trends - New Model Launches 2013e-2016e

New model launches hit a relative lull from MY09-MY12, but we anticipate a pick up in MY14 and MY15.

# of

New

Mod

els

Laun

ched

Source: BofA Merrill Lynch Global Research

5

16 May 2012 Industry Trends - Replacement Rate


Industry replacement rate over the forecast period will remain above the 16% historical average, averaging of 23% for MY13-16.

14%10%

20%

13%

21%

16%18%17%

12%

17%14%14%

22%

17%13%13%

22%

17%13%

17%14%

18%23%

29%

0%

5%

10%

15%

20%

25%

30%

35%19

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

13E

2014

E20

15E

2016

E

Repla

cem

ent R

ate

Average 1993 - 2012 = 16%

6

16 May 2012 Industry Trends - Average Showroom Age [1]

Competitive pressure and increasing utilization of common globalplatforms will continue to drive down product cycle times. The average

age for MY13 – MY16 is about 2.6 years, down from 3.2 on average for the last decade.

Aver

age

Show

room

Age

in Y

ears

Source: BofA Merrill Lynch Global Research[1] Average is volume weighted.

4.5

3 .4 3.53 .7

3 .9 3.9

3 .2 3.02.6

2 .93.3

3.13 .3 3.2 3 .2

3 .5

2.7

3 .3 3.4

2.7 2 .8 2.83.0

2 .6 2.4 2 .6

-0.51.01.52.02.53.03.54.04.55.0

1991

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

7

16 May 2012 Industry Trends –New Models by Segment

Source: BofA Merrill Lynch Global Research, not volume weighted

New model emphasis is on Crossovers, Luxury Cars and Light Trucks with launches accounting for 69% of volume in MY13-16. CUVs remain a growing segment, while Light Truck launches accelerate in MY14 with the new GM

truck launch, and in MY15 with the new Ford F-series.

24% 26%

21%30%

9%

12%23%12%

23% 19%

0%10%20%30%40%50%60%70%80%90%

100%

03-12 13-16

Mid/LargeCarSmall Car

Lux ury &Sporty CarCrossov er

Lt. Truck

8

16 May 2012 Manufacturer Trends – Avg. Showroom Age by OEM

Average age in the industry is converging in the 2-3 year range with only slight outliers on either side (Chrysler at 3.6 years and Honda at 2.2

years) This is a dramatic change from the large discrepancies of the past.


-123456789

1991

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2012

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Year

s

General Motors FordChrysler IndustryEuropean JapaneseKorean

9

16 May 2012 Manufacturer Trends – Cum. Replacement Rates,’13e-16e MY

We estimate that a relatively low level of disparity in replacement rates will result in smaller market share shifts in the future. All automakers appear to be refreshing product more quickly, which should drive auto

demand higher.


72%74%

81%82%

90%94%95%

101%106%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%

KoreanEuropean

ChryslerHonda

Industry Avg.NissanToyota

GMFord

10

16 May 2012 Company Analysis - General Motors (GM, C-1-9)

Replacement rate vs. industry New model volume mix

Historical replacement rate low at 13%

Replacement rate over the next four years improves dramatically with the launch of the next generation trucks on the K2XX platform, large CUVs (L2XX) and small CUVs (D2XX)

Mix is skewed toward Light Trucks due to the launch of K2XX in MY14

Relative showroom age should get closer to the industry average in MY14

Conclusion: GM’s new product launches should stabilize market share, although share in CY2012 is at risk as Japanese competitors recover.

Average showroom age (years)


5% 5%

25%

5%

18%

3%

25%21%

1%

14%8%10%

15%13%

27%

11%6%

22%13%

6%16% 13%

20%

52%

0%10%20%30%40%50%60%70%

1993

1994

1995

1996

1997

1998

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2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014E

2015E

2016E

GMGM 93-12 Av g.Industry

Replacement Rate

26%45%

30%23%

12%12%

19% 18%

12%2%

0%

20%

40%

60%

80%

100%

Industry General Motors

Mid/Large Car

Small Car

Lux ury & Sporty Car

Crossov er

Lt. Truck

4.33.02.1

3.84.1

2.8

5.0

2.5

4.13.63.14.3

3.0

3.93.73.83.62.9

4.74.05.3

5.04.65.8

(2)(1)

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1991

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2012

2013

E20

14E

2015

E20

16E

Younger

Relativ e to Industry :Older

Av erage Show room Age (Years)

11

16 May 2012 Company Analysis - Ford Motor Co. (F, C-1-7)


Historical replacement rate about 14%

Replacement rate for MY13-16 is above the industry average at 26%

Average showroom age should drop just below the industry average in MY15-MY16

Ford’s mix is relatively balanced, but overweight Trucks due to the launch of the new F-series in MY15

Conclusion: Ford’s product cadence is solid, which should support market share in the long term. However, as management increasingly focuses on maximizing profit, market share may be traded for higher prices/profits.



14%4%

12%13%

28%

11%11%19%

4%12%

6%

19%10%8%

16%10%

38%

6%

20%13%

30%

9%

46%

20%

0%10%20%30%40%50%60%70%

1993

1994

1995

1996

1997

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1999

2000

2001

2002

2003

2004

2005

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2007

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2013E

2014E

2015E

2016E

FordFord 93-12 Av g.Industry

Replacement Rate

26% 37%

30%32%

12%12%

19% 19%

9%3%

0%

20%

40%

60%

80%

100%

Industry Ford

Mid/Large Car

Small Car


Crossov er

Lt. Truck

5.8

2.9 3.54.34.2

3.54.3 4.7

5.64.9

4.43.43.6

1.7

4.32.8 3.0

3.33.5

6.0

2.72.5 3.04.0 4.0

(2)(1)

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Younger



12

16 May 2012 Company Analysis – Chrysler


Historical replacement rate about 13%

Average replacement rate of 20% over the next four model years is below the industry average of 23%. However the launch of the new Ram pickup in MY17 should help in the out years

Mix is skewed toward CUVs from Fiat platforms, and Trucks with the likely launch of the minivans in MY15

Conclusion: The launch of numerous Fiat-based vehicles and recent improvement in perception may help stabilize market share.



23%16%19%

26%

10% 13%5%

27%

1%7%

16%22%

27%

0%

18%

7%10%

35%

8%

28%15%

8%

33%

14%

0%

10%

20%

30%

40%

50%

60%

70%

1993

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2013E

2014E

2015E

2016E

Chry slerChry sler 93-12 Av g.Industry

Replacement Rate

26% 32%

30%36%

12%12%

19% 14%

2%16%

0%

20%

40%

60%

80%

100%

Industry Chry sler

Mid/Large Car

Small Car


Crossov er

Lt. Truck

3.3 3.6 3.4 3.83.33.1

2.1

3.93.0

2.22.5

3.53.92.73.02.1

3.94.43.43.5

2.73.63.53.63.2

(2)(1)

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Younger



13

16 May 2012 Company Analysis - Japanese OEMs


The replacement rate of the Japanese brands combined is 22%, just below the industry average, which is largely a function of the market becoming more competitive and the smaller manufacturers fading

Average showroom age overall remains just below average

Mix is weighted toward Mid/Large Cars with the launch of Avalon, Prius, Accord, Altima and Maxima

Conclusion: Japanese OEM product cycles are generally converging around the industry average, indicating large share gains are over.



21%16%24%

15%24%

34%

13%17%15%

24%30%

19%14%12%

26%

14%16%14%7%

27%

6%

29%25%

29%

0%10%20%30%40%50%60%70%

1993

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2013E

2014E

2015E

2016E

Total JapaneseTotal Japanese 93-12 Av g.Industry

Replacement Rate

26% 16%

30%32%

12%10%

12%16%

19% 25%

0%

20%

40%

60%

80%

100%

Industry Japanese

Mid/Large Car

Small Car


Crossov er

Lt. Truck

2.1 2.52.3 2.2 2.12.5

2.02.4 2.42.5

2.41.52.0

2.2 2.42.1

2.52.6

2.92.4

3.12.3 1.92.4

(3)(2)(1)

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Younger



14

16 May 2012 Company Analysis - European OEMs


Replacement rate of 18.5% for MY’13-16 is below the industry average

European OEMs are unsurprisingly overweight Luxury cars

Average showroom age is creeping above the industry average in MY15-16

Conclusion: We expect European OEMs to collectively hold market share about flat from 2012 YTD levels, but there is likely upside market share risk at BMW and Mercedes while there is downside risk at Volkswagen.



17%13% 9%

22%

42%

8%

18% 17%23%

9%16%

30%

15%20%

26%21%

7%16% 10% 13%14%

7%

37%

17%

0%10%20%30%

40%50%60%70%

1993

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2007

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2013E

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2015E

2016E

EuropeanEuropean 93-12 Av g.Industry

Replacement Rate

26%

30%

31%

12% 53%12%

10%19%

6%

0%

0%

20%

40%

60%

80%

100%

Industry European

Mid/Large Car

Small Car


Crossov er

Lt. Truck

6.05.7

2.41.2 1.7

2.5 3.03.2 3.63.3 3.7

2.42.62.5

2.52.62.53.0

3.32.82.42.92.72.4

(2)(1)

-12345678

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2013

E20

14E

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Younger

Relativ e to Industry :

Older


15

16 May 2012 Company Analysis - Korean OEMs


Historically high replacement rate of 20%

The average replacement rate of just 18% for MY13-MY16 is the lowest among the major groups

Average age slips above the industry average in MY14-15 but improves in MY16 with the launch of high-volume models like Sonata and Tucson

The mix of introductions for Korean OEMs is overweight Small Cars, Mid/Large Cars and Crossovers

Conclusion: Korean OEM product cadence appears volatile, indicating market share gains should slow or reverse.



0%

16%

0%

46%37%33%

38%

53%

9%13%13%6%

41%

26%

2% 5%

21%

9% 7%10%

46%59%

26%

57%

0%10%20%30%40%50%60%70%

1993

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2002

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2005

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2007

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2013E

2014E

2015E

2016E

KoreanKorean 93-12 Av g.Industry Replacement Rate

26%

30%

33%

12%

2%

12%

37%

19% 28%

0%

20%

40%

60%

80%

100%

Industry Korean

Mid/Large Car

Small Car


Crossov er

Lt. Truck

1.42.02.4 2.6

1.6 1.91.2 1.1 1.5

3.62.52.8 2.5

1.11.9 3.11.31.41.92.52.4

1.01.71.4

(4)(3)(2)(1)

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Younger

16

16 May 2012 Expected market share shifts

Source: BofA Merrill Lynch Global Research[1] volume weighted, [2] over 2012 YTD-2015 calendar year

Large market share shifts appear to be a thing of the past. In the future, we expect a handful of volume manufacturers with market share in the

teens that fluctuates around product cycles.

Replacement Rate [1]

Avg. Showroom Age O/(U)

2011 Mkt. Share

2012 YTD Mkt. Share

US Market Share [2]

2015e Mkt.

Share

Ford 26% (0.1) 16.6% 15.3% 0.8% 16.0%GM 25% 0.4 19.7% 17.7% 0.5% 18.2%Toyota 24% (0.3) 12.9% 14.3% 0.3% 14.6%Nissan 23% (0.6) 8.2% 8.5% 0.0% 8.5%Industry Avg. 23% 0.0 nm nm nm nmHonda 20% (0.5) 9.0% 9.5% 0.0% 9.5%Chrysler 20% 1.0 10.7% 11.6% 0.0% 11.6%European 18% 0.0 9.2% 9.0% 0.0% 9.0%Korean 18% (0.3) 8.9% 8.9% -0.5% 8.4%

17

16 May 2012 Implications for Suppliers & Dealers

Supplier Exposure to OEMs Dealer Exposure to OEMs

Source: Company Filings

We believe that proprietary technology trumps all for suppliers. However, exposure to profitable and growing OEMs is extremely important for growth, profitability, and returns

Assuming all else equal, dealers that are most exposed to the OEMs with the highest replacement rates and lowest

average age are best off

0.0%

10.0%

20.0%30.0%

40.0%

50.0%

60.0%

70.0%80.0%

90.0%

100.0%

ABG AN GPI LAD PAG SAH

Chry sler

GM

F

Toy ota

Honda

Nissan

Hy undai/Kia

VW

BMW

Mercedes

Other0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AXL

BWA

DLPH

GNTX JC

I

LEA

MGA TE

N

TRW VC

Chry sler / Fiat

GM

F

Toy ota

Honda

Renault / Nissan

Hy undai / Kia

VW

BMW

Other

18

16 May 2012 Conclusions

1) Replacement rate and showroom age drive market share gains and losses

2) Product activity slowed, but should re-accelerate in MY14-MY15

3) Intros focused on CUVs, Luxury Cars & Light Trucks, which should drive positive mix

4) Convergence of product cycles is re-emerging as D3 increase focus on product

5) GM product launches for MY13-16 should stabilize market share, but share in CY2012 is at risk as Japanese competitors recover

6) Ford’s product cadence is solid, which should support market share long term

7) Chrysler’s product cadence appears to be improving, but share may just tread water

8) Japanese OEM product cycles are generally converging to the industry avg

9) Korean OEM launches appear volatile and market share gains may reverse

10) Suppliers & Dealers success should be correlated to their exposure to OEMs with high replacement rates

19

16 May 2012 Car Wars Poster Available


Car Wars 2013 - 2016

Model Year 2013e 2014e 2015e 2016e Industry Analysis

Buick Encore - Small Lux CUV Chevrolet Silverado/HD - Large Pickup Chevrolet Equinox - Small CUV Cadillac SRX - Small Lux CUVCadillac ATS - Sedan & Coupe GMC Sierra/HD - Large Pickup GMC Terrain - Small CUV GMC Acadia - Mid CUVCadillac XTS - Sedan Chevrolet Tahoe - Large SUV Chevrolet Colorado - Small Pickup Buick Enclave - Mid Lux CUVChevrolet Malibu - Sedan Chevrolet Suburban - Large SUV GMC Canyon - Small Pickup Cadillac Escalade Light - Mid Lux CUVChevrolet Spark - Hatchback GMC Yukon - Large SUV Cadillac Escalade - Large SUV Chevrolet Traverse - Mid CUV

GMC Yukon XL - Large SUV Cadillac Escalade ESV - Large SUV Buick Verano - SedanCadillac CTS - Sedan, Coupe & Wagon Chevrolet Camaro - Coupe & ConvertibleChevrolet Corvette - Coupe & Convertible Buick LaCrosse - SedanChevrolet Impala - Sedan

% of volume replaced : 16% % of volume replaced : 52% % of volume replaced : 13% % of volume replaced : 20%

Ford C-Max - Small CUV Lincoln MKD - Small Lux CUV Ford Edge - Mid CUV Ford Explorer - Large CUVFord Escape - Mid CUV Ford Transit - Large Van Lincoln MKX - Mid Lux CUV Lincoln Aviator - Large Lux CUVLincoln MKZ - Sedan Ford Transit Connect - Small Van Ford F-Series - Large Pickup Lincoln MKS - SedanFord Fusion - Sedan Lincoln MKC - Sedan Ford Mustang - Coupe & Convertible Ford Taurus - Sedan

Ford Fiesta - Sedan & Hatchback Average Showroom Age


Ram C/V - Small Van Jeep Compass - Small CUV Jeep Liberty - Mid CUV Dodge Journey - Large CUVDodge SRT Viper - Coupe & Convertible Chrysler Pacifica - Mid CUV Dodge Nitro - Mid SUV Chrysler Town & Country - MinivanDodge Dart - Compact Sedan Jeep Grand Wagoneer - Large CUV Alfa Romeo Giulietta - Lux CUV Dodge Caravan - Minivan

Maserati Kubang - Lux CUVRam Dakota - Small PickupRam Ducato - Large VanAlfa Romeo Giulia - Sport Lux SedanChrysler 200 - Sedan, Coupe & ConvertibleDodge Avenger - SedanChrysler Horizon - Hatchback

% of volume replaced : 10% % of volume replaced : 35% % of volume replaced : 8% % of volume replaced : 28% New Models by Segment

Toyota RAV4 - Small CUV Toyota Highlander - Mid CUV Lexus CX - Small Lux CUV Toyota FJ Cruiser - Midsize SUVLexus ES - Sedan Lexus RX - Mid Lux CUV Toyota Venza - Small CUV/Wagon Toyota Sequoia - Large SUVLexus GS - Sedan Toyota Tundra - Large Pickup Toyota Tacoma - Small Pickup Toyota Sienna - MinivanScion FR-S - Coupe Lexus IS - Coupe, Sedan & Convertible Lexus LS - SedanToyota Avalon - Sedan Toyota Corolla - Sedan Toyota Prius - Hatchback% of volume replaced : 19% % of volume replaced : 40% % of volume replaced : 24% % of volume replaced : 11%

Acura RDX - Small Lux CUV Acura MDX - Mid Lux CUV Honda Stream - Small CUV Honda Crosstour - Mid CUVAcura ILX - Sedan Honda Ridgeline - Small Pickup Honda Pilot - Mid CUV Honda Insight - HatchbackHonda Accord - Coupe & Sedan Acura TL - Sedan Acura NSX - Coupe

Acura TSX - Sedan Honda Fit - HatchbackAcura RL - Sedan


Segment KeyInfiniti EX - Small Lux CUV Nissan Rogue - Small CUV Nissan Frontier - Small Pickup Nissan Quest - MinivanNissan Pathfinder - Mid CUV Nissan Murano - Mid CUV Nissan Titan - Pickup Infiniti M - Sedan CrossoverInfiniti JX - Lux SUV Infiniti FX - Mid Lux CUV Nissan Maxima - SedanNissan Altima - Sedan & Coupe Infiniti G - Coupe & Sedan Light Truck Nissan Sentra - Sedan% of volume replaced : 45% % of volume replaced : 27% % of volume replaced : 17% % of volume replaced : 5% Luxury & Sporty Car

Land Rover Range Rover - Large SUV Audi Q3 - Small Lux CUV VW Tiguan - Small CUV Volvo XC40 - Small CUV Mid & Large CarMercedes GL-Class - Large Lux CUV Mercedes GLC-Class - Small Lux CUV Volvo XC70 - Small CUV Volvo XC90 - Mid CUVMercedes B-Class - Hatchback BMW X4 - Mid Lux CUV Land Rover LR2 - Mid CUV Audi Q5 - Mid Lux CUV Small CarBMW 3-Series - Coupe, Sedan & Convertible BMW X5 - Mid Lux CUV BMW X6 - Mid Lux CUV Mercedes GLK - Small Lux SUVPorsche Boxster - Convertible Audi Q7 - Large Lux CUV Mercedes MLC - Mid Lux CUV Audi R8 - CoupePorsche Cayman - Coupe Land Rover Range Rover Sport - Small SUV Audi A4 - Sedan & Wagon BMW 7-Series - Sedan Body Style:Mercedes SL Roadster - Convertible Audi A3 - Sedan & Wagon Audi A5 - Coupe Porsche Panamera - Sedan Coupe = two door passenger carVW Polo - Hatchback Mercedes S-Class - Sedan Audi TT - Coupe & Convertible Crossover (CUV) = vehicle combining

Mercedes CL-Class - Coupe Mercedes C-Class - Hatchback, Sedan & Wagon car and truck attributesMercedes CLC-Class - Coupe Jaguar XF - Sedan Hatchback = 2 or 4 door car with a hatchJaguar XK - Coupe & Convertible Volvo S80 - Sedan Sedan = four door passenger carMINI Cooper - Hatchback BMW 1-Series - Coupe SUV = sport utility vehicleVW Golf - Hatchback VW EOS - Convertible Wagon = station wagon


Hyundai Santa Fe - Mid CUV Kia Forte - Sedan & Coupe Hyundai Veracruz - Large CUV Hyundai Tucson - Small CUVKia Cadenza - Sedan Hyundai Genesis- Sedan & Coupe Kia Sorento - Small CUV

Kia Soul - Hatchback Hyundai Elantra - Sedan Source: BofA Merrill Lynch Global ResearchHyundai Sonata - Sedan

% of volume replaced : 9% % of volume replaced : 7% % of volume replaced : 10% % of volume replaced : 46%Kor

ean

New Model Launches by Model Year

GM

Ford

Chr

ysle

rTo

yota

Hon

daN

issa

nEu

rope

an

3538 36

21

48

21

3935

3841 39

32

41 40 4043

56

42

3035 35

38 37

5550

34

-

10

20

30

40

50

60

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

3.4 3.5 3.7 3.9 3.9

3.2 3.02.6

2.93.3

3.1 3.3 3.2 3.23.5

2.73.3 3.4

2.7 2.8 2.8 3.02.6

4.5

2.4 2.6

-0.51.01.52.02.53.03.54.04.55.0

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

26%45%

37% 32%

6%16%

0%

30%

23% 32% 36%

31%

32%

33%

12%

12% 9%2%

53%10%

2%

12%2% 3% 16%

10%

16%

37%

19% 18% 19% 14%0%

25% 28%

0%10%20%30%40%50%60%70%80%90%

100%

Industry GM Ford Chrysler European Japanese Korean

Mid/Large Car

Small Car

Lux ury &Sporty Car

Crossov er

Lt. Truck

20

16 May 2012 Car Wars Poster Available


C r Wars 2013 - 2016Re acement Rate & Showroom Age vs. Market Share GM Relative Showroom Age & Replacement Rate Japanese Relative Showroom Age & Replacement Rate

Model Years 2002 - 2012Avg. Volume

Replacement Rate Avg. Showroom Age O/(U) Industry Avg.

Total U.S. Share Δ

GM 13% 0.4 -8.7%Chr ler 13% (0.2) 0.0%For 14% 1.3 -5.1%Eur an 15% (0.1) 2.7%Japanese 19% (0.6) 8.3%Kor 20% (1.0) 5.6%

Pr uct Replacement Rate 2013e - 2016e Ford Relative Showroom Age & Replacement Rate European Relative Showroom Age & Replacement Rate

Mercury Mariner - Misdize CUV (h)

Av age Showroom Age 2013e - 2016e Chrysler Relative Showroom Age & Replacement Rate Korean Relative Showroom Age & Replacement Rate

apl

ysdope

ean

od

er

72%74%

81%82%

90%94%95%

101%106%

0% 20% 40% 60% 80% 100% 120%

eanopeanry slerHonda

Indu Av g.ssany otaGM

Ford

KorEurCh

stryNiTo

10% 19

%5% 5%

25%

5%18

%3%

25%

21%

1%14

%8% 10

% 15%

13% 27

%11

%6%

22%

13%

6%16

%52

%13

% 20%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%

Younger

Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

22% 28

%14

%4%

12%

13% 28

%11

%11

% 19%

4%12

%6%

19%

10%

8%16

%10

%38

%6%

20%

13% 30

%9%

46%

20%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%

Younger

Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

32%

0%23

%16

% 19% 26

%10

% 14%

13%

5%33

%27

%1%

8% 15%

7%16

% 22% 27

%0%

18%

7% 10%

35%

8%28

%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%

Younger

Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

8%19

%17

%37

%13

% 17%

9%22

%42

%16

%8% 7%

18%

10% 17

% 23%

9% 14%

13% 16% 30

%15

% 20% 26

%21

%7%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%

Younger

Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

17% 23

%21

%16

% 24%

15% 24

% 34%

13% 17%

15% 24

% 30%

19%

14%

12% 26

%14

%16

%14

%7%

27%

29%

29%

25%

6%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

Younger

15%

35%

0%16

%57

%0%

46%

37%

33% 38% 53

%9% 13

%13

%6%

41%

26%

2% 5%26

%59

%21

%9% 7% 10

%46

%

(8)(7)(6)(5)(4)(3)(2)(1)

-123

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

E20

14E

2015

E20

16E

0%15%30%45%60%75%90%105%120%135%

Younger

Older

Avg.

Age

O/(U

)

Repla

cem

ent R

ate

3.0

2.3 2.32.02.2

2.5

3.6

2.7 2.6

1.1.2.2.3.3.4.

Chrysle

r

GM

Europea

nInd

ustry A

verage Ford

Korean

Toyota

Honda

Nissan

0505050

21

16 May 2012 Automotive Research Team

U.S. Automotive Research

John Murphy, CFA+1 646 855 2025

Research Analyst

MLPF&S

[email protected]

John Lovallo, CFA+1 646 855 2942

Research Analyst

MLPF&S

[email protected]

Elizabeth Lane+1 646 855 2547

Research Analyst

MLPF&S

[email protected]

Michael Tuteral+1 646 743 0217

Research Analyst

MLPF&S

[email protected]

22

16 May 2012 Price Objective Basis and Risk

Ford Motor (F; $10.15)

Our $18 PO is based on an adjusted EV/EBITDA of roughly 4.5X our 2012 forecast. This multiple would represent the higher end of the company's historical range, but is consistent with periods where F earned EBITDA comparable to what we expect in 2012. Downside risks to our PO: 1) restructuring plan disappoints materially 2) the US market was to fall lower than ests 3) input costs rise meaningfully 4) disruption in the supply base 5) significant increase in gas prices 6) new vehicle pricing deteriorates 7) market share losses pressure results 8) unwillingness of dealers to shoulder inventory risk 9) suppliers gain significant pricing power 10) F is unable to receive the same terms from the UAW negotiated by GM/Chrysler in CH11 11) further stress in capital markets makes borrowing prohibitive 12) recovery in sales occurs later than we think, rendering our call early 13) key members of mgmt leave F 14) dealership network is impaired and unable to sell F vehicles 15) significant share dilution if F issues new shares.

General Motors Company (GM; $21.42)

Our $35 price objective is based on an EV/EBITDAP multiple of about 4.0X our 2012 estimates. Prior to GMs bankruptcy, the stock traded in the range of about 3X to 8X, with an average of about 4.5X-5X. However, given GMs recent decision to invest in Peugeot, which we believe presents a distraction from the core business and additional risk, we are basing our PO on an EV/EBITDAP multiple of 4.0X our 2012E. Also, while GMs balance sheet restructuring in Chapter 11 was helpful, we believe further operating rationalization is necessary and the lack of a comprehensive captive finance arm still need to be resolved, but are on the horizon. Downside risks are 1) A slower than expected global economic recovery and/or slower recovery in production volumes 2) General consumer confidence 3) Another wave of stress in the supply base 4) New management team 5) Rising raw material cost 6) Potential overhang from continued government ownership 7) Pricing pressure 8) Inability to retain operating leverage as volumes recover further 9) Inability to successfully execute future follow-on offerings or capital raises 10) Risk of further regulation by foreign governments 11) Higher oil and gas prices.

23

16 May 2012 Analyst Certification

I, John Murphy, CFA, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.

24

16 May 2012 Important Disclosures

F Price Chart

US$0

US$3

US$6

US$9

US$12

US$15

US$18

US$21

US$24

1-Jan-10 1-Jan-11 1-Jan-12F

B : Buy, N : Neutral, U : Underperform, PO : Price objective, NA : No longer valid, NR: No Rating

1-May:BMurphy

PO:US$7.5015-Jul

PO:US$8.754-Aug

PO:US$11

2-NovPO:US$12

5-JanPO:US$13

28-JanPO:US$15

28-AprPO:US$18

26-JulPO:US$20

9-DecPO:US$24

31-JanPO:US$22

5-AugPO:US$26

15-SepPO:US$24

6-JanPO:US$22

27-JanPO:US$19

13-AprPO:US$18

Review Restricted No Coverage

The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of April 30, 2012 or such later date as indicated.

GM Price Chart

US$0

US$10

US$20

US$30

US$40

US$50

1-Jan-10 1-Jan-11 1-Jan-12GM

B : Buy, N : Neutral, U : Underperform, PO : Price objective, NA : No longer valid, NR: No Rating

28-Dec:BMurphy

PO:US$455-Aug

PO:US$50

15-SepPO:US$45

9-NovPO:US$42

6-JanPO:US$40

29-FebPO:US$36

13-AprPO:US$35

The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of April 30, 2012 or such later date as indicated.

25

16 May 2012 Important DisclosuresInvestment Rating Distribution: Autos Group (as of 01 Apr 2012) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 49 53.26% Buy 41 89.13% Neutral 22 23.91% Neutral 13 81.25% Sell 21 22.83% Sell 13 76.47% Investment Rating Distribution: Global Group (as of 01 Apr 2012) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 1881 49.24% Buy 1265 73.38% Neutral 992 25.97% Neutral 641 70.75% Sell 947 24.79% Sell 548 62.27%

FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster*

Buy ≥ 10% ≤ 70% Neutral ≥ 0% ≤ 30%

Underperform N/A ≥ 20% * Ratings dispersions may vary from time to time where BofAML Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.

INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent BofA Merrill Lynch Comment referencing the stock.

26

16 May 2012 Important Disclosures

Price charts for the securities referenced in this research report are available at http://pricecharts.ml.com, or call 1-800-MERRILL to have them mailed.

MLPF&S or one of its affiliates acts as a market maker for the equity securities recommended in the report: Ford Motor, General Motors.

The company is or was, within the last 12 months, an investment banking client of MLPF&S and/or one or more of its affiliates: Ford Motor, General Motors.

MLPF&S or an affiliate has received compensation from the company for non-investment banking services or products within the past 12 months: Ford Motor, General Motors.

The company is or was, within the last 12 months, a non-securities business client of MLPF&S and/or one or more of its affiliates: Ford Motor, General Motors.

MLPF&S or an affiliate has received compensation for investment banking services from this company within the past 12 months: Ford Motor, General Motors.

MLPF&S or an affiliate expects to receive or intends to seek compensation for investment banking services from this company or an affiliate of the company within the next three months: Ford Motor, General Motors.

MLPF&S or one of its affiliates is willing to sell to, or buy from, clients the common equity of the company on a principal basis: Ford Motor, General Motors.

The company is or was, within the last 12 months, a securities business client (non-investment banking) of MLPF&S and/or one or more of its affiliates: Ford Motor, General Motors.

BofA Merrill Lynch Research personnel (including the analyst(s) responsible for this report) receive compensation based upon, among other factors, the overall profitability of Bank of America Corporation, including profits derived from investment banking revenues.

27

16 May 2012 Other Important Disclosures

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28


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This report may contain a short-term trading idea or recommendation, which highlights a specific near-term catalyst or event impacting the company or the market that is anticipated to have a short-term price impact on the equity securities of the company. Short-term trading ideas and recommendations are different from and do not affect a stock's fundamental equity rating, which reflects both a longer term total return expectation and attractiveness for investment relative to other stocks within its Coverage Cluster. Short-term trading ideas and recommendations may be more or less positive than a stock's fundamental equity rating.

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29


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30


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Car Wars 2013-2016 The automotive product pipeline for the U.S. market

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Transcript of Car Wars 2013-2016 The automotive product pipeline for the U.S. market