Growth Through Effective Partnering Garry Cardwell Vice President and General Manager China, South East Asia, India, Au

1. Growth Through Effective Partnering Garry Cardwell Vice President and General Manager China, South East Asia, India, Australia Johnson Controls Inc.

2. Content • Johnson Controls Corporate Overview • Why It Makes Sense to Partner in China • How Johnson Controls Approaches Making Successful Partnerships • Johnson Controls’ Experience in Partnering

3. AUTOMOTIVEGROUP (AG) CONTROLS GROUP (CG) The global leader,serving automakersaround the world. Diverse & Strong Business Segments • Founded in 1885 • 123,000 employees worldwide • 2004 sales of US$ 26.6 billion Making customers' buildings more energy efficient, comfortable,safe and productive.

4. Automotive Group Seating Overhead Door Panel Instrument Panel Battery Complete Interior Integration Electronics/ Storage

5. AG Worldwide • Over 6,000 in Engineering, Design, R&D • 7 Technology Centers (Asia-Pacific): • Pune, India • Ayase, Japan • Ansan, Korea • Changchun, China • Shanghai, China • Malaysia • Australia Recent Acquisitions: • Ikeda Bussan, Japan • Sagem Automotive Electronics Group, France • Borg, Germany • Hoppecke, Germany • Varta’s Automotive Battery Group, Germany • Grupo Imsa, Mexico • Recent LOI for Delphi Battery Shanghai, China

6. Established first facility in 1997 Operations in 9 Asia-Pacific countries: Australia, China, India, Japan, Korea, Malaysia, Taiwan and Thailand 10 joint ventures, 11,000 employees 37 manufacturing plants 25 OEM customers Asia-Pacific Operations CHANGCHUN SHENYANG BEIJING KOREA YANTAI CHINA YANCHENG JAPAN SHANGHAI CHONGQING FUZHOU GUANGZHOU INDIA TAIWAN PUNE THAILAND CHENNAI MALAYSIA AUSTRALIA ADELAIDE MELBOURNE

7. Completed first JV agreement in 1996 – 6 primary, 4 subsidiary JVs today. One of the largest suppliers of seating systems and components in China. 18 auto seating and interior plants, 2 technical centers. Capabilities include product design, product evaluation, prototype build, production verification, production support, benchmarking, industrial design and local supplier development. Johnson Controls in China CHANGCHUN SHENYANG BEIJING CHINA YANTAI YANCHENG SHANGHAI CHONGQING FUZHOU GUANGZHOU

8. Why It Makes Sense to Partner in China

9. A Color of Complexity: Three layers of networks, Geo-political barriers…….

10. SAIC FAW DONG FENG GUANGZHOU CHANGAN BAIC Solid Existing Partner Relationships with OEM CBA Keys To Partnering Success Find Strong JV Partners to Share Risk Top 7 China OEMs Strong OEM Connections with Current Business

11. Lower Initial Investment Local Market Knowledge Legend Toyota Plant GM Plant Ford Plant DCX Plant BMW Plant Honda Plant Ren/Nissan Plant Hyundai/KIA Plant 2005 Annual Volume, CSM Q1 2005 Forecast Country volumes consist of only the above 10 OEMs Keys To Partnering Success Find Strong JV Partners to Share Risk Existing Facilities and Supply Base Mitsubishi Plant VW Plant

12. Open to Learning Reduced Expat Cost Manufacturing Purchasing Leadership Financial Keys To Partnering Success Find Strong JV Partners to Share Risk Management Talent Willing to Adopt Best Practice Systems Quickly

13. Shenyang Joint Venture Est in 1999 Products: Seat, Door Panel, Instrument Panel Chongqing Joint Venture Est in 2003 Products: Seat, Parcel Shelf Guangzhou Joint Venture To be est in 2004 Products: Seat Shanghai Joint Venture Est in 1998 Products: Seats, headliner, visor, OHS Keys To Partnering Success Find Strong JV Partners to Share Risk Changchun Joint Venture Est in 2001 Products: Seat, Door Panel, Instrument Panel, Headliner, Cluster, Parcel Tray Beijing Joint Venture Est in 1997 Products: Seat, Door Panel, OHS The Results

14. How JCI Approaches Making Successful Partnership in China

15. Success Factors Y = f ( Identifying, Assessing, Executing) = f (X1, X2, X3, X4, X5, X6)

16. Kickoff • Decision • Closing • Handoff • Identification • + Relationships • Assessment • Due Diligence • Integration • Operations JV Process (Science) • ongoing • -3 months • -2 months • 100-180 days • 12-18 months Key output: • M&A or JV,Contracted, • CAR for Greenfield • Ranking: • Regions • Market Opportunities • Product Lines Report: • M&A Potentials • JV potentials • Product Strategy • Footprint • Business Plan • Execution of Integration Plan • Validation ofBusiness Metrics

17. Shenyang Joint Venture Est in 1999 Products: Seat, Door Panel, Instrument Panel Chongqing Joint Venture Est in 2003 Products: Seat, Parcel Shelf Guangzhou Joint Venture To be est in 2004 Products: Seat Shanghai Joint Venture Est in 1998 Products: Seats, headliner, visor, OHS A Balance Between Art and Science • It varies on: • Market Entry Timing • Global OEM vs. Local Political Leverages • …………… Science Beijing Joint Venture Est in 1997 Products: Seat, Door Panel, OHS Changchun Joint Venture Est in 2001 Products: Seat, Door Panel, Instrument Panel, Headliner, Cluster, Parcel Tray Art

18. JCI’s Experiences in Partnering

19. Partnering: Failure Modes and Success Factors Reasons JVs Fail – Things to Avoid How to Ensure Success • Financial failure • Parties don’t trust each other, can’t work together successfully • Involved parties have conflicting objectives • Partners can’t achieve their objectives • Strong daily execution • World-class quality • Maintain trust, partnerships • Innovative technology • Localization of materials • Willing to adopt best practice systems quickly • Good partners resolve any differences rapidly • Both partners able to achieve their objectives

20. Summary / Conclusion • China represents nearly half of the automotive growth for the next ten years and the market is likely to become one of the Top 3 in the world. • We will be facing many challenges while the opportunities are tremendous for both growth and cost reductions. • Forging effective partnerships is critical for success as a supplier. • A successful partnership starts with relationship supported by transparent objectives, nourished by mutual trust and maintained through consistency in doing what we say we will.

21. Effective partnerships are based on trust