LEARNING FROM THE HISTORY THE ROOTS OF THE FUTURE ARE IN THE PAST

1. LEARNING FROM THE HISTORYTHE ROOTS OF THE FUTURE ARE IN THE PAST • AFTER MORE THAN 100 YEARS OF DEVELOPMENT THE MECHANICAL ENGINE TECHNOLOGIES HAVE REACHED AN ASYMPTOTIC STATE THROUGH A SLOW AND INCREMENTAL EVOLUTION. • DURING THE 70’s, UNDER THE ENVIRONMENTAL LEGISLATION PRESSURE, ELECTRONIC GASOLINE FUEL INJECTION WAS INTRODUCED IN ORDER TO CONTROL MORE PRECISELY THE WIDELY UNKNOWN COMBUSTION PROCESS. • IN THE FOLLOWING DECADES THE ELECTRONIC CONTROL OF COMBUSTION RADICALLY CHANGED THE RULES OF THE GAME, BOTH IN THE ENGINE TECHNOLOGY EVOLUTION AND IN THE MARKET. • TODAY THE ENGINE CAN BE DEFINED AS: “A COMPUTER THAT CONTROLS THE COMBUSTION PROCESS AND DRIVES THE VEHICLES THROUGH A MULTI-CYLINDER ACTUATOR”

2. LEARNING FROM THE HISTORYTHE COMMON RAIL BREAKTHROUGH CASE STUDY - 1 • ENGINE BREAKTHROUGH SYSTEMS ARE CONCEPTUALLY SIMPLE “The best way to inject the fuel is directly out of a fuel line kept under constant pressure”Rudolf Diesel “Die Entstehung des Dieselmotors”- BERLIN 1912 • BUT TECHNOLOGICALLY COMPLEX (HIGH TECH ACTUATORS AND COMBUSTION CONTROL) HIGH PRESSURE PUMP EVOLUTION FROM HYDRAULIC SYSTEMS INNOVATIVE INJECTOR WITH HIGH TECH SERVOVALVE ENGINE CONTROL UNIT EVOLUTION FROM GASOLINE INNOVATIVE COMBUSTION CONTROL STRATEGIES

3. DIESEL EMISSION TIGHTENING LEARNING FROM THE HISTORYTHE COMMON RAIL BREAKTHROUGH CASE STUDY - 2 • ENGINE BREAKTHROUGH SYSTEMS BECOME STANDARD IN THE INDUSTRY (MULTIPOINT INJECTION TECHNOLOGY – THREE WAY CATALYST – COMMON RAIL …) WHILE INTERMEDIATE TECHNOLOGIES, AFTER A LOWER PENETRATION, DISAPPEAR • THE PRESSURE OF ENVIRONMENTAL AND FUEL ECONOMY LEGISLATION PERIODICALLY GENERATES A TRANSIENT PHASE OF TECHNOLOGY INSTABILITY DURING WHICH VARIOUS DIFFERENT TECHNOLOGIES APPEAR IN THE SEARCH OF THE NEXT OPTIMAL, STABLE, TECHNOLOGICAL LEVEL DI DIESEL FUEL INJECTION ELECTRONIC IN-LINE PUMPS HEUI MECHANICAL PUMPS UNIT INJECTOR COMMON RAIL ELECTRONIC ROTARY PUMPS COMMON RAIL 1980 1990 2000 2010

4. DRIVERS OF THE ENGINE TECHNOLOGY IN THE NEXT DECADE (2005 – 2015) • ENVIRONMENTAL REQUIREMENTS • REDUCTION OF DIESEL PARTICULATE AND NOX EMISSIONS DOWN TO THE EURO 4 (2005) GASOLINE LEVELS (“FUEL NEUTRAL EMISSIONS”) • NEED FOR ULTRA-LOW EMISSIONS FOR URBAN VEHICLES IN CRITICAL METROPOLITAN AREAS • FUEL CONSUMPTION AND CO2 REDUCTION UNDER THE PRESSURE OF BOTH, REGULATION (EUROPEAN CAFE) AND MARKET (FUEL COST) • PERFORMANCE AND DRIVEABILITY IMPROVEMENT (“FUN-TO-DRIVE”) • EMPHASIS ON INCREASE OF DYNAMIC LOW RPM TORQUE RATHER THAN HIGH RPM POWER

5. DIESEL TECHNOLOGY EVOLUTION • THE FAST AND INCREASING PENETRATION OF THE COMMON RAIL DIESELS INTO THE PASSENGER CAR MARKET CAN BE EXPLAINED BY: • THEIR SUPERIOR DYNAMIC TORQUE (COMMON RAIL & TURBOCHARGING) • THE FUEL CONSUMPTION (-30%) AND CO2 (-20%) ADVANTAGE OVER GASOLINE • THE POWER AND TORQUE DENSITY WILL FURTHER INCREASE (UP TO 70kW/l) HOWEVER • THE MAIN TECHNOLOGICAL CHALLENGE IS TO SATISFY FUTURE EMISSION LIMITS: EURO 5 (2010) AND EURO 6 (2015?) • ADOPTING DPF AS A STANDARD (PM) • LEVERAGING ON FURTHER DEVELOPMENT POTENTIAL OF COMMON RAIL (PM & NOx) • DEVELOPING LOW TEMPERATURE COMBUSTION TECHNOLOGY (NOx)

6. PILOT PRE MAIN AFTER POST FUELLING COMBUSTION RATE -60° TDC +60° FURTHER DEVELOPMENT POTENTIAL OF COMMON RAIL NEW HIGH TECH SERVO-ACTUATOR NEW 2-WAYS/2-POSITIONS PILOT VALVE: • REDUCED ANCHOR LIFT (<20 µm) • ONE-PART ARMATURE / SHUTTER • HIGH FLOW RATE WITH REDUCED ANCHOR LIFT RADICAL SIMPLIFICATION OF THE PRESSURE GENERATING CIRCUIT (BASED ON 10 YEARS OF FIELD EXPERIENCE) FROM MULTIPLE INJECTIONS …. ….. TO MODULAR INJECTIONS

7.  Pre-cat VGT C Air cleaner T AFM VGT Cat DPF  T C Air cleaner EGRby-pass valve AFM Cat DPF Intercooler Intercooler EGR cooler ELECTRONIC VALVE CONTROL Swirl Flaps POil Inlet Throttle EGR mixer P/Tboost EGR valve P/Tboost LOW TEMPERATURE COMBUSTION TECHNOLOGY FROM THE CURRENT TECHNOLOGIES … ….. TO LOW PRESSURE EGR & ELECTRONIC VALVE CONTROL TECHNOLOGIES

8. THE DIESEL TECHNOLOGY ROAD MAP MULTIPLE INJECTION DPF 40 COOLED EGR MODULAR INJECTION IMPROVED EGR COOLER (DPF) LOW PRESSURE EGR MODULAR INJECTION EL. VALVE CONTROL DPF Diesel DI Present Production ADV. COMBUSTION (ADV. COMBUSTION) 30 Part. < 0.025 Part.<0.005 Part.<0.005 Reduction of CO2 Emission (%) 20 Part. < 0.05 10 REFERENCE Gasoline PFI Euro 4 2010 2000 2005 2015 0 Euro 3 Diesel Euro 5 Diesel Euro 4 Diesel Euro 6 Diesel / / 0 0.1 0.4 0.3 0.2 0.5 NOx Emission [g/km]

9. SPARK IGNITION ENGINE TECHNOLOGY EVOLUTION • THE SPARK IGNITION ENGINE IN EUROPE HAS BEEN MARGINALIZED IN THE UPPER PASSENGER CAR SEGMENT BUT STILL HAS A LARGER SHARE OF THE MEDIUM-LOW SEGMENTS AND MAINTAINS SOME STRATEGIC ADVANTAGES • THE ROBUST AND LOW-LOST EMISSIONS CONTROL TECHNOLOGIES (3-WAY CATALYST) • THE INTRINSIC COST ADVANTAGE OVER DIESEL, WHICH WILL BE FURTHER INCREASED • THE MAIN TECHNOLOGICAL CHALLENGE FOR THE SPARK IGNITION ENGINE IS TO REDUCE DRASTICALLY FUEL CONSUMPTION / CO2 EMISSIONS AND TO IMPROVE FUN-TO-DRIVE • WITH AN ADD-ON COST EQUAL / LOWER THAN WHAT NECESSARY FOR EMISSIONS CONTROL IN DIESEL ENGINES • WHILE MAINTAINING THE INTRINSIC CHARACTERISTICS OF COMFORT • AND LEVERAGING ON ITS POTENTIAL TO BURN LOW CARBON FUELS SEARCH FOR A FUNDAMENTAL BREAKTHROUGH IN THE SPARK IGNITION ENGINE

10. BACK TO BASICS • IN THE DIESEL COMBUSTION PROCESS THE KEY PARAMETER IS FUEL • IN THE SPARK IGNITION COMBUSTION PROCESS THE KEY PARAMETER IS AIR (AND THIS IS THE REASON FOR THE LEAN DIRECT INJECTION TECHNOLOGY FAILURE) • THEREFORE, THE NECESSARY BREAKTHROUGH MUST BE BASED ON THE DYNAMIC AND DIRECT AIR CONTROL, CYLINDER-BY-CYLINDER AND STROKE-BY-STROKE ELECTRONIC INTAKE VALVE CONTROL • IN THE STRIKE BACK, GASOLINE ENGINES SHOULD ADOPT THE STANDARD WEAPON OF THE COMPETITOR TURBOCHARGING AND LOWERED DISPLACEMENT

11. THE SPARK IGNITION TECHNOLOGY INSTABILITY GDI LEAN GDI STOICHIOMETRIC NATURALLY ASPIRATED MULTIPOINT PORT FUEL INJECTION THROTTLED TURBOCHARGED ENGINE WITH ELECTRONIC VALVE CONTROL PFI OR GDI VALVETRONIC SWITCHABLE TAPPETS TURBOCHARGING VARIABLE CAM PHASER 1990 2000 2010 2020 CO2 EMISSION TIGHTENING AND DIESEL FUN-TO-DRIVE COMPETITION

12. ELECTRONIC VALVE CONTROL TECHNOLOGY ELECTRO-MECHANICAL ELECTRO-HYDRAULIC ELECTRO-MAGNETIC ( R & D ) VALVETRONIC UNIAIR • IN PRODUCTION SINCE 2001 AND IN EXTENSION TO ALL ENGINES • FUEL ECONOMY < 8% • SIMULTANEOUS CONTROL OF • ALL CYLINDERS • SLOW DYNAMIC RESPONSE • HIGH COSTS OF • MANUFACTURING (TOLERANCES) • READY FOR INDUSTRIALIZATION • FUEL ECONOMY ~ 12% • VALVE-BY-VALVE AND CYLINDER- • BY-CYLINDER CONTROL • FAST DYNAMIC RESPONSE • COSTS SIMILAR TO VALVETRONIC • AFTER YEARS OF R & D STILL PRESENTS PROBLEMS OF NOT EASY SOLUTION: • REMARKABLE ELECTRIC POWER • REQUIRED • NVH – WEAR - RELIABILITY • NOT APPLICABLE TO DIESEL • VERY HIGH COSTS

13. SPECIFIC FUEL CONSUMPTION CONSUMO SPECIFICO CONSUMO SPECIFICO CONSUMO CONSUMO [ [ g/kWh g/kWh ] ] 1.8 NA 1.8 NA “THROTTLED” “THROTTLED” 1.8 NA 1.8 NA >10% >10% UNIAIR EVC 10 10 - - 15% 15% 1.4 1.4 TC TC UNIAIR EVC BMEP PME PME MEAN BMEP IN NEDC = THE TURBOCHARGED ENGINE WITH ELECTRONIC VALVE CONTROLTHE FUEL ECONOMY AND FUN-TO-DRIVE BENEFITS “DE-THROTTLING” ELECTRONIC VALVE CONTROL “ENABLING TECHNOLOGY” DYNAMIC AIR CONTROL (TC + VALVES) TO MINIMIZE RESPONSE TIME DURING TRANSIENTS DE-THROTTLING AND DOWNSIZING 20 – 25% FUEL ECONOMY INCREASE SMALL SIZE TURBOCHARGER STROKE-TO-STROKE AIR CONTROL IMPROVED TRANSIENT RESPONSE

15. ULTRA-LOW EMISSION PROPULSIONFOR URBAN TRANSPORTATION • AFTER THE FAILURE OF THE CONVENTIONAL ELECTRIC PROPULSION, AND WAITING FOR THE LONG TERM HYDROGEN OPTION, THE SPARK IGNITION NATURAL GAS ENGINE IS THE ONLY REALISTIC AND INDUSTRIALLY AVAILABLE SOLUTION FOR THE URBAN TRANSPORTATION ISSUES • THE TURBOCHARGED SPARK IGNITION ENGINE WITH ELECTRONIC VALVE CONTROL WILL LEVERAGE THE CHARACTERISTICS OF GASEOUS LOW CARBON FUELS (NATURAL GAS  HYDROGEN)  PROPULSION SYSTEM WITH NEAR EZEV EMISSIONS AND ULTRA-LOW CO2 LEVELS • THE PROGRESSIVE INTRODUCTION OF NATURAL GAS ENRICHED WITH HYDROGEN ON PUBLIC TRANSPORTATION FLEETS REPRESENTS A SAFE AND REALISTIC TRANSITION TO HYDROGEN PROPULSION IN THE LONG TERM

16. ALTERNATIVE PROPULSION STATUS • HYBRID PROPULSION SYSTEMS “NOT REALLY CONCEPTUALLY SIMPLE AS A BREAKTHROUGH SHOULD BE” • FUEL CELL PROPULSION SYSTEMS “A LONG LASTING PROMISE WITH FORWARD MOVING PRODUCTION TARGET BELOVED BY POLITICIANS AND NEWSMEN”

17. THE SPARK IGNITION ENGINE TECHNOLOGY ROAD MAP H2-CNG TC - EVC 60 Euro 4 Diesel Euro 4 Gasoline NMHC < 0.01 Euro 6 Diesel CNG PFI TC - EVC 50 NMHC < 0.01 CNG PFI EVC 40 NMHC < 0.01 Diesel MODULAR INJECTION L.P. EGR + EVC + DPF Diesel MULTIJET (+DPF) CNG PFI Euro IV CO2 Emission Reduction (%) 30 NMHC ~ 0.01 Gasoline PFIGDI TC - EVC Part. < 0.025 Part. < 0.005 20 NMHC < 0.05 10 Gasoline PFI EVC Gasoline PFI Euro IV NMHC < 0.05 NMHC < 0.08 0 / / 0 0.08 0.02 0.04 0.06 0.25 0.08 0.25 NOx Emission [g/km]